Positive Property Investments
Real Estate Lesson Learned: Is Big Better?
Copyright 2006 National Real Estate Network LLC At one time in my life I was buying 7-8 Houses a month, fixing them up and then reselling them. Then I got the bright Idea that if I can buy and sell 7-8 a month, I can buy and sell 80. This was a choice that eventually led me to bankruptcy. This has not been that long ago. Twice in my life I have made a lot of money and then took on a large growth spurt and got a large learning experience in business failure. The last one resulted in bankruptcy.
It is hard when things are going well to not be seduced by more is better. When you have something working for you, it is easy to become overconfident and start to think of multiplying it. As with most things in life, you want to be sure when you take on something, that you complete it. Pumping up the volume puts you at risk of not having the structures and being set up to deliver on what you are committed to. You naturally encounter problems that were not present on a smaller scale.
It is hard when things are going well to not be seduced by more is better. I had to learn personally that pride Goethe before the fall. The bottom line is that there are always good deals in Real Estate! I say measure your success one house at a time. Buy investor property, fix it up, resell it, rent, do a lease-option, but do it one house at a time. Multiple Purchases? One of the most common mistakes I see in business is where investors come into the business and think they need to do multiple houses at a time. Try this on: Try doubling the cost you think it will take to fix the property, doubling the time you think it will take to rehab the property and figure your holding costs doubled (insurance, mortgage payments, taxes, lights, gas, rehab cost). Great deals in Real Estate don’t come in houses fixed and ready to sell. The great buys come from houses that need work. If you are just getting started, stick to cosmetic rehabs (paint and carpet), Don’t take on major rehabs. It will take time to develop rehab crew.
The most successful people I see in Real Estate do one house at a time. Failures are great; if you look at them and ask what action was missing that would have made a difference? Hard moneylenders? One pitfall is using very expensive money. For years I ran a business financed on money from Real Estate Investors who are called hard moneylenders. They look at collateral and loan money based on receiving interest can be 18% or higher when you figure in the closing costs. When you get multiple properties in this condition, you will have interest payments that are going to be double and triple what conventional financing is in Real Estate. Now combine this with the common lie we tell ourselves that we can repair the house and put it back on the market for sale or rent in a short time. Your overhead will rise because you will need a staff to manage and rehab everything. Can you see this is a recipe for disaster for everyone? Now if you are doing one house at a time, your overhead will probably stay very low, with very little staff. Therefore you have limited your expenditure of time, money and aggravation. At one time, my overhead was in excess of $50,000.
00 per month. I had to depend on other people to do everything, including checking the work. A hundred percent of the monies I was making went paying down my debts and I kept telling myself I would turn it around tomorrow. I found myself with houses that were not finished and houses being lost in foreclosure and for taxes. That left me a very motivated seller and bankruptcy was looming large. With my overhead still there, I attempted to wholesale deals. I decided I would no longer find, repair and resell homes. Instead I would find great buys and sell them to other investors. Basically, I started my business over. It takes a great amount of time to cultivate a list of investors interested in buying deals.
This business is built on the concept you can borrow you way out of debt, but it just does not work. You have family, friends, and business associates that may get hurt or destroyed. I’m not saying this to tell you a sad story, but rather in the hopes that by sharing it, someone else can avoid the pain of my mistakes. Take from this what you can learn for yourself. I am 53 years old and starting over. I now have the knowledge to build a business with the proper foundation. I teach Real Estate Investing class now that look for pitfalls and what is needed to do a successful deal one at a time. My advice to you on handling real estate transactions is: Use Title Companies What can happen to you when you fail to get title insurance? We had a participant in one of our seminars, who purchased a house to fix it up. He invested over $40,000 into the home in both repairs and purchase price.
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