What Hurdles Did you Face during Your First Deal

Phoenix, AZ · Member since 2016 · 74 posts · 17 votes

I'm curious as to what obstacles you faced going through your first deal? How did you handle them? Did they set you back or did you press through with flying colors?

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Jeff B.

Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes

We offered under a 1031 and the buyer signed a "Cooperation" agreement for same. V E R Y late in the process, there were all kinds of new demands, including $x thousand for a silent partner.

We were within 4 weeks of the 180days closing and this T*R* was attempting to extort more cash or fail my 1031. My exquisite wife found the seller from which our seller bought the propert - - OUCH, what an earful. We gave the contact info for the Escrow agent and suggested that a claim be made to get paid at COE. Our seller had defrauded his purchase in the same manner, extorting some 40K as a second and destroyed their 1031.

I send a nasty gram to the seller, his agent and my agent of the consequence of failing to close one time:

suite for specific performance (aka complete the transaction)
all tax liabilities attached to the 1031 would be sought as damages - - and that was 128k!!!
I would file with the Calif board of RE to take the licenses of both brokers as being complicit in the fraud.

After 4hrs of two lawyers from both agencies in the sellers home, the sale was consummated.

The escrow agent ask "Why didn't you just walk away?" I replied, the 1031 was just to heavy to ignore.

Moral: Know your rights and act BEFORE time becomes your enemy.

