7 Things Some Investors Do That Really Grind My Gears

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Over the years, I’ve met a lot of investors. Most have seemed like great people but there have been some that I did not get a good feeling about. There have also been the stories related to me by other investors, real horror stories.

It would be great if everyone took responsibility for their actions and had integrity in all of their dealings. I’m afraid that’s just not the case.

Here are 7 things that other investors have done that really grind my gears, rattle my chain, push my buttons, boil my blood, get my goal, chap my…well, you get the idea. Not all of them deal with issues of integrity. Some of them relate more to things that really just frustrate me and cause problems for the investor that they might not even be aware of.

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1. Complain marketing doesn’t work when it’s them that didn’t work

This happens a lot with people that are just getting started flipping houses. We’ve all likely heard of success stories before we got started, but until you actually found a deal there is a lot of doubt whether they really exist.

I just really hate to hear people complain about certain marketing methods not working when they are just not being consistent enough for it to be able to work.

This is especially true when marketing to motivated sellers. Sending out 20 letters isn’t likely to land you a deal. It could, but it`s just not likely. We’re trying to find someone motivated to sell that also has enough equity to allow us to buy it cheap enough. 20 letters is just not enough to reach someone that meets that criteria.

Now, if you had sent out 1000 letters and didn’t get any calls, there has to be something wrong. Either your list is bad, your letters aren’t getting delivered, or your phone number was wrong in your letter. Oops!

2. Blame other people for their misfortunes

This one is super annoying. There are so many excuses thrown around when something doesn’t work out. It’s enough to make me sick. The vast majority of the time, it is the person that is complaining’s fault.

I’ve heard of this sort of thing happening when people buy houses from wholesalers. The numbers given by the wholesaler might be accurate, but there are so many ways for a rehabber to screw things up. I know, I’ve done most of them.

The problem is when the deal was a real deal, but the rehabber messed things up enough to lose money. The easy thing to do is point the finger at the wholesaler and say that the numbers were off. Even if they were, the buyer should have done his/her own due-diligence and determined that on their own before doing the deal.

3. Brag about the number of units they have

Why would they think I cared how many units they had? I could care less. What should be cared about is how much cash flow (and/or equity) is being generated by those units. That’s what really counts.

Most of the ones that have talked on and on about the quantity instead of the quality have ended up with major problems and exited the business. You see, reality has a way of happening. Things can look incredible on paper, but as soon as you involve tenants, vacancies, trashed units, etc., things can and do get hairy in a hurry. I mean sasquatch hairy.

4. Attempt crazy, dangerous investment techniques

If I had a nickel for all of the hair-brained real estate investment schemes I’ve heard of over the last 10 years, I probably have several dollars. These usually involve buying properties at or very near full retail value.

I’m sure there are times when these ‘tactics’ can work, but I’d wager to say that they are few and far between. There are just too many variables that all have to work out perfectly for someone to actually profit from them. To me, the people pitching these things are likely the only ones profiting from them. I really have to question how many such deals they’ve actually done.

5. Don’t keep their word to other investors

Integrity. We must strive to keep it. Money has a way of making people lose their integrity.

Let me relate a couple stories.

The first one involved my wife and a pair of investors that were working together. I had met them at a house we were wholesaling. They liked the house but needed to go over the numbers. They called me shortly after we parted and made a reasonable offer. I verbally accepted their offer.

Melissa, my wife, went over to their office to get the contract signed. The two guys proceeded to go through every negotiating tactic in the book trying to get her to agree to a lower price. They didn’t know who they were dealing with. She had fun listening to them and staying quiet. They were fumbling around with their words while she was laughing inwardly making a game of naming which negotiating tactic they were using.

Needless to say, she told them to either sign at the agreed upon price, or we would just sell to someone else. They signed.

The other story was told to me by an investor I know. He was assigning a contract to another investor (who happens to be really well known). The new buyer was supposed to close the house by the date specified on the contract. They didn’t.

The seller kept calling the investor that assigned the contract and asking him what was going on. He was in a bind because his buyer was taking forever to close. The seller was facing foreclosure and needed to have it sold.

It turns out that the investor that paid for the assignment was working a short sale and never mentioned this to the investor that assigned the contract to him. When the contract was assigned he was agreeing to honor the terms of the contract, which didn’t involve attempting a short sale.

How someone could do this and live with themselves is beyond me.

6. Don’t keep their word to sellers

When investors agree to do things like take over a seller’s payments (buying subject to the existing mortgage), they’d better be in a position to do so, whether their ‘investment’ works out or not. When investors take on responsibilities like this and can only afford to do so if they immediately sell or rent the house, they are playing a dangerous game. Some of these techniques really require you to have some financial reserves as things don’t always work as planned.

When things go south is when all investors get a bad name. It gives us all a black eye. This is also the time when legislation starts to get passed that ends up making life hell for everyone.

7. Don’t keep their word to lenders

Keeping your word and repaying all debts is a must. I’d like to think that when loans aren’t repaid it’s usually because of circumstances that were unforeseen. But, I think there are also times when people just decide to stop paying on a bad investment and let the lender inherit the problem.

This is really bad for private lenders as it affects the other borrowers that the lender has and can really cause them major problems if they are investing their retirement savings.

