I thought I would go ahead and write my success story. I guess I was waiting for my story to turn out and look a certain way. I would have to say that I thought about real estate investing for ten years and, with the exception of my house, I didn’t do anything.
Then about two years ago, I was looking at property, and Randy Smith told me about Invest Northwest. I met Coni who told me about Robert Kiyosaki, and I read Rich Dad Poor Dad. After reading that book, I starting thinking differently. I wanted to meet him, and then I heard that he would be speaking at the 1999 CRE Online Convention in Dallas.
At the convention, the first person I saw down in the bar was Robert Kiyosaki, his wife, and Sharon Lechter. For anyone who hasn’t been at the CRE Online Convention or your local investment group, those are the biggest factors for me getting in action. The CRE Online Convention jump-started me. I signed up for courses, and Ron Legrand’s materials clicked for me.
I started purchasing houses. I hired someone I knew to manage the projects. This turned out to be a mistake. My first house was a house that looked like a chicken coop with a tin roof. I bought the house for $59,000. I put in $26,000 into the house. I sold it for $124,500, and I paid $4,500 in the buyer’s closing costs. I made about $20,000 when it was all said and done.
We had budgeted $17,000 for the house and planned on selling for $110,000. With my current contractor, I could have done the project for $12,000 to $15,000 and finished the project in one month and possibly less.
I bought the house on a hard money loan. I then refinanced and pulled some cash out. I was going to lease option the house, but someone wanted to purchase the house.
The next house I purchased was basically four walls. This one we purchased for $73,500, and we were going to put $35,000 in the house. We started justifying our numbers because we were attached to the deal. I really wanted to do a deal. Our exit strategy was to sell for around $135,000. We ended up putting $69,000 in this house. I refinanced and got an appraisal at $160,000, so I had a loan for $120,000. I then sold on a lease option for $169,000.
The next deal, my wife found an 8-plex that needed to be moved. I had purchased a house with an acre of mult-family zoning. I was going to put the 8-plex on the property, and I thought it would work well. I wrote the contract to say that if the government said “no,” the seller would have to refund my money. I wrote a check for $25,000.
I talked to the City of Woodburn and went over the idea with them. I had their inspector look at the building. We then went through the process of getting things approved. The planning committee gave it the thumbs up and said that we fulfilled all their requirements.
At the hearing, the nine-member board didn’t like our idea, and basically they weren’t going to let it into their city. The planners rewrote the plan so that it failed. They compared it to the state-funded housing on the back side of my property that aren’t that great rather, than the other parcels.
The seller then tried to collect on the balance of the contract. I got an attorney to write him a letter. They have been trying to serve him, but the bottom line is I don’t have my $25,000. I also spent additional money on fees and moving dirt.
I learned a lot of lessons. Evaluate who you are doing business with. Do a background check. Put the $25,000 in an escrow, so that if anything is not fulfilled, you have recourse. Have an attorney look over your contract. I also learned that I could develop a piece of property. If I hadn’t gone through this process, I would still be thinking about building an apartment complex.
The next deal, I bought another property that was a fixer. We were buying for $53,000. We figured that we would cost $50,000 for rehab, and that we would sell for $135,000. It was a similar property. This project ended up costing $85,000.
In the middle of the project, I realized that it wasn’t working. I then fired my project manager. I started managing the projects myself with my wife. I had been borrowing money off a big credit line. The only thing having money does is allow you to make bigger mistakes faster.
You are probably wondering where the success part is. I am still playing the game. I am learning from my mistakes.
I bought a couple properties in November of 2000. One house I bought for $93,000 and paid the seller’s costs. I took seven days to finish the repairs and I sold it on the 9th day from closing for $129,900. My costs were $6,000.
The other property took nine days to complete. I bought for $44,000. My costs were $8,000. We went over budget by $2,000. I have the condo lease optioned at $72,500, and I got some money down.
I had a couple of lease options where we put $100 down. We sold for $3,000 down. Since I didn’t know how to do a lease option, I asked my friend to come to the appointment. We made $150/month cash flow, and we were just cashed out for $7,000 that we split.
The lease option was definitely less stressful than the fixers. The fixer route takes a lot of time and money. I have another business that I own, and I am not too gifted in the fix-up arena.
My net worth has increased $600,000 in the past two years. I am definitely learning. I am becoming a smarter investor. I am learning how to walk away from deals. I bought a 10-plex, too, and learned about rentals based on price.
It definitely is fun. It can be stressful. I feel a whole lot better about myself for being out there making mistakes than I did when I was thinking about how to avoid making mistakes. Go out, make mistakes, and keep moving.
Thanks again for all the people who have supported me in learning about real estate. I love business. I love real estate investing. I am continuing to try new things.