Tell me a story about a time you were NOT successful.

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Tell me a story about a time you were NOT successful.

Adrian Delgado
San Antonio, TX · Member since 2016 · 7 posts · 5 votes

Hello, so I always read these amazing stories about how successful people have been with their Real Estate Investing. However, today I want to hear different stories about a time you guys were NOT successful. The reason why is because it will help everyone on these forums learn from each others mistakes and different experiences.

A wise man once said: "If you can, learn from the mistakes of others so you never have to make the same ones again."

Happy Investing!

*Bonus*** Does anybody know of a website that is like BiggerPockets but about stock trading?

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y

too funny .. just be an investor in 07 and 08... mortality rate was quite high.. most folks on BP not all but most never lived through that debacle. for me I lost millions. so there you go its not all wine and roses.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    too funny .. just be an investor in 07 and 08... mortality rate was quite high.. most folks on BP not all but most never lived through that debacle. for me I lost millions. so there you go its not all wine and roses.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    9Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    PS your a palm springs dude.. I had a house in escrow at the Tradition.. that thank god never closed other wise I probably could not have kept it.. I had TWO airplanes sold one.. sold my big house. sold all my high end cars.. I got lean and mean.. but I never BK'd like so many of my peirs.. and now well we are right back on top with a lot of hard work.. things are great but then its great for most folks.

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    7Reply
  • Marian Smith
    Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
    9y
    I bought my first property in 2007 in the Austin MSA. Texas, so we were not hard hit but I did have trouble renting my house in 2009. I can remember driving down streets with just about every other duplex having a for rent sign out front. I have since tried to buy properties with a hook, 1 block to elementary, backs to greenbelt, etc. so when there are a lot of rentals I can both lower rent and have some feature the competition cannot match.
    3Reply
  • Adrian Delgado
    OP
    San Antonio, TX · Member since 2016 · 7 posts · 5 votes
    9y
    Be specific and explain the reason as to how you were unsuccessful.
    2Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    9y

    @Jay Hinrichs what's BK'd mean?

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Jordan Moorhead filing for bankruptcy protection and re organization..

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    1Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    Day trading in teck stocks before the big crash. 20K to 50K, 50K to 6K in the blink of an eye. Sold all and took the loss. 

    0Reply
  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    9y
    I bought a tax sale property to flip. Spent too much on the rehab and broke even. It was a good learning experience and a mistake I won't repeat.
    2Reply
  • Mark Douglas
    Investor · Nashville, TN · Member since 2015 · 429 posts · 143 votes
    9y

    @Adrian Delgado  You might be interested in the "How to Lose Money" podcast.  They interview different business people (real estate, tech, sales/marketing, oil, etc.) and discuss in-depth the cause of their failures, as well as the psychology behind their decision-making.

    5Reply
  • Adrian Delgado
    OP
    San Antonio, TX · Member since 2016 · 7 posts · 5 votes
    9y

    @Mark Douglas Thank you for your response! The most helpful.

    1Reply
  • Jeffery Waicak
    Investor · Massillon, OH · Member since 2015 · 266 posts · 156 votes
    9y

    I got involved in re in 2001 at 22 years old. It was a duplex did about 100/mo cashflow on a 15 year note.  About 2003 I refied to a 30 year and was pulling in about  200/mo. 

      I took the cash and bought a 4plex with the cash I pulled out  (it basically covered closing costs) I was cashflowing roughly $1000 between both properties!  I was 24 and a guru! 

      I went all in on a 3 unit. NO CASH RESERVES!  I then moved a bad tenant in, knowing she was bad. I thought I would get her deposit and she would move out as asked. I was at $1500/mo  cashflow!  I'm I think 26 and about ready to retire. I had a vacancy at the 4 unit. I moved  on it took the cashflow to about  $400 I'm that unit. 

     Then the bottom fell out! The top tenant in the duplex moved out with no notice,  cashflow- $400 on that unit. The two end units on the 4 unit started fighting and moved out cashflow- 400 I think. That bad tenant, she knew the law well and i wasn't able to evict because I bought on a land contract and I agreed to not have it recorded so the due on sale clause in the seller wouldn't occur.   The other tenants stopped paying.  I then got laid off.

