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Nov 25, 2018

When we started out some of the best lessons we learned when others talked about actual properties, experiences, and numbers. This week we chat about two deals. One good and one not so good.

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Follow Josh Koth and Jack Hoss on their journey towards financial freedom using the power of Real Estate through the REI Rookies Podcast (Real Estate Investing Rookies Podcast). We share our experiences as we acquire rental properties, build net worth, and work towards financial freedom. We are focused on creating wealth through conventional and creative real estate investing while improving our financial education. If you are a fan of Rich Dad Poor Dad by Robert Kiyosaki and Millionaire Real Estate Investor by Gary Keller or are looking for an alternative to the Dave Ramsey, Jim Cramer, Motley Fool or Suze Orman shows we invite you to subscribe today!

Transcript

0:00:00.000,0:00:04.380
we're rollin welcome to the REI rookies

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podcast the real estate investing

0:00:04.380,0:00:08.730
rookies podcast episode number 86 where

0:00:07.379,0:00:10.889
we invite you to follow us on our

0:00:08.730,0:00:12.420
journey towards financial freedom using

0:00:10.889,0:00:15.240
the power of real estate

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i'm Josh Koth and i'm Jack Hoss and here

0:00:15.240,0:00:19.289
at REI Rookies we believe in a couple

0:00:17.070,0:00:21.330
key principles number one the best way

0:00:19.289,0:00:23.760
to retain information is by teaching it

0:00:21.330,0:00:25.650
to others and number two a rising tide

0:00:23.760,0:00:28.650
lifts all boats we're out competitors

0:00:25.650,0:00:31.529
we're a community so let's get into some

0:00:28.650,0:00:34.320
real estate investing so we decided to

0:00:31.529,0:00:36.719
do something that is a bit overdue I

0:00:34.320,0:00:39.000
think I'd do a comparison and case study

0:00:36.719,0:00:41.129
on a couple properties yeah I remember

0:00:39.000,0:00:43.649
when I was first starting out one of the

0:00:41.129,0:00:46.020
best ways I learned was by hearing

0:00:43.649,0:00:48.360
somebody talk about actual deals a case

0:00:46.020,0:00:51.300
study because I it's tough to get from

0:00:48.360,0:00:53.789
the theoretical to the real world and to

0:00:51.300,0:00:55.469
apply some of these concepts so I think

0:00:53.789,0:00:57.270
occasionally just talking through

0:00:55.469,0:01:00.210
specific deals and comparing and

0:00:57.270,0:01:03.270
contrasting good results and bad results

0:01:00.210,0:01:07.110
really helps people learning out there

0:01:03.270,0:01:09.630
how to apply these these theories so why

0:01:07.110,0:01:12.540
don't we just jump right in to a couple

0:01:09.630,0:01:15.060
of these the first one is a property we

0:01:12.540,0:01:18.150
picked up off the MLS about a year ago

0:01:15.060,0:01:20.610
and it was listed for about 65 thousand

0:01:18.150,0:01:23.130
yeah and just to kind of back backpedal

0:01:20.610,0:01:25.170
one one step here what we're gonna do is

0:01:23.130,0:01:27.030
talk about one tiel that went really

0:01:25.170,0:01:28.799
well where everything was kind of firing

0:01:27.030,0:01:31.100
on all cylinders and we got the results

0:01:28.799,0:01:34.770
who wanted and then one where we did not

0:01:31.100,0:01:36.900
so you can kind of see what lessons we

0:01:34.770,0:01:38.280
learned and and where we made some wrong

0:01:36.900,0:01:40.500
turns and what we could have done

0:01:38.280,0:01:42.240
differently and we're comparing kind of

0:01:40.500,0:01:44.430
compare and contrast a good deal and a

0:01:42.240,0:01:47.909
bad deal so yeah so this first one is a

0:01:44.430,0:01:50.130
was a really good deal it was an

