Maximize your chance of Real Estate success by making your investment process boring and predictable. If you’re looking for something exciting go skydiving or take a trip to a foreign country. Why do I suggest this? When you know what you’re doing there isn’t that sense of excitement that comes from jumping into the unknown. When using a proven investment system you will have predictable results and that will inevitably result in boredom. If your investing is filled with excitement this increases the chance of making a serious error. What I call the BCM (Big Costly Mistake).
My BCM came early in my investment career when I decided to venture into flipping properties. I had some investment experience with buy and hold real estate and had done a number of mid-size renovations. My realtor at the time brought me a quick turn opportunity of a Victorian Century home. The owner at the time was trying to rehab the property, but ran out of money part way through. This included a foundation underpinning job which was approximately half way done, and as a buyer this meant that getting traditional financing was not possible. I knew that while this would deter some buyers, as it would also limit competition in a competitive market and provide an opportunity to purchase the property well below market value. The seller was very motivated and I was urged by my realtor to close quickly, and I proceeded as such.
Due to the quick close as well as the size and scope of the project I wasn’t able to use my team of contractors, which included handymen and subcontractors. The experience of my contractor team and I was in cosmetic renovations, and this renovation was much more extensive. The extensive work included structural repairs and alterations, plumbing, electrical, and insulation. Additional resources such as engineers, foundation specialists, and designers were also required. As a result of not having the right team in place and having numerous contractor issues what should have been a three to four month renovation ended up taking between seven to eight months. Additionally, due to my lack of experience I significantly underestimated costs to do the renovation. What should have been a one-hundred thousand dollar profit was completely eradicated, and I barely broke even.
The message is not to avoid flipping properties, but to be cautious when switching your investment strategy. Don’t get caught up in the excitement of a great deal. Instead change your strategy in a planned and controlled way. This means getting the prerequisite education, doing the prerequisite market research, and ensuring you have the right team in place ahead of time. Lastly, slowly tweak your business model over time to make results boring and predicable.