MY GREATEST RE FAILURE TO DATE!
I frequently hear from people that have had a deal gone south and don't want to keep trying. I placed my own largest failure here along with "Honest Abe's".
Maybe others will put theirs and what they learned from them as well!
I was just reading about Abe Lincoln, we all remember him because of his success as a politician (and his assassination). But what I learned is that he failed miserably as a politician in the beginning, it seemed like everything he did he failed at.
The love of his life died at a young age, he failed in business and spent 17 years paying off the debts…….
I am sure that those life lessons made him into the man that we remember and that made him famous.
Now you get to hear about my failure as a RE investor;
I was working for 10 years as a UPS driver and the wife as a pharmacist, we lived in about 700sf with two kids in order to pay off debt and save $$ I found what I thought was a “hot deal” to rehab. I jumped into this with both feet and every penny that I had saved and borrowed. I worked 50 hours a week at UPS and then another 30-40 on this house for a year. I too made the mistake of falling in love with the property. I deviated from my original plan and rehabbed everything from the sewer to the roof. Sill thinking that I was in a good neighborhood and the median home values were 150K and that I had bought the house for 68K and the 50K I put into it would be returned.
Along comes an organization I had never heard of, “Habitat for Humanity” the need me to sign off on their use of a vacant lot directly adjacent to my property. They claimed that they would put “three houses commensurate with the neighborhood and good property owners on it”. Being a good Republican I figured that it was free enterprise and that their new houses would bring up the value of my rehab.
To make an end to a painful story, they put in six of the narrowest smallest houses I had ever seen outside of a mining town. No landscaping was done for over a year. They populated the houses with drug dealers and prostitutes and the police were there almost daily. Since they had no lawns they would congregate on mine to drink beer every night after I left and I would come to clean up the debris the next day.
I sold that house for $98,000 and I paid $3000 of the buyer closing costs after listing it for about a year and no takers due to the “ghetto next door”.
To recap:
Purchase price: $68,000
Repairs: $50,000
Loan payments: $15,600
Utilities for 24 months: $2600
Buyers closing costs: $3000
My closing costs: $1250
Total: $140,450.00
Sales price: $98,000
Realtors Fees: 5910.00
Net Loss: $48,360
The good news is that I learned a ton! More than I ever would have if I had putzed into a profit on my first deal. The next house I rehabbed and sold I cleared 100K on a 15K investment of funds.
The skills I picked up have paid off that debt many times over and hopefully will serve me well into the future. If I would have quit at this time all that I had learned would have been wasted and I never would have tasted success..
_________________
Winners are not afraid of losing. But losers are. Failure is a part of the process of success.
People who avoid failure also avoid success.
Kiyosaki
[ Edited by Stockpro99 on Date 12/09/2003 ]
Stockpro,
Thank you for posting things like this. Makes newbs like me one more thing to look out for and also gives me hope that if the first doesn't work out the next might.
That's everyones nightmare. I think about the possibility of a loss like that almost everyday. The one I'm doing now is going to be a pretty slim profit. I jumped into it really fast cause there were other offers on it. I'll probably squeak by with 5-6K as long as it doesn't stay on the market too long. I have to be really careful. I think that in any business you take losses as well as gains. What matters is the overall gain I guess. I would rather be using my skills and intelligence doing what I'm doing today then to be punching a time clock and having someone tell me how to do something their way. I think it's all worth it. And you do get smarter along the way don't you?
Newbies: Exit strategy is the golden rule and never fall in love with the property. Stick to the plan and do not rationalize the situation.
Thanks for the post
Eric & Rosa
[addsig]
I used to hear of the "Hall of Flame" Club.
You got automatic membership if you have made a decision that cost at least $100,000.
The good news is that we usually recover and learn from the failures. I wear a diamond ring that was partial collateral on a note transaction. It is a good reminder of what I did wrong.
I think that my favorite part of the Tony Robbins course is the part where he says "the past doesn't equal the future".
I got a PM from a friend that had a drastic and devastating first CRE experience.
The past prepares us for the future, nothing more...
As I started to read your story it reminded me of a shockingly similar experience. Then to top it off, you have one of my favorite quotes posted!!
"Winners are not afraid of losing. But losers are. Failure is a part of the process of success. People who avoid failure also avoid success. --Robert Kiyosaki"
I purchased a rehab and made everything as best as I could. I didn't cut corners and only did the best that I thought the house could have. Worse comes to worse when I can't afford the holding costs because I jumped into REI full time with no experience and no job. This brings me to the present!! I have a contract to sell a house at a negative $18,000!! I come to find out that my buyers are trying to get out of buying the house for personal reasons.
My biggest problem was that I expected I could sell the property at the high end of the market. Yes my property did have an ARV of $250k but being such a unique property and location, it simply wasn't going to sell quickly at that price. I could have still broke even if I would have lowered my price before I ran out of money!
