Seeking Biggest Mistakes and Lessons Learned Stories (Again!)
Melanie StephensPro Member
Investor · Tabernash, CO · Member since 2012 · 11 posts · 237 votesSeeking Biggest Mistakes and Lessons Learned Stories (Again!)
Most Popular Reply
Justin R.Pro Member
Rental Property Investor · San Anselmo · Member since 2015 · 659 posts · 599 votesI lost a lot a large chunk of money (over six figures) on a wire at closing time. I high level criminal hacked into my agents email and was able to place email filters on the agent, the closing attorney, and myself. The criminal then created a "relationship" of communication with both the agent and attorney as they thought it way me. During the wire day the criminal intercepted the wire instructions, and changed the account numbers utilizing the same company format, design and logo. This was not some low end group you would expect, with bad grammar and an account in India. This was a high level group and they paid a "mule" to open a account at a local bank branch. I always contact the wire recipient upon sending, and ask them to notify me upon receipt, this wasn't enough.
By the time everyone realized something was weird and everyones stories didn't add up, it was 8 hours after the wire was sent. I immediately called the criminals receiving bank (Wells Fargo) and they confirmed they had received the wire from my account. I let them know what happened, but unfortunately they had to back their "client" and couldn't place a hold on the funds. I watched my money disappear within the next 48 hours as the criminal was paying "mules" again to make cash withdraws. The FBI was involved in this case and said this is now the new sophisticated "bank robber." Due to my case and a many others within a few month timeframe, new consumer protection laws have been passed. Unfortuanlty many agents/title companies/closing attorneys still do not follow best practices to this day.
Here is how I now send a wire EVERY time.
1. Receive wire instructions through email (secure source if available)
2. Print out the instructions, yes PRINT a hard copy
3. Call the recipient, ensure its the same person and phone number you have had some form of previous contact with.
4. While looking at your printed copy of instructions, have them read you the account and routing number live over the phone. Yes, THEY read to you. If you read to them they can be lazy and just say "thats correct." This has happened.
5. Request the contact you immediately after the funds hit their bank on a "pending" status.
134 Replies
- Member since 2020 · 132 posts · 90 votes5y
@Melanie Stephens - I messed up what was a PERFECT BRRRRRR! (Still punching myself) I got excited of the thought of going and doing my first out of state investment and made an offer and went into contract with a VERY delapitated house on the southside of Milwaukee. Purchase Price was $89,000. It was a small ranch - 2 bed room - on a massive lot. (I should of kept it and had it as an opportunity to add bedrooms, baths etc down the line.). I could of easily gone back to the seller and gone down on the price, done a rehab of about $25 K. and then had a new value of about $150 K - which ALL the houses in the area were going for. The thought of doing work in an area where I did not have a 'team' scared me and I quickly cancelled the contract. The property manager - there is a silver lining here - had other houses in the area going for $1500 a month - so I missed the opportunity not only to get a BRRRR property started but also to produce a cash flow property.
The positive! The property manager that I found in Milwaukee - actually turned out to have offices in the Chicago land area - and in turn - I have used them locally to rent out my first unit that is cash flowing $500 a month and have them working on two other condos. They are aligned with my mission and always sending me leads to scale the business.
In short, sometimes it is OK to not have all the pieces of the puzzle in place. Take a breather and not get overwhelmed with what is in front of you - I should of taken the opportunity to slow down, get a second opinion and see what costs would of been to rehab the unit. I think I was two weeks into BP at that point so lesson learned and on to the next one! - Rental Property Investor · CO · Member since 2017 · 11 posts · 1 vote5y
@Melanie Stephens
Insurance cost, terrible in Colorado and most companies are leaving. Real problem finding insurance. Should have researched it better.
- Developer · Austin, TX · Member since 2010 · 371 posts · 284 votes5y
I bought three lots on 'Oak Springs Rd.' Built three homes, all with core samples and engineered foundations to meet specs. Two years later a dormant spring (pay attention to street names) popped up and moved one of the three houses a full 3 inch tilt! The marble raced to the door when you put it on the floor. Fortunately I had an engineer's stamp on the plans, had to get attorneys involved, but the engineer (who let his insurance lapse) ended up buying the home, leveling it and reselling it. Bullet dodged. I felt bad for the engineer.
- Dallas Fort-Worth · Member since 2019 · 64 posts · 33 votes5y
Always get rehab agreements in writing before doing them. I had a house under contract and agreed to rehab the driveway for about $2500. After all the work was done, they exercised their option to terminate the contract.
What I could have done instead was add to the contract that the repairs would take place after the option period ended and/or reduced the price by the cost of the rehab.
Lesson learned: GET EVERYTHING SIGNED AND IN WRITING
- Member since 2020 · 5 posts · 2 votes5y
A big shout out for plumbing video inspections. I wish I had done it when we bought our four bedroom home in Livingston, NJ in 2018. After several slow drains and backups I finally popped ($400) for a sewer line camera inspection. The results were a we have a copper sewer main pipe (street to house - luckily PVC in the house) from probably when the house was built in the 1960's and will need to pay $5,800 to replace it with PVC which our insurance company may or may not cover. But at least it's better then a sewage backup in the middle of the coming Covid winter.
