It’s 12:30 a.m. EST on a Friday night/early Saturday morning, and I’m just getting ready for a live Skype interview with the Seoul Real Estate Meetup group. So while I am waiting, I thought that I might as well write a blog for you all.
My questions to you TODAY are: What are you doing right NOW to get you a step closer to where you need to be? Where are are you going and WHY are you going there? WHY do you do what you do and for whom? Is it for yourself? Is it for money? Or is it for a bigger and better purpose than just yourself or money? I hope it’s the latter, as your PURPOSE and WHY in life shouldn’t be about yourself or money. Doing what you do solely for these two things is not powerful enough to push you through the many tough times that you will come across. And I can guarantee you that there sure will be many of them.
Now, let’s get into this week’s blog.
As many of you know by now, I am not the most educated individuals, and I can be quite rude and raw at times. I’m proud to say that I never cheat, steal or lie — but I do make many mistakes, though they are are always honest ones. In this blog article, I will share with you one of the biggest mistakes I made when I first started investing in real estate.
How I Bought, Rehabbed, Rented, Refinanced, and Repeated for 14 Rental Properties
This is the dream right? Going from zero to 10+ rental properties, providing stable cash flow and long-term wealth for you and your family, and building a scalable business model to boot! Learn how this investor did just that, in this exclusive story featured on BiggerPockets!
Learning How to Say No
You must learn how to say NO to the good opportunities so you can say YES to the great ones.
When I first started investing in real estate, I was buying properties for the purpose of being able to call myself a “Real Estate Investor/Entrepreneur.” Boy, was that a bad idea. Although I did build a substantial portfolio in only a short time, the amount of debt I got myself into was just plain stupid. I had over $1M in debt on a $40k salary and a portfolio of properties that were costing me money each month.
Buying on hope that a property will go up in value is not a sound or sustainable strategy. Also, I believe this to be the main reason why the US real estate market tanked so much. Investors were buying “high” and hoping to sell “higher.” I, on the other hand, jumped the gun way too soon, as I was young and eager — which almost got me into a ton of trouble.
Another lesson I learned from my mistake stemmed from the fact that while I was holding these non-performing properties, my personal funds were tied up within the existing properties in the portfolio, which in return didn’t allow me to purchase any other good deals that regularly came across my desk. I was fortunate enough to wake up and smell the roses very quickly, and soon after started cutting my losses and liquidating.
If I could turn back time and start all over again, I would definitely be more patient. I would not just buy for the sake of buying, but would make sure that I had an established end goal in mind with a set timeframe. The timeframe of my end goal would give me insight into how much risk I would need to take. The shorter the timeframe, the more risky investments would be needed, and the longer the timeframe, the less risky investments would be taken. I also would’ve made sure to focus only on the numbers in the deals and not to speculate on appreciation. The numbers in the deals would need to make sense, and every property I purchase would need to get me a step closer of achieving my end goal.
Another thing that I would like to touch on is that I see many investors trying to get the perfect ROI by getting caught up in the different types of complex formulas. To be honest with you, I have no clue how any of them work, and I only use this simple formula that I wrote about in one of my previous blog posts, “How to Crunch Real Estate Numbers Painlessly Using This One Simple Rule.”
A perfect example of keeping things as simple as possible is best described in the book How To Pick Stocks Like Warren Buffet. In chapter 7, “Avoiding the Chain Link of Errors,” it is described that the more links you add to a chain, the more chance there is that something could go wrong. If one link is broken, the entire chain becomes useless. I believe the same to be true when calculating ROI on properties. The more stats and figures you add when calculating an ROI, the more of a chance that you will get something wrong and your whole formula will be useless.
At the end of the day, something that you will always find me stressing is to make sure to focus on establishing trust and relationships with the key people that you are looking at working with before you get caught up in the many different stats and demographics. No matter how good the area or capital appreciation may seem, the people you surround yourself with will either make or break your investment.
Team work makes the DREAM work.
What’s the biggest real estate mistake YOU’VE ever made? What lessons did you learn from it?
Leave your comments below!