There is an old saying that goes “If you’ve been sitting at the poker table for more than 15 minutes and you don’t know who the patsy is, you’re the patsy.” That’s pretty harsh, but it’s true. So many note and real estate investors try to jump into the market with both feet without having a strong background in the field only to make mistakes. The problem with making mistakes with a 6-figure property is that it can be a very expensive mistake. I’ve made mistakes. I call my mistakes “tuition”…very expensive tuition.
I was speaking at a real estate convention in Dallas several years ago when one of my old business partners texted me that he had put a $10,000 non-refundable deposit down on a property. Normally, I was the one that did the due diligence on deals, but he was very excited about the steal that he had just gotten and couldn’t wait for me to see it. Upon my return, I really thought about eating the 10 grand. He did not realize that he dilapidated property sat in a flood zone and was subject to a rule he didn’t know about…the FEMA 50% rule. My gut instincts about walking away from the deposit were right…we lost a lot more than that on the deal…the only real loss I’ve taken in my career. Everyone makes mistakes. He didn’t know about the rules that went with buying property for a flip and I was arrogant enough in my experience and know-how to think that I could save the deal.
Starting off in any field is hard. Everyone, regardless of their field, has to start somewhere. The heart surgeon has to perform her first surgery at some point. The attorney has to try his first case. The mechanic has to fix their first car. Real estate and real estate notes are no exception. If you don’t have the knowledge, find a mentor. If you don’t have a great mentor, we at the institute would love to help. We have programs where we consult as little or as much as an investor wants…it’s a lot cheaper than the “tuition” you’ll pay when making mistakes.
When you sit down at the poker table of real estate or note investing, make sure you’ve got the know how to win, or be sure you have the mentor on your team that can shepherd you through the process. It’s well worth it!