I had a lender once tell me that he didn’t like a deal and that he would lend on it only if I gave him my word that if things didn’t work out that I would go as far as selling my vehicle and riding a bike so that I could still pay the loan. Maybe I wouldn’t have done something that silly, but I would have done whatever would have been required to pay that loan back.

It’s called integrity.

Conclusion

Those are some things I hope I never do and I hope you will never do. The fact is there are a lot of people that do some or all of these things and it’s good to be prepared as they could affect you.

Nobody is perfect. I don’t pretend to be. We’ve just got to watch out for the people that don’t even try to be.

If you have any stories about things other investors have done that really grinded your gears, please share them in the comments below. I’d love to hear them.

Thank you for reading my article.

About Author

Danny Johnson (G+) is a real estate investor in San Antonio, TX. Visit his blog: Flipping Junkie - A House Flipping Blog to follow along with him as he shows, in detail, the marketing he is doing, the leads being generated, the lead and deal analysis, the rehabs and really, just about everything. He also provides real estate investor websites at LeadPropeller.com.

23 Comments

  1. Great article Danny!
    Anyone in this business has to realize they need to be honest and ethical to everyone because eventually they will need their help. The more people you piss off the less opportunities you will have to succeed.

    I am glad you mentioned the short sale as well. One thing investors really need to be careful about is buying a short sale that is off the market or not marketed properly. Short sale fraud is te number one crime being investigated by the FBI. I an investor is trying to buy a short sale at well below market without it being in available in MLS it could be said they are trying to defraud the bank.

  2. I’ll add another one to your list: Let money dictate their business decisions. We all work to earn money and provide for our families, but it shouldn’t define you. Fairness and integrity should win out over a dollar amount or a bottom line if you plan to stay in any business venture for long.

  3. Daniel Fisher on

    I’m with you all the way Danny! #7 especially strikes a chord with me. I’m really struggling with the first property I bought. It’s been suggested to just default and let the bank take the property but I just can’t do that.
    I love this article!

  4. Mike McKinzie on

    Excellent article! I believe that integrity and personal responsibility are getting rarer and rarer. It starts in school, where teachers pass a student to the next grade even if they did not qualify for it, something for nothing because the teacher doesn’t want to get a bad mark, s/he doesn’t care if the child is ready or not. This mentality grows and grows. I even had a tenant, who rented from me for 24 years, on HUD Section 8, ask if we would GIVE the house to them since they rented it for so long. WOW!

    But I have to look myself in the mirror and know that I am doing what I feel is right. And while I usually pay full retail, or close to full retail for homes, it is because the numbers work for me. I want newer homes, that rent for around 1% and are rarely vacant. Because I do that, I get good appreciation, good tenants and good investments.

    Let’s home INTEGRITY makes a come back!

  5. “Now, if you had sent out 1000 letters and didn’t get any calls, there has to be something wrong. Either your list is bad, your letters aren’t getting delivered, or your phone number was wrong in your letter. Oops!”

    One I would add to this and it is a big one. Make sure you have the RIGHT marketing message to illicit a response!!

    You can send out 2,000 letters to the RIGHT list with an ineffective message and get ZERO response. What you have to do with any marketing is test and track your results. If you are getting 1% you are doing okay, if you are getting 3 to 4% you are doing good, if you are doing 7 to 10% response your message is having a grand slam effect.

    So getting the message right and then tracking the numbers ( the calls, the appointments, the deals put under contract ,and then the actual closed deals that happen will give you your ROI on time and money investment.

    Many newbies throw out a huge list and spend their wad in one shot. Then even if they do get a lead they are not seasoned enough to be effective and convert the sale. They run out of money and exit real estate. This is why you start small, test and track, and then grow at a slow pace after you get good at conversions to make the most of your results. I do not wholesale but I am a commercial principal broker and an investor myself and market for off market commercial properties for my clients and new listings.

    The last part is be consistent. Some people will get letters and respond 6 months later when they are ready to do something. It’s NOT about YOUR need as an investor to make money but about the sellers needs and timing to solve a problem they are facing and they have decided to now take action and do something about it. That applies to distress sales, regular sales, etc. If you keep being consistent you will start having a snowball affect and then the mailings plus referrals from others will bring you business.

    Hope it helps everyone.

  6. Number 7 is a very important point. I know quite a few people, including myself, who got burnt lending money that we had put aside for retirement to real estate investors. I think those investors wanted to get rich quick and it blew up in their faces, so they screwed us older people who had been putting that money away since we were young. By doing so they basically gave all investors a bad name.

  7. What happened to the days when a hand shake meant something. I have been burnt by some other investors early on in my career but I keep my enemies closer.

    I had a “wholesaler” more of a bird dog recently not want to give me an address because another investor went around him and bought the another property undercutting him and never paying him a dime. Needless to say I worked that out with him and gained his trust. He will now make $2000 because we closed the deal & will fulfill our obligation to pay him. Guess who will get the next deal? .

    I love the story with the buyer’s and your wife. I was laughing when reading it.

    Good article Dan.

  8. Super list Danny!
    Our little world would be so much better if all investors took this to heart.
    The last few that show your integrity are a must!
    You can make all the money in the world but if you your friends, you spouse is embarrassed of you and your kids are estranged all because you are just a bad person was any of it worth it? It wouldn’t be for me that’s for sure!

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