What was your biggest mistake investing?

36 Replies

Thought some of us could learn from others mistakes here. Are you all willing to cop to your mistakes? Let us learn from your small misfortunes.

So: What was your biggest mistake investing?

so far, not buying a condo in NY, LA, or Miami 3 years ago. Man I wish I had 2o/20 foresight!

As a property manager for 40 years, the biggest mistake is thinking that being a "landlord" is easy....that purchasing the RE is the hard part and that the rest is downhill.

Newbies who go to Staples or Office Depot, get a generic lease, put a sign in the yard and get blinded by the CASH flashed at them by the applicants who smell the "new landlord" on them.....and then they don't see any more money for 4 to 6 months.

I agree w/Brent....

My ONLY regrets have been the "NON-Investments";
On MANY occasions I thought buyers/Borrowers had LOST THEIR MINDS
until the APPRAISAL came in....Gulp;
My bad :violin:

The thing about "investing" is You gotta DO it!
Otherwise U're just "watching" or doing "research"?
I've made a fortune on that which I actually stepped up to the plate & BOUGHT.....

All my "bad experiences" are related to "Eating Crow" :cry:
(& it tastes NOTHING like chicken) :violin:
& NOT having taken that swing...only 2 later find out that the property was worth 2x...< 2 years later?
dang....who'd a thunk it?

The actual BUYER(S) maybe?

I agree with you completly mortgageman. It is so easy to come up with excuses for action. Everyone does it. I regret most the occasions I did not take action when I knew in my heart that action was needed. Fear overcomes you and then come the reasons not to.

Taking risks is the only way to go in life. I'm not talking about being reckless, just making moves when reason sometimes tells you not to.

Likewise, my worst mistakes have been those of inactivity.

I once passed on a 3 unit residential that was going for 35gs. It had strong renters in it totally more than $1,000. mthly rents. The seller was willing to do what ever I asked even allowing me to structure a no money down deal. The only draw back was it had an old octopus furnance system in the basement which, at the time was functioning well and needed no immediate repair. It was a profit cow! And too good to be true! When I asked my agent why it was going so cheap and why was the seller such a push over, he replied; "She's an elderly woman that is wanting to just put some of her affairs together before passing." My reply to him was, "Sure! and after this transaction is over, the two of us are going to buy one of the reactors at the nuclear site, (which was where both of us were working at the time)." I was living in Illinois at the time and real estate offers automatically expired after so many days of not replying to a counter-offer. Needless to say the little old lady passed (God Bless Her Soul), shortly after the expiration of my offer. My advice is like the lottery....You gotta be in it to win it! If you have done your homework, trust your gut!

There's a great passage in the Bible 2 Kings 7: 3-9 about going for it!

So inactivity is the common theme so far. Interesting. Anyone have other mistakes we can get something from? TY.

Originally posted by "marks":
So inactivity is the common theme so far. Interesting. Anyone have other mistakes we can get something from? TY.

Ty,
That's about the ONLY "mistake" You can make?

Title Companies & Real Estate Attorneys Provide You with Title Insurance,
they alert You to "clouds" on title (or anything that COULD Be a problem that the seller neglected to "mention";

Home/Structural Inspectors give You a size up of repairs needed,

Apprraisers give You an accurate valuation of the property & marketplace (& also point out any obvious structural or neighborhood problems)

With an appraisal, You'd KNOW Whether You were potentially paying too much or not....

There isn't too much left except failure to follow thru after purchase in the case of making needed repairs?

About the only thing any investor needs to know is that AFTER You close...everything else that CAN go wrong(in the rest of Your life) WILL!. The engine will have problems in Your wife's car, tenants will move out in Your other rentals, prices will go up for repairs, hurricanes will come....blah,blah,blah....figure DOUBLE Your original time frame on repairs, ALWAYS.
Figure 1/3rd higher costs than quoted estimates, BORROW accordingly.
BE the BOY SCOUT.
I have, I PREACH it to my borrowers/buyers/investors, & every operates under the "Be Prepared" philosophy;
Do these things, & I doubt You'd ever have a "catastrophe".
Trust the experts & LET them do their JOBS!
If You do, Your "job" of making money becomes incredibly easy (& hard to scre*w up)
Hoping I helped U get a bit closer 2 that 1st one;

Originally posted by "dcg123":
Likewise, my worst mistakes have been those of inactivity.

