First Deal Flopped...Now What?

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First Deal Flopped...Now What?

Investor · Chattanooga, TN · Member since 2019 · 137 posts · 122 votes

Have invested time in Bigger Pockets for a year: reading, podcasts, analyzing, drive-arounds, learning, learning, learning. Thought my first deal was done, only to have it fall apart in the eleventh hour.

So many of you pros talk about hard times...but man, it is tough! And difficult to face up to my rookie mistakes that broke this deal.

I'm not asking for sympathy...but do want advice that will get my face out of this bag of chocolate and put my boots back on the ground so I can find my lost grit.

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Brant Richardson

Investor · Santa Barbara, CA · Member since 2013 · 658 posts · 315 votes

You can only learn so much reading and now you are learning while taking action. That's real progress.

You learned a whole bunch making rookie mistakes and it didn't cost an arm and a leg. Sometime those rookie mistakes are measured in 10's of 1000's of dollars.

Accept rejection and keep making offers that will work for you.

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Josh Evans
Montgomery, AL · Member since 2019 · 3 posts · 1 vote
7y
@Renee Yarbrough keep it pushing, this just adds fuel to your goals. Good luck.
0 Reply
Jawad Ashur
Member since 2019 · 4 posts · 1 vote
7y
@Alexander Ball the bank really dropped the Ball on this one. Time to look elsewhere
0 Reply
Jay Weathersby
Rental Property Investor · Orlando, FL · Member since 2019 · 44 posts · 48 votes
7y
Don't feel too bad I had three deals fall through over the last few months. I paid for home inspections and appraisals for all of them. All failed for completely different reasons. You live and you learn. That's the nature of the game we're in. I'm back up and on the prowl again with my finger on the offer trigger. Let's see how the next deal goes.
0 Reply
Phillip Johns
Rental Property Investor · Victoria, TX · Member since 2019 · 11 posts · 10 votes
7y
@Renee Yarbrough
My first flip I wound up losing $7,500 on after it was all said and done. I could have thrown my hands up and quit but I did something else. I basically told myself that I just had a $7,500 lesson because in reality it wasn’t a total loss. I learned so much from the experience, a lot of things I’d never do again and things I knew I had to work on and a couple things that went well. Overall my expectations coming into the deal were one of knowing I wasn’t going to hit a home-run right off the bat.
The fact of the matter is that if you have spent that much time researching and learning then don’t allow that time to be a total waste by walking away. Failure is not a lost flip or a negative return, that is a lesson learned (hopefully you learned from it). Failure comes from walking away and not trying again. Only then do you really fail because you choose to allow your fear, indecisiveness and emotions of loss to dictate your future.
Get your butt back in it and try again, you’re not a quitter.
1 Reply
Tim Hall
Flipper/Rehabber · Tallahassee, FL · Member since 2014 · 462 posts · 237 votes
7y
@Renee Yarbrough it happens to everyone. I can’t tell you how many times me and my wife used to run out of money during or after a flip. If you’re in real estate it’s going to happen, how badly will effect weather you can stay in real estate. Hey there’s no mistakes, just learning what to do and what not to do. You’re going to be better for this.
0 Reply
Scott Kaczmarek
Investor · Dallas, GA · Member since 2016 · 59 posts · 57 votes
7y
@Renee Yarbrough
Whenever I fall down, I read and reread this quote:
“Nothing in this world can take the place of persistence. Nothing is more common than unsuccessful men with talent. Persistence and determination alone are omnipotent”
Calvin Coolidge
I’ve found it to be very true. My best to you.
0 Reply
Nick Rutkowski
Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
7y
@Renee Yarbrough
Failure is a part of success. You got this, try again.
0 Reply
Matthew Lukas
Member since 2019 · 31 posts · 15 votes
7y
Renee.. everyone else. I'm lost. Slightly. I'm pushing. Smart. I know every learning corner in turn, there like 20 more things to learn. I'm about to just take a leap. Take the same route. Ya ya, read and study enough there is enough example how not to fail. Smh. Years in the making. I'm a hands on learner. I will take a few punches too. I've asked for help around my area and not much help.
0 Reply
Charlotte Dunford
Investor · Johns Creek, GA · Member since 2017 · 463 posts · 488 votes
7y
@Renee Yarbrough don't let this stop you. I totally understand that this sucks so badly but mistakes like this is when your break through happens. I am also going through an eviction right now, and it will probably cost me $6,000. But guess what, it's worth it. College costs way more than that, and may not pay you back as much as a $10,000 lesson pays you in real estate. When you make it big in real estate, you wouldn't care about this $10,000 in tuition. Keep going cause you are almost there :)
0 Reply
David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
7y
Originally posted by @Renee Yarbrough:
Have invested time in Bigger Pockets for a year: reading, podcasts, analyzing, drive-arounds, learning, learning, learning. Thought my first deal was done, only to have it fall apart in the eleventh hour.
So many of you pros talk about hard times...but man, it is tough! And difficult to face up to my rookie mistakes that broke this deal.
I'm not asking for sympathy...but do want advice that will get my face out of this bag of chocolate and put my boots back on the ground so I can find my lost grit.

