How 5 Real Estate Investors Turned Mistakes Into Cash
Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.
What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was “what has been your biggest learning opportunity (or mistake as some say) in your real estate career and what did it teach you?
I think Jonathan Twombly, who provided an outstanding answer to this question, said it best: “The only way to gain experience is by making mistakes.” Of course, mistakes are not the ONLY way to learn, and you should never TRY to make mistakes. But the point he is trying to make is that if all of your real estate endeavors go off without a hitch, you may begin to feel like YOU are entirely responsible for that fact. In reality, if you’ve never made a mistake in real estate, not only have you probably been lucky, but a sticky situation WILL arise eventually. When it does, if you have this sense of infallibility, it may be your downfall.
Whereas if you have made and successfully overcome mistakes in the past, you have gained the experiential knowledge that will allow you to avoid making that same mistake again or, if you are faced with the same or similar issue, to navigate it successfully. In some cases, facing and overcoming an obstacle may be the best thing to ever happen to your real estate business, as it forces you to reevaluate what you have been doing and determine if you need to alter your approach or entire strategy!
That being said, the poll is closed, the results are in and here are the responses:
Jonathan Twombly made two big mistakes. The first was not promoting his real estate business early enough and aggressive enough. The market is saturated with real estate entrepreneurs, so branding and promoting of your business is a must if you want to stand out from your competitors. For promotional tips, here are 8 ways to promote your real estate brand.
Jonathan’s second big mistake early on in his real estate career was allowing the property management company to put a manager on his property who lacked experience with that asset type, which caused a ripple effect of problems for YEARS, even after they were fired, replaced and long gone. Having one bad year, or even a few months, of management will negatively affect the operations for a long time. A large dip in occupancy results in a dip in revenue, which means you get behind on payables, investor returns, your returns and liquidity. And to make matters even worse, when you have liquidity problems, if an unexpected maintenance or capex issue occurs, you may not have the liquidity or cash flow to cover it, which results in out-of-pocket expenses, capital calls or even foreclosure!
In regards to the property management issue, this is overcome by properly screening the property management company prior to hiring them. Here are the best practices for interviewing and screening property management companies. In regards to the vacancy and liquidity issue, Jonathan always ensures that the cash flow on the property is high starting on day one and that he has a large reserve fund on hand to deal with unexpected issues.
Similarly, Ryan Gibson’s biggest mistake was hiring the wrong people in general. He learned that good people are what make your business and the world go ‘round. For the best hiring practices, check out our blog category on building your real estate team.
Jason Buzi is prime example of someone who realized he was making a mistake, completely changed his business model and benefited greatly as a result. In 2011, he and a friend wholesaled a property to a fix-and-flipper and made $12,5000. The buyers ended up rehabbing the property and netted $400,000. This deal made him realize that he was leaving MILLIONS of dollars on the table, so he started rehabbing properties himself in addition to his wholesaling. Based on this shift, he had his first seven figure year in 2013 and bought a personal residence worth over $1 million free and clear. If you are interested learning how you can net over $1 million per year as a wholesaler, click here.
Micki McNie’s biggest mistake was working with and trusting someone she didn’t know. She gave this person $40,000 to do a rehab without having looked at the house herself. As a result, she had a hard time selling the final product because this person didn’t prioritize the repairs and upgrades that actually attract buyers. Projects like updating the mechanicals or installing new windows were not performed. The lessons she learned were to always perform her own due diligence rather than trusting a partner, even an experience partner, to do it. Also, she learned to be much more cautious of new markets that she’s never worked in before. Another solution to the market problem is to use the ultimate guide to evaluating a target real estate market!
Lastly, Cheryl Oliphant’s biggest mistake was not buying based on positive cash flow, but for appreciation only. She learned that buying for appreciation is not investing, it’s speculation. In fact, not buying for appreciation is one of the three fundamentals to thrive in ANY real estate market. Click here to learn the other two.
What about you? Comment below: What has been your biggest learning opportunity (or mistake as some say) in your real estate career and what did it teach you?
Subscribe to my weekly newsletter for even more Best Ever advice www.BestEverNewsletter.com