Thought some of us could learn from others mistakes here. Are you all willing to cop to your mistakes?
Let us learn from your small misfortunes.
So: What was your biggest mistake investing?
You can’t learn from others mistakes. If I learn a million mistakes I know a million ways that it won’t work and still don’t know how it works. What we should focus on is how to do it right.
That being said I have only made 1 mistake. What I mean is that I could have made more money doing a deal one way versus another, but it is not a mistake given the facts on the table. The one mistake I made was getting started later in life than I should have. When I got out of college, I planned to stay with my folks while I pocketed all my salary I made and go out and buy half of the county. Instead I got married, and started to buy big house and cars and going on vacations etc. I should have stuck with my plan and I would have been living off my real estate by the time I was 30.
I respectfully disagree Bluemoon. I think that it is possible to learn from other’s mistakes. I actually have an ebook coming out soon that explains my mistakes in real estate. I am no big timer like alot of guys and girls on here, I have done 6 rehabs total and have made money on some, broke even on some. I have alot to share on how "not to " make a million dollars in real estate. I have learned from each rehab also, whether it’s a process such as putting in floors, or financially, or even picking the wrong neighborhoods to invest in. Anybody interested in reading my story shoot me an email. BlueStarHomes@gmail.com. Thanks and good luck to all!!
Not starting sooner (like when i was younger…!)
Keith
Blue,
I also respectfully disagree. I believe that you can learn a LOT from the mistakes of others. That is one of the great things about going to your local REIA. You get to hear the horror stories of other investors. By listening carefully, you can learn what not to do or how to do things better. It is foolish to have to learn everything the hard way.
For example, if an “new” investor describes how he bought a house at retail and then was not able to wholesale it, I might learn to buy at a discount. I shouldn’t have to buy at retail and learn the hard way that this was a poor idea.
My biggest mistake when I first started my rental business was not fully understanding the expenses involved. Having successfully operated other businesses for more than a decade, I should have known better than to believe the guru nonsense. Fortunately, I did do one thing right and that was to buy my properties at a big discount. That saved the day and allowed me to make a profit even once the true expenses became obvious.
Mike
Being too motivated to get my first deal done. 
Trying to save everyone. Sometimes people just don’t get it and there is no way to help them if they can’t make new decisions. You just need to let those deals go and move on.
The problem is figuring that out early on.
It seems that we make big mistakes on every project. You can definitely learn from others’ mistakes. Here are a few.
- Trusting other peoples’ back-end sales numbers. Make sure you know the numbers inside and out…, the real costs, etc. I almost bought a development project based on (my appraiser’s) back-end numbers. If I had not ran my own numbers, the project would have lost at least $300,000.00. He was on my team and his numbers were usually pretty accurate.
- Letting contractors get ahead of you on the money.
- Not holding enough money back from contractors to ensure timely completion.
- I once had brand new windows installed in one of my projects when I was on vacation.
The sub-contractor threw the old windows in the dumpster…WITH THE PERMITS STILL ON THE OLD WINDOWS!!!. It took me 4 months to get the permits for that job since it was in a historic district. Luckily, I got a hold of the president of the window company and had him get his installer back to go through the dumpster the same night to dig out the permits and afix them to the new windows. - Trusting time estimates from contractors and telling your investors inaccurate timeframes.
- Not going after deals because I did not have the money. It is true, if the deal is there, you can find the money.
- As much as I would like to say I am a person that believes in doing business on a handshake, this is also a big mistake. Even with friends. Put things in writing to protect all parties.
One of the Biggest Mistakes I made:
I had started investing while at my full-time job, but did not form a company right away. I just did everything in my name. I should have started a company immediately just to be able to report income throught that company and build a good credit history for the company from the beginning. Even though I made money, after 1 year, the banks were telling me that I did not have provable income for 2 years…in my new profession. My profits were added to my personal tax returns, but they wanted to see that I was legitimate with 2 years of business history. I found myself with great credit unable to get loans on 2-3 more projects that I really needed to do for my income that year. That forced me to use investors for the first couple of years. I really think it makes sense to run your investing like a business, establish business credit, have a professional financial statement, build a spreadsheet or web portfolio of completed deals to present to banks, investors, etc.
