10 Mistakes I Made In Real Estate

As 2019 comes to a close, I look back and think of all of the things that I wish I did and the things that I wish I didn’t do. I made a lot of mistakes in the last couple of years, and those mistakes have cost me tons of money, energy, and time.

Here are my top 10 mistakes that I wish I could go back and change, maybe you’ll feel the same.

1) Bought Too High

At the end of 2017, I was coming off a big win! I was eager to put my money back to work instead of having it sit in a bank account. But as the months went by, I wasn’t able to find a deal that made sense. The large balance of my bank account taunted me and laughed in my face as I felt the purchasing power erode due to inflation.

I hated seeing that money sitting in my account, so when I got a chance, I purchased a project that needed a lot of TLC and would only work if I added square footage.

The property didn’t play out, the market took a dive, and we’re now in a very bad spot. I was too eager, and I purchased a property for too much money. I should have focused on the fundamentals, and worked on getting a deal with a bigger spread that would work whether or not I added square footage.

2) Bought From Unverified Wholesaler

Basically, I purchased the property for much higher than I had to. If I did more research, I would have realized that the wholesaler that I was working with was a daisy-chainer who added their wholesale fee on top of the original wholesalers. I should have done more research on the deal instead of jumping into it blindly.

3) Financed Too Many Projects At Once

When you’re just starting out, you should focus on one project at a time. I got too ambitious and acquired 4 projects at the same time! I thought I would get economies of scale but instead, I ended up overexposing myself by purchasing many properties at the peak of the market.

If I focused on just one project at a time, my growth would have been slower, but I wouldn’t have been as exposed.

4) Used Same Team For The Projects Instead Of Getting Multiple Bids

By relying on one team, I hoped for economies of scale. Instead, I ended up becoming dependent on one group, and if they couldn’t perform, then I was screwed.

I should have gone out to get more bids and tested different groups. If one contracting team is busy, I would have had the flexibility to use another crew.

5) Borrowed Money From Friends Without A Plan For A Downturn

When I purchased my properties, I expected the projects to sell for a profit. I NEVER expected that I would end up selling one for LESS than what I originally paid for! Borrowing money from friends allowed me to buy more projects.

If I didn’t borrow the money, I wouldn’t have put myself in such a bad position when the market shifted.

Also, telling your friends you lost their money on a deal is one of the WORST feelings in the world…ask me how I know.

Luckily, I have a great relationship with my private money lender, and they understand that these things happen. I’ll make them whole in the future, but it’s not a situation I want to ever be in again.

6) No Second Exit Strategy

When the market turned, I had no second exit strategy. I wasn’t able to rent it out or convert it to an Airbnb. I couldn’t even move into it! Having multiple exit strategies can save you in case of a market downturn.

7) No Mentor

If I had a mentor, they could have told me what a bad decision I was about to make. After I closed on the deal, I started to ask other investors if they would partner with me and help with the construction.

After reviewing it, they said they couldn’t touch it because it would damage their reputation. Having a strong mentor will guide you when you’re about to make a mistake!

8) Not Building A Better Network

Similar to not having a good mentor, not having a good network is detrimental to your success. You need to have a team of lenders, contractors, agents, stagers, etc…

By having a diverse group that’s on your team, you’ll be able to do better and you’ll gain more knowledge about different subjects.

If I had a better network, my team could have helped me be more efficient with my project and things may have turned out differently.

9) Not Getting Enough Deal Flow

If you don’t have enough deal flow, you’ll end up falling in love with the wrong deals. I was looking for a deal for 6 months with no luck. Once the opportunity came, I jumped on it! If I had a lot of deal flow, I would have been able to pass on most of them and only cherry-pick the best.

10) Not Understanding My End Buyer

One of the reasons why one of my projects did so terribly is because I didn’t understand what my end buyer wanted. I grew up in Milpitas and the South Bay.

We don’t use our garages to park our cars, we use our garages to park our stuff. I thought the same logic applied to the project I was working on. The property had a huge shed in the back, but just a carport and a driveway in the front.

When we finally decided to sell the home, the potential buyers were EXTREMELY turned off from the fact that we had no garage. They wanted a place to park their BMWs and Teslas and immediately walked away from our property.

It was a hard lesson to learn, but we didn’t understand that people who buy $2M houses want a garage!

Tuition Is Expensive!

These 10 mistakes cost me a lot of money and aggravation in 2019, but I’ve definitely learned and grown from the experience. Sometimes we pay a high cost for tuition but that’s what happens sometimes. I hope this list helps you from making costly mistakes yourself!

Learn from my experiences and find out how the best investors in the Bay Area are killing it in one of the most expensive markets in the world. Click the button below to download your FREE copy of the Ultimate Bay Area Investing Handbook!