I did a few flips back when I could have a small stockpile of cash to work with, but now that I have nothing, I have fallen behind in every one of my obligations.
I constantly keep at it though. Those of you who read my posts, know that I try to stay active on here and try to give good advise. I'm confident that I know what I'm doing. Thats the other thing. Real estate is not a liquid investment! Make a bad stock pick or such, you can sell it in an instant. In RE it is literally been months that I've been trying to recover.
I have deals that I've lost and deals that are on the backburner. For those of you out there that want to get started in REI, don't quit your day job. Start out with something low risk. If you happen to be like me and have a high risk tolerance and drive to suceed, consider something what I have done. I went into this not expecting to fail but accepting that it was a possibility. Some people pay tens of thousans of dollars for education at a university but I guarantee you that my tuition was well spent at the unversity of hard knocks.
I'll end with a couple other modivation quotes for us all:
"The significant problems we face cannot be solved at the same level of thinking we were at when we created them." --Albert Einstein
Persistence is what makes the impossible possible, the possible likely, and the likely definite. --Robert Half[ Edited by myfrogger on Date 12/09/2003 ]
great, now i suppose i can look forward to losing about $35k on my deal coming up! thanks a LOT!!
just kiddin. great story - reality is a great medicine for impulsiveness! (my intellectual quote, from myself to myself)
Thanks for all of the posts, guys. It really helps keep me motivated and realize that mistakes are unavoidable in this business--and as a newbie I have made WAY MORE than my share!
Thanks again for all of the encouraging words and real life experiences shared. <IMG SRC="images/forum/smilies/icon_biggrin.gif"> [ Edited by results_one on Date 12/10/2003 ]
Stockpro99
Thanks for sharing, It goes along way to hear the trials and tribulations of others. this is a benefit to all who read it. Thanks
Kmaples
One time I lost 35 cents in the coffee machine!
I did too! However I found a dollar bill on the floor when I was walking out of the room.
A mixture of good and bad experiences (whether they are yours or not) make for a GREAT education!
BAMZ
Stockpro99,
Thank you for sharing this story.
Are you saying so much for the theory of "Just go do it." It might have been better to have someone knowledgeable walk me through a few deals.
In your case you are the knowledgable one and were kind enough to share it with others.
John $Cash$ Locke
I'll post one that wasn't such a big loser, but hard to believe, and my biggest loser.
First the biggest. I did an owner finance deal where I took back the note. The buyer paid for 9 months and then stopped. I waited 5 months before starting foreclosure because I thought we were going to work things out. We never did. The buyer began tearing up the house and filed bankruptcy to stop the foreclosure. It took me 14 months to get my home back and I ended up losing about $30k.
The hard to believe one is on a home that I bought for $1000. All said and done I lost $750 on it. The home was in a war zone. Moral of this story is don't buy homes in war zones unless you really know what you are doing with them. I couldn't even make money on it when I paid only $1000.
[addsig]
I'd love (but never will) to see a late night infomercial with dozens of people sharing such stories.
Thanks for sharing. I don't think it's healthy to ONLY read about successes. It's important to know where potential pitfalls lie and how to avoid them. Thanks.
I would like to also appreciate you guys for sharing the ups and downs of REI...It just keeps everything real as far as ones approach to entering this still ever so lucrative business...
I'm understanding that no matter how versed or experienced we become in this business, we are going to make some type of mistake...The key from what I see should be to make your mistakes as less costly as you possible can... And never give up on pursuing REI because you will definitley learn something from each deal that will later help you out on future projects.
Good fortunes to you all!!!
Got to tell you a really funny loss I experienced.
There was this slummy little house deep in the heart of a Ghetto in the wilds of LaLa land, middle of Watts, a place of great repute if you are into major riots, fire bombing and looting.
Anyway this nice old Investor comes to see me, seems Reliable Mortgage sold him a mortgage/Trust deed on this house with a yield of 10% and distracted by the interest yield he bought it.
It set a record, not one single payment was ever made. Nada zero, blank.
So I feel sorry for him cause he is living on a pension, hates the world has a nagging wife and a mean yappy dog.
I put him into a good note that pays and I take over this one. The following day I get a big pole and a white sheet and nail it on. Down I go. Oh my god shades of Urban combat. Its Stalingrad revisited!
I get out of the car and wave the pole with the white flag on it. I am the only semi white face anywhere. The guys with the funny full pants are gathering around the car and I am waving the flag. Out comes the home owner. About 350 lbs and he has that look. He hates whitey. Or maybe it is just me. Can't we all get along!
I drop the white flag, pick up the two six packs and walk in fear and trembling up the driveway to the house. It is big truth time.
"Hi Sir," I say, always call someone with a club in his hand Sir. "I have come to throw you out of the house, right in the middle of the street. Oh by the way would you like a beer?"
He gives me about two minutes of rapid Gullah (dialect) mostly describing a rather intimate arrangement between me and my mother. All the time I am uncapping a beer, which I hand to him and of course he has to drop the club.
