A contact of mine asked me today at lunch time to check a building out and since it's near my office, I decided to drop by. 

The building is 15-units, 100% vacant and the owner drove all the way from Missouri and this is the first time he saw the property. His partner and everyone, including the Property Manager, went "dark" on him. 

We went inside and he told me later that the building's condition is worse than he expected.

He overpaid for the building by a lot, specially given the area where he bought it. He got a hard money loan on it that's costing him a lot of money every month.

I told him flat out that there's no way I was buying his building but I know 2 people who can or has the network of buyers. 

I treated him to lunch and encouraged him that this is just a detour. If he does not quit and goes through it, he will be a smarter real estate investor and he too will become successful.

His situation is a real estate NIGHTMARE scenario and provides valuable lessons on what NOT to do when investing in multi family. Here they are:

1. Don't buy a building you have not personally seen or inspected. A week ago, I inspected a 91 unit building in Mariemont. Me and my partners went through all the units as part of our due diligence. I have been informed of a hotel in New Jersey and I trust the guy who told me about it and shown me the numbers, but I am flying out there to see it for myself.

2. Trust but verify. He trusted his partner. He trusted his property manager. But never took the time to verify things for himself.I trust my partner Nate but I always inspect a building I am about to buy and will visit from time to time to see what's going on even after I bought it. Three weeks ago, I visited my 145-room hotel in Columbus and I plan to visit every 2-3 weeks specially during the PIP (Property Improvement Plan).

3. Know your Market before you buy. He really does not know Cincinnati, again because he trusted his partner. His partner really can't know it as well because he is not from here. When I buy buildings, I always walk the area - where are the developments around it, what's the real value of the comps, how do they look like, what are the issues in the location, what are the potential problems, etc.

4. Hands-on Management is the Key to Success in Real Estate. Being present, on the ground (specially during the acquisition phase) and hands-on is the way to properly invest in real estate. I've never met a truly successful real estate investor who manages from behind the desk. Or, if you can't be local, you need a really good property manager who is local, ahnds-on and knows the area. But even then, trust but verify everything he/she tells you.

5. Honestly Assess Your Capabilities: If you're a Newbie, Do NOT Buy Dumb Sh*^. You might be a successful wholesaler, or rehabber or maybe even a successful landlord of single family homes. But success in single family, or success in rehabbing does not necessarily translate to success in multi family. Heavy repositioning deals is not for the newbie. Buying in D and F areas is not for the newbie. Don't be too greedy for big money -  if you don't have the experience and skills to pull it off, don't do it. Remember that a good deal for one investor could be a terrible deal for another.

So what about other multi family investors here on BP: what have you learned from other "real estate nightmare properties"?

Spill the beans here so that newbie investors specially won't suffer like this guy did.