Real estate investing is an extremely rewarding industry but does pose it’s challenges like any other business/industry. This blog is to share a little about my experiences on both sides of that fence.
Let me start with the challenges. I have experienced many pitfalls but that did not discourage me as the rewards and my passion outweighed those immensely. I have been investing in real estate since 2006. Buying my first investment property at the height of the market thus paying more than the property’s current value is now in 2020. With not having the education that I have now acquired and continue to do so contributed to the price I paid for that first piece of investment property. I use the term “investment” property as this is a rental unit that I still own today. Now although I purchased at the high end of the market in 2006 right before those now memorable years of 2007, 2008, & 2009 real estate as always is still a particularly good investment. Some investors look at immediate return on their investment. I have always looked at hold property as a long-term investment and now 14 years later from a value perspective this property is leveling out in value to what I purchased it for in 2006. Now keep in mind there has always been a positive cash flow and continued equity growth. This is one of several challenges I have faced in real estate investing. Let me share a few more. Having temporarily taken a step back from real estate investing in 2006 (luckily) I did not become more active again until 2014. Now I had grown my education in this industry and started investing in rehab properties or what is more commonly known as “flips”. Now the challenges increased but I was armed with newfound education. I will briefly list a few of those challenges. My first 2 rehabs in 2015 were somewhat smooth in comparison to what came in the later part of 2015. I purchased a 1909 farmhouse that had been vacant for approximately 15 years prior. Having great foresight, I could visualize what the finish property would look like in my mind and eagerly purchased the property from a wholesaler with anticipation of completing the project in 4-6 months. Man was I wrong. Also understand I had purchased another property in the same timeline. Well 18 months later on the “4-6 month” farmhouse and being funded through a HML (hard money lender) at 12% interest it was completed and on the market listed on the MLS (multiple listing service) just before Thanksgiving. Now I was a nervous wreck because it had been shared with me that this was a horrible time of the year to list a property, which I learned later was an opinion of those that really were not in tune with the market as they lead me to believe. But after no solid offers and now my listing coming up on Christmas and 30 days later, I was starting to believe those opinions. My listing agent and I put our heads together and decided we would remove the listing from MLS during the holiday weeks of Christmas and New Years and relist in the new year of 2017. We relisted with no price adjustment and immediately had multiple offers and my accepted offer had us to closing in early March with a $100k profit. The good and the bad. Now let me share with you the UGLY!! When you go into business the intent is to be profitable. At least at some point after starting. This was not the case in fact the $100k of profit that I just shared about, well that was lost in 2017. I joint ventured with two other investors on two projects and project managed a third one with another investor and project managed all three of these in addition to working full time in Corporate America. Well let me be the first say that I do not have anything on Superman and there is no BIG golden “S” on my chest. My ambitious thoughts of “I can handle this no problem” were quickly deflated and those three ventures ended up a loss to the amount of approximately $100k in anticipated profit for me. Now at this point most would say I am out of here and cut their losses like a lot of people I saw do in this industry. Me? I was always a strong believer and still do that business is built on failure as well as success. So, I pushed forward and acquired another property from a wholesaler this one needing mostly cosmetic remodeling and a quick sale which it was but, in this business, when your rehabbing property there is one little part of the equation called inspections. Now remember that 1909 farmhouse I wrote about here in this blog earlier. Well I had gained a reputation with the local inspector and let us just say that it was not a particularly good one. Joe, (not his real name but I had some really special names for him) felt it was is his best interest to figure out how to really do what ever he could to fail me on my inspections for some reason. Let us see how about not having a shower curtain rod in place in one of the two bathrooms, or no splash blocks at the bottom of the down spouts of the gutter system? Yep these are legit in the New Jersey code enforcement book. Go figure. So, my new rehab that was mostly cosmetic remodeling and a three month turn around to put back on the market now turned into six months. On the other hand, that property went under contract and sold over asking price with a concession still yielding me with a full asking price and $50k +/- in profit. I was determined to put a so called no problem, no hassle project under my belt and here comes 2018. The market was slowly shifting, and I was going to experience the next part of my challenging journey. I think a lot of people see what others are doing in this business but with blinders on. They see the projects, the sales, the profits (sometimes) and say to themselves wow that looks easy, I am going to do that!! I was one of those people!! Let me tell you it’s NOT EASY but it is very rewarding and fulfilling and seeing the transformation of these properties for me was HUGE in having that great feeling of accomplishment when the project was completed and the new property owners had closed on their new home. I had people in the neighborhoods of my projects come to me and say I am so happy that you are doing this. This house has been an eye sore for such a long, long time. In addition to the 15 plus years of being vacant farmhouse, I also purchased, rehabbed and sold another house in the same town (township I live in) where the standing vacant time had been approximately 15 years. I was getting these projects done. They looked beautiful and were selling quick usually at or above asking price. Now with the changing market the next challenge was lead generation and marketing. You see back in 2015 just several short years ago I did not do an ounce of marketing. I did not spend a dime. I would call my wholesaler Lenny, every Wednesday at about 4pm and say hey Len what did you get at the auction today? He or sometimes one of his staff would run through their acquisition list I would say I am interested in this one or that one, go out and do my due diligence and purchase at least one. Times were good and no worries for inventory. Now coming into 2018 sellers got savvy. As the market was shifting into a sellers’ market. Even the sheriff auctions got inundated with so called investors who were buying “up” on properties. Now the challenge became lead generation and it was onto the marketing trials. Trials because I had not had to do this in the past, so it was trial and error. You could not go to another investor and say hey what are you doing that is working for you marketing wise? They are not going to share that information because that would be an opportunity for someone to cut into their action!! So, marketing trials it was and let me tell you it is not cheap. We tried list purchasing, direct mailing, cold calling, skip tracing, social media advertising and on and on and on. The $$$ costs kept adding up but the results were not materializing. Currently this was all taking place in New Jersey. My local market. Albert Einstein’s famous line is “Insanity is doing the same thing over and over again and expecting different results.” We were practicing this in the grandest form!! Time to regroup and come up with a new strategy!!