Forgive the lost post.
So this just happened. I'm an investor based out of Miami and am currently in the middle of my first buy and hold deal which is currently under renovation with the hopes of making it a successful BRRRR. I had landed this deal by sending out some direct mailers a few months ago which put me in contact with a somewhat motivated seller who had multiple properties that he was trying to unload. I really liked one property because it was in a nice up and coming area and had very close proximity to downtown. The problem with it however is that as I did my walkthrough with my inspector it became obvious that it wasn't in as great a condition as the seller had led me to believe.
There were issues with termites, the electric was really not up to code, the HVAC was complete trash, there was mold, and the inspector had doubts about the health of the roof because he couldn't get into the attic to inspect it because it had been sealed off apparently for who knows what reason. Altogether I was looking at about 30k in renovations BEFORE we even got to the more topical kitchen, bathroom, and painting upgrades.
Because of the area I knew the property had an ARV of 150 and would definitely sell for 100K the way it currently stood. So after my inspection I showed the seller the results and told him that I would like a price reduction of 10K which would have brought the price down to 70K (we were under contract for 80K). He agreed but only if i would also purchase a second house which was not in as great an area but was structurally much better maintained for another 70K to which I also agreed
Now i didn't have the cash necessary to buy both houses but I agreed anyways thinking "If I've got the deals the money will find me". Anyways before i could send him the amendment to the contract for the price reduction he tells me he's got another buyer for the original property that is willing to pay 80K so he wants to at least get 75K from me for it.
NOW HERE IS WHERE MY REGRET COMES IN...... I KNEW that property was worth in its current condition 100K EASILY but I told him I would have to pass and only ended up buying the other house in the not as great area because I was scared about the overall condition of the first house and I didn't know what other huge problems might have been lurking that I wouldn't have been financially prepared to tackle during the renovation.
Anyways the other buyer was clearly a wholesaler. They also knew what the house was worth and as soon as I passed they offered him 80K for the house and SOLD it the very same day for 100K. Some else made a quick 20K dollars on a property that I could've made 25K had I kept it and done the same thing.
Obviously I applaud the other party for taking action and being successful but this really makes me question my business model of buy and hold if it seems you can make money faster wholesaling without any of the other hassles I'm currently learning through (renovations, tenant screening, refinancing etc)
I hear a lot of times on BP about staying focused and not following everything that glitters but it sucks thinking that I gave away 25K in easy cash. Has this ever happened to anyone else?
It happens all the time. It's "the one that got away".
My best advice: The best way to get over a lost contract is to get under another one.
Keep plugging along. The more contracts you dance with, the better you get at dancing. Just never forget who brung you.
On a different note. Losing 25k in profit sucks, but not as much as losing 25k in cash. One is paper money, an opportunity and you'll get more of those. When you actually have to put cash on the table, that hurts, alot.
If you felt you couldn't swing both.. then you made the right decision. To try and do both would have potentially cost you real money. You got some learning, but didn't lose your shirt... consider it cheap education.
Now, go find another deal or two or two dozen!
Hope that helps.
You lost nothing , but you gained an education .
Definitely not lost, just a missed opportunity.
Yeah, don't beat yourself up over that. Just consider it a learning experience.
As others mentioned, you'd really be kicking yourself if you got in over your head, either by buying both and running out of funds or by buying the first one and uncovering a massive renovation problem you couldn't see beforehand.
I myself experienced the same situation but I just went by and looked at what the investor did to the house (once it was finished and on the market) and it opened my eyes to some ideas I never even considered.
You'll come across other deals. Just keep "your" goals in check and take it one step at a time, it's easy to get in over your head.
I think that's one of the hardest aspects of being new to REI. It's hard to know when to 'hold them or fold them' and when you realize you should have held, someone else is already there, all on top of the opportunity that you missed.
It can be hard to be careful and fast at the same time, especially when you are new. This is especially true if you are a perfectionist like me. It's can be a deterrent to progress.
Kudos to Greg Grant ... for even stopping bye to learn from the deal he missed out on. Hopefully that's me one day. Life goals :-)
The good news is, you didn't LOSE the money. To lose it would be that you paid the $75K and opened up the attic to find Mold had taken up residence there and it was going to be $25K to remediate it ON TOP of the $30K renovations, only to find out that you could sell it for $105K.
I don't think you should be discouraged by this, but maybe your business model needs some flexibility. There will be times when you evaluate a property for a BRRRR, but decide through the process, that it could convert to a quick wholesale flip for a quick profit. There are other times when a buy and hold strategy is the way to go. The key is to be flexible, and allow the opportunities to present themselves.
My husband and I just did a beautiful flip that we got a trustee sale. Complete gut. However, when we got done and looked at the numbers, we were going to make more money by holding it as a rental. The cash flow in 1 year was more than we were expecting to get out of the flip itself. So, we opted to keep it.
You just never know until you look at the project, and the opportunities out there for it.
Best of luck to you!