What’s Your Worst Deal EVER?

20 Replies

Hey BP!

One of the biggest draws of this site is the positive and helpful community that I’m now emmersed in. We all see so many amazing success stories of people starting with nothing who are now “financially free.”

But, I guarantee you, it took some bumps in the road to get there. So, I thought I’d change it up a little. Not to create a negative vibe or anything, but to show transparency and humility. It’s not always rainbows and unicorns.

Can you describe in detail your worst deal or investment ever?

Now, after you answer that question, what I REALLY want to get at is: HOW DID YOU BOUNCE BACK?

Thanks all! Have a great day!

-Tyler

@Tyler Jahnke   too many to count..   but the most stressful for me was in my lending days and having 400 plus loans out in the mid west and realizing that low end C class is high risk /  and ended up owning 200 plus of them and getting my butt handed to me.. if you think of your Indy property when you bought it .. that's what many of my home looked liked by the time I got them back.

and its why I am pretty opinionated  that low end C class is only appropriate for locals and not out of state I lived it.. 

my B and A loans were all or 95% fine... C class was a cluster to the extreme.. And again why I am so vocal about what morris has done.. 

so even though we work in C class now we only do it with local ground partners that are professional landlords and that is their business... that model has worked fine.. they are on site to handle it own 50 to 300 doors and its their JOB and lifes work.. C class is not real estate investing its asset management in my mind

@Tyler Jahnke I wrote about mine on the BP blog. You can find it here:  https://www.biggerpockets.com/renewsblog/colossal-fail/

What could have seemed like the beginning of the end instead made me a much better investor and set up my business for success beyond anything I could have imagined. 

I often think that the most dangerous investors are the ones that haven’t ever lost money and I sometimes say that if you haven’t lost money it’s just because you haven’t been doing this long enough or haven’t done enough deals. I’ve done over 700 deals in my nearly 30 years and I’ve come to accept the fact that even the best-laid plans don’t always work out as expected. Our job is to minimize the possibility of an adverse outcome, mitigate risk to the extent possible and when the inevitable happens, make sound decisions to produce the best result you can.

Appreciate the honesty @Jay Hinrichs ! And I always listen to your feedback!

Yikes...I can't imagine having 400+ loans out there in low end C class. But, you learned and got through it and have systems in place to succeed. Now you can hang out on BP all day long if you want hahah :) Thanks for chiming in!

-Tyler

Originally posted by @Tyler Jahnke :

Appreciate the honesty @Jay Hinrichs! And I always listen to your feedback!

Yikes...I can't imagine having 400+ loans out there in low end C class. But, you learned and got through it and have systems in place to succeed. Now you can hang out on BP all day long if you want hahah :) Thanks for chiming in!

-Tyler

 Well since I am looking at Waikiki beach. And getting ready for farmers market I can laugh about. But I had to retool and we lived to fight another day 

@Brian Burke I love how you stated it, “Our job is to minimize the possibility of an adverse outcome, mitigate risk to the extent possible and when the inevitable happens, make sound decisions to produce the best result you can.”

My worst deal came about from a bad partnership in Phoenix. I partnered with someone on an expensive property in Scottsdale and just trusted him without doing my own due diligence on the property and I didn’t look at the partnership docs closely enough to see what would happen if the deal went south.  The property sat for 8 months and the price was lowered and then finally I had to take the property over, lower the price, and then sell it for a loss to get out of it. I ended up losing 50k on that property.

I learned the importance of looking over the docs carefully before partnering with someone, the importance of having multiple exit strategies, and how to protect the investor from loss.

Shortest best answer is “the one I backed out of contract due to fear”

I got a small assignment fee, but a 16 unit apartment building we still manage doubled in value within 6 months! Net loss of 500k in 6 months :-(.

Nope  with one of my client/friends.. he is a member at Wailai country club.. so we spent the day there at the pool and beach and getting ready for some kick butt sushi tonight.. :)  I met them when I sold him a 100 unit apartment in PDX 14 years ago and we have been friends and business partners ever since .. last year we built and sold 27 homes in Portland together.. good people..

Still got a long way to go to get the fancy digs Mr. Burke has though over on Maui !!!! 

Love your post @Brian Burke - I remember reading it right when you posted it. Thank you!

I also love how you call out the fact that if you haven't lost money you haven't done this long enough. We all get knocked down at some point, but it's all about flipping it 180 into a learning opportunity and minimizing adverse outcome for the future.

-Tyler

@Tyler Jahnke   I think Brandon is over on the other side of the Island from what I heard.. slower pace over there.. 

My worst deal was a house I bought at a TX tax sale. I walked the outside of the house but didn't see that part of the roof was caved in. There was extensive water damage. There was also a hole in the floor that animals had been coming in, and the house was infested with thousands of fleas. I paid $19,000 for it and sold it for $17000 a year later.

Not me but a guy at the courthouse steps told me he bought what looked like a decent house sitting on 5-6 acres at the foreclosure auction after driving by and looking at it out the car window. After he bought it he found the house was an old trailer with add ons all around it.

Can you describe in detail your worst deal or investment ever?  I can. 

I paid a lot of money for education, and didn't follow it.  Paid too much for a house, then paid too much on the rehab.  Tried to manage it myself.  Could have been much worse, in retrospect.  It is under contract now and life will go on, but it was painful and stupid to do what I did.  I don't want to relive the numbers, but many have told me their first flip was worse.  Still failure sucks, but that brings me to your next question. 

Now, after you answer that question, what I REALLY want to get at is: HOW DID YOU BOUNCE BACK?

This is the part I am figuring out right now.  

I am going to focus on the marketing aspect, getting the phone to ring and I can get some properties under contract.  Will need to wholesale to get some cash coming in.  Unfortunately I had to go back to work to make ends meet, but I'll ditch that one we get things rolling.  But now, I just need to do ONE.  I'll pump those funds back right back into marketing.

Many established investors recommending getting good at one type of marketing, and do that consistently, before moving on to the others.  I will probably focus on one target segment but will use two methods (direct mail and targeted FB ads) to go after them.  I am probably going to be in for a long slog.  At least I have a $10K credit line to use to start.

While this is going, I'll do some other things to augment the marketing efforts, driving for dollars, and doing some admin jobs for other investors in my area, etc.

I have found one fellow locally (met first right here in BP in fact) that is doing some cool stuff and I do some simple admin work for him, checking on properties on my side of town, etc.  It is something, and I am surrounding myself with the right people.  I'm recruiting him to mentor with me and eventually go in with me on a deal or two.

It is just going to suck for a while but I am going to have to 'embrace the suck' as they say in the service.  I am not going to allow that first deal to define me or break me or make me quit. 

My worst deal was a 6 unit seller financed apartment building, I lost the most valuable asset we have....time. I didn't do enough homework going into the deal, I knew that worst case I would just sue him and get my money back lol. Which isn't as easy as it sounds, yes we won the lawsuit, yes we recovered every cent we had into the deal but oh the time. The lawsuit should have taken about 9 months according to our lawyer and we were on track......8 and a half months in and the building mysteriously caught on fire. That dragged out the process about another 9 months, in the end we got a nice big check for all our money into the deal and our lawyer fees but that's a year and a half of paying lawyer fees instead of investing.

@Tyler Jahnke I call it "My $2000 Nightmare" where I bought a mobile home in a not so great mobile home park for cheap ($2000). To make a long story short, found it hard to find the right type of residents to fill the home (due to the area). Ended up costing a lot of money in holding costs (lot rent). Eventually sold to another real estate investor looking for mobile homes to put on his land for a loss. Lesson learned. :) 

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