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Andrew Johnson
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
@Alexander Alguire Not to be (too) glib but getting my wife on board with the plan! It's a huge decision, obligation, investment, etc. and if everyone isn't on the same page you're probably sunk. I handled it by finding a relatively conservative property. Good area, far from the cheapest rent, etc. so our PM could (at least theoretically) vet for higher quality tenants. As a deal, it wasn't a home run or a strike out, just a solid dependable double. But I did go through the requisite panic attack when I had an accepted offer. Why did they sell? Did I pay to much? Will this really work? All of that fun stuff. So I just reran all of the numbers from scratch two more times.
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Alexander Alguire
OP
Phoenix, AZ · Member since 2016 · 74 posts · 17 votes
9y
@Andrew Johnson Thank you so much! How long ago was that and how many properties do you have to date?Is your wife pretty on board now?
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Andrew Johnson
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
@Alexander Alguire It was a few years ago and what's ended up bringing her is the tax benefits of being able to write-off depreciation and mortgage interest against the property income. We have 3 properties with a total of 36 units. That said, I think her DNA is always going to be oriented towards larger down payments, predictable cash-flow, decent areas, etc. So she has her comfort zone and I have to make sure that I (we) don't stray from that zone. I know that's counter to a lot of desires to "find a great deal!" but the definition of "great" is a lot more complex than just ROI.
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Alexander Alguire
OP
Phoenix, AZ · Member since 2016 · 74 posts · 17 votes
9y
Thats very fair, you have someone else in your life who is your partner in crime! Very cool that she is open to REI now though! Thank you for your replies and engagement! I would love to hear other's stories on this! @Andrew Johnson
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Stanley Parsley
Investor · Chandler, AZ · Member since 2015 · 409 posts · 214 votes
9y
first deal
everyone told me I could not do it with zero money
took a lot of work to find the right seller
made a deal at a restaurant on a napkin
1000 down 1000 a month
rehabbed the property lived in it and ran a business out of the commercial building and sold after two years with a 100000 profit
never let someone say you cant do this or that
enjoy
4 Reply
John Kesner
Investor · Reno, NV · Member since 2015 · 167 posts · 90 votes
9y
Alexander Alguire I bought my first deal in 2010 when lending was very tough. I had a partner and both of us had $50k/yr+ jobs and a 20% downpayment (total between the two of us) so we figured getting a $99k house would be easy. Wrong!! We ended up having to add both of our wives who also had $50k/yr+ jobs to the loan to make it happen! It all came together in the end after a few extensions to the close. I didn't realize how tight they were going to be so it was very frustrating. Now I wish I could go back in time and buy 10 of those houses, it was by far the best investment I have ever made.
1 Reply
Anthony GaydenPro Member
Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
9y
Alexander Alguire I faced hurdles due to inexperience. I had my first 4 plex under contract. I had just completed the inspection and appraisal and I had to sign a contract seeking a few minor repairs in the inspection. My real estate agent sent me a contract that I did not read and just electronically signed. I didn't realize it at the time, but she had checked the wrong check box, and said I wanted to back out. I got a panicked call from my RE agent explaining the problem and that I no longer had the property under contract. I was extremely angry and told her to immediately call and get the place back under contract or the $1000 I had spent on the inspection and appraisal would have been wasted. She calls me a couple of hours later and tells me that the seller is demanding $1000 more than my original offer. I am pissed because I knew it was still a good deal, so I agreed. There was only one problem. The appraisal came back at exactly the previous offer amount. So the bank wouldn't lend me the full purchase price. I had to come up with an extra $1000 on top of the 25% down payment. In the end I closed on the property and I still own it, but it taught me a lot of lessons. Always read what you are signing.
Podcast Guest on Show #21
3 Reply
Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
We offered under a 1031 and the buyer signed a "Cooperation" agreement for same. V E R Y late in the process, there were all kinds of new demands, including $x thousand for a silent partner.
We were within 4 weeks of the 180days closing and this T*R* was attempting to extort more cash or fail my 1031. My exquisite wife found the seller from which our seller bought the propert - - OUCH, what an earful. We gave the contact info for the Escrow agent and suggested that a claim be made to get paid at COE. Our seller had defrauded his purchase in the same manner, extorting some 40K as a second and destroyed their 1031.
I send a nasty gram to the seller, his agent and my agent of the consequence of failing to close one time:
- suite for specific performance (aka complete the transaction)
- all tax liabilities attached to the 1031 would be sought as damages - - and that was 128k!!!
- I would file with the Calif board of RE to take the licenses of both brokers as being complicit in the fraud.
After 4hrs of two lawyers from both agencies in the sellers home, the sale was consummated.
The escrow agent ask "Why didn't you just walk away?" I replied, the 1031 was just to heavy to ignore.
Moral: Know your rights and act BEFORE time becomes your enemy.
6 Reply
Anthony GaydenPro Member
Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
9y
Alexander Alguire I should mention that my first property is in Phoenix.
Podcast Guest on Show #21
1 Reply
Christopher Bowie
Real Estate Agent · Spring, TX · Member since 2017 · 10 posts · 6 votes
9y
I am researching properties to finally select my first deal! Little nervous.
1 Reply
Alexander Alguire
OP
Phoenix, AZ · Member since 2016 · 74 posts · 17 votes
9y
Appologies for just responding. My day job involves a lot of driving and I don't shy from working long shifts in order to build capitol. I will be responding to everyone today and thank EVERYONE for their replies!
0 Reply
David Zheng
Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
9y
My first deal was a condo in an unwarranted complex. Finding a lender of it was an absolute headache and I got many No's. However I learned a lot about funding sources from that debacle.
1 Reply
Peter TverdovBusiness Member
Developer · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
9y
First property had 10 illegals living in a 4 bedroom apartment and my realtor helped "evict" them on Day 1 and they left in 30 days. Every rodent and pest imaginable was in the place. Also termites and UST. Place had been broken into multiple times in the past. Had a squatter in the upstairs apartment. Pot smokers in another apartment. Father in Law thought I was crazy, so did everyone else. Looking back it's amazing how laser like my focus was. I flipped that place around and now it's a clean, safe and fixed up juggernaut in my portfolio.
[email protected]732-289-3823
3 Reply
Alexander Alguire
OP
Phoenix, AZ · Member since 2016 · 74 posts · 17 votes
9y
Stanley Parsley that is absolutely incredible! How many sellers do you estimate you had to sift through to find the one? I'm not asking to find metrics for my own accord but because I love the hustle people have when they decide to do what ever it takes. I would love to hear the full story on this purchase as well! A restaurant napkin!?
0 Reply
Alexander Alguire
OP
Phoenix, AZ · Member since 2016 · 74 posts · 17 votes
9y
Anthony Gayden where in AZ? And those are great lessons to know but I can't imagine they were fun to learn. I applaud you for seeing it trough the proverbial valley of death though! Most would quit and you kept at it.
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Alexander Alguire
OP
Phoenix, AZ · Member since 2016 · 74 posts · 17 votes
9y
Jeff B. I'm curious, how did you offer under a 1031? I thought those were only for moving from one deal to the next. Either way though it seems you weathered a storm. How many properties do you own to date?
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Alexander Alguire
OP
Phoenix, AZ · Member since 2016 · 74 posts · 17 votes
9y
John Kesner that's some creativeness you pulled together! Brilliantly done! What would you say your biggest take away was?
0 Reply
Alexander Alguire
OP
Phoenix, AZ · Member since 2016 · 74 posts · 17 votes
9y
Christopher Bowie that's awesome! I'm working on the creative financing part right now. I don't have a height enough income to substantiate a loan for what I want. You should tag me once you find your first deal and offer on it! I would love to know when you find one!
0 Reply
Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
Originally posted by @Alexander Alguire:

