The proverbial sh*t has hit the fan...
Deal with "what is"...not with "what isn't."
There will be a time in all of our real estate investment journeys where something will go wrong...the proverbial sh*t has hit the fan...
And for each of us, our definition of that can be very different.
Inside the Trenches
There is a saying, "the worst thing that has happened to you, is the worst thing that has happened to you."
What does this mean?
It means for some of us, losing $10,000 on a deal, or going over budget can be mentally catastrophic. Whereas for others, this is just a Monday morning, and it mentally doesn't even register.
No matter the size of the problem that comes up though, we still must deal with it...and trust me...there will always be a new problem that comes up.
I sometimes joke that I am a "martyr for house flippers" and that every problem a house flipper can face, I have gone through...at least it seems that way sometimes. Despite this, each problem has made my business stronger, and we have learned to deal with problems faster.
Here is a "small" list of end-of-the-world problems that have happened to me in this business:
- Over budget on a rehab by more than 50%
- Been red tagged by the city due to getting caught with no permit (more than once)
- Three-year audit by the Department of Labor and Industries, WA state
- Projects shut down by Washington Labor and Industries
- A 6-month project turned into an 18-month project that I lost money on in the end
- Lost $86,000 on a simple cosmetic flip
- Contractor skipped town with a $30k deposit
- