Why is it such an important question? One of the best ways to learn how to be a better, wiser investor is to learn from the experiences – both good and bad – of other investors around you. This keeps you from trying to reinvent the wheel. Remember the old saying: A smart man learns from his mistakes. A wise man learns from others’ mistakes.
During the meeting, the first thing we determine is how the deal was found. You quickly realize that there’s not a “the” way to find a profitable investment property. Some folks knock on sellers’ doors. Others do lots of Internet marketing. Let’s not forget about mail outs and the foreclosure steps. The list goes on and on.
Did the property meet your criteria? For example, if you’re an estate builder and looking for rental property, is the property you bought a solid rental? If not, then why in the heck did you buy it?
For example: Kim and I are looking to add three more rentals to our portfolio. A great rental is a three-bedroom, two-bath ranch over a basement, built in 1990 or later, in a comfortable tool-belt neighborhood, has a two-car garage, doesn’t need a big rehab and cash flows at least $200 per month after expenses and debt service. So if we buy a five-bedroom, four-bath home on thirty acres that was built in 1884 and needs a $300,000 rehab, what in the heck were we thinking? The thing is, this may have been a great deal, but why did we stray so far from our criteria?
It’s also important to discuss your exit strategy when the property was bought. Was your plan to bird dog the deal? Flip it? Option it? Rent it? What?
As you entered the deal, what were your expected results and what were your actual results? If the two results were far apart, why were they far apart? Was it a good thing or bad thing?
Hearing someone answer the following three questions can change your whole investing strategy – we know this because it’s happened to us: Question 1: What went right with the deal?
Question 2: What went wrong? Question 3: Knowing what you know now, what would you have done differently?
Someone recently asked whether I feel sorry for the investors who had deals go bad. No I don’t – not one little bit. Sure they got bloodied – we all do at some time or other. This happens when you play the game. Truly, it’s the would-be investors who never did a deal – who never got inside the ropes – that I pity. They may not know the sting of defeat, but they don’t know the thrill of victory either. They are oysters. Investors are eagles.
Before the year is out, get together with other like-minded investors and discuss your best and worst deals of the year. And remember: the more open and honest you are, the more you – and everyone there – will take away.
Bill and Kim’s North Georgia Real Estate Investors Association meets on the second Thursday of each month, from 7 - 9 p.m., at the Hilton Garden Inn off Main Street in Cartersville, Georgia. For more info, go to REIoutpost.com.