Hey BP family,
I was sitting here reflecting on my 2 year REI journey and wanted to share a few thoughts. As I've learned more and more about real estate I'm really starting to appreciate the different exit strategies. For instance, seller financing used to really confuse me but not any more. Whenever I locate a potential deal, I can't help but to find myself trying to determine multiple ways to exit the deal now. I didn't realize how much of a job wholesaling, flipping, and even just being a landlord can be if you don't have a solid system in place that will allow you to scale up.
When I first started wholesaling I had to pass up a lot of different leads & potential deals because there just wasn't enuff meat on the bone. I really couldn't understand why a home with $25,000 in equity had to get passed on. Especially when the seller just wanted out from under the mortgage. I thought to myself.....Surely this could be a deal for someone but as I would speak to other investors, they would look at the numbers and simply pass on the so called deal or they would tell me to pass on it as well. Of course I was still new to the game so I had to really re-evalutate any property I put under contract. Then one day... The numbers finally made since. Which brought me to me first my deal....
I thought to myself. Finally! This is it! My first deal is going to closing table! And to think....After all of the books, podcasts, youtube videos, bigger pockets forums, and analysis paralysis. It was finally happening for me. Well.....Nope, not exactly. My first wholesale deal fell through the cracks on the day it was suppose to close. Not once, but twice! 1st investor requested 2 extensions but still couldn't secure funding so they backed out. 2nd Investor requested an extension then had a stroke. By this time all I could sense was my relationship with my first title company and my integrity literally being destroyed. My deal fell apart and I was literally shook. I mean literally shooketh! I was so done! I thought to myself this can't be happening. What the hell did I do wrong here? My numbers were right and I had a backup buyer. I had assigned the deal twice already, I Got the seller to extend contract for a third time, and then it still fell thru? Come on man! This can't be real. Yep, it was very real. But..... luckily the rapport & transparency I had with the seller, along with some good ole faith, brought me a long way. The seller believed in me and gave me another extension. The only thing that saved this deal was another exit strategy "Creative Acquisiton".
I stayed up all night thinking of another exit strategy. Seller financing. Long story.... I'll spare you all the details. I re-structured the deal, found another buyer, assigned my contract, and in the end made about $10,500 on my first deal. Yes, It finally closed. It's all good now right? Nope! What I thought was a win-win-win didn't turn out to be a win for everyone. My investor/buyer over-spent on the rehab and still lost some money in the end. I wish everyone could have won in this transaction but it just didn't quite pan out that way.
The investor/buyer wasn't familiar with any other creative exit strategy other than flipping. Honestly, even my only strategy at the time was a typical wholesale deal until it all fell apart and I was forced to think creatively. The initial deal was a no-brainer for my investor/buyer because I structured a creative acquisition and assigned the contract. It should have been a win-win-win for everyone right? In a perfect world yes! But in realty..... Heres what happened.
6 months holding costs, Change of orders on the rehab, over spent on rehab costs and labor, then winter time hit. I didn't realize that winter was not a great time to have listings on MLS. By February the investor was just ready to be done with the whole project so he dropped the price, sold the property for less, and took a loss. I think his loss was less than 7k in the end, but that includes 6 months of lost opportunity due to the investment capital being tied up in one flip, bad dealing with contractors, and many sleepless nights. I received a great 1st testimonial from the seller because they were so happy the deal finally closed and they saw that I tried my best to do right by them instead of walking away. My first investor/buyer still hasn't returned my calls or texts in over 1year and a half. Although this was only a wholesale deal for me, I still felt the pain of my buyer who flipped the property but lost in the end. I was there observing the whole way. I was hoping we could have both learned from this experience. Or maybe I missed something. Since then, I have continued to try and go the extra mile for everyone I do business with. Even during turbulent times I will figure out another way. To say I learned so much from that first deal would be an understatement. Remember....I thought that deal would never close and I almost gave up, but having another exit strategy was a major key.
Last thing....For some reason I use to think of bankers as investors. It never dawned on me that banks never deal with any of the headaches that investors do. It's two totally different languages. They've creatively figured out an easier way to do this. I guess that's why they have the tallest buildings.
Hopefully this inspires someone to keep going on their REI journey when it gets tuff. Or maybe it was simply entertaining to someone who's been at this for years. I really intended this to be a short post but hey..... forgive me. I just couldn't quite pull it off. lol