I once passed on a 3 unit residential that was going for 35gs. It had strong renters in it totally more than $1,000. mthly rents. The seller was willing to do what ever I asked even allowing me to structure a no money down deal. The only draw back was it had an old octopus furnance system in the basement which, at the time was functioning well and needed no immediate repair. It was a profit cow! And too good to be true! When I asked my agent why it was going so cheap and why was the seller such a push over, he replied; "She's an elderly woman that is wanting to just put some of her affairs together before passing." My reply to him was, "Sure! and after this transaction is over, the two of us are going to buy one of the reactors at the nuclear site, (which was where both of us were working at the time)." I was living in Illinois at the time and real estate offers automatically expired after so many days of not replying to a counter-offer. Needless to say the little old lady passed (God Bless Her Soul), shortly after the expiration of my offer. My advice is like the lottery....You gotta be in it to win it! If you have done your homework, trust your gut!

There's a great passage in the Bible 2 Kings 7: 3-9 about going for it!

wow what a lucky timing!

Mortgageman, I guess you're right here. When you think about it there really aren't too many ways to make mistakes if you've done your homework. Oh well - time to get busy investing, right? :groovy:

I guess I'll jump on the bandwagon here. I guess the mistakes I remember/regret are basically the props I never got into and watched rise in value beyond my dreams. It takes a bit to figure out, but I get it now.

Hehe nice to see you around again Cash! I would like to hear some real mess ups, though, wouldn't everyone else? It's like watching a car wreck or something. Fascinating to hear about/see!

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Regret? Me, too. 4 years ago, I came home from a seminar and executed my plan--EXACTLY 30 days later, I closed on a wholesale that made me $14,000 "Using None Of My Own Money!" just like in the commercials.

I then dusted myself off and went back to work with a partner I grew to hate and in a business that never made much money.

It sickens me to think about where I would be right now if I had left my firm THAT year like I did last year!

Oh, well, a year after going out on my own, my income is up, my overhead is down, and the sky's the limit!

Fear IS the mindkiller.

Ok here some advice I learned the hard way. I was moving to Houston and needed a house to live in. The Woodlands, which is north of Houston seemed like a nice place and it still is. Coming from Europe I was not used to these subdivision builders. So I look at a few houses and decide to buy from one builder. The house was under construction already and the move in date was exactly when I needed to move there. OK so far so good.

This was one of the last houses to be built in that sub, so no more building noise etc...

Here is what happened after 2 years when I needed to sell.

1) The builder had relocated to a subdivision close by and was still manufacturing the same style house and floor plan I had bought
2) There were only a total of 3 different types of houses on my street
3) For some reason and I think because the community was not organically grown there were 20 homes on the market, so I was competing with 7 other identical homes. Yes, there were minor differences but basically the same.
4) The builder was undercutting his own product. He sold new construction with greater incentives than wat he sold me my house just 2 years ago.

Here is what I think:

1) I will never buy another property where I will be competing soly on price when it comes to selling. With custom-built homes there is ever only one home of that style. If a potential buyer likes your home he cannot just play you off against the guy down the street that owns the same type of home. He likes and wants your home he has to negotiate with you and can't play 7 other owners against each other.

2) Expect large turnover in not organically grown communities. Here is what I think is going on. Somebody builds a subdivision. To fill all the houses with families it takes families that are mobile, otherwise they would not move in the first place. The fact that there are mobile families moving into this brand new subdivision will almost guaranty a high turnover in the future. After all they are mobile and will likely stay that way. That means a lot of competition for the same buyer in the future = lower sales price

3) With a custom home the market determines your sales price. With a cookie cutter home it is not only the market but also the developer. He has a certain profit margin built into his product. For whatever reason (he lost money in Vegas, he is a bad business man) he can find himself in a position to be forced to reduce the prices of his product. So not only the real estate market determines your sales price but a completely new kind of influence that you have again no control over. The developer. As long as he is still manufacturing the same style of house in your area you are exposed to factors that influence the developers pricing strategy. And you will have to compete with him when it comes to sell your house.

So I learned my lesson, cost me $20k and I think it was better that I learned that lesson early on.

By the way I am now a realtor/investor in Aspen Colorado.

Here is a short list

1. lack of knowledge about rehab 4fam 135k needed about 10k in work.

2. lack of knowledge in management-fell for every story

3. Lack of knowledge of court system- In most states court holds rent in escrow. tenant cant claim any repair or avoid eviction until rent is secured by court.

4. Lack of knowledge of how to price-had equity didnt know what to do with it.

5. Almost forgot. Ivest your profits back into your house

The key to investing is knowing what youre getting into, and if you dont........ASK SOMEBODY WHO DOES! HAVE A TEAM!

