# 1 Mistake any investor can make

[Sharad M.]

So I met a newbie investor (let's call him Joe) through BP this week and went and looked at a property that Joe had just closed on. I was excited for Joe because hopefully, this will be first of his many, many properties.

Joe had told me a little bit about the property history on the phone a day or two before I went and looked at it, like list price, purchase price and some general property condition. When Joe told me about the purchase price (which was over asking) in what I would consider a D area, I was a little concerned, because I wouldn't have paid more than 50-60% of asking in that area. But I was hoping that this was a real steal and I was wrong in my assumption.

So I went and looked at the property and I was shocked to find the condition of the property. I could not stand for more than 5 minutes in the "finished" basement because of how much mold is down there. The roof had been leaking for a VERY long time (now there is a new roof) and had caused the floor to buckle at least 6 inches in one of the bedrooms and living room and 2nd bedroom floor was in very bad condition also. The kitchen cabinets are at least 3 different kinds. There is no furnace, no hot water heater, no plumbing, no electric that I could see, garage had a huge hole in the floor (I didn't see it, but the investor told me about this). The windows are all shot, I mean every single one.

I have done over 150 deals since I started and I wouldn't have even touched that property for free because there are so many other better deals out there. In the area Joe bought the property, he will be now lucky to make the 2% rule for this property and I wouldn't buy anything for less than 4% rule in that area if I was buying anything that needed work.

Also, Joe lives about 80 miles (90 minutes to 2 hours) away from the property.

So why did Joe bought the place?

Because Joe fell in love with the property.

I could tell that when I first spoke with Joe on the phone and during our first meeting that Joe was in love with the property. He wasn't looking at it as an investment to get the best ROI but he was more emotionally attached to the property. My GUESS is that Joe has seen some shows on TV like Rehab Addict, Property Brothers, etc. where they restore some older homes and Joe wanted to do the same thing. Joe was talking about refinishing the windows, keeping the character of the house when they all needed to be replaced, because it will be a less expensive and smarter decision in the long term.

What Joe did wrong was WAYYY overpaid for a house. Once you have overpaid for a house, you are stuck. You can't go back to the seller for a discount, you can't cut your rehab budget because you have to get things done in a proper manner otherwise you will have later on with selling or renting. The only thing you can do is learn from it and not repeat the same mistakes again.

People (at least smart ones) eventually learn from their own mistakes and correct the course, but if you can learn from the mistakes that other people have already made for you, you will be WAYYYY ahead of the other newbie investors. You just don't want to leverage money in RE, you want to leverage other people's experience also as much as you can. It doesn't cost anything at all do that. Doing that saves you so, so, so much time, effort, headache in both the short and long term. I genuinely believe that is one of the main purposes/benefits of BP that newbie investor can come on here and read and network with other investors and learn from their experience. That's how I got started.

Anyway, in short, please do not overpay for a house.