A good friend of mine, and I were recently able to connect and enjoy a nice dinner together. We had some great conversation, we covered a variety of topics, the story I would like to share with you today is one of my very favorite topics, real estate investing. My Friend, Scott shared with me some details in regards to his latest real estate transaction and a very valuable lesson he gained from the whole experience. First, I’ll give a little background/credentials, Scott is a fairly experienced real estate investor, he’s been dabbling in REI for the last 10 years or so years and closed at least half a dozen deals. He’s a sharp businessman and no slouch in the brains department, he’s a banker by day and knows how to handle complex business transactions. Scott‘s not all black and white (or is it black and red) like many people in the financial world. He’s got a creative side, and is a bit of a rockstar in his own right, which is without a doubt useful when coming up with creative solutions to problems in real estate investing or elsewhere in life.
Now for the story, Scott purchased a single family home in February of this year with the intention of quickly rehabbing and flipping it. He got a great deal on the home, it was a foreclosure that needed around $10,000 and 2 weeks worth of work. he was anticipating a profit of around $35,000 when all was said and done. Scott quickly procured a buyer for the home and being in the banking world he was prepared to get the financing for the mortgage done within 8 days. The buyer however told Scott that he had a lender that he really preferred to use. Knowing that this would slow the closing of the deal by a few weeks, at the least, Scott told the buyer OK you can use the lender of your choice but you have to pay for my cost of holding the home which is roughly $1600/month. The buyer agreed to Scott’s terms and time went on. Three weeks went by and Scott checked in with the buyer, the buyer indicated that there was a bit of a hold up on the financing and it was going to take some more time. Scott called the financial institution to verify and they concurred that it was going to be another month. Scott was a little anxious now covering the costs and sitting on his vacant ready to sell home but he called the buyer again and the buyer confirmed that yes, he wanted the home and yes, he was going to cover the additional costs. A month went by and he called the mortgage lender again and again the lender said there were some stumbling blocks and they just needed a little bit more time. At this point Scott started getting that sinking feeling (you know the one). He said he would give them two more weeks and then he would have to find another buyer. The buyer and the lender both assured him again that everything was moving along but there were just some minor issues. Two more weeks go by and the buyer sets up a meeting with Scott. They sit down to a cup of coffee, and the buyer begins to tell Scott that the financing fell through that he wasn’t going to be able to purchase the home after all. As you can imagine this got Scott’s blood pressure up a bit. Scott began questioning the buyer and the buyer looked Scott square in the face and told him “you let this happen”. Wow! Scott had nothing to rebut because he was correct, as much as the buyer was in the wrong for stringing Scott along the way he did Scott let it happen and now unfortunately Scott will not recoup his costs for holding the house and will have to find another buyer.
And last but not least….
“Make a mistake once it becomes a lesson, make the same mistake twice and it becomes a choice” Nishan Panwar
The Lesson, looking from a glass half full perspective, which is exactly what Scott did, what a great lesson indeed. From this experience Scott learned that you can’t consistently rely on people to follow through even if they have good intentions. He learned to always make sure he is covered regardless of others choices or personal situations. This is not to say that you can’t be kind, do people favors, or be charitable but it should always be on your own terms and of your own choosing. In life we have to take responsibility for; our actions, the results of those actions, and our own reaction to those results. It’s not to say that bad things won’t happen even if we make all the right choices, it’s what we do with those experiences that really can transform our life. We can become bitter, untrusting, unproductive or we can take those experiences and learn from them, pull the positive away, and create a rewarding life that is everything we’ve always wanted. Living authentically and being conscientious of what could happen (bad or good), being thorough, trusting your gut, watching for those red flags or situations that could put the RE deal, or anything else, in jeopardy can help you steer clear of plans gone awry. If you find a repeating pattern in your life in your business or in relationships that you want to change it could be time to dig deep, consider that you are the common factor, determine what’s bringing you to these situations and know for a fact “you let this happen”.