First substantial loss

48 Replies

I have closed a property yesterday that I took a hit on... it was my first loss in 3 years and over 250 transactions that I funded.

Take away...

 BP member good talker bad in execution.. I went and met with him in Atlanta again talked good game... But I got a little greedy I will admit and I tried a scheme that was not known or proven to me.. and he failed miserably.. I ended up taking over the project. One shinning light is I met a nice RE agent in Atlanta who went above and beyond to help me sell this property...

So my record last 3 years is 249 +  1 -  but it was not a wipe out but it was not 500 dollars either.

be careful out there just because someone is on BP does not an expert make or create a person of great character... Having been a HML for almost 30 years I have had it happened before and I usually have a pretty good sense of who to do deals with and who to avoid and most of my Vendors I have known for 10 plus years... So I will be more diligent if I bring on a new vendor again.. and for sure will not get lulled into thinking being on BP is some barometer of well being LOL... myself included.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Jay,

Ouch. Even after 40 years in the business, you're still a victim......occasionally. That goes to show that newbies should hang on tight to their wallet from solicitors on BP. Sometimes, I feel we should have a wall of shame on BP so these.....what should I call them...shysters don't take advantage of newbies. 

Based on my observation, you're one of those individuals that will do a deal on a handshake. Unfortunately, you shook the wrong hand this time and got an electric shock. LOL!!! 

Better luck next time sir. 

Thanks for the words of warning! It's good reminder to those of us that are enthusiastic but less experienced that even very seasoned investors lose money sometimes, and that you need to be very sure of who you're working with. Some of the best talkers are just that- talkers.

Medium team zen logo vJean Bolger, 33 Zen Lane | http://www.solidrealestateadvice.com

@Minh Le   that about sums it up for me .... but I do control the deals and have the experience to take them over.. its the one's that do not have experience and or trust the wrong folks that can get wiped out.. their is another BP member who is stuck with this same guy I went and looked at his home when I went and took control of mine and his is a wipe out he will lose 90% of his money and the guy keeps leading him on..

I don't name names I just move on... I also funded 6 deals yesterday and got paid off on 3 more.. so I closed 10 transactions yesterday.. this loss is a minor irritant.. but I did want to share for others on BP to be careful out their.. lots of newbie wanna be's with good intentions but good intentions still lose an investor capital... but here are great people on BP as well ... our job is to figure out who is who !!!!  And as you state when I find a good one I will change their lives ( make it very busy and make them a lot of money )  :)

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

@Jean Bolger when I had my HML shop I had an Accurant account and they had a mortgage fraud detection module.. you can't believe those folks that made loan requests form me and I ran them through that and they were not what they represented...

the module had a speedometer green was good yellow needed more verification and RED was bad .. public records indicated all sorts of issues.

My take away on this one also was I hung in their with him to long trying to let him rectify and I broke another of my rules.. IE it never gets better with time.. cut and run the second you see the deal not working...

However for a smaller investor this could be painful.. for us like I said its really nothing on the monetary side its more just something that is irritating and another lesson learned, never to old to learn lessons. 

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

@Jay Hinrichs Sorry to hear about your troubles, and it is certainly a warning, especially for beginners. That is personally why I caution people to be conservative and always have their finances in order. One bad deal can destroy someone who already was in bad financial shape.

[email protected] | 402‑965‑1853

@Anthony Gayden no worries on my end the loss represents about .01% of our income or less.. its not the money its nothing money to us.. but to another investor it could be devastating.  for me is piss's me off more than anything else.. and I like to bat 1000... not 999....

This Other BP member though he is really in a world of hurt I think the loss may represent most of his liquidity it not a great portion of it.. and that is the take away... be very very careful who you do your business with no matter were you are or what your trying to accomplish.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Thanks @Jay Hinrichs for the cautionary tale.  Appreciate the word of warning.  Sounds like you limited your risk by starting off with someone new to you with a relatively smaller deal for you (which might be a bigger deal for others), meaning that you wouldn't be significantly hurt if the deal went south?

