Your worst deal ever ! - Posted by Bob

Posted by Jack on January 08, 2005 at 15:09:40:

Firstly that was ten years ago. Secondly despite having been licensed as a Real Estate Broker in 3 States, I have only ever represented myself as a Principle. Thirdly, I agree with you that illegal Realtor Sleaze Balls signs reflect negatively upon other Real Estate Professionals.

Your worst deal ever ! - Posted by Bob

Posted by Bob on January 08, 2005 at 04:19:53:

I would like to hear of your worst deals ever. How much $$$ you lost and what you learded…

Re: Your worst deal ever ! - Posted by Milo Brom

Posted by Milo Brom on January 10, 2005 at 22:10:37:

Back in 1990, bought a block of land for cash (no loan) in upmarket suburb for $70k. Spent next year visiting display homes getting ideas. Then designed own house.

1991 went to bank for building loan. Conditions of loan were: use the remainder of my funds (about $45k) and then start drawing down the loan amount. Logic was, they wanted to see construction beginning and wanted me to have a lot of skin in the deal.

During construction, after all my money gone, bank sends letter saying I default interest payments (not true). Waste entire day sorting it out. Turns out to be a computer error and ALL owner-builders got same letter.

Bank would not release final $5k of loan until inspection. Bank’s inspector looked and did NOT approve release. Said building not finished.

I said, if I could finish it without that $5k I wouldn’t have wanted to borrow as much.

He tells me all stuff that needs doing. I stop him. He must be talking about different place. Turns out he was. The “inspector” got two different places mixed up. The other home (just a shell) had all their funds approved and mine (nearly finished bar light fittings and floor) was not approved. They sorted it out and released funds.

Took 3 months to lease so I in the hole for three mortgage payments (it was a P&I loan at 14.5%!!!) Tenant stayed 6 months before family problems (place was in same suburb as wife’s parents and they kept interfering) forced them to move to another state. Another 3 months to lease to next tenant. Had to evict due to breaking lease and getting more people into house. Another 3 months to lease.

This went on for four years. Last tenant in for three months and walks in on wife having sex with his “mate” in the spa. Kicks her out and now can’t afford rent by himself.

All the while, every attempt at laying grass and plants went dead. Nothing would grow in the soil (clay like soil - very hard like rock). So we move in.

Can’t stand neighbors and had a gut full of the place and put on market. Takes 18 months to sell.

After 7 years, with equity, I walk away with the cash I had put in - the $70k I paid for the land and the $45 I spent during construction.

Estimated loss - money spent on trying to get lawn and garden established (about 40 odd palm trees dead, not to mention all the turf), money spent paying mortgage when no tenants in (kept taking about 3 months to lease each time tenant moved out), land taxes, insurance etc. etc. - about $50,000.

Lessons learned:
1: Do not put all your money into deal. You then have nothing left in reserve should things go wrong or you need extra funds.
2: Do not owner-build as bank requires all your money in the deal.
3: Do not buy in upmarket suburbs where there are not many renters. Buy in lower down suburbs where lunch pail Joe and Jane can afford to rent and want to rent.
4: Instead of one deal with a lot of money, do many smaller deals with little money in each.
5: Do ALL your numbers before going ahead. No surprises that way. And makes sure you don’t run out of money.
6: Build the type of houses people want to rent.
7: Do not buy land and then build. Buy ready-to-rent dwelling so income comes right away.
8: Beware tax man. He hit me up for taxes of being a builder!!! Double tax that year (gulp)

There you go, you have just got $50,000 worth of lessons.


Lost on this one by choice… - Posted by Natalie Smith

Posted by Natalie Smith on January 09, 2005 at 11:29:14:

My husband and I bought a “project” needing at least 30k worth of rehab. We’re not new to this, so it didn’t appear to be a problem. We bought it right at 79k. The ARV at the time was at least 140k to 150k, so by the time you add in expenses of 10k + 30 rehab + 79 to buy it, we still had room for all of the unexpected.

Well, long story short, we even had trouble getting the trashout done on this mess. The guys were pulling dead rats out and throwing them in the bin. I couldn’t even put this thing on the MLS for fear someone would get hurt when showing it. It was BAD.

