Tuesday, December 2, 2008

Biggest Challenge in Making Money in Real Estate

Yesterday I told you that the biggest challenge to making money in real estate was yourself. That is an absolute fact. Let me explain by example - unfortunately our example. BTW that is a common theme in real estate investing is learning by your own example. That is why I started this Blog to help you avoid those examples.

Anyway we purchased a property in a town not far from us. We negotiated a great deal with the seller. They were looking to move quickly and were willing to provide seller financing. We closed quickly so they could move to their new apartment. This was our very first deal and we did not want anything to mess it up. We waited on pins and needles while all the paperwork was done and the seller's questions were answered. It moved so quickly that we did not get a property inspection prior to closing.

Big mistake, not one that sinks the ship but we did leave several thousand dollars on the table. The inspection was done and it noted that there had been a fire in the kitchen area. The work had been repaired and done correctly but up above the ceiling it was charred. The electrical panel was under a recall. The wiring in the kitchen was not correct and the garbage disposal was shorting out. All told the repairs were an additional $3500.00. That is money that could have paid for marketing, or other repairs or to ourselves - we do want to make money in this endeavor.

So read and learn, during the escrow period always get a property inspection and appraisal. If the numbers do not match what you thought then renegotiate the deal. You have to be willing to walk away from it. That was our mistake, we did not want to walk away from our first deal and it cost us.

See Ya,
Mike Smith

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