0:01:47.909,0:01:52.560
infinite return deal that had profit at

0:01:50.130,0:01:55.439
all points and so we'll talk about how

0:01:52.560,0:01:57.360
we acquired it and exited the property

0:01:55.439,0:01:59.509
so yeah as you mentioned we found this

0:01:57.360,0:02:03.000
one on the MLS I believe was listed for

0:01:59.509,0:02:06.990
65,000 we ran the numbers on it offered

0:02:03.000,0:02:11.430
I think 45 and ended up negotiating up

0:02:06.990,0:02:13.500
to flick 50 to 5 and then we threw in

0:02:11.430,0:02:16.320
about a $10,000

0:02:13.500,0:02:18.660
in rehab we put a new roof on and fixed

0:02:16.320,0:02:22.800
a couple things to get it renter ready

0:02:18.660,0:02:24.840
the nice thing was this turned out to be

0:02:22.800,0:02:27.780
an infinite return of property because

0:02:24.840,0:02:29.850
we were able to extract everything that

0:02:27.780,0:02:31.890
we had into the property as far as

0:02:29.850,0:02:33.750
acquisition and rehab and we put a

0:02:31.890,0:02:36.660
mortgage on the property of sixty-five

0:02:33.750,0:02:38.970
thousand so that fifty two thousand

0:02:36.660,0:02:41.070
fifty two five of acquisition plus about

0:02:38.970,0:02:42.870
ten grand in rehab was sixty two five

0:02:41.070,0:02:44.760
and we put a mortgage on for sixty-five

0:02:42.870,0:02:47.459
so actually put about twenty five

0:02:44.760,0:02:49.560
hundred bucks in her pockets at the time

0:02:47.459,0:02:52.530
of the placing the mortgage on the

0:02:49.560,0:02:54.180
property and then we got Indian in the

0:02:52.530,0:02:56.280
hands of our property manager and they

0:02:54.180,0:03:00.120
got it printed out for eight hundred

0:02:56.280,0:03:02.190
dollars a month and those people lived

0:03:00.120,0:03:04.410
in it for about a year and are actually

0:03:02.190,0:03:05.760
still living in it they rescind another

0:03:04.410,0:03:08.250
year lease

0:03:05.760,0:03:10.680
so it was what we call an infinite

0:03:08.250,0:03:12.360
return property because the amount of

0:03:10.680,0:03:16.280
money and you remember how to calculate

0:03:12.360,0:03:19.230
ROI quickly as you take the annual net

0:03:16.280,0:03:20.370
cash flow profits and divide that by the

0:03:19.230,0:03:22.380
amount of money you have into the

0:03:20.370,0:03:24.600
property well since we had zero dollars

0:03:22.380,0:03:27.890
into this property that's what's called

0:03:24.600,0:03:30.269
an infinite return so that was great and

0:03:27.890,0:03:31.650
eventually we found that we were

0:03:30.269,0:03:34.019
approached by another investor who was

0:03:31.650,0:03:36.989
looking to pick up some properties and

0:03:34.019,0:03:38.780
we mentioned this one would be kind of a

0:03:36.989,0:03:40.980
turnkey opportunity it already had a

0:03:38.780,0:03:43.410
tenant in it who had resigned after

0:03:40.980,0:03:45.840
being in it for a year pretty solid

0:03:43.410,0:03:48.660
tenants and had really no major issues

0:03:45.840,0:03:51.420
so it was a great deal for him as well

0:03:48.660,0:03:53.549
so we negotiated a price of eighty

0:03:51.420,0:03:57.120
thousand dollars and sold that property

0:03:53.549,0:03:59.610
so the cash flowed for a year infinite

0:03:57.120,0:04:01.380
returns a little over a year actually

0:03:59.610,0:04:03.799
and then we sold for eighty so made

0:04:01.380,0:04:08.430
another fifteen thousand on the exit

0:04:03.799,0:04:10.590
yeah that was a great example of what

0:04:08.430,0:04:12.750
that can what that can possibly do for

0:04:10.590,0:04:14.940
you and that infinite return thing is a

0:04:12.750,0:04:18.919
bit of unicorn and it's great when we

0:04:14.940,0:04:21.180
achieve it the the great exit there was

0:04:18.919,0:04:23.210
and I don't think we even really were

0:04:21.180,0:04:26.700
planning on selling this one it just

0:04:23.210,0:04:30.060