I swing into Gullah, and add more comments on his relationship with men and small dogs. We are friends.
Anyway, after all of this theatrical foolishness he agrees to move and give me the house if I will pay two months rent in an apartment house down the street. We walk down and I do it. We exchange the strange poundidng of fists and asses which goes for a statement of consent and agreement and I leave, secure in the knowledge that I have a new friend. I present to him my white flag in token of our arrangements and I remove most of the surrounding gang members from the car by distributing more bottles of beer, all is well just another day in the life of a landlord in the combat area of Watts.
It was about four in the morning when the police called. Asked me to return, there had been an incident of some kind. So I climbed into my black Corvair with the tinted windows and gun ports and on to Watts.
Of course you guessed it, obviously some of you have experienced this before. What had been a house was now a pile of cooling ashes. I could make out what had been a 30 gal water heater resting peacefully in what had been laughingly called the living room.
Well being a little annoyed I went to see the prior owner now living in the lap of luxury in a $50 a month apartment. Interesting place you could stand in the middle and touch both walls. Yes a little tight for a 350 lb man. We touched fists, and then hips in full ritual greeting. He informed me that he had no knowledge of the recent succesful arson but he was sure it was done by someone jealous of his new position in the community as the possesor of superior housing.
The insurance check produced enough money to pay for the two six packs of beer and the dent in the hood of the Corvair where two large members of the 18th Street gang had sat. Yeah the 18th Street gang. Want to know how they got their name? That was as high as they could count.
That was one of my losses. But I learned, my accent in street Gullah is almost perfect. Of course in recent times with the advances in education it is becoming a lost language as here in LaLa land the races converge, thank god.
Wet Pants Lucius
Every R.E. investor has a bushel basket of horror stories. I personally have a graveyard full of them. I like to talk about them on rare occasions and can laugh at them now.
Robert Kiyosaki said that you have to fail in order to succeed, so the quicker you fail the quicker you will succeed.
Good luck
Thanks stockpro99 and myfrogger for having the guts to admit that not every deal ends in a cashiers check and a trip to Mexico to celebrate.
Myfrogger - hang in there. I have gotten a lot from your advice here and if I had to guess, I would think it will only be a matter of time before you are putting all this behind you.
I've told people before that the true measure of a man is how he deals with adversity and not prosperity.
Any jacka$$ can be a great guy when the money is rolling in, but when you are down and have been kicked again for the upteenth time and it just seems like it can't get any worse and you still can dig into your pocket to buy a box of girl scout cookies from the next door neighbor or put $5 in the collection plate at church even though you ate a package of ramen noodles so you could save the 10 bucks lunch would have cost you eating out, or if you can still throw a smile to the wife when she comes home and asks you how your day was, or if you can still take the time to throw the ball for the dog, that is the sign of a trully great man in this world.
And all great men get rewarded in the end. I believe that.[ Edited by The-Rehabinator on Date 12/10/2003 ]
Hello all
Sink to much money into them to make them really really pretty makes for a really really thin wallet.
But all said and done I've learned lots in the last year and I do have Better looking properties than what I started with.
ED
[quote]
On 2003-12-10 19:09, The-Rehabinator wrote:
I've told people before that the true measure of a man is how he deals with adversity and not prosperity.
Any jacka$$ can be a great guy when the money is rolling in, but when you are down and have been kicked again for the upteenth time and it just seems like it can't get any worse and you still can dig into your pocket to buy a box of girl scout cookies from the next door neighbor or put $5 in the collection plate at church even though you ate a package of ramen noodles so you could save the 10 bucks lunch would have cost you eating out, or if you can still throw a smile to the wife when she comes home and asks you how your day was, or if you can still take the time to throw the ball for the dog, that is the sign of a trully great man in this world.
Rehabinator: I just may frame this quote! It i sooo true!!! It is scary how similiar we all are...........
Stockpro-
Thanks for the lesson. And congrats on your career!
Failure is guaranteed, success is learned.
Thanks for Storey
Congratulations on your success! I honestly believe that continued effort will yield success.
"One enjoys the benefits of success and pays the price for failure...."
[addsig]
Stockpro99,
I too admire you for not only sharing your story but even more for hanging in there. It would have been easy for you to become someone who told everyone you met how dumb it was to invest in real estate. You are one of the active posters that I follow closely and appreciate your knowledge and insight.
It appears this was dug up from the archives of over a year ago. I think the door has been opened and you should take the opportunity to put a different twist on the thread, toot your horn, and share your comeback story. How are you doing now?
Larry[ Edited by LarryNut on Date 01/30/2005 ]
I heard this story in church 7 years ago. It was great then and now!
[addsig]
Stockpro99,
As a good Republican, you should have know that “Habitat for Humanity” was a Jimmy Carter program - lol
In all serious, thanks for sharing your story. At lease you can look back and laugh
I just wanted to say that I think this is a great thread with lots of great info by a great group of people.