     I filed bankruptcy. That's usually the end of it. Not for me. On the 4 plex I had the seller take back a 20% second mortgage. The seller fought me on the bankruptcy I was having to go to trial for it. I kept asking my attorneys assistant  (he was the one handling it and an attorney himself)  if we should/ could just settle with her . He said no way.  The main attorney went to the trial, he said we could just try to settle. We worked out a deal in the courtroom right before trial, judge agreed bankruptcy granted. 

      The silver lining was I got bk discharged in 2006 and was scared of debt.  I was buying as everyone else was folding up.

    2Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    9y
    Originally posted by @Adrian Delgado:

    Be specific and explain the reason as to how you were unsuccessful.

    That's too funny! Jay just explained.

    This happened to one of my partners. Bought a townhouse in Garner NC in June 2005, and because the market only goes up, this person paid $105,500 which was too much. By the end of 2007, the market was completely unglued. By late 2007, prices were under $80,000. The dude did a 'strategic default' to stop the madness. Property sold at the courthouse on March 28, 2008 for $45,000.

    I could rattle off 100 more just like it. 2008 to 2010 was pretty brutal to many people.

    1Reply
  • William C.
    Real Estate Agent · Souderton, PA · Member since 2016 · 591 posts · 414 votes
    9y
    The moral of most of the horror stories will be: 1) Real Estate does not always appreciate in value 2)Screen your tenants 3)Pan for the worst, hope for the best, reality will fall somewhere in between 4)Screen your tenants 5)Budget for maintenance and repairs, everything has a shelf life 6)Screen your tenants 7)don't over leverage yourself or your properties 8)Screen your tenants 9)have more than one exit strategy 10)last but not least Screen your tenants
    7Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @William C.  there is much more to real estate than landlording. but I like your points if your focused on landlording.

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    0Reply
  • Harrison Liu
    Investor · Seattle, WA · Member since 2016 · 143 posts · 68 votes
    9y
    @William C. you forget the number one rule in real estate, location, location, location. I paid a heft tuition for it in 2008. I started investing in 2001 after 6 option arms loans and two loan modifications. I actually came out a winner and retired last year. talking about blessing in the sky. most importantly my credit never dropped one bit. I get it a lot of people want to learn from other's mistakes, you can to some degree. but the one that pushs you close to the edge, you can only learn it from yourself. And if it doesn't kill you, will make you stronger!
    1Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Jay Hinrichs:

    too funny .. just be an investor in 07 and 08... mortality rate was quite high.. most folks on BP not all but most never lived through that debacle. for me I lost millions. so there you go its not all wine and roses.

    Hi Jay,

     Looking back what would you say was the cause of your non successful story and what would you do different if you were to be back in 07-08 again today?

    0Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Chris Martin:
    Originally posted by @Adrian Delgado:

    Be specific and explain the reason as to how you were unsuccessful.

    That's too funny! Jay just explained.

    This happened to one of my partners. Bought a townhouse in Garner NC in June 2005, and because the market only goes up, this person paid $105,500 which was too much. By the end of 2007, the market was completely unglued. By late 2007, prices were under $80,000. The dude did a 'strategic default' to stop the madness. Property sold at the courthouse on March 28, 2008 for $45,000.

    I could rattle off 100 more just like it. 2008 to 2010 was pretty brutal to many people.

    Was the investor in your story not able to service the debt on that 105k purchase ? Or were they just so distraught over the balance sheet losses and just threw in the towel and did a strategic default?

    0Reply
  • Ed B.
    Real Estate Investor · Sacramento, CA · Member since 2010 · 298 posts · 103 votes
    9y

    this is awesome! 17 replies already to a posting only a day old! Not to pour salt on anyone's wounds, but reading about their busts and failures is every bit as interesting--and educational, to boot-as successes. 

    1Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Jeffery Waicak:

    I got involved in re in 2001 at 22 years old. It was a duplex did about 100/mo cashflow on a 15 year note.  About 2003 I refied to a 30 year and was pulling in about  200/mo. 

      I took the cash and bought a 4plex with the cash I pulled out  (it basically covered closing costs) I was cashflowing roughly $1000 between both properties!  I was 24 and a guru! 

      I went all in on a 3 unit. NO CASH RESERVES!  I then moved a bad tenant in, knowing she was bad. I thought I would get her deposit and she would move out as asked. I was at $1500/mo  cashflow!  I'm I think 26 and about ready to retire. I had a vacancy at the 4 unit. I moved  on it took the cashflow to about  $400 I'm that unit. 

