Do you remember your first time?
February 14, 2008
No. I’m not talking about anything personal- so get your head outta the gutter will ya?
I’m referring to your first deal.
Were you excited?
Scared to death?
Nauseous?
How did the deal go?
It’s good to reflect back. So here’s a pic of my first deal:
This junker appraised for $37K back in September of 2000. I bought the property for $23,500.
The bank would finance 80% of appraisal so I put around $6K in pocket at closing. Sold it the next day on a contract for deed to a couple named JD and Barbie for $1K down. I thought I was hot shit just rolling in moolah…
That is, until a few months go by with no payments. I should’ve known these guys were trouble when they looked at the house and the man started stomping his foot yelling - “there’s a damn whole in the floor.” It was where the previous owner had carpeted over a vent.
Oh well…
I swear what I’m about to tell you is completely true and I’m laughing as I type this so forgive me for the ramblings.
This was my first deal and I was green as could be and these tenants knew it. Experienced tenants can smell it a mile a way.
They bullied me around, lied to me, and made the yard look like a junkyard.
After all, JD worked for a towing company, so I guess it was only natural to cover the yard with more junk.
Anyway, months go by and I finally get a gut full. I muster up the courage and decide to call their asses out. Barbie answers the phone and I began yelling about owing me money and after a very heated argument I slam the phone down.
A couple of hours pass and my cell phone rings - it’s JD… (this is where it gets good)
I start the conversation yelling at him when he stops and tells me the best excuse any tenant has ever told in the history of rentals.
He said, “I have a reason for being late on the payment. See, several years ago, Barbie was working at a factory when a box fell on her head. And sometimes she forgets stuff especially when it comes to making payments.”
I couldn’t help but laugh right there on the phone because this was something I never expected. I guess we can call this disorder - NonPayment Amnesia.
Anyway, they get their payments in order for the time being and everything is running smooth for a few months when a buddy of mine calls me and says he’s on the street this house is on and there’s a huge gust of smoke coming from my house and he’d check it out for me.
I’m praying for a fire chanting “Burn Baby Burn” while I’m doing my disco dance.
I didn’t want anyone hurt, just the house to go up in flames.
My buddy calls me when he arrives at the house laughing hysterically.
My fire that I’d hoped for was nothing more than a redneck on an old forklift! JD was in the back yard on an old forklift doing donuts and it was causing all the smoke.
A little over a year later, I start an eviction and they move out trashing the house.
I could go on and on, but I won’t. You live. You learn. You move on.
I want to hear your stories from your first deals.
How did they go?
-Derek
PS- Don’t let my story discourage you- just learn from it and don’t make the same mistakes. Real Estate Investing is a great business and has been great to me, this was a rocky way to start the business, but I learned from it. I made adjustments and now I love it. This is one of the main reasons I encourage beginners to flip before they ever attempt to hold rentals.
BTW- Happy Valentines Day…
Derek,
My first deal was a duplex I bought with no money down, I lived in one half while I rented the other side. My tennants weren’t the greatest, although they paid rent on time for most of the months anyway. They had so many people coming iin and out I never knew who was actually living there. I sold it a year after I bought it and made $48,000 because the market went up. I didn’t do ANY repairs on the duplex while I owned it except to sepearte the front yards with a little picket fence that cost about $100. I then bought another vacant home on a lease purchase agreement and assigned that six months after doing some work to it and made another $24, 000 within six months!! Not bad for a single mom of twins huh?
Happy Valentine’s Day!
I haven’t had my first flip yet, but I hope it goes a bit better than yours. i am so happy that there are people out there like yourself, that give advice. I am trying to clean up my credit before I start flipping. How much do you think a person needs to get their first flip going??
Keep this in mind - when I bought this “flipping wasn’t cool” like it is now. That was in the year 2000 and the real estate industry has come a long way since then. My goal was to buy the house to hang on to.
And that was my mistake. I should have focused on generating CASH and not worried about rental income. I could’ve flipped it and made $2k-$5K and been done with it. Instead, I still have this property nearly 8 years later. Now I have some good tenant-buyers from selling it on eBay
At the time, I had a good job and this was intended to just be a supplement to my income- not the main source. Within 1 year of this purchase, I learned to flip properties in a double close fashion and quit my job just before a huge merge with the company I was working for.
How much cash do you need to flip?
I’ll answer that in one of my next posts.