LOL, well, the 'guide' said to keep the introduction short, but since it's been requested, I'll give a quick rundown.
I have been working away in the oil field for a bit over 10 years now....don't remember much of the first 5 years....way too much partying. There is a reason that guys die in this business, it usually involves liver failure, LOL!
Anyhow, got married in 2009. My beloved and I found a real estate investing group in Houston that impressed us (not mentioning any names, LOL!) and worked out our 5 year plan for me to quit working away. 9 months in she decided that I was gone too much and that she had a good ROI by packing up and taking half of everything. After the lawyer bills and it was all said an done, I was out just shy of 100K.
Took me a couple years to rebuild, and I started going to the REI group again, getting pumped up and getting debt paid off. Finally had a good egg to start with and I partnered up with a very experienced member of the group. I still needed to work away from home (a lot....last year I was only in the US about 60 days) and I wanted someone with experience to be on my team. To afford the experience, I was willing to be a virtually silent partner and front the finances and let him do the leg work. The long term strategy was buy and hold, but he found a home in need of repairs for cheap that was a great target for a flip, and if it worked out, would double the money that I'd set aside for REI.
Went in on the deal, and my partner didn't exactly do his best at keeping track of the contractors. Repairs were not done to spec or to the quote, and my partner didn't follow up on the contractors nearly often enough....just sent checks when they were requested. Lots of work ended up being done twice. Ended up sinking everything into this and having to float a hard money loan for about 6 months. After the dust settled, I'd lost about $65k, and then there was the credit card interest that I would pay on for a couple of years due to having to live on cards so that I could pay my mortgages - the mortgage on my personal home as well as the hard money loan for the investment property. The only good thing that happened out of that deal was that I learned my lessons (I'll list the ones that come immediately to mind below), and that I got a large capital loss to write down on my taxes the following year.
That was a few years ago now, and I've changed my strategy a bit....I've decided that IF I do another partnership, it won't be while I'm still working away. And that I'm not going to stop working away till my personal home is paid off. I realize that a LOT of folks pay the mortgage, buy a car, invest in real estate, and put kids through school on 60K a year, but I earn too much now to walk away without really squaring my life away, and part of that (for me) is paying off my primary residence. SO....now I'm working on that note....with the recent slowdown in the energy industry, I'm hoping it'll take me about a year or 18 months to pay off my home, and at that time, I'll allow myself to go into the office (either project management or people management), and work on getting my funding together again for another go at REI - should not take too long with no other expenses besides taxes, food, gas, and misc.
Now - The part that I HATE to have to think about, but the most valuable take aways from all of the above.....
1) If you get married after the age of 25, or you have control of family money (or unless you are married at 20 and neither you nor your spouse have any assets to speak of) GET A PRENUP!!! As my lawyeer explained so kindly to me, a prenup is not asking for failure, it's part of a smart business plan. When you get married, you and your spouse's tax liabilities change, and you are (or can be) taxed as a couple by the state. When you say 'I do', you have effectively started a business, and if a business is to succeed, it requires a good business plan. Part of a good business plan is an exit strategy. That's all a prenup is - What's going to happen IF this doesn't work out. That includes divorce, but it also includes death, incapacitation, and a myriad of other factors....whatever you wish to include. As my attorney so elloquently put it "When you get married, from a religions aspect, it's your and your spouse and God in bed. From a secular standpoint, it's you and your spouse and the State of Texas in bed. Only way to get the State of Texas out of your bed is to have a good prenup. It keeps the state from telling you what you have to do if something happens to this marriage."
2) Don't be so eager to get into REI that your emotions make decisions for you. I broke this rule a LOT when I got into that first deal. I shouldn't have partnered up and started at all until I was in the area enough to monitor the deal and the property. I should not have just taken my partner's word that everything is fine. My emotions clouded my judgement, and I paid dearly for it. If I'd put that initial investment nest egg against my personal mortgage instead of towards (what I later learned to be) a risky gamble, I'd have my home paid off right now, and either be working in town or putting stacks of cash away for when I will be working in town and can manage my projects.
3) Find a good mentor. This I DID do, but I want to get it in these lessons learned as well. The guy that was my partner was and still is an excellent mentor with a ton of experience. He just didn't treat my money like it was his money. Speaking of.....
4) Don't think that ANYONE will treat your money like it's their money.
5) Manage your own projects.
I realize that these rules might not work for everyone, and many (especially in the REI community) will find them to be too conservative, but this is what bit me in the rear when I made my first foray into the REI world. Breaking these rules cleaned my clock, and many folks ruefully talk of the time they did that one REI deal and hwo bad of an investment RE is. I know this to be untrue, and I expect a bed deal every now and again. It just hurts a lot more when it's your first deal. I also know that if this one didn't break me - financially or spiritually - I'll be around for many many more deals....some duds, hopefully more than a few home runs.
Hopefully there is someone out there that is about to do what I did and this helps them to reconsider their plans or adjust and put in place some more checks and balances.
Cheers!
Gerd
