Mistakes Myself/You've Made

Thanks for sharing this. When I first got into RE investing I had the same type of thinking. 10 to 20k off of the asking price seemed great to me. I noticed at the end of your post you talk about how easy it has been to build your buyers list. Would you mind sharing what you have done to start building it up?

Thanks

Josh

From my reading I was under the impression that both books stressed more on the assigning strategy rather than purchasing. Your purchase at $72,500 was only 15% off asking price ($12,500/$85,000). I'm not certan of the FMV on your purchase but it is rather low. Dean's books talk about 25-50% off FMV.
Holding or flipping is profitable if you can land something at least 25% off FMV. Remember that most, and if not all, prices are set at 5% cap rate if left up to the professional.

Jonny,
Thanks for the insight. It's always nice to learn from our experiences. I am just beginning the process and I too would appreciate it if you would share your secrets about building a buyers list.

Johnny,

Great story about taking action! I completely agree with using a phone instead of a hammer. I bought my first property in October and did the remodeling myself with the help of some friends. It took me a month longer than I anticipated, but it is done. I am a mechanic working with metal using a torch and welder to make my repairs, not plaster, drywall, or screws. atleast I will have all the tools I need for the next job to give the next duplex a fix up.

But what about your cashflow and equity? Do you have enough equity to Refinance and pay yourself back your rehab expenses, and still have a good positive cashflow? If you do then you may feel that you have made a mistake by doing all of the work yourself, but if you get yourself paid back and cashflow every month, then you still have good deal.

I think this is something allot of people dont even think about.Great post ,you probally saved some of us time and money...good luck on all your deals!!!!

Thanks all for comments, with the property rented it will cost me about 15 dollars a month to live in it. It will cast flow when both units are rented, but I will probably live there a couple years.

As far as the buyers list is concerned, this is what I do. I tell everyone I know I'm starting out in real estate investing( just like Dean says). I just ask people if they are looking for homes. For example: Monday I had a junker/scrapper guy come by and take some out metal and bits that were in the basement of the duplex. So he comes in and I'm helping him carry some stuff to his truck and were just talking. I ask him if he rents or owns a home, he says hes renting for $700 a month, well naturally I ask him if he is interested in buying a home, "of course" he says but, "My credit isn't good enough to get a mortgage", he says he has a couple bills he needs to pay still.

Well this guy sounds to me like a rent-to-own(lease purchase option what Greg Murphy does). So I say "well if I can find you a home for what your renting now or a bit above would you be interested in doing a rent-to-own sort of deal?" He thinks that would be great, so I just ask him what type of home hes looking for, just basic stuff bedrooms/bathrooms/garage spaces, area of town. Just things like that, just talk to him comfortably. So I write down his information and tell him I'll try and find him something.

Another example I called investor I saw on craigslist.org earlier today that had an ad saying he specialized in negotiating short sales, and we just talked. I told him I had bought a duplex and was just about to rent it out and I was extremely interested in making real estate my full time job. He says "its a great business to get into". He tells me hes part of a group of investors mainly negotiate short sales. Very awesome. I ask him if they pay any sort of bird dog fees, or will be interested in taking assignments if I can find them a good deal. "Oh definitely" he says, and he offered to help me out since I'm new. It was amazing easy to do.

So, after I get a nice solid list of 20-30 people(15 investors would be nice) I'm going to start house hunting hardcore and do some assignments with these investors or some lease options with the rent to own crowd.

Hope it helps,
-Jonny

Lesson learned. You took your punches, made some mistakes, but it will make you much wiser down the road. Jeremy and I have been there and done that. An exposed set of water pipes that froze up over the week end, that i missed during my original walk thru. Spent a lot of time on my stomach in a crawl space wrapping pipes. Won't make that mistake again. Ya see, we all learn thru mistakes....Jan

Our first one was a doozy, but you'll see we have a second chance to fix it.

Last year we finally got a house under contract with just $100 earnest money and had an investor ready to buy it from us. Listed at $125,000 and we locked it up for $110,000 and worth $185,000 ARV and not needing too much but cosmetics. We had a buyer at $125,000 for a quick $15,000. Nice! This is a 5 bed/2 bath in a desirable part of town on a main road. This is an REO and then the agent comes back and says we need an additional $900 for earnest money.

Here's where we fell apart. No extra cash and to be honest I even needed that initial $100 back! We have no support from our families and they think I am nuts to try and get into real estate. They won't be saying that in a few months...Now this same property is back on the market at the same price with the same agent and you can bet your bippy I will make sure to have enough for a deposit and put in the contract that the earnest money is to be a set amount I can handle. And I will pull in some additional guns for backup if needed. I don't care if I have to share the profits, I just want to make some profit first. A portion of the money is a whole lot better than 100% of nothing!

I have contacted with several local DGers in RI and have been asked to let them know if I get any deals. Thanks guys and you can be sure I will contact you first if I need any help.

Congratulations johnny on taking action and on this Post. This is a great idea. I appreciate your insight as I am now leery of making my first deal a "major rehab" (Fix-n-Flip)-would rather it be an Assignment or Bird-dog fee at least. Your post reminds me of what Dean says in his new book Your Town Your Real Estate profits-I just read tonight where he said it is "better to Take Action and Make a Mistake" then to take No Action and Have "Analysis Paralysis" which is what I battle myself. HE does recommend always to do our due diligence; but you sound like you are Persevering so you are an inspiration to all of us.