Jeff B. I'm curious, how did you offer under a 1031? I thought those were only for moving from one deal to the next. Either way though it seems you weathered a storm. How many properties do you own to date?
Yes, we had an SFR in Silicon Valley and wanted to move our equity closer that 450 Miles :) We 1031 the Silicon Valley rental to an MFU in Redlands where this experience was a nightmare.
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John Kesner
Investor · Reno, NV · Member since 2015 · 167 posts · 90 votes
9y
@Alexander Alguire
The biggest take away was that closing a deal can be very frustrating if you don't have the right mindset. Nowadays I go into it assuming nothing will go as planned. That way I'm ready for anything that pops up, and if things do go well its a bonus.
0 Reply
John Kesner
Investor · Reno, NV · Member since 2015 · 167 posts · 90 votes
9y
@Jeff B.
I have heard many stories of people try to extort others in a 1031 situation. I don't think its all that uncommon. Unscrupulous sellers that are savvy to the 1031 process think they can drag out the timeline then extort you, knowing you will have a huge tax bill if you don't close.
Nice job handling the scammers!!!
0 Reply
Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
Originally posted by @John Kesner:

@Jeff B.
I have heard many stories of people try to extort others in a 1031 situation. I don't think its all that uncommon. Unscrupulous sellers that are savvy to the 1031 process think they can drag out the timeline then extort you, knowing you will have a huge tax bill if you don't close.
Nice job handling the scammers!!!
My agent was a real pro and and my letter(s) were to the Brokers. As she said
- I would have LOVED to be a fly on the wall to overhear that discussion!!
(so would I) :grin:
1 Reply
Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
9y
@John Kesner I've seen such overt unethical behavior once in 17 years. It may be because we cover ourselves and our clients for just such potentials. Stories of such abound. Verification is a little scarcer. Protect yourself contractually and use good professionals as @Jeff B. said and you will be fine. That's what the law is there for.
The 1031 Investor5140 Reviews
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Alexander Alguire
OP
Phoenix, AZ · Member since 2016 · 74 posts · 17 votes
9y
Jeff B. That makes so much more sense!!!! Thank you for that! Do you still have our Silicon Valley rental😳 and hey the education you got I am sure is valuable beyond the hell from the experience.
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Alexander Alguire
OP
Phoenix, AZ · Member since 2016 · 74 posts · 17 votes
9y
David Zheng what would you say some of the top lessons about funding you learned were? Very curious as funding is my road block right now.
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