I love this stuff…sorry to ramble.
Chip Hoisington
Chris,
Great points on all accounts. I think we have all experianced some of what you went thru. Except for the permits in the dumpster.
Thanks for pointing them out. It will make us all think twice.
Keith, you stole my answer. Since I can’t go back and start sooner, I would have to say my biggest mistake to date… wasn’t very big at all. Not worth mentioning actually.
I’ve lived my life learning from the mistakes of others, besides mine.
When I first started, I made key mistakes.
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Didn’t know enough about buying rental properties to ask the agent for rent comps. I bought a duplex and we used the sellers numbers for cash flow instead of verifying. My agent was not an investor’s agent, so didn’t ask for rent rolls, etc.
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Rehabbed a property without a contract with the contractor. I also paid him by the hour AND told him how much I had to spend. Geeeeez.
Not allowing enough allowance for repair cost when I made my very first bid for a HUD home.
This was not a mistake…thanks to asking questions at my local REI club. But it opened my eyes to some potential issues that can occur based on a specific cities zoning regulations.
I had an offer to purchase a cheap property for $17K, it needed about $10K in work, would sell for $60K, rent for $550 per month. I had a buyer as soon as I made some calls. He was going to give me $22K.
However, in this city, there were some changes made in the zoning laws, such as minimum square footage for rentals, how close your property could be to an alley, and several others. The laws would not go into affect on a property unless it was vacant for 6 months or longer, in which case the new regulations would apply.
The property I had under contract was vacant over a year, and thus the new laws went into effect. The property was right next to an alley. The alley was not a through alley, and had no use, but was city owned. The new laws state the property could not be within 25 feet of an alley. Therefore the city would not give a certificate of occupancy. The only recourse for the owner would be to buy the alley from the city, and additional costys related to the sewers under it. The costs were too much. not only did I lose a deal, the owner is really screwed because he can’t really do anything.
The moral of the story…KNOW THE AREA AND CITY you are investing in.
Made great deals not trying to. Primary residences and weekend getaways did really well.
The one time I try to make a few bucks on a rental I lose (so far).
Market reverses, taxes and insurance take what small cash flow I had.
Could be ALOT worse though. I’ve learned some, and wont let it stop me from going forward.
Keep learning, keep trying, you’ll make it!
how old were you when you started kdhastedt? I’m 25 yrs. old and I am currently working on improving my credit with a secured credit card then get a major credit card after about 6 mo to 1 yr and then do the same with my major credit card until I finally can get a loan for my first investment property. So I probably won’t get started in investing until about another 2.5 to 3 yrs.do you think I will be starting kinda late? or is there some other way I can get started faster rather then having to kill about 3 yrs ?
Anyones advice will help. thank you
Agreeing to pay to much interest and signing personal guarentees on the money.
In retrospect, If at the time I was more aggressive in negotiating, I would not have had to do either.
Secondly, (From my early days) dont lie, in trying to get a deal, in trying to get the money, or in trying to sell the deal. It all comes back to you sooner or later.
Third, (Again frm my early days), keep good credit. No matter if its on your credit report, with your rich uncle that lends you money, or with the utility company. Pay you bills! Dont take on bills you cant afford to pay back! If you cant pay your bills, talk to your creditors, often they will work with you if your sincere about settling the debt. What other choice do they have, realistically?
Low income housing…stay AWAY! I have a property that has destroyed my life.
gmt,
I think that everyone would like to hear your story. How has it destroyed your life? We all can truly learn a LOT from these types of true stories.
Thanks,
Mike
Yes Do tell!!
I don’t know about my life being destroyed by a deal, but I know I have pulled my hair out on more than one occasion.
Thanks!!
Jared