Doing Everything Yourself Often Leads To Expensive Lessons

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A couple very recent real life examples of how a solid expert can be crucially pivotal to either solving or avoiding sticky problems. Yeah, I realize some segments of the real estate investment world avoid certain professionals like the plague. I get that. However, in doing so they also get superb lessons teaching them how to handle the very problems that coulda been avoided so easily. I’ll only reference one of these mini case studies briefly.

A local businessman well known to me was in a lease for one of his two stores which had almost two years left to go. However, his landlord had violated some plainly written sections of the lease. They also had consistently played hardball with all the property’s tenants, many of which were national in size. Though this guy does business nationally, he’s pretty much a one horse operation. (He hates it when I say that.) He called me for advice, just as he had years ago when wanting to put the store there. Knowing his attorney was first rate, I asked him if he’d talked with him about it yet. No? Why not? Insert the usual boloney answer here.

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Let’s Skip to the Chase.

Once the attorney was done with the landlord, he didn’t have to pay rent for the last three months there. Furthermore, the subpoena they served him was so botched as to be cartoonish. ‘Course, he had no way of knowing this. But the attorney guffawed as he read it. The landlord’s legal counsel kept making the same mistake over and over β€” and the court kept allowing him to ignore them. Bottom line is that he’s now outa there, and it cost him less than $1,500. He saved just under $30,000.

If he hadn’t immediately called the lawyer as I begged him to do, that outcome would’ve been impossible. Β The reason was that the attorney provided a couple key answers to questions he NEVER woulda known to ask. That’s a working definition of real expertise in action. He learned that lesson for $1,500 instead of about six times that amount, and who knows how many sleepless nights. I was rewarded with one of my favorite dinners at one of my frequent hangouts. Free swordfish tacos β€” the name of my new band. πŸ™‚

Stop Grinding on the Cost and You’ll Save Money in the Long Run.

It’s not just a matter of measure twice and cut once, though that certainly applies in many cases. No, it’s about the value experts bring to the table. In business, the concept of the ‘expert’ has been abused almost beyond recognition. It’s akin to the concept of ‘great’ as it’s been bastardized in the sports world the last couple generations. Willie Mays was great. But today? 22 year old Mortimer Snerd is great cuz he’s made a couple difficult catches in centerfield and got a hit in three consecutive games. A real expert in business sticks out like a sore thumb in the most positive of ways.

Make it your business to find ’em and get ’em on your side. Attorneys, lenders, CPAs β€” the whole lineup. I realize you’ve read and been told to avail yourself of expert advice whenever possible. I’m here to tell ya it’s virtually always possible. Experts have saved me or pulled me outa the fire many times. What’s been fun to realize is how the more I began to rely on bona fide experts, the fewer times I even got near the fire. They’ve literally saved me both time and money beyond counting.

Attorneys, CPAs, and, surprising to some, your lender are the three I strongly recommend you locate soon. Like around 4:30 yesterday afternoon. All CPAs are definitely NOT created equally. I can now count on one hand and have enough fingers left to hold a baseball, how many I know who have a legitimately thorough understanding of the Internal Revenue Code as it relates to real estate investing. I’ve stopped being dumbfounded when yet another investor tells me they did last year’s taxes themselves with a downloaded software. Find a killer CPA and make them your best friend.

Lenders

This is where many investors run into problems. Yet they’re convinced most of those loan related glitches are not coming from their lender’s inexperience with investment property loans. I’m here to tell ya that most lenders don’t know most of the underwriting questions, much less the answers. They’ll tell you they do investment loans, which they do. However, my experience is that easily over 90% of their closed business is with owner occupied borrowers. They don’t even play in the same arena.Β Wait ’til you’re doin’ a tax deferred exchange, and they hit the wall at 125 mph cuz they didn’t realize what they just told you to do with your vesting would effectively blow up your exchange. Think I’m kidding? Seen it dozens of times over the years. I shudder to think how many innocent investors have filed tax returns thinkin’ they successfully deferred capital gains taxes only to discover a five figure tax bill was due instead. Typically that lesson need only be learned once. πŸ™‚

Stop playin’ Russian roulette with a house lender. Sooner or later there’s gonna be a bullet in the chamber.

