I was going through some of my older notes last weekend and came across the numbers for my VERY FIRST perspective deal. It cost me $1K, 2 months of my time, a drop in my credit score, and I didn’t even close on the property. Needless to say it was a nightmare and I made every possible mistake you could possibly think of. From assuming the inspection wasn’t needed, to choosing good financing terms. The house was crushed over the winter time by a falling tree during our (buffalo’s) infamous ice storm and week-long blackout.
Anyway, my notes showed me how naive I was to think I knew what I was doing and really humbled me to see how much this forum has taught me. With that, I have this question for the “Vets” in the forum:
If you knew THEN what you know NOW about REI, what would you have done differently and what mistakes would you avoid?
Learning from someone else’s mistakes sometimes helps us avoid them and maybe this can help us newbies make better choices.
You can’t learn how to do something from another’s mistakes. If you learn 1000 mistakes you then know 1000 ways that it won’t work, but you still have no idea how to do it. Trying to learn for other’s mistakes is like telling a little leaguer when he goes up to bat “Whatever you do don’t strike out.” What you should tell him is “Wait for the fast ball and if any thing is close to the plate swing at it and make sure you make contact.” What you want to do is learn how to do what you are trying to do.
All real estate is local and I can’t tell you how to make money in Buffalo and you should find someone making money where you are and do just what they do. But in Houston this is what I do. I find a single family house built between 1976 and 1990 that is over 1500 sqft with 3 bedrooms 2 baths and 2 car garage that is for sale for $50k to $70k in a neighborhood that all the houses just like it are selling for about $100k and rents are around $1000/month. That house should have a fix up of no more than $10k. That house after fix up will rent within 2 weeks maybe 3 weeks if you screen hard. The PITI on this is about $600/month and you will end up with about $200/month for your pocket per house. Do that at least 6 times (to cover for unexpected vacancy or maintenance). Then you have a self sustaining business. If you get 20 of these you have about $45k per year tax free.
I definetly agree with you, "You can't learn how to do something from another’s mistakes". I do however believe you can learn what NOT to do from another's mistakes and thats what I was asking.
Your strategy makes perfect sense (wish we had it like that here), and It sounds like you have it down to a science. My question was more to find out “WHAT GOT YOU TO THAT SCIENCE”? For example, your repairs max out at 10k in your strategy, have you ever gone over the 10k budget and if so what changes did you make to your strategy to better evaluate and keep the numbers where they need to be? Maybe some if these can be attributed to other’s strategies on the forum.
…rather than trying to learn 15 different ways to buy & sell
a house…
I wasted a lot of time and talked myself out of a lot of deals
because of information overload.
Even though I consider myself a “REI nerd”, and find it fun
to learn all I can about real estate investing, doing so never
made me a dime.
It wasn’t until I actually took action that I broke free from
all that “noise” in my head.
This is exactly what I have been trying to say. I don’t care how many people bought a pre construction condo and lost their shirts and how they wished they had not done it because I am not going to do it anymore than if I am going to drive from Orlando to Miami by heading straight south east across the swamps. I would take the turnpike to I-95 and down. I have no intention to cut brush. I am going to find a tried and true way to go and follow it.
There are a whole series of middle class beliefs that are not used by the rich. These beliefs are not intended to be malicious but they have never and can never get you to where you want to be…RICH. They are very good for stopping you from going broke but they also stop you from getting rich. One of these middle class beliefs is the belief that you can learning from others mistakes. What Andrew Carnage said in Think and Grow Rich by Napoleon Hill is that you should find somebody that has what you want and imitate them. He called this a mastermind group. He didn’t say go out there and try something that everybody around you is failing at. Another middle class belief that he mentioned in that book is “don’t put all you eggs in one basket” What he said is put all your eggs in one basket (one that you can control) and spend all your time making sure nobody knocks over your basket. The people that get rich are never diversified. They make the lion’s share of their money from one activity. Using his methodology you never fail so you never have any mistakes to “learn from.”
Like JasonAL said find a niche. Learn as much as you can from it and repeat it until it is grooved right down the middle.
No you see the secret is the process not the particular deal. When I buy houses I make an offer and when I have control of the property, I get a contractor to go in with my inspector and give me a quote to fix everything the inspector is finding. If the quote comes in higher than I though, I amend the offer. They can accept the amended offer or not. If they do then we still have a deal. The beauty of this part of the strategy is that you don’t have surprises, because you already have a hard quote in hand for the fix up before you even close on the house.
Back in March I made an offer on a house for $75k when I went in with the inspector and the contractor we found that there was a piping problem in the master bath. The repair was going to add $5k to the repair job. I amended the offer to $70k, they balked I walked. The house is still on the market. I will probably go back and re offer $65k next month if it is still there. (a tip Dee will hate this, but when you send in the amendment to the offer attach a copy of the inspection report as support for the lower price you request. Now the agent knows of the defect and has to disclose it)
So when you make the offer, do u always have an approximate idea of what the cosmetic rehab will be? your process sounds great for any new problems that arise from the inspection report, but what about the rest of the rehab?
and i guess you assume that all the houses u do need those things? so, if in fact, the house does not need “everything” you make out even better?
I’m at the point now where I am trying to get a handle on rehab costs… for someone who does not have a construction background, it’s a little tough to get a handle on.
Last week, I went to a house that had just been rehabbed with an experienced investor. Was very interesting and I learned a lot, but right now, the only thing holding me back from making offers is getting a good handle on rehab costs.
You might try to talk to a contractor about what he would charge you for some basic rehab parts and write them down to use for guidelines.
Paint, carpet, appliances (just go to Lowes and look around), foundation work, whatever you find is the typical repair in your area (A/C or Furnace etc.)