The Three Greatest Lessons I Learned in Real Estate

[Don Konipol]

1. 25 years ago I came across an auto repair facility for sale - asking price $350,000.   Reached a verbal agreement to purchase for $250k, until a title search showed $938k in liens!   An environmental analysis showed that the seller has been dumping motor oil in the open field in back of the property and the motor oil had worked its way into the sewer  system.  
The seller filed bankruptcy; long story short I purchased the property out of BK for $115,000, solved the environmental problem for under $4k, and sold the property 6 months later for $335k. 

Lessons learned: The value of a property is totally unrelated to the asking price, the amount of debt, the APPARENT problems of the property, and a brokers "opinion of value". Investors need to be able to determine value THEMSELVES - This is where excess ROI is made.

2. I started my real estate “career” as a commercial real estate broker.  Like everyone else in those days I had spent the first 12 months developing a “Rolodex” of buyers for every type of commercial property.  Someone in my brokerage listed a grocery store property 3N lease at about 60% below market value - we verified that there were no negatives that rendered the valuation bogus.  I had 200 “buyers” for just this type of property in my Rolodex.  I called them ALL, and 197 of them had some excuse or another why they wouldn’t purchase this property.  It was then I realized that these 197 “buyers” would NEVER buy any property, and decided to identify REAL buyers (or sellers) early and work ONLY with buyers, sellers and deals that COULD be successfully concluded. 

Lesson learned: 90 % of buyers will never do a deal, 90% of sellers will never sell, and 90% of “deals” will never get done.  Your success depends on identifying and working only with what has the most chance of success. If you only have “bad” deals to work on, don’t work on them.  FIND better deals!

3. My partner and I purchased 60% ownership of a retail/service center one week before COVID in2020.  We lost 9 of the 10 tenants.  For the next 18 months we operated at a $240k deficit.  My partner and I had to put $240k plus 40k working capital into the property to carry the loan and pay operating expenses.  
By 2024 we had fully leased the property, and was able to sell it providing us with an almost 16% annual ROI.

Lesson: TIME will often rectify bad investment timing in real estate, but you need STAYING POWER - capital to carry thru to the light at the end of the tunnel.  

[Don Konipol]

Quote from @Greg Kasmer:

Don - Any thoughts on scaling/growing that you can share? In particular, using creative financing, other people's money, JV/partnering, only using your own capital, etc... that you can pass along with your experience?

I know of a number of people that followed one path - or one strategy and duplicated that strategy X amount of times to success.  That’s not how I did it myself, though.  I invested in almost any type of real estate and type of deal that I thought met the risk/return requirements I wanted.  Before I did any specific investment I learned enough about it to feel comfortable.
While early in my investing career I was forced, by lack of capital to “place all my eggs in one basket”, I quickly used diversification of investments to limit my loss of any single investment.  I also reached a point where I wouldn’t sign personal guarantees, and set up my personal finances so as to have an “asset protection” plan in place.
I have often used “creative” thinking and real estate techniques in both the purchase and sale of real estate.  Since management is not my strong point, I outsource it to more able individuals.
I’ve stated this in many other posts; to be successful as an investor in a sustainable way become thoroughly familiar with the BASICS - real estate principles, real estate finance and real estate law first.  Once you know and understand these three areas, you can study techniques and strategies.