Hhhmmm... Sounds like you didn't quite make it to closing. Not fatal.
Did you lose any money?
Without the details (I haven't read the entire thread), there's not much to say beyond look at what happened, see what you can learn from it, then "get back on the horse" and have another go at it.
Go for it!
0 Reply
Sam Li
CA · Member since 2019 · 7 posts · 4 votes
7y
@Renee Yarbrough
There’s only one direction you can go now. Onward and upwards. Each mistake is a growth marker. Keep it up and this lesson is now part of your future tool belt.
2 Reply
Rich Lopes
Rental Property Investor · San Jose, CA · Member since 2016 · 114 posts · 54 votes
7y
@Renee Yarbrough, I couldn't figure out what part of REI did you fail? Offer not being accepted or falling through is just the tip of the iceberg in REI. I wouldn't even consider this as as failure but it's just a trailer of the "Pacific Heights" (must watch for every REI)
1 Reply
Morgan Nilsen
Rental Property Investor · Sandefjord, Norway · Member since 2015 · 202 posts · 87 votes
7y
Millions of things can go wrong in this game. Sometime it cost money, sometimes its time or connections. You will have to get comfortable with losing and failing as it's a big part of the game. Losing a deal sucks and might feel very significant in your current situation, but if you keep pushing forward, your winnings will dwarf your mistakes. Its all worth it in the end!
I have made several mistakes that has cost me north of $10,000 each. But I've learned from every one of those and made my money back several times over.
If you can adapt to the mindset that you either will win or you will learn when you invest, "losing" is then impossible as all outcomes are positive.
Get back up on your horse and attack your next deal!
1 Reply
Bryan R. Crnkovic
Rental Property Investor · Drexel Hill, PA · Member since 2019 · 4 posts · 3 votes
7y
@Renee Yarbrough
I'd call that a solid learning experience. Keep going. You will get there. Work on the DTI, or maybe find a partner with good DTI.
0 Reply
James McgowanPro Member
Lender · Atlanta, GA · Member since 2015 · 17 posts · 10 votes
7y
@Renee Yarbrough Thank you for sharing Renee. You will be a better investor for this as you proceed. Always remember, there are many other ways to finance these types of deals then conventional or traditional routes. Ones that don't look at DTI.
1 Reply
Chris Wyche
Real Estate Investor · Philadelphia, PA · Member since 2012 · 41 posts · 2 votes
7y
Originally posted by @Renee Yarbrough:
@Andrew Zannotti

I don't mind sharing...especially if it will bring advice or help others who might be starting out.

Mistakes:

1. Didn't make sure of loan eligibility before putting an offer on the house, then spent weeks scrambling (and asking everyone involved to scramble) to get DTI ratio in line for approval.

2. Applied for a FHA loan on an old, worn house which cost the seller thousands in inspector-required repairs, all while I was still fighting to be approved.

3. Vendors who did repairs agreed to be paid at closing...this one really bothers me, as I don't know when they will be paid.

4. In the end, I couldn't get approved because of my DTI ratio, a mistake that could have been avoided by taking time at the front end to get a solid pre-approval.

@Caleb Heimsoth
No, this wasn't a wholesale deal.

Renee, it's not the end of the world. **** happens, and it stinks (pun intended), but you'll recover. Just look at it as a learning experience. I could tell you about my first deal and a couple others since then and it'll make you feel better, lol. But seriously, just take those mistakes as a learning experience for what not to do next time. When you succeed in this business, you'll look back and laugh at this deal
Question. Was this intended to be an investment property, or what was the end goal here? Just wondering why you were trying to get an FHA loan

1 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
7y
Mental toughness and resiliency is one of the least talked about parts of real estate investing but is of huge importance.
Anything worth doing or accomplishing in life tends to be not easy. In fact it can be very challenging. To keep pushing yourself to take calculated risks to new heights takes constant strength and courage.
Of course you need to constantly daily learn for self improvement and to provide value to your potential clients and investors.
About 90% of the population lives paycheck to paycheck because they dream but can't bring themselves to be ALL IN. Total immersion and commitment is needed to the art of investing in real estate. By becoming more and more knowledgeable the odds of success tend to swing more into the investors favor as they pursue real estate properties to purchase.
If you broke even on this deal or close to it but learned a ton than consider it for the most part a SUCCESS. There are those starting investors that make HUGE mistakes upfront and rarely recover to try again. They are left with ( They tried the real estate thing but didn't work out etc.)
Some days with commercial real estate I can be looking at 6 figures in returns per deal. Some pan out and others do not. The goal is to constantly refine the process so that I have less ones that do not work out versus those that do.
Good luck and try to accept that investing in real estate can be like a mental roller coaster. Our brain is one of our most important organs In the body but sometimes keeping the brain for our mental muscle worked out and in great shape can fall by the wayside.
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Renee Yarbrough
OP
Investor · Chattanooga, TN · Member since 2019 · 137 posts · 122 votes
7y
@Chris Wyche
Thanks for the perspective. So many encouraging posts on this thread have forced me to look past this first flop and see the value of the education.
My goal was to live in the house for a year (as per FHA guidelines), rent the other bedrooms for cash flow, and prepare for my next REI.
It was to be a step into the learning curve, where I could sink my teeth into REI without losing much if everything went south.
Why FHA? It seemed a good option to a cash-poor first time buyer, since the down payment was so low.
0 Reply
Renee Yarbrough
OP
Investor · Chattanooga, TN · Member since 2019 · 137 posts · 122 votes
7y

