Here is the context: Last week I bought a property in a small city in Arizona called Arizona City. Currently this city is in a buyer's market. More investory and less buyers. Also, a lot of new builds were built over the past few years because of the low cost of lots. But due to lower activity some of the properties in Arizona City (even new builds) don't sell quickly.

Here is the story: A flipper built a nice, 2000 square foot home with several upgrades. It took him a while to get all the permits and build the home. Probably around 16 months. According to my assessment, the property should be worth $320,000 which is where he listed it at first. When he listed it, he got it under contract but then the buyers just cancelled the contract. His hard money lenders were becoming impatient and wanted their money back. So he lowered it to $280,000. Still no offers. He tried to put it for rent for a couple of weeks but nothing. So due to pressures from his hard money lenders he put the property on the wholesale list for $250,000. I offered $230,000 because that is what would work for me and my strategy. I reached out personally to his lenders and they were willing to decrease their payoffs by 10k collectively because they just wanted to get paid out and it would cost more to do a foreclosure and it would take longer. The investor brought in about 8k to the closing and I increased my offer to $233,000 and the wholesalers in the middle were willing to take a discount and we made the deal happen. 

Ultimatly, he lost about $40,000 on the deal. Here are the mistakes that I see that he made that led him to that loss.

1. He didn't have enough in reserves so his lenders were able to pressure him into selling at a bad time.

2. He only had one strategy which was flipping. He tried to switch to keeping it as a rental but he didn't have the credit to get the property refinanced.

3. His network wasn't very big so he chose some lenders with really high interest rates that he didn't have a solid relationship with. 

4. He was a lone wolf and didn't have mentoring or coaching that could have helped him explore other strategies like partnerships or lease options or something else.

5. He didn't reaching out to fellow investor friends. He could have talked with an investor buddy and told him, "hey man I'm taking a beating from my lenders on this property. Can I sell the property to you for what I have into it. There is a lot of upside." And I think investor friends would have bought it from him because it was a good deal. 

So here are some things that I knew that the flipper did not (my competitive advantage). I put up a property on the market for $243,000 in the same city and it went under market right away because of the way I presented the property. I knew that his property still had comps that would support a value of $320,000. And I knew how to buy the property in such a way using a rehab credit strategy to get the property to record at $320,000 so that when I got it tenanted I could refinance it right away and the appraised value would come in at $320,000. So ultimately I would only need to leave about $7,000 into the deal (due to closing costs). I also know how to use the lease option strategy and how to find a tenant buyer who will give me a $4900 option fee to buy the property from me for $339,900 within the next 3 years. And they will pay a higher than market rent for the home so the property will cash flow even with the higher interest rates. Within a week I got a tenant buyer set up and I received a $1000 non-refundable deposit to hold the property for him until October 10th at which time he will pay the rest of the $4900 option fee and the $2000 rent.

The things that I know as an experienced investor is turning what could have been an $80,000 gain for him into a $40,000 loss for him and an $80,000 gain for me. 

Here are some of the morals of this story: first, check out his 5 mistakes on this deal and make sure you don't make those same mistakes. Also, network with other investors. Learn from them. The saying "your net worth is your network" has a lot of truth to it.

Give me your thoughts and opinions below.