Lessons from your worst deal

[Kevin Semenas]

Hi Bigger Pockets Forum!

2019 was a learning year for me. I read a few books, made some connections, and continued working my day job.

In 2020 my goal is to purchase a single family/ duplex in Southeast, WI and learn a TON from it.

I boxed for 4 years in my late teens and early 20s. I realized a newbie in anything (especially boxing) learns better and quicker once they get knocked down and face adversity.

After getting knocked down I improved quickly as I knew exactly what failure/pain felt like. I learned more from one hard punch than I did in a year of training from a professional coach.

I started working on my speed and defense. When I improved on these areas, it took me to the next level.

How did you get “knocked down” in Real Estate Investing?

Instead of quitting, what did you change/ improve as a result?

-Kevin

[Marcus Auerbach]

I have been buying and rehabbing properties now for over ten years and I have made many mistakes, but never really got knocked down. The worst deal was probably a forclosure that I bought in 2012 and it needed extensive work - at the time we had already gotten good at rehabs and I got a little too confident with what we can do and I took on a house that was in really bad shape and needed a huge amount of work. 

Our usual rehab for a SF would run around 40k to 50k and I burnt through that number and we had not even started to drywall yet. I remember one evening talling up all the invoices and we were in excess of 75k and still not done. It felt like a sucker punsh.

What went wrong? The issues was not that it needed basement work, that we had to move the staircase to a better loaction, that it needed a roof or that it also needed a new driveway - we knew how to handle all these things and had done them before - the problem was that the list was too long.

It's a little bit like grocery shopping and you wonder how the heck did I just spend $160 and you look on the receipt and there is nothing really expensive - it's just a really long list.

The good news is that the house turned out great, the value has increased since and more than made up for the massive remodel bill and it cashflows very well. 

Compared to flipping, which is brutally black and white on profit/loss, buy & hold is a very forgiving business model, it's almost hard to screw it up and time will cure almost every mistake.