@Joel Owens Thank you for taking time to write an encouraging, teaching reply. I've learned and learned from the posts in this thread, and yours is no exception.
The mental game has nearly cracked me at times. I thought the biggest challenge would be my lack of knowledge, and that certainly added to the issues, but convincing myself to stay in the game, act kindly, learn quickly, ask questions that were humbling, and keep persevering were by far the hardest part of this attempted first deal. So I completely agree that tenacity is a big part of this equation.
BP has been an enormous help in dusting myself off and hopping back on my ride. Thank you again for your voice.
0 Reply
Account Closed
Rental Property Investor · IN · Member since 2019 · 34 posts · 39 votes
7y
The next one will be much better. The lender should have told you the personal and property requirements for your loan way in advance. Enjoy the ice cream and look for a new lender. You haven't done anything most of us have not experienced in one form or another. I had control of a property about six months once while the seller was dragged along on a seller note refinance because the lender lied to me about being able to do what I wanted. You learn and move on. Don't give up.
1 Reply
Renee Yarbrough
OP
Investor · Chattanooga, TN · Member since 2019 · 137 posts · 122 votes
7y
@Account Closed
Ouch! Your situation sounds terrible!
I have learned a lot, but also realize that I love this challenge. The encouragement from the BP community has set me back on my way, and the education from experienced REI's is priceless. Thank you!
0 Reply
Renee Yarbrough
OP
Investor · Chattanooga, TN · Member since 2019 · 137 posts · 122 votes
7y
@James Mcgowan
Thanks for the encouragement!
Do you have recommendations for learning about financing/lending? Many people on this thread have commented on creative financing, and I'd like to education myself. Maybe a Creative Financing for Dummies book?
0 Reply
Renee Yarbrough
OP
Investor · Chattanooga, TN · Member since 2019 · 137 posts · 122 votes
7y
@Bryan R. Crnkovic
From reading the posts on this thread, it appears I escaped with a bruised ego and a fabulous education. Armed with new information, new courage, and my money intact, I'm back in the saddle. Thanks for the encouragement.
1 Reply
Jerry N.
Chicago, IL · Member since 2016 · 172 posts · 38 votes
7y
@Renee Yarbrough
A lot of posters have left encouraging insights for you. Your "flop" doesn't seem that bad. Aside from some stress, which is really understandable, did you lose any money aside from application fees? To us, that is what a real loss would equate to.
(To others who may try to bash this point time is money, blah blah blah. For a first deal, for people who may be a little more risk averse, might it not be better to take some time, have everything lined up and look hard for a deal that would work? There are sometimes people on BP who seem to just want to be 'in it' no matter the deal.)
Can you elaborate on your point about the vendors? Who signed a contract with them? The owner? Ultimately the owner has now benefited from the work because if the work has now made the building FHA inspection approved, someone else would probably be willing to pay more for it. Don't know much about FHA requirements, we've never used it for financing. Unless you pulled some family/friend favors to get people to do the work for you, and they now have a fight with the owner, maybe? A poster correctly pointed out the contractor can file a lien on the house, which will ultimately have to get cleared. Creatively, the contractors will get paid at closing - someone else's closing.
It's nice to read BPers offer friendly perspective and advice, sometimes the feedback people offer is brutal.

1 Reply
Renee Yarbrough
OP
Investor · Chattanooga, TN · Member since 2019 · 137 posts · 122 votes
7y
@Jerry N.
Yes, so many posts on this thread have been encouraging and extremely helpful! I've learned a lot for the journey forward, which is wonderful.
You are right, the FHA-required repairs improved the house, and the seller won't have the inspection/appraisal issues it had before, so has lost nothing.
The vendors, however, agreed to do the work and get paid at closing, which bothers me...as that could now be months down the road.
Technically, it isn't my responsibility, but I feel bad that the sale dragged on a long time, repairs were made with promise of payment, and then it came to nothing.
After reading all the posts, it is very clear that my situation is a bit of humble pie and some out-of-pocket expenses. At the time, it was dreadful, but with a bit of perspective from people like you, I see very clearly that this first try was just that...a first try.
There will be many more in the future.
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