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Maybe You Can Learn From My Mistakes

by Irwin Prince   

Okay, here it is. Now get ready to laugh your butt off. I'm a foreclosures expert, right? So I'm asked to speak to a group of recent seminar graduates who, after finishing the program, really don't know all that much. The chairperson of the group asked me afterward if I would be interested in going in with her on two real estate investments that she had found. I would put up the money, and she would do the rehab work.

Both houses were absolute pits and had to be literally rebuilt inside. We estimated the costs and the resale value and figured to clear about $7,000 to $8,000 on each. (First mistake--too little spread). I put up the money, she did as agreed, and we put them up for sale, at which time we realized our second mistake, which was, never buy houses in pure rental areas expecting to sell them to anyone but a low-dollar slum lord.

That was about 1983, and I still own those two hummers. My partner moved away, and I bought out her interest. I mortgaged one and got back all my cash I had in it.

One has been a Section 8 rental (the rents have increased yearly, and now are finally where it cash flows okay) and the other, a tiny duplex, has had one tenant the entire time in one side and about ten different ones in the other. I haven't raised the rent yet. All in all, they're decent investments, but on occasion I've been tempted to give them away. Eventually they'll sell. I hope.

My next deal wasn't too much better. I partnered with a friend who was a salesperson with a big real estate firm. The lesson we learned then was to control your costs, and also that the costs and time frame you project are not necessarily what really happens. That one did sell and netted a whopping $2,500 profit, after a ton of work and problems.

My biggest mistake was letting these experiences discourage me from doing any more real estate investing for a number of years until I met the people I now work with. I should have kept plugging away and learning; however, I was too busy with other things and needed partners, which I didn't have until much later. I hope you can learn something from my mistakes.

 
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