Remember also this is a business! Just like any other business you have to protect your assets and strive for profit. If there is no profit. FIND SOME OR MOVE ON!
I learned my lesson the hard way.

Trusting that private investors actually have the cash they say they do!
Always do your homework!

I've made a few mistakes, none of these recently, but I've made them:

1.) Passing on properties I should have bought.
2.) Selling too soon.
3.) Not reinvesting the proceeds of a sale (1031 exchange).

As long as you learn from them, it's ok.

Not keeping up with the deals.

1. Allowing the Title Companies to drag deals out way too long. 6 months plus. You have to realize that you are the one that is about to make the 60k plus and other than the $250 that you paid them to start the title search what is thier vestied intrest? Maybe making another $1000 or so? Stay in control every step of the way.

2.Not letting a deal die when it should!

3.Choosing the wrong markets and neighborhoods to start investing in.
You want to spend all that time birddogging deals and putting them together for only marginal returns. ie i put a house under contract for $300 put $10 down but, it only had the potential of being sold for $2000.
Good return on investment? YES
Good experience? YES
Good use of my time to try and do this over and over? NO way.

My 2 sense

I have two. Wait, two hundred. I will only name two. Buying a house just to get that first one under my belt. I bought a home that was in a less than average neighborhood, paid a little too much for it, and then listed it $5K too high and sat on it for 6 months over the winter. I just HAD to get that first deal. What did I learn? Patience.

Two. I bought a home from a lady that was a pack rat EXTREME, and gave her two weeks from closing date to move out knowing full well that she wouldn't be able to in that time frame. I ended up evicting her and not able to get into the house for 3 months. I HAD to get that second deal. What did I learn? Patience.

In the beginning I felt like this was a race and I now realize it is a marathon. Let us all be......... patient. :beer:

Hands down I can say the biggest mistake I made was.....

I GOT GREEDY

It's easy to do and it's sad to see nearly all investors at some point get sucked in by the all mighty dollar.

Keep your retail sales price in a bracket that 80% of the buying public can qualify for and don't buy any property for more than 70 cents on the dollar (exclude long term rent properties).

Jim Watkins
www.dfwmentor.com

I keep re-reading this topic to see what else I can pick up. Lots of good mistakes! I really wanted to just try and revitalize the post and read more interesting stories. Don't be ashamed! Share with us.

Aside from the regret factor, one of the biggest mistakes I see made by many new investors (it is also the same mistake that many primary homeowners make) is not planning the financing aspect of their deal. They don't get their financing pre-approved so they don't have any idea of what they can afford to buy or even what their options are. Then they go out and find a house that they really can't afford yet and they get into trouble trying to pay for the loan.

My advice for newbies:
-Do your homework (get to know the markets you want to buy in; know what you want to buy and why)

-Put a good team of professionals together to work with
-Straighten out your finances and get your financing pre-approved before you buy.

My biggest mistake has been believing ANYTHING said by ANYONE other than myself (and other members of this board).

Examples;

Here's the first month's rent and 1/2 the deposit now, I'll bring the rest when I get paid on Friday.

CORRECT RESPONSE (ie; not always the one that I did at the time): Fine, you can have the keys when I get the rest of the money

Oh the bank will never accept an offer that low, we've submitted other offers and they've never responded to any of them.

CR: Then put in a clause that they must respond to our offer with 3 business days.

I can't pay the full rent today, but I'll pay you two months next month.

CR: OK that's fine, but in the meantime here's your 3 DAY NOTICE TO CURE, if you get both months paid before the judge evicts you, you'll still be here.

OK, we're all moved out, except for a couple of boxes in the garage.

CR: Fine but your rent continues until you're ALL MOVED OUT and we can't do your walk through, and you'll notice that your lease calls for a penalty of $30/day plus normal rent for "holdovers".

Just a few.

all cash

Refis where lenders jacked the points up on closing day. $$$ which I never felt like I recouped.

Not reinvesting profits.

Bought a duplex with a cottage in the back yard which turned out made the financing very unconventional causing me to have to search for a lender who would do the cottage as a portfolio loan and bear another closing for the duplex. Two attorney's closing fees, etc. etc. Forced bad judgement.

Buying a triplex 6 months later and not checking to see if the grandfather certificate was in the file allowing continuous occupancy in the triplex. Neighbor complaint forced research of former owners/affadavits of continuous occupancy since 1970 to satisfy local zoning folks....plus lawyer fees to make the necessary calls. Everyone buying a multifamily property should make sure that grandfather certificate is produced or obtained before signing a contract. Won't make these mistakes again.

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