Posted over 5 years ago

Investor Insights: My first missed opportunity

I still remember the sick feeling in the pit of my stomach.

My real estate agent had scheduled a walk through of a potential investment property. It looked perfect on paper. Great location. Nice neighborhood. Open floor plan. Discounted price.

We met at the property on a breezy spring day. Inside, we saw lots of potential on the main floor. The place was a bit beat up and dirty, but wouldn’t require major repairs. Overall, it was a strong match for my search criteria.

Then we went upstairs and found a nasty surprise. And I quickly – and unfortunately – walked away from a great opportunity.

First Impressions

This was about ten years ago, when I started to seriously look at investment properties.

I was searching close to home, in an area I knew well. This gave me the advantage of understanding local property values, rents and having access to local real estate contacts and suppliers.

Jill, my agent, was a real estate investor herself and understood what to look for. She scheduled the showing because the property fit my criteria and had been sitting empty for too long. That would give us negotiating power and leverage to make an even lower offer.

The place was bank-owned and vacant. The exterior was nice, but the condition inside was poor enough to keep buyers away. It needed new paint, flooring and cosmetic touch ups, like new light fixtures and cabinet pulls.

We went upstairs. It was here that we discovered the nasty problem keeping buyers away. Apparently, the spacious master bedroom had been used as an animal pen. There were disgusting stains and a terrible, overwhelming odor.

That was enough for me. I quickly left and didn’t look back.

Second Thoughts

In spite of my bad reaction, Jill followed up with me after the property tour. She still thought the place had potential.

Unfortunately, I focused too much on the pet problem and not enough on the opportunity at hand. I dismissed it and moved on.

I told a few people about what I’d seen, and they generally said things like, “Good thing you didn’t buy it,” or “I wouldn’t touch that place with a ten foot pole.”

A few years later, I thought about the property again. In hindsight, it was a missed opportunity. It would’ve been easy to repaint, recarpet and update the home. It had many positives: nice kitchen cabinets, decent countertops, newer appliances. The neighborhood was nicely maintained, in a good school district and close to shops, bike paths and two major freeways.

Those features were not likely to change. The carpet, on the other hand, was an easy fix.

Lessons Learned

Real estate investing is often a mixed bag of opportunities. As the housing market has rebounded, it’s become much harder to find investment-worthy properties.

I’ve learned to change my perspective from what I see in a property (present state) to what might be (future state).

Time and time again, I’ve seen the biggest rewards go to people who can see the potential in bleak or even ugly homes, then go on to create much greater value through their vision and action.

On the bright side, this experience was an early learning opportunity. I missed a good deal, but I gained experience in knowing what to look for. No risk, no reward.

The biggest lesson is that success in real estate investing is a learned behavior. Most people focus on the downside — not the potential — in an unlovely home.

And that’s exactly the reason why it represents a good investment opportunity, if only you can see the potential.

Comments (5)

  1. Yes, I assumed the carpet and subfloor were ruined and would both need to be replaced. It was fear of the unknown that really stopped me. I like your approach - get help when needed, admit what you don't know, and don't be afraid to learn more. Thanks for your comment.

  2. If you are looking at a house with problems that you are not experienced with, get a contractor that specializes in that repair to look at it for you. It might be a deal breaker or it may turn out to be just cosmetic; you won't know unless you have someone check it out.

  3. I actually love when there are things like that in a home. My experience tells me its an easy fix (affordable), and I can get the price lowered, lowered, lowered. I love it!

    1. I agree! But it took me a while to learn that lesson. It's helpful to see the different perspectives of the investor, renter, buyer and seller. Each looks for different things and can have different priorities. Thanks for reading.