Lesson 1 learned, it's worth it to pay for extra's outside the basic home inspection. Lesson 2 leaned, if the house has a tree in the front of it and is older it may have copper pipes with tree roots feeding on them and be closer to a complete blockage then you realize. Another warning sign you'll soon have sewer problems is if the toilet water levels change for no reason.
- 5yKristopher KyzarBusiness MemberRental Property Investor · Norfolk, VA · Member since 2017 · 260 posts · 174 votes
I got a 4/1.5 house under contract for $127,000 based on it needing about $20,000 worth of rehab, and an ARV of $205,000. I never verified the square footage because what I saw made sense. The owner said it was 1800 sf. The tax assessor had it at 1432 sf. Based on the addition of a large kitchen, I made the assumption that the size was correct. This size is what my ARV was based on. The HM lender did an appraisal, and never told me the appraisal came up short. The HM appraisal was $170,000. I only found out because I had to bring an extra $11,000 to closing above what I anticipated. The actual measured size was 1552 sf. OUCH! Luckily, the market is on an upswing, so I was able to list at $199,900. Accepted a full price offer. Here's hoping the new appraisal supports!
- Member since 2020 · 8 posts · 2 votes5y
I moved to a different city and had hired a friend to manage the property for me. He is a great friend but not the best property manager. He ended up changing careers and someone else took over the management. He had not checked on the property since the tenants paid rent on time every month. They totally trashed the place. I had to repaint the whole interior and replace all the appliances before I put it on the market. I was in a time crunch because I had 2 other properties under contract that were contingent on this one selling. I was using a 1031 Tax exchange so I had a lot riding on the first house selling. This put me in a bit of a bind so I took the first offer that came in because it was a cash offer that was a quick close. I probably could have sold it for more if I was not under the gun with the 1031 Tax Exchange.
- New to Real Estate · Richmond VA · Member since 2020 · 7 posts · 3 votes5y
Not my story but I know someone who bought a house that was a bad deal and he ended up living in it.
- Investor · FL · Member since 2019 · 42 posts · 17 votes5y
one of my biggest mistakes was not having the equity before earnest money went hard. i can share the story
- Real Estate Agent · Prior Lake, MN · Member since 2015 · 42 posts · 63 votes5y
I'm not sure if this issue counts as a mistake but it was certainly a lesson learned. In the past year and a half, I've purchase 3 properties / 5 doors. In 2 of the 3 properties, I've had a sewer pipe collaspe with water backing up into both properties. Each of the repairs cost me $5K to $6K each. I thought after the first incident I had learned my lesson. In the first property, I didn't have the sewer pipe scoped during the inspection. So in the second property, I had the sewer scoped and the inspector found a potential area of concern but there wasn't a full blockage in the pipe. Since we were investing $20K in the rehab on the second property I choose not to make any repairs to the sewer line until it finally collasped. Well 5 months in the bill came due on the second property. #lessonlearned
- Flipper/Rehabber · Houston, TX · Member since 2020 · 87 posts · 59 votes5y
@Boone Tyson On the insurance, the agent who sold the policy might be liable for not selling what you actually needed. The agent has Errors & Omission insurance for things like this. It’s worth looking in to. I am a public insurance adjuster, so insurance is what I’m familiar with. Also in Texas. Hope you can get it worked out.
- Specialist · San Antonio, TX · Member since 2012 · 462 posts · 294 votes5y
I would just like to thank everyone for making me feel so much better. I am not alone in making myself look like a jackass.
So many failures over the years and even someone who has a tremendous amount experience, still make mistakes from time to time.
i have way too many stories, but honestly, many are similar...
As they say, you learn a lot from losing and I will say, I am an expert at losing. It's what makes me better.
How?!?
.Because I know what definitely doesn't work and that makes me an asset.
Just my two pesos,
"Big" Henry
- Real Estate Agent · McAllen Texas · Member since 2018 · 188 posts · 186 votes5y
@Shelby LeBlanc Had a call with my attorney this week and it sounds like I will still be liable for the mistake. I should've paid more attention
- Flipper/Rehabber · Houston, TX · Member since 2020 · 87 posts · 59 votes5y
@Boone Tyson Sorry to hear this. An Agent’s duty is to understand your needs & provide the proper coverage. They are expected to know this as the perceived expert. An insurance litigation attorney is the best to ask. Merlin Law Group only handles insurance related cases.
- Member since 2020 · 9 posts · 4 votes5y
@Aaron Mazzrillo what’s the biggest deal you’ve done? Total units wise.
- Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes5y
Originally posted by @Taylor Santoro:
@Aaron Mazzrillo what’s the biggest deal you’ve done? Total units wise.
I bought a 65 Space mobile home park, then sold it 4 years later for $1M more. I was in escrow on 200 units in Tuscon, but the deal was a bit stinky, so I stepped out. Not sure if the other investors closed it or not. I'm currently converting 4 small office buildings into 4 duplexes consisting of 8 one bedroom apartments. Total rehab is budgeted at $350K.
If you listen to the podcast I did on here a few years ago, Show 37, not much has changed in the way I do business. I run more of a development company now, but we still work very few hours a day, only a few days a week, and invest more of my time enjoying my days than crunching numbers.
- Member since 2020 · 25 posts · 21 votes5y
Water can do a lot of damage really quickly. I had one issues where a tenant had the water turned on and they were not present when it was turned on. There was a nice leak under the sink which lightly flooded the kitchen and living room. Luckily it only cost me some time and some carpet but it could have been worse. This was completely my fault. I was the person who changed out the kitchen sink faucet. But I have since learned some lessons.
1. Get a water key. This way you can briefly turn on the water at the meter and check any work you have done.
2. Make sure you know where the main water shut off (not the meter) is located and show your tenant. Having a tenant who can turn off the water in an emergency can save you a ton on repairs.
3. If a new tenant is moving in and the water is off, turn off the main shut off as well. This way they will have to be present when water reaches the house. Plus they will have to know where the main shut off is located and how to operate it.
4.Those shower heads with the hand held sprayer are the enemy. People will soak a whole upstairs bathroom till the down stairs ceiling if falling in just from negligence. Then they will call you to look for a leak that doesn't exist.
I have tons a bad storied involving water from negligence, to stupidity (some times my own), and even down right sabotage.
So what ever you can do to mitigate it is a WIN!!! - 5yJorge VazquezBusiness MemberReal Estate Broker · Tampa, FL · Member since 2017 · 1k+ posts · 680 votes
One of the biggest mistakes that happened to me was about 15 years ago when I bought a property taken away from a prior primary buyer, not paying the mortgage. The property has been with them for generations. I closed on the property without any insurance, thinking that I will put insurance later that day after closing on the deal since it was a cash deal, a cheap deal under $40,000, so I didn't mind or was not concerned with not having insurance at the moment. Well, the day after closing, the former seller try burning the property down. He started a fire in the living room that did not thankfully burn the whole property down. So I decided not to look back and add to the rehab budget, fixing the house's burn area. Once I was done rehabbing it, almost ready to put it on the market, the previous owner returned to the property and burned it down completely. At the moment, I wanted to have insurance, but because of the incident, no insurance company will give me coverage anymore, so I lost my investment completely. So my advice is always to get insurance no matter how cheap the property is or how quickly you believe you will have the property for.
Graystone Investment Group4.6268 Reviews - Investor · Hendersonville, NC · Member since 2013 · 754 posts · 281 votes5y
Mine is investing in a condo that was only 15 months old. After it aged 35 months, we realized we had major construction defects. Tho idiots went so far as to install window flashing upside down, if you can believe that #hit. Seven long years later I sold, and there was a $60,000 special assessment I had to pay to even exit. Nightmare overall.
I even passed up a steady-Eddie syndication fund of 3 Class A/A+ properties in center business districts because they were less than a year old.
One good thing rehabbers have going for them is that they are always looking at aged buildings. The bad news is that you can't see behind walls, but maybe with an infrared camera you can do that 1/3 of the way. What you CAN see is construction defects and deferred maintenance and other time bombs.
- Attorney · Springfield, MO · Member since 2016 · 39 posts · 22 votes5y
This didn't happen to me, but it is still the most significant mistake I have witnessed in real estate. Clients attempted to daft their own "contract for deed" with a seller to purchase an apartment complex. It was a literal train wreck. First, the seller refinanced the property after the "closing date" since he was still listed as the record title holder. Then, the seller continued to act as though he was the real owner of the property. He threatened tenants and even demanded that they pay him rent instead of the buyers. Even worse, he re-listed the property.
- 5yMatt StricklenPro MemberInvestor · Austin TX · Member since 2020 · 224 posts · 152 votes
The disincentive to this post is everyone who thinks they've been invited to do the post mortem on behalf of those who chose to share.
- Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes5y
What an unfortunate situation @Justin R. I'm glad to hear that consumer protection laws have passed since, hopefully making it more difficult for this to happen again.
- Virginia Beach, VA (Virginia Beach) · Member since 2020 · 17 posts · 1 vote5y
@Jay Hinrichs you have so much wisdom I mean your response is gold!!!!
- Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes5y
Rented to a tenant who wanted to move in right away. I still did a background and credit check, but I did not check references. They moved in that night. Next day I find out WHY they were so eager to move in that night. After I got them out 6 weeks later, it was even more obvious what their scam was. BUT....I scammed them not the other way around. I got to legally keep their money. My lease structure and the state law on property abandonment and rent being mine when they abandon was key. Month to month leases only!
Another time I had a tenant move out in the middle of winter. It dropped to 9 degrees Fahrenheit. The galvanized pipes stopped working. 4.5K for replumbing the house (1 bathroom, kitchen, water heater and washer) plus 1K for drywall and paint...and I had just painted....
Hiring contractors....without a contract that stipulates the terms of the deal.
Luckily most of the mistakes I read today were 5-10K mistakes, that's easy to swallow but not ideal. At least it's easy to swallow once you've been in this a while and realize how much money you can make/make.
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