On top of it all, being married to your business partner is not easy. We mutually decided that we could continue with this project and probably end up separated, or we could get rid of it and stay happy together. We sold it to another investor at a loss of 5k and never looked back. Then we went to Florida for 3 weeks for our own “rehab”.

The lesson I learned is that you don’t always HAVE to have a house to work on. If you don’t find the right one, stay home and let someone else deal with it. Also, the lesson was to keep our priorities straight. Staying happy together is more important than making another 20-30k.

Anyone else married to their business partner?

Re: Your worst deal ever ! - Posted by funbob

Posted by funbob on January 09, 2005 at 10:37:32:

That old dog 4-plex sure did me no favors. Bought for 140k, sold for 140k 3.5 years later. 6 years later they are going for 320k or more. I must have lost 5k or so.

I did learn much though!

  1. Don’t buy just because you can (Bill Clinton mindset)
  2. Paying for utilities (Gas heat) is NO GOOD!
  3. Yes, those non-homestead taxes WILL kick in eventually
  4. Assuming a 1 ARM is a BAD IDEA
  5. Sub-standard properties attract sub-standard renters
  6. Even dogs can go up a lot IF you hold on long enough.

The day I sold that POS was a great day for me. It was a good education. I guess what I discovered most was that WORKING HARD TO LOSE MONEY is no fun!! DON’T put yourself in that position.

My Worst Deal Ever ! - Posted by Martin Greenberg

Posted by Martin Greenberg on January 09, 2005 at 01:55:38:

In 1996 I returned to Ft Lauderdale after excaping living in Florida for seven long years. My former roomate, also a RN, and I spent two years looking for an assisted living facility. Lots of old people in Ft Lauderdale, right? We lost our shirts and I now face BK running up over $125k in credit card debt to feed the red ink. In addition, I lost ALL my cash, my IRA money, and half my mother’s net worth (no good deed goes unpunished).

Lessons learned:

  1. Like real estate in general, you must get in low
  2. Like real estate in general, it is good to get in light
  3. Staring a business underfunded is asking for truble. We had a jumbo loan ($1.1mm) which had a variable interst rate. As the interest rate went up, we were crying more and more.
  4. We didn’t know Marriot & Radison were comming to town in our market. They beat the snot out of the mom and pop assisted living facilities.
  5. Tied into underfunding was we didn’t have a budget to advertise. We couldn’t afford to advertise and couldn’t afford not to advertise.
  6. Our residents died and the ones with the highest rents were replaced with lower rents. We couldn’t fill the place or stay at breke even census for long despite being clean, pretty, and run by nurses (we provided execellant care).
  7. do not make the seller’s problem your problem unless you have a solution for their (your) problem.
  8. Don’t grow old and sick without a lot of money or insurance to take care of you. It has been said, growing old is not for the faint of heart. Believe it.

Passing thought. We wanted to convert some multiunit buildings into an assisited living facility. That would have been a HELL of a lot cheaper. We had a proforma showing that. We would have built equity by changing the use of the buildings. Couldn’t get funding for that. Instead, we purchased an on-going place at full price. During the two years we looked we made offers and the owners thought our offers wwas the down payment. We weren’t trying to steal the places, the income only justified the price we offered. If we continued this policy, we would not have purchased our assisted living facility and I’d be financially whole.

After this experience I still want to invest in real estate. Forget about the business attached to the real estate though. Keep focused. Don’t make the same mistakes. I keep asking myself if Donald Trump knew something more than I did when he didn’t invest in assisted living facilities.


Re: Your worst deal ever ! - Posted by jasonrei

Posted by jasonrei on January 08, 2005 at 19:43:06:

I never make mistakes.

  1. No, I bought a duplex with very little equity, had tenant problems, and re-sold it within a few months. Forget what I lost, maybe $4-5k. Lesson learned- don’t take guff from tenants, it’s REAL money at stake.

Bought a house with ceilings less than 7 feet high. Could not get rid of that thing. Paid too much for the quality of rehab I got. My intent was to fix it up a little and sell it cheap. Didn’t work out that way. Probably lost money on paper, but managed to squeak out a negligible profit (maybe a few hundred bucks for 60+ hours of work?). Lesson learned- only buy houses you KNOW will appeal to large numbers of qualified people.

Re: Your worst deal ever ! - Posted by GL(ON)

Posted by GL(ON) on January 08, 2005 at 12:22:19:

The only real estate deal I ever lost money on was an apartment house I bought in 1975 with a 5 year mortgage and had to refinance in 1980 when interest rates hit 18%. Oh yes they did, I was there.

