I made a rookie mistake and destroyed my future!!!

[Nathan Gesner]

THE SITUATION

My first investment was a townhome, bought sight unseen on the recommendation of my father-in-law who was a REALTOR with 15 years experience. My mortgage, taxes, and insurance were $365 a month and I paid an HOA fee of $25. Rent was $425 a month, tenant paid their own utilities.

Expenses: $390

Income: $425

I knew nothing about the 1% rule, 50% rule, etc. I thought anything above the mortgage payment was "cashflow" and I would be raking in the money. If you run the numbers, it's clear this is a bad investment. To make matters worse, I had a sewer problem two months after purchase that cost $7,000 to repair (insurance covered $4000 of it). But wait, there's more! Two months later I got hit with a special assessment of $3,900 from the HOA that my REALTOR (aka: father-in-law) failed to tell me about. I paid $6700 to purchase the property, $3,000 in repairs, and $3,900 in special assessment.

I was a rookie and made a rookie mistake. I would need 400 months (33.33 years) of my $35 cashflow just to break even. Life sucks.

THE RESULTS

Here's the reality. I held onto the property for eight years. I put the $35 "cashflow" into a savings account and used it only for maintenance or vacancy. My rents increased over the years and I eventually had what most investors would consider a strong cashflow. Eight years later, I sold the property for an $85,000 profit. My total return was over 500%. In layman's terms, I turned $14,000 into $85,000 in eight years despite a housing crash three years before I sold, and despite the mistakes made along the way.

THE POINT

Prior to 2010, beginning investors had no access to fancy calculators, free websites like BiggerPockets, or even a lot of books. These mom-and-pop investors saved up some money, found a cute house in a nice neighborhood, they bought it, and they held on.

It's easy for all of us to get wrapped up in the numbers. We spend a ridiculous amount of time educating ourselves, crunching numbers, and looking for the perfect situation that will guarantee a 12% return because anything less is a waste of time. Don't get caught in that trap! I knew nothing about real estate in 2004. My first investment looked like a complete loser. If I saw that deal today, I would walk away from it. But real estate is a forgiving investment vehicle and many, many mistakes can be erased if you just hold on.

Don't kill yourself over the numbers.

Don't be scared that properties don't cashflow like they did three years ago.

Don't wait for the perfect deal and miss 100 mediocre ones.

Get out there and invest!

[Nathan Gesner]

Quote from @Maksu Ize:

It's a click-bait title, for sure! 

I don't do it often, but I'm seeing an increasing number of investors complaining they can't find anything that cashflows in today's market. That may be true, but it doesn't mean you shouldn't invest. My first investment did not cashflow, but it still produced an incredible return.