Productive Reflections

Productive Reflections

I am currently going through a season in life that is causing me to reflect on things that have gone wrong.  I’m not living in a fantasy world of wishing there were a time machine that would allow me to go back and redo certain real estate transactions or deals.  Instead, I’m focusing on answering some questions.  What were the things I knew but ignored or should have known but didn’t?  Asking myself these questions now keeps me from doing bad deals like I did in the past.  One particular deal stands out in my “hall of shame”.

It was supposed to be a fix and flip rehab with various investing cohorts.  I didn’t know enough to recognize that this deal had trouble written all over it.  Instead, my insecurities and need to prove myself caused me to ignore warning signs, the first of which came early in the deal.  While standing on the property with some of my investing cohorts and the deal was still in the preclosing status, I had this deep disturbance in my gut about the quality of the deal and how reliable the business cohorts would be.  Couple that with the fact that my spouse at the time told me she had a bad feeling about the deal, and I should have enthusiastically declared, “Three strikes, it’s out, and there is no way I am doing this deal.”

Instead, I went ahead and funded it, the rehab went out of control both in cost and time, and the resale was as exciting as a wet firecracker.  Lacking experience, I sold the property on land contract to a couple who really couldn’t afford it.  After years of putting up with their slow-to-no- pay, I reached a crisis moment with that property.  The net result was well over $100,000 of my hard-earned capital being lost on that deal.

Extracting the appropriate lessons from that deal through productive reflections, I would urge you to listen when your gut says no and when your most trusted people around you say no.  If your spouse has that gut feeling, listen to it.  I’m not telling you this story to feel sorry for me, but for you to respect the fact that I am qualified to give you some advice.  Given the current status of our market, I strongly urge you not to make the same mistakes I did.

Most of us are working in a real estate market that is presenting a new kind of challenge that most investors are unfamiliar with.  Those of us who have seen a few market cycles are paying attention to every twitch in the market to figure out if this is the beginning of the reset we think is coming, or if the market is merely catching its breath and getting ready to accelerate again.

Either way, I know this:  Good deals will always exist, bad deals will always exist, and you need to pay attention to that gut feeling in the pit of your stomach warning you away from a deal that may look good, but underneath is a bad deal.