After attending REI meetings the last week, and watching the BiggerPockets forum, I keep coming back to: Setting goals, and developing a master plan to get there. After the first property closed, I figured half way through 2014 I would have wrapped up another 3 or 4 – 4plexes in Las Vegas. The cash flow should have been there, the money should have been there. Well I was overly ambitious and not conservative enough.
Major problems plagued my start to investing, and really hampered where I thought I would be. To reflect, and be honest to myself I have come to the conclusion that I purchased the wrong properties. I bought wrong, and I fumbled my way through the first year making every rookie mistake that could be made. Which rookie mistakes?
- Purchasing Problem Tenants. Each Property we bought in 2012 had tenants, INSTANT CASH FLOW! No Instant COSTS! Evictions, repairs, cost of doing business.
- Not holding back rehab expenses. We only did the minor amount of work to turn an apartment over when a tenant was evicted, and we spent little to no money on Improving the Properties
- Hiring the wrong property manager. 3 in 1 year! 3 PM companies in 1 year! Absolutely screwed. Do your research, and find the right person.
- Buying too fast. It was overwhelming and I had no systems in place to manage the managers or to follow-up on the accounting
- Doing the minimum repairs. I have repaired the same A/C unit 3 times in the last 2 years at upwards of $1000 per occurrence. That A/C unit has killed my cash-flow! $3000 would have bought me a new HVAC unit.
- WEAK TENANT SCREENING. Oh man, I think I let every problem into the apartments. We were cash poor and coming out of pocket every month to pay the bills and were desperate to get the property filled. There are a ton of examples that I have written about.
- Not solving big problems. It wasn’t until just two months ago that we finally fixed the water problem at Hopkins!
But we got through the first year. We did it. We survived, built some equity, took a couple of bruises but kept on plugging. And then something magical happened. In December we sold Zavala! at a huge profit. It turned around everything that we had been doing. Suddenly we were capitalized to do rehabs, to fix things, to wait out the vacancies to get the right tenants into the property. We had a finally proven that we were going to make it.
I continue to fail in my Real Estate Goals. Perhaps it’s because I’m too ambitious, or that I haven’t spent the time developing my systems and plans as much as I should. In 2012, I thought I’d get to 20+ doors by the end of 2013. But I had my hands full of getting an education in being a Buy and Hold Investor. At the beginning of 2013 I wanted to double my door count. And I went backwards. I sold and did not acquire more. At the end of 2013 I thought I was going to purchase larger Multi-family and add 20-30 doors. Here it is nearing the end of 2014 and I’ve got two properties, 8 doors, some equity acquired and a degree in land-lording mistakes. I’ve seen little to no actual pocketable cash-flow, but a ton of appreciation and unrealized gains.
This year has been educational. I’ve evaluated a lot of different opportunities. From Mobile Home Parks, to Redevelopment Projects, to multifamily in the midwest, to the infamous $30k houses. My knowledge base has grown, but the fear of making the same mistakes keeps me back, and the fact that I’m aware that I can’t continue down the path that I’ve been going. I need to pivot and change my mindset. As I chased the midwest Multifamily I thought that I was on to something great, I developed my speaking abilities, and worked on getting my network going. But it fell apart and I couldn’t figure out how to avoid the deal falling apart. And I am to thick headed to ask for help and advice.
So I keep coming back to the basics:
- I need to develop a marketing plan to find deals
- I need to start doing some flips with people to generate capital.
- I need to focus, and get active.