First deals… They’re terrifying, educational, and unforgettable.
Whether you made a profit or not, every investor remembers their first deal.
Lessons are learned, strategies are perfected, and your confidence and expertise grows with each deal.
We asked 6 experts to share their first deals with us today and needless to say, no two are alike.
“My first deal probably cost me over a million dollars in lost opportunities so I do remember it well. My wife and I bought a duplex when we were 23 years old and everything imaginable went wrong. The duplex was only $21,000 and looked great on paper, but in reality it was a nightmare. We had no money to do the fix up which led to us taking any possible tenant with a pulse and a deposit, which then led to horror stories of evictions. After we got out from under that duplex my wife refused to invest for the next 10 years. I am sure that taking 10 years off has cost us a ton of net worth and cash flow. What were we missing? The training and coaching to help us understand the very basics of investing. Don’t let this happen to you! It is way too costly to invest in real estate before investing in yourself.”
“My First Deal Truly *Was* Terrifying, before, during, and after.
When I bought my first 12-unit apartment building I was completely overwhelmed by the thought. Even after having flipped 34 houses. But it was something I WANTED to get started with.
I had invested in my education, looked at about 100 deals and felt like I was ready.
Boy how I was wrong.
Everything that could have gone wrong before and after closing did.
It took 4 months to close and fell out of contract at least once.
Then, once I closed on the property, one of my tenants made it his life mission to break me. He called the permit authorities daily, emailing everyone along the way shy of the mayor. I had inspectors SWARMING all over the building, enforcing the letter of the law. I was having to deal with fines and onerous compliance rules.
The tenant sued me repeatedly for the same violations. He called the lead paint people. He tried to organize the tenants against me.
I nearly ran out of money, even though I had a healthy reserve.
I’m not sure exactly why he did this, but after one of the many court hearings, he apologized and he stopped.
I missed my projections for the first years by a mile, but I bumbled through it. Now the property is stable, cash flowing, and about doubled in value.
While this deal nearly sunk me, it didn’t kill me, and in fact it made me stronger. It positioned me to help other people who want to get started with apartment building investing but are afraid.
We’re all afraid when we start something new.
The difference is how we handle fear.
Do we let it paralyze us or do we figure out a way to take action nevertheless?”
After closing that first deal, I remember finding myself going back and forth with thoughts of “Wow, now that we have proven that we can do this again and again and more often” and “Was that a fluke?” “Will we ever be able to do it again?”
Finally we made our way to the front of the house to discuss the deal. He asked me what I paid and how much I was looking to make on top of the deal. I VERY nervously and sheepishly said that I was looking to make $10,000 (thinking that this was the single biggest check I would receive in my life). And after what seemed like an eternity he uttered the words that would change the destiny of my life … “I’ll take it”… to which I immediately said to myself … “What??? He didn’t even negotiate?? … I sold too cheap! Thus my journey as a wholesaler began.
I bought the property under the premise that there was a lease purchase tenant who would pay the rent and buy the house back from me at the higher price. Ultimately, the tenant bailed on the property almost immediately and I was stuck with a house that I had just paid full market price for and no tenant to cover the mortgage. Two years later and after burning through 3 tenants and about 100K in sunk costs, I sold the house.
The rehab took us a full year and the entire summer just to build a porch; we put money into windows and landscaping and didn’t even update the kitchen or bath! Wow, how foolish were we!
After six months on the market and barely any showings that’s when we met a wholesaler. Not even knowing what a wholesaler was we signed a contract with him knowing we were losing about $4500 each, which believe me as a college freshman that was a lot of money to us. 20 days later when we went to close of escrow and our eyes almost fell out of our heads when we saw the wholesaler making over $20,000.
As you can see, you never know what to expect when you finally get your first deal. Due diligence can help you with some avoidable mistakes but there’s always the possibility of something going wrong. When things go wrong in real estate investing, it usually costs a decent chunk of money.
Be careful. Learn everything you can from other experts’ mistakes. If at all possible, have a buffer in your numbers for unexpected costs that might arise and most importantly, enjoy the journey!
It’s not always about the end result, but the journey along the way.