Learn from mistakes - tips and suggestions # 2

Learn from mistakes - tips and suggestions

Learn from mistakes - tips and suggestions

 

Post # 4 # Initiated week

About mistakes we made and what we can learn from them.

This week in one of the responses Marina Che asked me about the mistakes I made and what I learned from them so I raise the gauntlet and share with you.

First, let's talk frankly, most of us are a little ashamed of the mistakes we made and try to keep them modest and certainly not to tell about them, so I want to tell you that the mistakes I made were the greatest gifts the real estate world has given me. Following every mistake I made I analyzed the mistake, what caused it and how I can avoid it next time. I improved my system and came out much stronger in my risk management.

The mistakes I made taught me and gave me the ability to increase my buying volume because all the way from buying, accompanying investors, renovations and maintenance, choosing tenants and more and more I went through so many things that shaped me as a real estate investor and my method.

So let's start with the list of mistakes:
1. Renovation is more expensive than planned: In my first deals I sent the property manager who gave me a $ 1,000 25 repair estimate. In practice, the renovations ended in the sum of about $ 1,000, which, of course, damaged the yield. In the following transactions I sent at least 32 contractors and sometimes 2 to get tough quotes and made it clear to them that there was no room for budget overruns. This of course allowed me to stay within the limits of my business plan.
2. Selling at a lower price than expected: one of the most annoying mistakes. A broker gave an estimate of the sale price according to the compass that was in the area, but with the experience I realized that Compass can be ordered on demand and you can choose the compass with the high selling prices, and then what a wonder, the selling prices that the broker gives you are biased upwards. My way of overcoming this was to have a strong connection with a local intermediary who added me as his assistant to the MLS. Now I do my own compass and the difference is huge.
3. Appointment of a management company: In one of my first deals I bought a property in a new city that I did not know and I looked for an online management company. After checking for two days, I appointed a management company that I found online and the appointment was based on a brief conversation with the manager and a review of their site. It took me exactly 3 days to fire them because they thought that if I'm from Israel I do not know prices and sent me a quote for a renovation with exorbitant prices. Such as replacing a single roof with a price of $ 9500, while such a cost is around $ 5000. I learned from this to get targeted referrals from my colleagues with experience or even to turn one of my realtors into a small management company.
4. Filtering tenants: At first I received a tenant who had low incomes and really during his stay in the property he did not pay on time, and I had quite a few difficulty collecting with him. In the end, he left after a year at the end of the contract and paid everything he owed, but my collection efforts exhausted me. What I have learned is to make potential tenants a square filter: an economic background check to understand the ability to pay rent, a criminal background check to figure out who I'm dealing with, checking past evacuations and the latest personal interview interviewing Molly or the property manager that has nothing like personal impression.
5. Buying from auctions without inspection: In the beginning, I bought some properties from auction sites without the possibility of inspecting the property. BIG MISTAKE! Alongside a few deals that I managed to make a lot of money on (because the renovation was sane and the purchase price was low and I sold them at a big profit) there were some bad deals whose renovation was outrageously expensive and I sold them at a loss. Corollary: Want a casino? Go to the casino because real estate is not a place to gamble. If you do not have the ability to test before buying, just do not repair it!
6. Wrong adjustment of transactions to investors: One of the investors who bought property for rent reacted harshly and emotionally to any foolish expense that was in the property. When I recalled the meeting we had, I realized that I had a part in getting into a deal that did not suit him. Because he was not built for a changing flow and needed something more predictable and calm. I decided to transfer it to a fixed cash flow by buying the property from it under Owner Finance. I managed to keep him as an investor, he receives a steady flow, satisfied with the yield, and thus I turned an unhappy investor into a satisfied investor.

So far my list of mistakes and how I turned them into my university for real estate.

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