This article is a little different from any other article that I’ve ever written. As I write this post, it is difficult because I am writing from a position of pain. Although this is difficult for me, I am using reframing techniques to turn my sorrow into success. I will explain this shortly, and you’ll understand my pain.
Many real estate newbies start with a high level of confidence and are extremely excited about learning a new profession. As in many situations when beginning something new, it’s easy to be blinded by ambitions. You’re very eager and extremely excited about the new journey. These are the emotions that many newbies have until they face the harsh reality that real estate investing, especially wholesaling, is more difficult than advertised.
Although there are ebbs and flows in real estate investing, you must remain consistent. There will be times when you feel you can do anything and get any deal you want, and there are times when you may feel you made the wrong decision to go into real estate, but this is the time to persevere and get your emotions under control.
You must be confident, and you have to overlook others’ perceptions of you.
I stated in the opening of this article that I am writing from a position of pain, and my pain point is very valid.
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Recently, I received a call via my marketing, and the seller was very transparent. He informed me that he had to sell, and he had previously contacted a few other investors who were interested in his property. We had a normal conversation like any other seller call. I was able to get all the information about the house and exactly why he needed to sell. He also informed me what the other investors were offering. Although I knew this to be a common tactic to get a higher offer price, I still considered what he was saying.
The conversation was straight forward. We actually had similar hobbies, so the rapport building aspect of the conversation was very easy. Before ending the call, he stated, “I’m not sure why I am telling you this, but you seem to be a pretty nice guy.” That was good to hear, but I really didn’t understand why he was telling me that, so I simply ended the conversation by setting up an appointment to view the property the next day.
After the conversation, I followed my traditional path of looking up the house. I ran comparables and looked at the history of the house to see when he bought the house and how much he bought the house for. I continued on my normal path of doing my research. However, when looking at the property, it was distinctly different from all the surrounding comparable properties. This house was completely converted into office space, so there weren’t any bedrooms, and the kitchen was converted into a kitchenette. This was not the problem; the challenge I faced was that the property was built 20 years earlier than the surrounding comparables. Also, the lot was huge and had a 5-car garage added, compared to the standard 3-bedroom, 1-bath home built in the 1940s.
I had a dilemma — not being well versed in doing BPOs, I had no idea how to comp this thing, but I had a pretty good baseline. It had to be worth more than the surrounding properties. I figured that out, but by how much was the question. I had done some research and spoken with some other investors to try and get a gauge on this, and I finally came up with what I believed to be a justifiable ARV.
Why Confidence & Perception Are Essential
I called the seller back within 24 hours as promised, and I made the offer, which was slightly above the competing offers. Remember, the guy did say he liked me and gave me the numbers of the other investors, right? He accepted my verbal offer, which I believe had a $100k spread in it, so this would be a great deal for someone; however, I was not confident in my numbers. Because of this, I waited to send the contract. During that time, I talked myself out of the deal because I was not confident in my numbers and afraid to take the risk. Also, if I was wrong, how would my buyers perceive my deal evaluation?
Here’s the Deal
I’m hurting, and here’s why: The following weekend I notice the same property in my email being marketed by a fellow (creditable) investor with a $25,000 wholesale fee above my verbally accepted offer. OUCH! Yes, you heard me correctly. I offered $185k, and it was in my inbox for $210k. The only solace I have right now is, when I called to inquire about the property, I had not received a return phone call, so possibly we were both wrong, but that is highly unlikely. Currently, I’m waiting to see if the property closes and for what amount.
The Wrap Up
It is important to be confident in what you are doing. You have to convince yourself that you put in enough time and study to know that your figures are correct. Since I was not confident in myself and let my fear of how others may have perceived me get in my way, it cost me $25k.
This is possibly an expensive reframe, but I understand now that I have to perfect my craft by working more comps and taking a BPO/appraisal class. I also need not worry about how others may perceive me and continue my work. You win some, you lose some. I hope the deal closes for the other investor. Lesson learned.
I’ve shared my failure. Please learn from my mistake.
Is there an area you may not be as confident in? What areas are you doubting about yourself?
Please share! You could possible help someone before they make a critical mistake.