happened to be a situation where we

0:04:26.700,0:04:32.370
we priced it at our walkaway price and

0:04:30.060,0:04:35.640
met that person's needs at the time and

0:04:32.370,0:04:37.590
and it was a win-win for everyone yeah

0:04:35.640,0:04:40.620
because it was still a good deal for him

0:04:37.590,0:04:42.060
he hit the one percent rule you know

0:04:40.620,0:04:45.180
bought it for 80 thousand it was rented

0:04:42.060,0:04:46.680
for $800 a month already had a 10-minute

0:04:45.180,0:04:49.380
we had already done all the work and got

0:04:46.680,0:04:51.930
it rent ready so there's really not a

0:04:49.380,0:04:54.540
lot of deferred maintenance needed for

0:04:51.930,0:04:56.550
the foreseeable future you know we did

0:04:54.540,0:04:58.830
kind of the hard work of finding the

0:04:56.550,0:05:00.930
property at a discount and fixing it up

0:04:58.830,0:05:03.270
getting a tenant in it and so for him

0:05:00.930,0:05:05.310
how we closed I believe like on the

0:05:03.270,0:05:08.850
first of a month and he started getting

0:05:05.310,0:05:12.180
cash flow immediately you know in his

0:05:08.850,0:05:14.160
return won't be infinite but that's like

0:05:12.180,0:05:15.360
I said it's kind of a unicorn and you

0:05:14.160,0:05:17.160
know we're the ones out there finding

0:05:15.360,0:05:19.920
the deal so you know we can we can get

0:05:17.160,0:05:22.080
those once in a while and while his

0:05:19.920,0:05:24.090
return wasn't infinite it's still a good

0:05:22.080,0:05:25.380
return and he didn't have to do much for

0:05:24.090,0:05:28.050
it all he had to do was kind of go

0:05:25.380,0:05:29.940
shopping right and pick from a list we

0:05:28.050,0:05:30.360
had for sale and say well this one looks

0:05:29.940,0:05:33.210
good

0:05:30.360,0:05:35.700
it's in a price point I like it gives me

0:05:33.210,0:05:37.650
a good return and I don't have to do

0:05:35.700,0:05:40.230
anything and immediately is cash flowing

0:05:37.650,0:05:42.330
from day one yeah you know when we

0:05:40.230,0:05:43.890
talked to potential sellers like

0:05:42.330,0:05:45.570
directly you know that we got this one

0:05:43.890,0:05:48.180
off the MLS but when we were talking to

0:05:45.570,0:05:50.010
potential sellers it's not necessarily

0:05:48.180,0:05:52.830
the price that we're focused on it's

0:05:50.010,0:05:54.930
more the solution we're providing that's

0:05:52.830,0:05:57.780
the same situation when it comes to

0:05:54.930,0:06:00.690
selling properties to other investors

0:05:57.780,0:06:04.340
we're really looking for a solution and

0:06:00.690,0:06:07.320
he he needed a certain thing to happen

0:06:04.340,0:06:09.990
he had some money he had to place in a

0:06:07.320,0:06:13.410
specific amount of time so we were able

0:06:09.990,0:06:15.960
to meet those needs yep exactly it just

0:06:13.410,0:06:18.870
you know being there being top of mind

0:06:15.960,0:06:21.230
and being ready to perform when when

0:06:18.870,0:06:23.550
those opportunities present themselves

0:06:21.230,0:06:26.610
so that worked out it was a win all the

0:06:23.550,0:06:28.290
way around and you know we did the work

0:06:26.610,0:06:29.760
of getting the property ready and the

0:06:28.290,0:06:32.190
rehab and that's really where we added

0:06:29.760,0:06:33.930
value was by preparing this this

0:06:32.190,0:06:36.990
property for a more a more passive

0:06:33.930,0:06:40.370
investor to come along purchase it

0:06:36.990,0:06:42.870
and off to the races he went he went

0:06:40.370,0:06:46.190
well that was one of the that was the

0:06:42.870,0:06:48.870
good scenario let's go to the dark side

0:06:46.190,0:06:50.160
yeah the you know real estate isn't all

0:06:48.870,0:06:52.500
sunshine and rainbows right sometimes

0:06:50.160,0:06:54.320
you strike out we've all seen the show

0:06:52.500,0:06:56.700