All of us have had to learn the myriad lessons when it comes to real estate investing. Frankly, it’s been my experience those lessons never really stop coming. The most important choice you can make to avoid learning some of the more difficult lessons the hard way. Some of my best buddies are lifelong members of the DIY Club. The ones who’ve survived learned to discern when it was time to call in a bona fide expert. Discovering you just avoided making an expensive mistake, or missed an opportunity of which you were unaware, makes the cost of the expert a non-issue.

It’s like the old car maintenance commercial: You can pay ’em now, or PAY ’em later.

Julia Manzerova

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.

10 Comments

  1. Great artcle Jeff!!
    I was raised by pretty smart parents ( I didn’t always think so at the time but realize more and more every day). When I was a child I would ask my dad how to spell a word and he would direct me to the dictionary on the bookshelf. This taught me that I could do things for myself and that information is everywhere especially in this internet age. This served me well but did make me hesitant to ask others for help when I realized I could most likely find the answer for myself. As I stumbled in my young adult life I learned that the lesson was not that I had to do everything myself but rather use resources. It was not myself that found the answer but rather the resource being the dictionary. I now see that it is fantastic to search out answers and knowledge but it is even better in certain circumstances to utilize the expertise of the resources available to me. I still do more myself than I need to but my resources check or approve or finish my work. I attempt to keep great records and ask the right questions throughout the hear for my acciuntant. He in turn allows me a lower rate. I have a fantastic attorney that provides excellent guidance. They give me the tools to take care of a lot and I am always happy to pay for their approval in order for thinks to go smoothly.
    This has even applied to the construction side. I am a Millwright by trade and can figure out most things but for some reason a reasonably small plumbing job requires about 15 trips to the hardware store and just way too much time. I now hire an old high school classmate who is now a plumber. He usually brings on a helper to make the jibs go quicker so I do that for him. I learn a ton everytime and get a little off labor by helping. I am amazed everytime when he knocks iut a job with only one extra trip πŸ˜‰

    In the end I would much rather admit I had help but got it right than take all the credit and have a couple things not correct..

  2. Glenn Schworm

    Jeff,

    Enjoyed your article. Why is it that we all seem to have to learn the hard way at first before we trusting the professionals. Maybe it is just me? πŸ™‚ I always say that the hardest lessons learned are usually the best ones learned and will never be forgotten. Thanks again for the article.

    Glenn

  3. Lenders #@%!!!

    This is a sore subject around our house, this after almost a year trying to do what should have been a simple refinance of an investment property.

    The “Senior Loan Officer” has asked for just about every document ever generated surrounding 3 businesses we own including every property we have ever owned.
    The process has taken so long the original appraisal expired!
    Now why was I so stupid not to cut and run from this imbecile? I didn’t want to walk away from the appraisal fee, believing this knuckle head might soon pull it together.

    Now let’s examine the complexity of this property, a renovated single family detached house.
    Tenant occupied for 5 years and with an expectancy of a permanent tenancy. Loan amount less then 50% of appraised value, deed in a land trust. Now out of that trust as a condition of the new loan. I have 840 credit score, had a 900 Duns number in the last large business I owned, have little debt, and good income.

    So what could possibly be the problem? I’m the problem for thinking this dope could ever pull it together. The loan was deigned; reason? The time period the loan officer took to supply the info to his company caused the loan to be closed out.

    After threatening to take this rejection up to the next notch in the legal food chain the loan is on again with a new competent loan officer who does not claim to be a senior loan officer, a title that vanished from the other fellows emails in midstream of the process.

    Not to sound cynical but at age 56 and after many transactions I can safely say 90% of all people claiming to be professionals or experts are neither. The world is held together by the glue generated by 10% of the workforce. Keep this in mind when hiring anyone.

    In defense of the 90% it has some members who I would put into a category above incompetence which I call “less bad”.

    • Robert Ricco on

      “The world is held together by the glue generated by 10% of the workforce”. That was phrased so admirably that I had to give you kudos for summarizing the 90/10 Principle in a way that relates to picking advisors. Love it.

      Indeed, keep it in mind when hiring your team.

    • Paula Pant

      Dennis, my question to you is — how do I find that fantastic 10 percent?

      I once went through a similar situation (the lender wanted so much paperwork that the original appraisal expired!) but I didn’t want away because I just didn’t know who else to turn to. The loan officer was referred to me by someone in the RE industry who I trust and like. So — aside from personal referrals — how else can I find the good 10 percent?

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