There was no way the building could handle double payments due to increasing the interest rate from 9.75 to 18% which was the best I could do.So I handed it back to the seller who was also holding the mortgage.

What I should have done was hang on as long as possible and defy him to foreclose. Interest rates soon came down, no one could buy under the circumstances anyway, and there was no need for me to ever lose the property.

I must say, this was the first time a real estate deal went sour on me and it was what spurred me to really study up on real estate, rentals etc. Previously I had been lucky, now I’m smart.

Still living it… - Posted by Ben (NJ)

Posted by Ben (NJ) on January 08, 2005 at 09:46:55:

I acquired over 3 acres of buildable, subdividable land through tax foreclosure. There are two boundary problems I have been trying to resolve now for two years. I have lost multiple buyers, title companies, surveyors and attorneys trying to resolve this. There is a pot of gold at the end of this rainbow though and I’m not giving up!

Re: Your worst deal ever ! - Posted by Jack

Posted by Jack on January 08, 2005 at 08:52:48:

Lost $20,000 on a high end house (at the time high end houses in my area were going for $200,000). Lessons learned:

  1. Don’t use new construction sales for comps.
  2. You still have to use the same purchasing ratio guidelines for buying a $200,000 house as for a $100,000 house. I thought that I could buy the $200,000 house for a higher percentage of FMV, and still net my $15,000.
  3. Listing your own property (I was a Realtor at the time) puts you at a large negotiating disadvantage.

Re: Your worst deal ever ! - Posted by Stew(NE)

Posted by Stew(NE) on January 11, 2005 at 13:25:23:

Just curious. Did you follow your own advice and how are things going now? Thanks for sharing the story.

Re: Your worst deal ever ! - Posted by Kristine-CA

Posted by Kristine-CA on January 09, 2005 at 12:55:36:

I like your comment about substandard properties attracting sub-
standard renters. I work with a lot of sub-standard properties and the
reason I end up selling them so quickly is because 1) I can (the market
is hot) and 2) it’s hard to get excited about low rents and a really
distressed and beleagered tenant pool. Haven’t received any rents this
month yet because everyone got “sick.”

I feel lucky because I am learning this without having had to take a hit.
But I can tell that I’m not the right candidate for 20 houses with rents
under $750.

Thanks for the funny post. Kristine

Re: My Worst Deal Ever ! - Posted by Maurice

Posted by Maurice on January 09, 2005 at 16:13:44:

After this experience I still want to invest in real estate. Forget about the business attached to the real estate though. Keep focused. Don’t make the same mistakes. I keep asking myself if Donald Trump knew something more than I did when he didn’t invest in assisted living facilities.


This is the most importatnt part of your story. What you bought was a business, not pure real estate. And it is far easier to fail at a business than to fail at real estate.

Maybe you should stick to buying medical properties, but not with the intention of hiring staff and running those facilities, but with the intention of leasing the properties out, or selling them outright. Done that way you only stick to real estate (which is generally forgiven) and not mess with business (which can be brutal).

LOL! - Posted by Jim FL

Posted by Jim FL on January 08, 2005 at 10:31:02:

“I was a Realtor at the time”…
That explains a lot.
I just drive around, taking down sleazeball realtor business cards, directional signs, and flyers, as well as signs in their yards, because they give all honest people who know that they are doing in this REI business a bad name.

“Lost $20,000 on a high end house (at the time high end houses in my area were going for $200,000).”

See what I mean…

I just thought this was funny is all.
A realtor…figures. :slight_smile:

Have a nice day!

Re: LOL! - Posted by phil fernandez

Posted by phil fernandez on January 09, 2005 at 08:09:29:

Happy New Year Jim,

That was indeed a funny post. Picture this : Ole Jack running around at 3 AM, sneaking around pulling bandit signs. He returns home cussing out those old bandit signs as he looks down only to see his hands all scraped up and bloodied, pulling out splinters from the sign posts. LOL

Re: LOL! - Posted by jasonrei

Posted by jasonrei on January 08, 2005 at 19:30:10:

Jim, that was ridiculously funny to me. Way to go.

What’s most beautiful is he had to respond. LOL. Jim is my hero!