     Then the bottom fell out! The top tenant in the duplex moved out with no notice,  cashflow- $400 on that unit. The two end units on the 4 unit started fighting and moved out cashflow- 400 I think. That bad tenant, she knew the law well and i wasn't able to evict because I bought on a land contract and I agreed to not have it recorded so the due on sale clause in the seller wouldn't occur.   The other tenants stopped paying.  I then got laid off.

     I filed bankruptcy. That's usually the end of it. Not for me. On the 4 plex I had the seller take back a 20% second mortgage. The seller fought me on the bankruptcy I was having to go to trial for it. I kept asking my attorneys assistant  (he was the one handling it and an attorney himself)  if we should/ could just settle with her . He said no way.  The main attorney went to the trial, he said we could just try to settle. We worked out a deal in the courtroom right before trial, judge agreed bankruptcy granted. 

      The silver lining was I got bk discharged in 2006 and was scared of debt.  I was buying as everyone else was folding up.

     Hi Jeff,

    Were you investing in Ohio area? What city?

    Did you manage your self with these rentals?

    What kinds of areas were these rentals in, c-, c, c+, B- areas?

    0Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    I had a contractor that recently had a stroke and had to be hospitalized, his wife unbeknownst to me took over his GC business and ended up spending all of the funds in my first draw I sent to him. I ended up losing most of my first installment since only a fraction of the work required to be completed was done.

    She did not pay any of the workers and they all stopped working.

    Has anyone had any success getting a GC to allow you to sign on as a "co-insured," on their state bond ? So I dont have to sue the GC to get at these funds?

    0Reply
  • Jeffery Waicak
    Investor · Massillon, OH · Member since 2015 · 266 posts · 156 votes
    9y

    @ Albert Bui these were in Akron ohio.  I self managed. C- or d

    0Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    9y
    Originally posted by @Albert Bui:
    Originally posted by @Chris Martin:
    Originally posted by @Adrian Delgado:

    Be specific and explain the reason as to how you were unsuccessful.

    That's too funny! Jay just explained.

    This happened to one of my partners. Bought a townhouse in Garner NC in June 2005, and because the market only goes up, this person paid $105,500 which was too much. By the end of 2007, the market was completely unglued. By late 2007, prices were under $80,000. The dude did a 'strategic default' to stop the madness. Property sold at the courthouse on March 28, 2008 for $45,000.

    I could rattle off 100 more just like it. 2008 to 2010 was pretty brutal to many people.

    Was the investor in your story not able to service the debt on that 105k purchase ? Or were they just so distraught over the balance sheet losses and just threw in the towel and did a strategic default?

    I'm not 100% sure.

    Most investors there had bought in with the promise the rents would go up to cover the negative cash flow. Apparently some got a teaser, low rate loan. Remeber those? There were combinations of income and balance sheet problems for the whole community. But when prices are doubling every few years... it didn't seem to matter to them;) Many bubble buyers were out of state investors, FWIW.

    0Reply
  • Steven Loveless
    Real Estate Investor · Sachse, TX · Member since 2016 · 69 posts · 60 votes
    9y
    Originally posted by @Chris Martin:
    Originally posted by @Albert Bui:

    I'm not 100% sure.

    Most investors there had bought in with the promise the rents would go up to cover the negative cash flow. ... There were combinations of income and balance sheet problems for the whole community. But when prices are doubling every few years... it didn't seem to matter to them;) Many bubble buyers were out of state investors, FWIW.

     This doesn't sound at all familiar does it?

    I'll post a different kind of failure: I started looking into rental properties back in 2012 when homes in DFW class A neighborhoods were cash-flowing (even with my conservative underwriting). I didn't think I could realistically save up a 20% DP in a short time period though (even though I have a pretty decent W-2); then life got in the way and I just never took the time to really educate myself and then get started. Fast forward 4.5 years, and those homes would be massively cash flowing and appreciated ~50%. Some failures come not from necessarily making the wrong decision, but from indecision and apathy.

    4Reply
  • Sebastien Hitier
    Rental Property Investor · Hong Kong, Hong Kong Island · Member since 2014 · 188 posts · 114 votes
    9y

    I bought a property in Mesa AZ. The property under consideration is a triplex located in a community for people aged over 50. The snowbirds (older citizen from colder states in winter) coming to this place do not seem well feathered. Despite strong price appreciation in Mesa, the triplex has not gained much value.

