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Hey ,
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A soft, fancier phrase for mistake and/or failure — a "learning lesson."
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With humility and honesty, I'm sharing my 4 biggest hard-won learning lessons - an unfiltered rare glimpse behind the curtain of the perfect track records shared online.
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Inside the Trenches
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I remember being told when I was in my 20's and really struggling with being self-employed that "this will make a great story one day."
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Sure, all those "learning lessons" I have had, have made great stories...but I also remember snapping back at the person that told me that these failures would make a great story one day:
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"I don't need any more F*ing stories, I already have enough stories. I don’t want any more stories, I want some success!" True story.
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Despite all my desires for success...I still came out of my 20's (and soon to be 30's — I’ll be 40 in a couple months) with a TON of stories, and those stories keep coming whether I like them or not.
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I have actually joked more than once that I am a "martyr for house flippers" and that every bad thing that can happen in real estate has happened to me and is supposed to happen to me…because I can take it and I can also share it...no matter how much I don't want to.
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I kid you not — every time I think we are done with making mistakes or having weird stuff happen to us in this business and I say to my team "we've seen it all..." there always seems to be some NEW FREAKING THING out of left field that catches us off guard.
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At this point it’s all hilarious to me, but that is only because of how calloused I've become with the volume we have done. The overwhelming insurmountable challenges and problems I faced years ago when I was newer in this business now seems like a normal Tuesday morning today and just part of doing this business as usual.
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The problems didn't change...but I changed and so did my business.
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So, I did some soul searching and decided to share 4 of my biggest learning lessons (aka mistakes/failures) in my career to date:
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1. Hubris...I can handle anything!
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I believe that real estate investing should be non-emotional and that it all is about the numbers at the end of the day. We are INVESTING money (or someone else’s) in order to get a return on that money, which means the top priority of investing in real estate...is the investment (duh).
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Yet for some reason, real estate investors can forget this at times. Maybe because many of us get emotionally tied to our personal house?
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Either way, I have done a good job at not getting emotional in this business for the most part...yet my ego has definitely harmed me (is that emotional? Probably). I've been caught up in my own success in this business more than once.
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Every deal seems to be working for me, so why not do more? Why not go bigger? Why not go out of state? I can handle it all, my track record speaks for itself, ha!
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I use to brag about how I never lost money on a single deal ever after hundreds of deals...until one day I lost $86,000 on just ONE DEAL.
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In 2017 I bought a deal in Milwaukee, Oregon just to prove how awesome I was at this business to someone I didn’t care much about. I overlooked the numbers on the deal, guessed on the rehab (I’d been right so many times), didn't allow my amazing team in Seattle touch it or help with it, and decided that I'll manage all of it myself (which meant no one was managing it).
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18-month-long story short — my ego was squashed, I wrote a check for $86,000 and learned a painful lesson...but a great story for another day.
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2. Focusing on income instead of wealth...flipping everything and not keeping anything.
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I grew up broke. When I started making money, I focused on not being broke. Which meant that I focused on making income...which is very different than growing wealth.
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At the end of flipping hundreds of houses after many years, I had a lot of income on my tax returns, money in the bank, but very little wealth. Not just a lack of wealth with assets, but also a lack of wealth of time. I was trapped in my business, addicted to the income, and I had to keep feeding the machine.
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Whenever I want to abuse myself, I look up what houses I flipped in 2013 are worth now...
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Switching my focus to wealth building has changed my life forever.
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It meant that I had to think past six months…
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…that I had to figure out what was truly important to me in my life.
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…that I had to be ok with having less income on my tax returns potentially.
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…that I had to start looking at balance sheets and not just profit and loss sheets (and learning the difference between them).
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Building wealth is a lot easier when you have a high income, this is very true. Just remember, like the book Rich Dad Poor Dad says, it’s not how much you make that matters, it’s how much you keep.
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3. Bank account accounting...if there's more money in the account than yesterday, then we are doing great!
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There’s a great book called Profit First where I first place I saw the term "bank account accounting” — making decisions based on what’s in your bank account.
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By the time I read that book, I was already a long ways past bank account accounting, but I thought "OH MAN! I've done that a ton of times, most my life" when I first read it.
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For years, if I had money in the bank, it meant I had money. If we sold a property and there was more money in the bank than there was when I bought the property, then we made money!
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Forget accounts receivables, projections, allocated funds, operating expenses, committed funds, whatever!
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But wait...how come I am almost out of money this month when I had so much money last month? Should I have not bought that other house? Hired that person? Paid for that vacation? The problem...I didn't know the answer!
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I paid the price more than once with this lesson, learned it the hard way, and then spent a bunch of money fixing past mistakes and building processes to help myself avoid bank account accounting going forward.
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4. Abdicating the rehab...I'm an investor, not a contractor, someone else be in charge of this!
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If I had to answer the question "what do you hate most about real estate?" The answer would be rehab!
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The problem...it’s a HUGE part of real estate investing. Especially flipping, value add, BRRRR's, builds, and pretty much anything real estate related other than be a passive Limited Partner. Even lenders need to know rehab a bit (at least if they want to protect their money and underwrite better).
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I fought for years to avoid learning rehab and leaning into it.
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Back in the good ole' REO days (2010-2014 ish), I would go to a property with my realtor and my contractor.
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I would let them walk the property and decide what to do, then ask my contractor what it costs, and if my realtor told me a good enough ARV (after repair value) that fit the budget, I’d buy it! From there, I’d pretty much let the contractor do their thing after that.
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What's wrong with that if it worked?
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Well...it worked for a little while. But it also lead to tons of change orders, mismanaged finishes, hidden damage, buyer inspection items, frustration, over scheduled projects, contractors bid creep, and so much more.
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What was my answer?? Hire someone else to deal with it, and let them figure it out!…
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What happened?? Same as before, but this time I had an upset and frustrated employee plus more overhead...
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It wasn't until we started leaning into rehab, getting better at it, processing it out, learning how it should actually work that we finally stopped having so many issues in our business.
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We also started making more money.
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…When I talk to real estate investors out there and I ask them what their biggest challenge in their business is, I get so many different answers. Most of the time their answers are surface level and not the real problem.
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When I dive in and ask more questions, we almost always find ourselves talking about systems, operations, lack of time, unknowns, guessing, etc.
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And almost always, most of their challenges, and what holds them back from scaling their business up and/or having more freedom, revolves around their business operations and rehab.
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I'd say that's at least 8 out of 10 investors I talk to...maybe even more…
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Despite all my stories and learning lessons, if it wasn't for going through all of them, I wouldn't be where I am today.
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The more people I meet in this business, the more people I see that have similar challenges that they are facing. I have seen so many people come and go, good people that had success, yet some how their ego got in the way or they didn’t manage their money right, or focused too heavy on the income (and spending it), or neglected a part of their operations (breaking their system).
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Learn from my mistakes and learn from those around you — you don't have time to make all the mistakes.
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Announcements
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Attn: Flippers Anonymous members! Register for the Upcoming Challenge!
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The Flipping Addicts 6 Week Challenge is a recurring challenge available to all members to leverage my experience in tackling real issues like the ones above costing you time, money and stress. Have noticeable progress towards achieving time and financial freedom, and to scale your business with confidence in just 6 weeks.
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To learn more and sign up, please register for orientation next Wednesday, July 31st at 6:30 pm CST to secure your spot. Registration is in the private Facebook group and in your email!
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Talk soon,
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Tarl
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Ps. Are you a Flipping Addict or seeking Recovery from Flipping Addiction? Learn about Flippers Anonymous here.
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