flip or flop right sometimes they make

0:06:54.320,0:06:58.710
$100,000 on a flip sometimes they lose

0:06:56.700,0:07:01.140
money right although they rarely show

0:06:58.710,0:07:04.740
that and we try to be as transparent as

0:07:01.140,0:07:08.130
we can here so when we have deals that

0:07:04.740,0:07:10.230
don't go our way we feel we learn a lot

0:07:08.130,0:07:12.450
from those or sometimes a lot more

0:07:10.230,0:07:14.730
actually because you have to really kind

0:07:12.450,0:07:16.800
of sit back and figure things out and

0:07:14.730,0:07:18.000
and figure out where did we take some

0:07:16.800,0:07:20.970
wrong turns what could we have done

0:07:18.000,0:07:23.370
differently and try to not repeat those

0:07:20.970,0:07:26.490
same mistakes so this this is one of

0:07:23.370,0:07:28.500
those cases so this property was brought

0:07:26.490,0:07:30.120
to us by another investor and it was

0:07:28.500,0:07:32.490
kind of quickly put together and that's

0:07:30.120,0:07:34.230
kind of where some of the you know the

0:07:32.490,0:07:37.830
problems happened is we like to move

0:07:34.230,0:07:39.390
really fast and this is kind of an I

0:07:37.830,0:07:41.460
think where we tripped up well and

0:07:39.390,0:07:45.180
specifically me tripped up was this is a

0:07:41.460,0:07:46.260
much newer property so it had a thing

0:07:45.180,0:07:49.130
and I don't know if this is something

0:07:46.260,0:07:51.150
around the country that other

0:07:49.130,0:07:54.150
jurisdictions have but it had to think

0:07:51.150,0:07:56.100
of special assessments so sometimes

0:07:54.150,0:07:57.660
properties that are well actually any

0:07:56.100,0:07:59.370
property can have a special assessment

0:07:57.660,0:08:01.560
it's basically to cover the

0:07:59.370,0:08:03.960
infrastructure under the ground or in

0:08:01.560,0:08:06.450
the surrounding your property so if the

0:08:03.960,0:08:09.390
city is putting in new sewer or streets

0:08:06.450,0:08:11.310
or things like that they this is how

0:08:09.390,0:08:12.930
they pay for it they attach a special

0:08:11.310,0:08:14.910
assessment to your property and

0:08:12.930,0:08:16.980
sometimes and you were like if you're

0:08:14.910,0:08:20.280
building a house and you buy a lot those

0:08:16.980,0:08:21.990
can be you know 50 grand in this area

0:08:20.280,0:08:24.480
sometimes and since this property was

0:08:21.990,0:08:27.720
only about 7 or 8 years old

0:08:24.480,0:08:29.940
it had a pretty high specialist balance

0:08:27.720,0:08:32.060
which I neglected to look up before

0:08:29.940,0:08:34.290
working out a deal with with the seller

0:08:32.060,0:08:39.150
and when we looked it up it was a little

0:08:34.290,0:08:41.820
bit of a shock yeah and in the end what

0:08:39.150,0:08:44.120
ended up happening was we were finding

0:08:41.820,0:08:47.930
it difficult to cash flow there was a

0:08:44.120,0:08:49.889
renter in that property already at

0:08:47.930,0:08:51.749
$1,500 a month

0:08:49.889,0:08:54.749
the purchase price on this property was

0:08:51.749,0:08:57.119
150 thousand which sounds good that it

0:08:54.749,0:08:59.819
should cashflow but because of those

0:08:57.119,0:09:02.459
taxes and specials assessments it it

0:08:59.819,0:09:04.649
caused some problems there so we took it

0:09:02.459,0:09:06.809
upon ourselves the best exit was to try

0:09:04.649,0:09:09.059
to get this one off the books yeah and

0:09:06.809,0:09:10.589
and just to let people know if they

0:09:09.059,0:09:13.769
don't have the same thing in their

0:09:10.589,0:09:15.329
jurisdiction how the special assessments

0:09:13.769,0:09:16.709
work is you have an overall principal

0:09:15.329,0:09:18.589
balance and then you have a minimum

0:09:16.709,0:09:22.079
amount you're required to pay annually

0:09:18.589,0:09:25.199
so this was about 200 bucks a month so