@Jay Hinrichs thanks for the honesty and words of caution.  It's not that often that we see investors of your experience & reputation talk of much loss. It's definitely a lesson for those of us who are less experienced. 

@Chin P. Exactly what I do... if someone is new to me.. but it was also a new scheme that sounded good.. but I should have known better.. knowing the rental pool as well as I do I should have known this would never work.. but they don't call me Mr. Blue SKy for nothing everything is great to me until it is not.. :)

@Minh Le   and Minh probably knows this one.. our core group of foreclosure buyers here in PDX we were pretty tight knit even though we competed.. and if a guy was short on something he really had IE he had checks for something that did not go.. but needed funds for another it was nothing for us to hand over 100 to 300k cashiers checks to let them buy it then meet them at their bank and get repaid... and maybe they buy me a beer for doing that.  we did it more frequently than one might think.. But that was my own money not investor funds.. I would never do that with investor funds.

All my deals I do I own the Asset out right 100% no partner has a claim to them other than for their services.  I don't loan money on the asset or to the person so at the end of the day I can just move on if I have like in this instance a bummer.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

@Carrie Giordano   I think it goes to human nature.. especially on a public forum .. you really only see the success stories or at least 95% are success stories.. those that failed well they generally are not going to post about it.. they have either been wiped out and are no longer in the business... or they just don't want to admit that to the public that they had a project not work out the way it was intented.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

I hate to re-learn old lessons, but have had to on several occasions.  As you stated it is not the money, but the embarrassment of knowing better and doing it anyway, thinking "it will be Different this time."  I remember the Red Skelton character the "Mean Little Kid" who used to say "If I dodit, I get a whipping, I dodit anyways"  

Yeah and just because you are a good poster on forums, doesn't mean anything in the real world.  On a couple other forms(not real estate related) we have a couple of "experts" that never show the work , good or bad, but have a definative opinion on everything.  They talk a firestorm every time they try, they go away for a little bit, but always resurface.  

Thanks for sharing the lesson! 

I almost made mistakes like the one Jay is talking about but it just so happened I got to witness a good investor friend of mine get started on a project that he bought for $125K and had figured needed $30K of repairs and comps showed it would be worth $400K on the market. Just the ARV might have been true if he got the project done within 60 days but he believed someone that told him it could be done. Well short story is the project took 2 years to complete and $325K in rehab costs and the house appraised for and sold for $325K, Yup !! now take from that agents commissions of 6% and you end up with a 6% loss and two years down the tubes.

I won't go into all the warnings I gave my friend and how I tried to talk him out of doing that project at that time of year or in that particular real estate market but suffice it to say that experienced investors sometimes will believe things will somehow work out, I mean they have to work , right? hehehehehe. By the way my friend was one of those type of real estate investors that knew everything and has seen it all. He was 80 years old at the time, owns about 20 properties and of course is a multi-millionaire, been in real estate since coming home from the Korean war. It happens folks !!!

That particular house could have been torn down and a band new house built for $240K and taken far less time to start and finish. We live and learn. I only observed it but I will never forget the lesson learned about knowing who to do business with. 

I think good advice for any business associations is walk before you run. BP has no filters. Start working with someone small on a wholesale. I usually only loan to proven and reputable flippers and builders and stay away from loaning to less experienced investors. I don't even wholesale to newer investors because a good project can go wrong with the wrong execution and then I end up being the bad guy even if it was a good deal.

@Jay Hinrichs   thanks for sharing, I had committed to fund a buy, fix, flip for a "great talker" but he/she kept stumbling on the way to documentation and communication SO I PULLED THE PLUG LAST NIGHT! all the Green lights had turned Yellow and I was seeing RED. One and done. 

Redeployed those funds on another deal this morning with a flipper with hundreds of deals under his belt that I have been building a relationship over the last year. We finally had a mutual need. I suspect we will work together for years to come. That's a good outcome for everyone. Persevere.

Thanks 

Don Harris, Jamison Realty Keller Williams | [email protected] | 704‑962‑0979 | NC Agent # 289021

@Jay Hinrichs Thanks for the heads up - this is a great reminder for all.

Continued success in your investments!

