Due Diligence Ends the Moment You Decide What You Want the Answer To Be

When Did I Actually Lose the Money?

I gave a presentation on Sunday morning earlier this week at the Limitless Expo that I did not enjoy making at all...

Room full of single family investors. I opened with before and after photos of some awesome flips...A 1905 house in Savannah that had never been updated. A rambler outside Seattle with nothing left inside it, not even floor joists. Good finishes, good bones, the kind of photos you put on Instagram.

Then I admitted to every one that every one of those houses lost me money, and some of them still are.

Good times.

The whole message I wanted to convey was simple and its something I really hope you pay attention to:

"Due diligence ends the moment you decide what you want the answer to be."

Probably the biggest lesson that came out of the last two years for me personally.

Anybody can make a spreadsheet say whatever they want. It is not hard to turn a $50,000 budget into $45,000. It is not hard to look at a $400,000 ARV, decide the market is moving, and call it $415,000. And then the deal works.

It works because we wanted it to.

So the game I ran on stage for this presentation was this: on each deal, when did I actually lose the money? Not the day it sold. The day the decision got made that ultimately made me lose the money...

Savannah. $90,000.

Bought it in 2024 with a couple of buddies. A 1900s house on a corner lot, and I owned the same house in Tacoma. Not a similar house. Same floor plan, same age, same everything. Put the two floor plans side by side and you could not tell them apart.

So I stopped looking.

I used my Seattle price book to budget a Georgia rehab, because Seattle construction is brutally expensive and there was no way the South came in higher. It came in higher. You cannot sub out a full gut on a 1900s house from 2,000 miles away, which is a thing I now know.

We also only ever walked that property in the morning. The corner it sat on turned out to be where everybody hung out after school, with the corner store right up the block. Our listing agent tried to tell us. I decided they were being conservative because they wanted a fast sale.

When did I lose that $90,000? Before I owned it. I lost it the moment I decided it was the same house I already knew how to do (confirmation bias).

Bentonville. Day three.

Ranch house. My favorite thing on earth to renovate, because every ranch is a rectangle and I have done hundreds of them.

Bought at $226,000, rehabbed for $135,000, came in $5,000 over budget, which on a full gut is basically a win. Listed at $475,000. Everybody agreed on that number. Comps agreed, both agents agreed, my team agreed. Nobody had blinders on.

Day three, we got an offer at $465,000.

Day three. My agent and I said the same thing to each other, which was that an offer this fast in this market means the demand is obviously there and these people are taking a swing at us. So we countered at full price.

They rejected it and bought a house down the street for $465,000.

Then it sat six months with zero offers. We chased it down to $450,000, and then hit the moment where you have to decide whether to keep dropping or pull it off the market, because your refinance appraisal is going to come in at whatever the MLS last said it was worth. Our loan was coming due at twelve months, and my private lender gets paid whether or not the deal works. Reputation is the one thing in this business that never depreciates.

So we pulled it, refinanced it, and left $78,000 of my own cash in it. It is still not rented. It costs $2,800 a month to own and I will write that check again this month.

When did I lose the money there? Day three. One offer confirmed what I already wanted to believe, and my diligence on that market ended right at that sentence.

Fayetteville. The label.

Bought at $205,000, ARV around $365,000, and every single offer came from another investor. Not one homeowner. We could not work out why, which is funny, because the house sits a few minutes from a major university.

It sat eleven months. We dropped it to $325,000 and left $60,000 in it after I refinanced and forced to keep it.

Where did the diligence end on that one? We called it a flip on day one and never once asked what it looked like as a rental. If we had kept it and refinanced at $365,000 it would have been a good deal. Investors were offering us that all day long. We were not listening, because we had already decided what the property was...a flip..!

Austin. The one where I did nothing wrong.

August 2024. Bought at $600,000, put $150,000 in, ARV of $1.25 million with a subdivision full of comps behind it. Projected north of $300,000. Five minutes from my house.

Sold it in January 2026 for a million dollars and made $3,600.

Nobody screwed that up. The rehab was clean, the comps were real, the agents were right. I just watched the market walk down for fourteen months while I owned it. Literally if I listed three months earlier it probably would have sold for at least $1.1MM.

Sometimes it really is just the market. That is exactly why the other three bother me more than this one.

"But Tarl, hindsight is free. You already know how these ended...."

Fair. Except I did it again in April, and that time it had nothing to do with any single house.

The Part I Got Wrong

I sat out all of 2023. Bought nothing, all year, on purpose. Then I got bored, decided the correction had run its course, started buying again, and now you know a few of the houses I made poor decisions on the last couple years...I should have stayed bored.

So this year in Austin I was going to do it properly. Hired an acquisitions lead before buying anything. Project coordinator, underwriting process, started a meetup, all of it built before the first purchase. Then I announced I was buying 40 houses in Austin this year and 20 outside of it.

Sixty houses. Where did that number come from?

I made it up.

Nobody handed it to me. And a number I invented becomes four houses a month I have to hit, which becomes being behind, which becomes fuzzy math on a spreadsheet. Which is precisely what happened to us in Savannah, where we had a goal to buy a pile of houses and started talking ourselves into deals to hit it.

In April, after Ken and I finished a seven hour webinar, I went to dinner and realized I had to rethink the entire thesis. Austin rents were still falling. Values were still falling. And I had enough scar tissue from the previous two years that fear was finally turning up in my decisions, which was honestly overdue.

What got me was not the market. It was confirmation bias, boredom, FOMO, and a quiet belief that I could not fail. But it was EGO, mostly.

I would be wealthier right now if I had just stayed bored.

What changed since April

No overhead. Salaries are gone, performance and commission only, the same way I rebuilt this in 2018. Sniper instead of scale. Cherry pick the best, dump the rest, underwrite every week. No arbitrary number, which means I do not have to buy anything I do not want to.

Four things I now run on a deal past the numbers themselves:

Because I do believe a single family house bought right today is worth considerably more in five to ten years. Almost everyone in that room believed it too. So why not buy everything?

Because you have to survive it. There is a real difference between buy and buy everything, and I had to lose actual money to feel that difference instead of just knowing it.

I am still buying. I tied up two REO properties the week of the event, and almost every house I am buying in Austin right now came off an investor who got foreclosed on. It is just the honest picture of what is out there.

What I would do with this

Pick a deal you own right now. Not a bad one, any one. Find the moment you decided what you wanted the answer to be. It is in there. It is usually early, it is usually small, and it is usually the moment somebody told you something you did not feel like hearing.

Then run the after action review. Every system and process I own that actually works came out of one. What went right, what we would do differently, projected against the original underwriting, what caused the variance, what changes in the process, what documentation gets updated.

And run it on the deals you crushed. Almost nobody does. We autopsy the losses and we celebrate the wins, and the win is where the repeatable part is hiding.

Need funding?

We are actively lending on disciplined single family deals, DSCR loans, plus small multifamily, in 40 plus states. If the numbers make sense, we move fast.

Apply here: www.fixatedfunding.com

Good luck, it's that sort of market right now.

Tarl Yarber

(Once again, I personally write these...)