0:09:22.079,0:09:27.959
any renter or person buying it was gonna

0:09:25.199,0:09:30.149
have either the landlord is going to

0:09:27.959,0:09:32.489
have to make $200 extra cash flow

0:09:30.149,0:09:34.859
somewhere to make up for that or anyone

0:09:32.489,0:09:37.079
buying it from you as an owner-occupant

0:09:34.859,0:09:38.879
would have another $200 added to their

0:09:37.079,0:09:41.339
mortgage payment to cover this special

0:09:38.879,0:09:43.319
assessment payment so that really was

0:09:41.339,0:09:46.619
the wrench that was thrown into this

0:09:43.319,0:09:48.299
property and another unique situation

0:09:46.619,0:09:50.730
was the lot it was really big because it

0:09:48.299,0:09:52.889
was up against a bike path which was

0:09:50.730,0:09:54.809
really nice as far as a selling point

0:09:52.889,0:09:58.470
and you know showing the property a work

0:09:54.809,0:10:01.019
in our favor but these special

0:09:58.470,0:10:04.169
assessments are assessed based on the

0:10:01.019,0:10:06.049
lot size so even though this is kind of

0:10:04.169,0:10:09.329
a twin what we call a twin home so it's

0:10:06.049,0:10:12.720
you know two side-by-side houses in one

0:10:09.329,0:10:14.759
building but they're sold as separate

0:10:12.720,0:10:18.029
parcels you know the problem there is

0:10:14.759,0:10:19.829
there's a lot of similar properties and

0:10:18.029,0:10:21.749
ours was a little unique as far as being

0:10:19.829,0:10:24.209
bigger so it had a much higher balance

0:10:21.749,0:10:28.199
so it's kind of a unicorn in the bad way

0:10:24.209,0:10:31.290
not a good unicorn well I think too it

0:10:28.199,0:10:34.230
wasn't this in the end didn't we

0:10:31.290,0:10:37.769
purchase this for almost what the last

0:10:34.230,0:10:40.679
owner paid for it or right and that was

0:10:37.769,0:10:42.360
kind of what got us excited it you know

0:10:40.679,0:10:44.399
we knew we were pretty well under the

0:10:42.360,0:10:47.039
the retail price so we had some equity

0:10:44.399,0:10:49.410
built into the deal and like you said we

0:10:47.039,0:10:50.369
we did cash for keys and got the renters

0:10:49.410,0:10:52.169
out of that because we knew it wasn't

0:10:50.369,0:10:55.049
going to cash flow once we realized what

0:10:52.169,0:10:57.329
the special assessment balance was and

0:10:55.049,0:10:59.519
that extra $200 a month was just killing

0:10:57.329,0:11:01.829
the cash flow so we knew and and it was

0:10:59.519,0:11:03.190
still 18 months left on a lease so we

0:11:01.829,0:11:05.230
knew we had to

0:11:03.190,0:11:07.330
get the tenants out of there so we could

0:11:05.230,0:11:10.900
retailer that was our best chance at a

0:11:07.330,0:11:12.760
profitable exit because if we had to

0:11:10.900,0:11:16.000
least stay in place for 18 months we

0:11:12.760,0:11:18.790
were gonna negatively cashflow yeah and

0:11:16.000,0:11:20.500
if you're not aware cash for keys

0:11:18.790,0:11:23.620
basically we went to the tenants and

0:11:20.500,0:11:25.120
offered them a bribe yeah we just said

0:11:23.620,0:11:27.820
we'll give you a month's rent if you can

0:11:25.120,0:11:29.830
be gone and we can have for two weeks or

0:11:27.820,0:11:31.300
whatever and they found a place

0:11:29.830,0:11:33.100
lickety-split and they were out of there

0:11:31.300,0:11:36.460
so that was that work that actually

0:11:33.100,0:11:38.350
worked pretty well so that's a good

0:11:36.460,0:11:40.890
tactic to try if you need to get some

0:11:38.350,0:11:43.690
tenants to leave earlier than a lease

0:11:40.890,0:11:45.010
dictates and one thing at least in our

0:11:43.690,0:11:47.500
jurisdiction I think this is pretty

0:11:45.010,0:11:49.240
nationwide is you can't really just have

0:11:47.500,0:11:51.940
a tenant leave earlier than their lease

0:11:49.240,0:11:54.190
