Hey BP! I have an interesting and important dilemma in real estate that I don't feel gets touched on enough. It's something I've been struggling with for years, despite the tremendous success I've had over the last few years. It's a pretty serious topic for me and has been weighing on me a lot lately. I am going to provide you a very short version of the struggle I've been dealing with in this business, but it's still going to be a pretty long post.
First about me and my background in this business. I'm very passionate about real estate. My family and friends would tell you that I am a total addict. I have been investing in real estate for approximately six years, and actively/full time for over half that time. I started out doing just a deal or two a year, and for the last few years I am at the point where I am doing multiple deals per month. My first priority in this business is to pick up rentals, but if the property doesn't work I'll next approach the deal with an end goal to fix and resell it. Lastly, I have a few employees whom, among other things, help to wholesale my excess deals to other investors.
I primarily focus on SFR's, however I also invest in multi-unit properties, land, manufactured homes with land, multiple types of commercial properties, including offices and apartment complexes, etc. I feel that my methods to finding these deals are fairly common place, at least to the BP community. I have websites, direct mail campaigns and a network of agents, wholesalers and so forth. All in all, I spend several thousands every month on marketing to distressed sellers, and probably a few hundred dollars more on regularly taking out fellow real estate professionals for coffee and lunch.
Business is going well, however, I am just steadily growing more and more unhappy with it. The problem is, I've begun to seriously question my place in this business. When people ask me what I do for work, I give them an honest personal interpretation of what exactly it is that I do. I'm afraid now though, as my perspectives have changed, that it would be a much darker answer if someone were to ask me tomorrow. It's a perspective that I am not certain of, but still afraid that it may be true.
It comes down to the sellers. The individuals I buy houses and other types of real estate from. I don't believe I am acting in their best interest. It used to take me no effort to rationalize that I was doing the sellers a serious service by taking their less than desirable real estate off their hands.
I would think to myself,
"I am buying their UNWANTED property, and I am buying it at a FAIR price."
or,
"It's not that I am truly buying at 60%-70% on the dollar, because there is no way retail buyers will pay the ARV price for a property in this condition! Investors are the only ones who pick properties up like this, so I'm paying pretty close to what it's worth now in it's current condition!"
The thing is though, I don't think these things are true anymore. In fact, I know they aren't. At least, not in the markets I invest in. I invest in markets all throughout Oregon and southern Washington, and I have connections with Investors, and agents who have buyers, that will pay significantly more than us 65-70% type investors and close equally as fast. What I am saying is, with almost every piece of real estate I purchase, I am a phone call away from putting the sellers in contact with someone who will pay $10,000-50,000+ more than what I pay for it. This really eats at me.
For example, I have a closing tomorrow for a property that needs $30,000 tops in repairs, and has an ARV of 275k. I am purchasing it for 135k. I feel like I could take this property and resell it for 180k+ as-is. It feels good to get great deals, and get that much closer to your financial/career goals when you do get them. But that difference of what others will pay for it vs what I will pay for it is weighing on my conscience.
Adding up all the transactions I do per year, this adds up to a sizable amount of cash that could've been in all these sellers hands. Cash that I now feel is dirty. How can I work my way to being a better person throughout my life while I actively build a net worth off of other peoples equity? Not only do I feel like they could've all got better deals, but I also feel like these are some of the people in the most need of help. There's such an opportunity to give financial blessing to some of these people in their distressed situations, but instead I seem to take their situation and make it a financial blessing for myself.
It's not an issue of honesty. I've setup protocols, neat little employee handbooks and so forth to make sure my team approaches each transaction with the utmost transparency and honesty.
This is the first time on BP I've went relatively in depth about my business, the success I am currently having, and the trials and doubts I am struggling with. I wish such a post could've been differently, perhaps another notch in the Success Stories forum. But it's not. I feel dirty. Like all the real estate I've acquired is dirty. Like I don't truly help sellers, and that I'm just here to take advantage of their situation.
I'm not a great writer, and I'm not the best at expressing myself either. I know that this post won't really express the depth of the struggle I am going through with this, and how much it weighs on my heart. But I think, you guys will still be able to get an idea of where I am coming from. Maybe some of you have even struggled with the same issue, or currently are?
Help me out guys! I feel I am on the brink of wanting to walk away from this business. Am I wrong in my thinking, and just beating myself up too much? Am I right, and should I just make a few minor or major adjustments in my business model to cleanse my conscience and better serve those I mean to do business with? Should I take a step back? I really appreciate the BP community and find that a lot of the knowledge here is practically invaluable. I look forward to reading the posts from anyone who would be so kind as to weigh in on this issue of mine!
Best