-Ben

@Ryland Taniguchi   If the deals are within 20 minutes of my home base I will sometimes take on someone with their first project.. but I watch it like a hawk and I don't loan I take title. so if they butcher it I can just pick up and go.. plus I have all my own crews and subs as I am building new construction in this market.. but for a passive non experienced lender this can be very very dangerous.   Are you familiar with Vestus up your way ?  And East side funding?

I

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

@Don Harris   sometimes you just have to pester the better players until one day they wake up and they realize they are losing deals and they look at it as opportunity costs.

I get that frequently...

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Originally posted by @Jay Hinrichs :

I have closed a property yesterday that I took a hit on... it was my first loss in 3 years and over 250 transactions that I funded.

Take away...

 BP member good talker bad in execution.. I went and met with him in Atlanta again talked good game... But I got a little greedy I will admit and I tried a scheme that was not known or proven to me.. and he failed miserably.. I ended up taking over the project. One shinning light is I met a nice RE agent in Atlanta who went above and beyond to help me sell this property...

So my record last 3 years is 249 +  1 -  but it was not a wipe out but it was not 500 dollars either.

be careful out there just because someone is on BP does not an expert make or create a person of great character... Having been a HML for almost 30 years I have had it happened before and I usually have a pretty good sense of who to do deals with and who to avoid and most of my Vendors I have known for 10 plus years... So I will be more diligent if I bring on a new vendor again.. and for sure will not get lulled into thinking being on BP is some barometer of well being LOL... myself included.

 Ugh, sorry to hear about that Jay.  Let me know if you need any boots-on-the-ground assistance here in Atlanta.  Also, I don't normally use my realtor's license except for my own investments, but if you have a need to list a property, let me know. 

David Begley MBA, Begley Capital Investments, LLC | [email protected]

@David Begley   Thanks for the offer David... I met a very nice Realtor who really did a nice job helping me... I sent you  a PM with the details...

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Jay: I had a guy approach me in Oct of 2012 wanting a HML. He was doing a flip. Seemed like a nice guy. Maybe he is...but made a VERY bad investment. Fortunately, the loan I did was on a different property that was free and clear. Bottom line: He lost over 50K. He defaulted on my loan. I got my money and it cost him a few extra thousand in legal fees but ...it was a PITA. He finally sold the flip in May of this year. His carrying costs were over 20K a year not counting the 1st of 250K he got when he purchased the property. Sometimes intentions are good but lack of education, research, experience, etc can ruin the deal. Thanks for the post Jay.

No company avatar mediumJohn Thedford, John Thedford | 239‑200‑5600 | http://www.capehomebuyers.com

@John Thedford AS you can see by my avatar I am basically bald.. but in 07 when I was at the peak of my HML company I had a full head of wavy nice hair.

08 09  I had over 200 foreclosures on my hands in 8 states... and by 2011 I was fully bald.. kind of like a sitting president goes grey...

so yes I have a PHD in loan defaults and work outs.. and its who I got a PHD in mid west rental markets.. and all the associated risks with lower end rental properties.. LOL... its  a distant memory but one I will not forget soon or ever.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

@Jay Hinrichs you wife's hair makes up for it :)

I am not far behind you (hair wise):)

wish I had your 100 years of experience in the business:)

No company avatar mediumJohn Thedford, John Thedford | 239‑200‑5600 | http://www.capehomebuyers.com

Originally posted by @Jay Hinrichs :

@David Begley  Thanks for the offer David... I met a very nice Realtor who really did a nice job helping me... I sent you  a PM with the details...

 Good, I'm glad you found a capable realtor.  Since I only use my license for my own investments, I'm sure the person you found could do a better job at marketing than I ever could.  Glad you got out relatively unscathed - it could've been worse I guess. 

David Begley MBA, Begley Capital Investments, LLC | [email protected]

@Jay Hinrichs

Thanks for sharing your story and warning.  Sorry you got hit this time and more sorry you lost your perfect record and to a fellow BP member stinks.

Someone else mentioned that we wish there was a list that we could reference.  Maybe the site won't let us name the bad folks, but how about if we had a list of at least good ones.

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