if they're performing so it has to all

0:11:51.940,0:11:55.690
parties have to agree you can never

0:11:54.190,0:11:57.490
force anyone to leave you just have to

0:11:55.690,0:11:59.800
ask and if they're willing to and if you

0:11:57.490,0:12:02.860
can offer some of them some cash that's

0:11:59.800,0:12:05.950
a great alternative and we knew also we

0:12:02.860,0:12:07.780
had a little bit of a there's a you know

0:12:05.950,0:12:08.740
up here in the Upper Midwest the market

0:12:07.780,0:12:10.870
is very seasonal

0:12:08.740,0:12:13.240
and we we wanted to make sure that we

0:12:10.870,0:12:15.600
sold it before the cold weather hit

0:12:13.240,0:12:18.280
because things can really take a

0:12:15.600,0:12:20.080
downturn when the weather gets cold so

0:12:18.280,0:12:22.660
we wanted the tenants out of there so we

0:12:20.080,0:12:24.160
could do some rehab to it and get the

0:12:22.660,0:12:26.080
property sold at retail and hopefully

0:12:24.160,0:12:28.480
still exit with a property well that's

0:12:26.080,0:12:32.770
not quite exactly what happened no and

0:12:28.480,0:12:35.050
in fact I'd even say that issue number

0:12:32.770,0:12:36.660
two with this property is that I think

0:12:35.050,0:12:40.300
we got a little cocky on this one

0:12:36.660,0:12:42.700
because we we thought this was going to

0:12:40.300,0:12:46.270
be a slam dunk it's in a nice part of

0:12:42.700,0:12:48.040
town we took it upon ourselves to like

0:12:46.270,0:12:50.830
take a look at some of the twin homes

0:12:48.040,0:12:52.420
that were similar and for sale in the

0:12:50.830,0:12:54.850
area so we did everything we could to

0:12:52.420,0:12:57.190
make sure that our stood out and then

0:12:54.850,0:13:00.460
still priced it at the same ballpark

0:12:57.190,0:13:02.320
so that ours just would stand out why

0:13:00.460,0:13:04.930
wouldn't anybody buy this thing I'm yeah

0:13:02.320,0:13:06.700
we used we used reclaimed wood on the

0:13:04.930,0:13:08.380
island for crying out loud yeah we had

0:13:06.700,0:13:11.290
cool light fixtures and we did some cool

0:13:08.380,0:13:13.060
stuff because the problem with this type

0:13:11.290,0:13:15.610
of property is there's a million of them

0:13:13.060,0:13:18.250
so really supply and demand we're not

0:13:15.610,0:13:20.260
working in our favor and we had some

0:13:18.250,0:13:21.850
other market conditions like you said

0:13:20.260,0:13:23.050
there's this alright like I mentioned

0:13:21.850,0:13:25.990
earlier there was kind of a seasonal

0:13:23.050,0:13:28.240
downturn coming and actually kind of an

0:13:25.990,0:13:31.000
overall I don't want to say downturn but

0:13:28.240,0:13:34.870
overall market correction or kind of a

0:13:31.000,0:13:37.060
you know coming down from Peaks so not

0:13:34.870,0:13:39.910
really a downturn but things were just

0:13:37.060,0:13:43.209
not as flying off the shelves as hot as

0:13:39.910,0:13:46.089
they were six months prior so all those

0:13:43.209,0:13:49.240
all those conditions kind of created the

0:13:46.089,0:13:51.519
perfect storm of us not probably looking

0:13:49.240,0:13:52.720
at a profit and we did get we work

0:13:51.519,0:13:54.779
hockey we thought for sure was gonna

0:13:52.720,0:13:57.310
sell like the day of the open house

0:13:54.779,0:14:01.720
which was kind of a silly looking back

0:13:57.310,0:14:05.980
because we had very horrible turnout for

0:14:01.720,0:14:08.230
the open house and then almost no

0:14:05.980,0:14:10.089
showings and that's never a good sign

0:14:08.230,0:14:13.180
right you want at least some pretty good

0:14:10.089,0:14:14.709
activity on your listing if he's showing

0:14:13.180,0:14:16.300
retail if you're having consistent

0:14:14.709,0:14:17.740
showings then at least you have a shot

0:14:16.300,0:14:19.390
of selling right well if people aren't

