R E N T A L READER
A ‘REAL’ REAL ESTATE EDUCATION
Learning From the Pain of a Bad Purchase
People say you learn more from your mistakes than you do from any success that you have in life.
We had a fire in one of the units when a tenant fell asleep cooking. Thank God no one was hurt. We have spent tens of thousands of dollars fixing, updating, remodeling, and re- remodeling the property along the way. The houses do not look like the picture above anymore.
I know they are right.
The very first investment I made in real estate was a colossal mistake. But even given that, I wouldn’t change it for the world. You see, I can point to that investment and the work we undertook as one of the main reasons I am a good investor and manager today. They say, “No pain, no gain.”Well, I definitely went through the pain to get the gain. The property was two multifamily homes on one building lot. The lot was skinny, and the buildings were even skinnier. When we bought it, there was only one vacant unit, and while we knew it would need work, we felt like we were buying for such a good price, less than $25,000 per unit. We couldn’t lose, right?
And there was a lot more than that. At some points, we felt that the only job we had was to work on this property.
But, there is a silver lining, and it is this: I am afraid of absolutely nothing that comes across my desk. Because of this property, I have either seen it, or I know the steps to take to solve the problem. And that gives incredible confidence as a property manager. So, do I think that everyone who wants to learn more about real estate should go out and buy a “tough one”? Absolutely not. There are easier and more profitable ways to learn these lessons. And frankly, I was lucky this one didn’t break me financially.
Boy, were we naive.
Let me list some of the things that have happened with the property since its purchase.
• We initiated five evictions in short order. One unit had three back to back. (We felt like we were cursed). • The best tenant in the building moved out because of roaches from another tenant, who swore she never had or saw them. The pest company would beg to differ. • We assisted an early morning drug raid. We had flagged the problem with the local police and actually gave them the keys, but they still crushed a brand- new steel door. • We paid “cash for keys” to get two tenants out sooner than courts would have. It was the best money I ever spent. • We had to evict a Section 8 tenant for “nonpayment of rent”when her portion was under $100. I never would have guessed I’d have to do that. • I did an eviction myself instead of using a lawyer and determined it is not worth it … ever. • We sued a tenant in small claims court and won and determined it is also not worth it …well, hardly ever. • We navigated a street brawl, numerous tenant arguments, and irate calls from tenants at all hours of the night (and the early, early morning).
However, everyone needs to know that only two things really matter with real estate. First, you have to buy well. Second, you have to manage well.
That is why experienced advisors are so crucial to real estate investing success. And that is why we are glad we are working with you on your real estate journey.
Yours in “higher” real estate education,
P.S. We were able to turn that property around. It required buying a blighted, four- family building on the street and fixing that up too, but overall they both perform very well now. P.P.S. Thank goodness for the second property we ever bought. It was only two blocks away, and we had to get really creative to buy it, but it laid out a path for us moving forward and helped us find a model that worked. Maybe I will tell you more about it next month.
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