Learning: NEVER sign a contract if you are not comfortable with the contents, no matter how bad you want the property.

I was a typical BP newbie. Searching for financial freedom, I stumbled upon rental properties as investments and soon I was at the doors of Bigger Pockets. I signed up for Brandon’s webinars and got hooked to the passion in the BP community. I read up the Ultimate Beginners Guide, and read up starter books recommended. I listen to podcasts like crazy, made my car my learning university. I have some savings and so I decided to start investing in multi family units.

I live in Bay Area in California, and it’s nearly impossible for me to start of investing in my area. So I decided to look outside. I have family in Tampa area and it is one of the growing places in the country. I research on the geography and find a decent 4-plex to invest in. Numbers made sense on paper, based on certain criteria I had set for myself. I quickly realized the property was not managed well and they did not care about raising rents. There was significant room to improve rents ($150-$200 per unit). I had built a good relationship with my agent over couple of months. He helped me walkthrough the property, took videos for me and gave me a good visual. We made an offer and decided to go into the contract.

One of the units needed some minor repairs (new flooring and some paint, about $2k worth of work). I decided to do the repairs and increase the rents once I buy the property. Seller had other ideas. This unit was at end of the lease and they decided to fill in the unit “as is”. There were a lot of applications already to fill the vacant unit, so the seller wanted Rent + Deposit in case the deal falls through. I was confident of making the purchase so I agreed to the clause. Mistake #1.

We put contingency in our contract that if inspection reveals something of not my liking I back out. What we did not explicitly put was backing out from the clause too. My agent said the contingency covers the clause as well even when it is not explicitly. I agreed. Mistake #2.

We got an inspector, he gave us the list of things needed fixing and seller wouldn’t fix the items I needed fixed at the minimum. Contract fell through and we learn contingency doesn’t explicitly state the ability to back away from the clause. I felt a punch me in my stomach and I couldn’t even fight back! I failed my first deal, because I lost money even before I acquired the property.

Learning: NEVER sign a contract if you are not comfortable with the contents, no matter how bad you want the property.