0:14:17.740,0:14:22.390
even going to see the property you have

0:14:19.390,0:14:24.430
no shot so that was depressing to say

0:14:22.390,0:14:27.279
the least so I think one of the big

0:14:24.430,0:14:28.959
lessons here is that first of all make

0:14:27.279,0:14:31.720
sure you check all of your numbers

0:14:28.959,0:14:34.870
including the specials assessments your

0:14:31.720,0:14:37.420
tax bills there's a lot more to taking a

0:14:34.870,0:14:40.899
look at it versus just the initial

0:14:37.420,0:14:43.810
overall cash flow it sounded it looked

0:14:40.899,0:14:45.940
really good on paper right off the top

0:14:43.810,0:14:47.829
a little digging probably we could have

0:14:45.940,0:14:49.690
caught some of this ahead of time it's

0:14:47.829,0:14:53.529
funny because you always want a property

0:14:49.690,0:14:57.250
to have equity and cash flow hopefully

0:14:53.529,0:15:00.970
and that specials payment kills both of

0:14:57.250,0:15:03.459
those both a cash flow exit and the

0:15:00.970,0:15:06.940
retail exit so that you know that that

0:15:03.459,0:15:08.949
one balance really skewed the numbers so

0:15:06.940,0:15:11.199
that's something you want to you know

0:15:08.949,0:15:12.850
believe me we check that now right yeah

0:15:11.199,0:15:14.860
you know you definitely check that now

0:15:12.850,0:15:16.600
it's funny because you get you kind of

0:15:14.860,0:15:18.010
cop well me especially by surprise

0:15:16.600,0:15:20.740
because we don't typically deal in

0:15:18.010,0:15:22.839
properties that new so usually the

0:15:20.740,0:15:24.819
properties we're dealing with have you

0:15:22.839,0:15:26.649
know maybe four or five thousand dollars

0:15:24.819,0:15:28.690
of specials balance but this one had

0:15:26.649,0:15:29.440
almost twenty so that was pretty

0:15:28.690,0:15:31.900
significant

0:15:29.440,0:15:35.830
yeah and I think this is another example

0:15:31.900,0:15:38.190
of when people don't want to work with

0:15:35.830,0:15:41.980
others that that come off as desperate

0:15:38.190,0:15:44.560
you know and I hate - hate to admit this

0:15:41.980,0:15:47.170
but I think one of the things that we

0:15:44.560,0:15:51.040
were dealing with is we were starting to

0:15:47.170,0:15:53.680
figure out ways to do for sale by owner

0:15:51.040,0:15:54.910
to try to sell Commission try to save

0:15:53.680,0:15:56.830
the Commission trying to save the

0:15:54.910,0:15:59.560
Commission trying to save this deal in

0:15:56.830,0:16:03.220
some way we were trying evaluating

0:15:59.560,0:16:05.800
whether to pay down the specials we

0:16:03.220,0:16:08.020
reduced the price of the property but

0:16:05.800,0:16:09.580
for some reason people were really

0:16:08.020,0:16:11.410
having a hard time with the specials so

0:16:09.580,0:16:13.840
we were even considering paying down

0:16:11.410,0:16:16.690
some of the specials we're doing all of

0:16:13.840,0:16:18.600
these different tactics or considering

0:16:16.690,0:16:22.180
all these different things as

0:16:18.600,0:16:23.530
desperation moves and I don't think that

0:16:22.180,0:16:26.020
really puts you in a very good situation

0:16:23.530,0:16:29.050
yeah I mean your leverage is gone at

0:16:26.020,0:16:32.200
that point so ultimately we just had to

0:16:29.050,0:16:34.240
say well let's just basically we were

0:16:32.200,0:16:37.150
ready to do a pretty significant price

0:16:34.240,0:16:38.410
drop just to get the thing gone because

0:16:37.150,0:16:40.030
what you don't want it

0:16:38.410,0:16:42.580
worst-case scenario as a property

0:16:40.030,0:16:44.710
sitting there costing you money every

0:16:42.580,0:16:46.870
month and it's just okay now you're

0:16:44.710,0:16:48.310
gonna lose money and the longer it sits

0:16:46.870,0:16:50.470
the more you're gonna lose so at some

0:16:48.310,0:16:52.120