    The triplex had a difficult start since 2014: It was bought in 2014 fully occupied. Rent is low $550 to $725 despite the triplex being nicely renovated. One tenant not only could not manage to pay rent, and he was a "bad character": after he lost his job, he first said he could not pay, and then that he would not pay (because the flat has problems), then he became violent and started to threaten the lady next door and her daughter (also my tenant) because she was young, there was some footage of him beating his partner. My good tenant left before I could evict the bad one, leading to double vacancy and extensive repairs on that unit. This killed all returns before interest in 2014/2015, and brought average tenancy duration on the property to 21 month.

    With hindsight, it is obvious that the tenancy agreement from previous owner was strangely accommodating: low deposit, very unusual rent reductions if tenant does normal things like pays on time, change his aircon filter and for pest control. The bad tenant would claim the money but would not do any of that.

    The net yield has now risen to 6%, and there is little appreciation. Depreciation of 3% needs to be factored in, as the 3 kitchens with appliances, toilets and washroom can trigger expenditures far beyond what the modest rents can absorb in a year, so unless we can raise rent, this triplex may not yield more than a bond.

    1Reply
  • Elizabeth Nourse
    Investor · Fairfax, VA · Member since 2015 · 239 posts · 90 votes
    9y

    Great question.  The I could write BOOKS on mistakes, but I'll boil it down to the top ones, which I think might be able to guide others:

    1. Not hiring based on natural abilities/ track-record/ interests.  I've been fortunate enough to hire others many times in my career, either as employees, agents, mentees, or as contractors.  Many times I thought a person might have more interest in really working than they did.... or that they had skills they didn't have... or that they were a good use of my time.  

    Example #1: I've hired people that wanted to learn from me, with me as a mentor, but I spent FAR too much time teaching and them not enough time asking them to start doing.  Then once the "doing" starts, they wander off quickly.  And I've wasted MANY hours this way.   Now I have learned to start small with people. If they are successful, do a bit more. But never give and give and give and THEN ask for them to preform. Es It It seldom pays off. 

    Example #2: I've hired VERY nice hard working people that were not well-suited to their role.  They just didn't have the natural ability that would have allowed them to be successful and they did not really enjoy what they were doing. Como As As a result, I wasted time and money trying to to teach a turtle how to hunt.  It doesn't work.  Turtles do what turtles do....  everyone has an ideal type of work and role to perform. Don't try to force it. You have to find people that genuinely LIKE the work they are going to do, not just tolerate it.  Again, start SMALL and if that works, then a bit more to the plate and see if they can handle it. 

    2. Too many short cuts.  Many of my biggest mistakes were taking inappropriate shortcuts.  Early in my career, I didn't know what I didn't know.  This is the MOST dangerous phase for anyone, and it was especially bad for me.  I frequently did things I NEVER would do now that I know better. 

    Example: I did not care about permits for the first few houses I worked on and I did not know enough to see/ recognize good work.  I'd get any contractor to do the work and then only later, realize that they had literally DUCK-TAPPED plumbing lines together.  I am serious. The crap those contractors got away with was crazy.  I am STILL paying for those mistakes.  

    3. Worst mistake:  Accepting NO.  In 2008, I bought my 3rd property and the lender informed me that I could only get one more... the conventional loan limit was 4.  I wanted to save that for my final primary residence, so I just stopped.  Seriously.  I thought "since I'm at the limit, I guess I can't buy anymore."  

    And then I stopped.  For 9 years.  WORST MISTAKE EVER.   I helped many, many other people buy and sell and own more rentals.  But I just shut down my own mind to alternatives that would have helped me continue to grow my portfolio. Now, I'm FINALLY realizing this was a very artificial rule. I could have bought dozens of other rentals and my net worth would have been MUCH higher. But I did not.  

    Given my skills in buying/ rehabbing/ renting/ management, it would have been relatively easy for me to add dozens of properties that cash flow well.  It kills me, since I have a pretty good idea of how much I lost due to my lack of openness to alternative ways of accomplishing my goals. It's not a small number. I'd be retired by now!

    I have no one but myself to blame for this horrible mistake.  The only thing I can say in my defense, is that I did build my real estate business (real estate brokerage/ property management) and I did create two great kids during my "time off from investing".  These are not small things!!  But really, I am very disappointed that I didn't see my own biggest blind spot.  

    I genuinely hope this helps you and other people on this forum avoid these mistakes, learning from others is absolutely the BEST way to go!

    3Reply
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