What Was I Thinking???
Can you really learn from your mistakes? That is a topic I am going to explore this week with you. Last week I left off with you about the first three notes we purchased, and there were some challenges that I was facing with those purchases. Right off, with the 1st note, we purchased we missed a mechanic lien against the property for $20,000. YIKES!!!! The lien had to be paid off. So, I located the lien holder and got him on the phone. The conversation at first did not go well as he wanted the full-face value of the lien. I was not looking to make another mistake on this asset so, I did some homework on the lien and his company. The lien had been in place for almost 5 years and was for services performed on the house. After about 30 minutes on the phone, I was able to settle at $15,000. The funds were wired and we closed the deal. Learning on this asset is always pull a Title Report on all transactions and go through the entire report to ensure you do not miss any liens. We successfully sold this asset within 60 days and turned a nice profit of $24,800.
On the 2nd asset, we purchased we overlooked inspecting the house since it was vacant. We turned on the power and gas and immediately we had an issue with the hot water heater and the air conditioning. You are probably asking why is this a mistake? Well…. We had access to the house prior to purchasing it and we did not do a full inspection DUH!!! Note investing 101! Like no one was present at the first day of class! This one was more frustrating than the first note we purchased because we ordered the inspection and went on the cheap to just do an exterior. DUMB MOVE!!!! After all was said and done we had to spend $6,000 to repair the air conditioning and hot water heater. What I learned on this purchase was to NOT BE CHEAP! If you have access to the entire house take advantage of it. We were able to sell this note on “Contract” for $40,500 and held it for 12 months. When we sold it, we were able to turn a profit of $26,309.
The 3rd note we bought was not a financial mistake but was a human error. You are probably asking what the heck is he talking about. We purchased the house and secured, but little did we know that someone was living in the house. The owner of the note told us the homeowners moved out and he could not find them. Well the reason he could not find them was they would leave out of the back of the house when someone would come to the front door. After a few weeks of playing these shenanigans, we got a “door knocking” company to dig into what was going on. After the 4th attempt, they finally made contact with one of the adults in the house. Ends up, they were trying to get all their personal items out of the house, and just wanted a few days to do so. We agreed to this and within 3 days all their items were moved out. We fixed the house up a bit and then sold it on “Contract” for $38,500 and held it for 16 months. We then sold it off to another investor and made a profit of $19,524.
The lessons that we learned on these three transactions were priceless! Did we lose money on these transactions? No, but we did gain a ton of experience and knowledge. If you take one thing away from this posting it should be the following: Make sure you do due diligence, and on your first few deals partner with someone that has more experience. Next week I am going to share with you my journey of selecting vendors. Sounds simple, but I made mistakes here too! Until next time, have a great productive week! Let’s all work together in bringing Wall Street to Main Street!