Starting over after a bad first property

[Jairo Freyre]

My business partner and I rehabbed a house in Texas beginning in April of 2014. We basically were helping a lender out because he made a loan to a person who couldn't finish the property he borrowed on. We were trying to avoid the lender foreclosing on the property. Being that we had no money to put in or experience in rehabbing, it seemed like one of the only ways to get into real estate investing.

We took out another lien with the lender and finished the home. It is in a small town in Texas so it is taking a while to sell the home. Recently the lender had to foreclose on the home from the initial borrower. So far the lender is being very nice and allowing us continue work on the property to sell it so we both break even after everything is said and done. There are a lot of if's but we have kept costs down and breaking even is a realistic goal for both the lender and my partner and I.

The question I really have is how do you get the motivation to start over after this. This house was so much work and time for basically some knowledge. From a good amount of podcasts and stories I have read on this site and other places, people often break even or lose on their first property. How long do you wait before starting again? Is there a certain amount of money you have to build up again in order to start. Is there a book or article that helped you start again? I know there is not one answer to these questions but I would just like to hear what helped others so maybe I can get the drive to do this again. Any advice comments would be helpful. Thanks!

[JD Martin]

Depends on whether or not you learned anything from your mistakes on the first property. It sounds like you got into a messy situation for your first project. A good way to move forward is find a small project - one you can afford - and make sure all your financials work before you lift a hammer (or pay someone else to). 

Aside from that, you'd be hard pressed to find anyone involved in real estate that hasn't picked a loser at one time. Many years ago I built a house that I ended up taking a bath on, through a combination of poor construction choices (building for myself instead of the market), timing (local market came down as I was trying to sell and prices were depressed), and sheer bad luck (just after I started a large developer bought a farm across the street and started dropping low-quality houses priced $30k or more below mine). I didn't go bankrupt, but came damn near close, and I gave away a hell of a lot of labor in order to move the house. I took the lessons from that house, licked my wounds, waited a couple of years to repair my financial portfolio, and moved on. It was an expensive lesson, but most lessons are :)  . If you can't afford to absorb an occasional loss, you probably aren't in a position to invest in something as expensive as real estate, unless you save and pay cash for everything and can afford to hold something for the taxes, utilities, and maintenance. 

Good luck! Look at the things you did wrong - be honest with yourself - and you can usually improve by leaps and bounds on the next project.