point you have to just reduce the price

0:16:50.470,0:16:54.340
until it sells and get it off the books

0:16:52.120,0:16:55.870
take the loss learn your lessons and

0:16:54.340,0:16:58.330
move on and really you have to think it

0:16:55.870,0:17:02.290
was - costing you stress wise and mental

0:16:58.330,0:17:04.660
mental you know just admit to gymnastics

0:17:02.290,0:17:06.970
trying to figure out ways to get the

0:17:04.660,0:17:08.650
deal to somehow break even or be

0:17:06.970,0:17:10.900
profitable and you don't want to be

0:17:08.650,0:17:11.980
spending all this time you know every

0:17:10.900,0:17:14.290
day we're like okay what should we do

0:17:11.980,0:17:15.579
with this thing you know and wasting

0:17:14.290,0:17:17.949
time worrying about it when we should

0:17:15.579,0:17:19.810
have enough finding the next deal and

0:17:17.949,0:17:21.819
right when we were about to do a pretty

0:17:19.810,0:17:24.730
significant price drop again we finally

0:17:21.819,0:17:27.430
got an offer that you know what allow us

0:17:24.730,0:17:29.530
to kind of get out I think we've

0:17:27.430,0:17:30.670
probably lost you know a little bit when

0:17:29.530,0:17:32.920
it's all said and done with carrying

0:17:30.670,0:17:35.290
costs and everything else but definitely

0:17:32.920,0:17:37.450
not as significant of a loss as we had

0:17:35.290,0:17:41.020
we would have taken hit done another

0:17:37.450,0:17:43.330
price drop so you know that thing god we

0:17:41.020,0:17:47.019
got that came in at the last second

0:17:43.330,0:17:49.269
and saved us and we'll finally get that

0:17:47.019,0:17:51.580
property off the books and it's just a

0:17:49.269,0:17:54.039
you know weight lifted and it feels good

0:17:51.580,0:17:55.899
even though we technically probably lost

0:17:54.039,0:17:58.570
money on it feels good just to have it

0:17:55.899,0:17:59.919
behind you and take stock of what

0:17:58.570,0:18:01.000
lessons we learned and how we can apply

0:17:59.919,0:18:03.370
those going forward

0:18:01.000,0:18:05.799
well like we've said before if we're not

0:18:03.370,0:18:09.460
earning we're learning yeah right so

0:18:05.799,0:18:11.140
make sure you get your money's worth if

0:18:09.460,0:18:13.000
you do take a loss on something get your

0:18:11.140,0:18:16.059
money's worth and analyze what went

0:18:13.000,0:18:18.490
wrong what can you do differently in the

0:18:16.059,0:18:20.769
future and how can you apply those

0:18:18.490,0:18:25.510
lessons and get some get some value out

0:18:20.769,0:18:29.620
of out of the loss so well revisiting

0:18:25.510,0:18:33.340
this last one kind of wore me out so

0:18:29.620,0:18:35.470
let's we don't typically like to talk

0:18:33.340,0:18:39.539
about the losses but I think it's really

0:18:35.470,0:18:42.580
important and we hope that some of this

0:18:39.539,0:18:45.029
transparency really helps you on your

0:18:42.580,0:18:46.840
journey towards your financial freedom

0:18:45.029,0:18:49.269
yes and if you like what you're hearing

0:18:46.840,0:18:51.340
head over to iTunes subscribe rate and

0:18:49.269,0:18:53.620
review the podcast it really helps other

0:18:51.340,0:18:55.510
rookie investors out there find a show

0:18:53.620,0:18:59.769
hit us up on Facebook Instagram and

0:18:55.510,0:19:01.720
Twitter at rei rookies and remember get

0:18:59.769,0:19:04.210
off the bench and get into the game

0:19:01.720,0:19:08.350
we'll see you next time remember they're

0:19:04.210,0:19:09.880
not all homeruns I don't like to tell a

0:19:08.350,0:19:11.320
man what to do it is money but if you

0:19:09.880,0:19:15.039
ain't investing in Barberie then you're

0:19:11.320,0:19:17.900
dumber than a dummy oh smart well by

0:19:15.039,0:19:31.160
property my advice

0:19:17.900,0:19:33.220
[Music]

0:19:31.160,0:19:33.220
you

0:19:33.760,0:19:37.029
[Music]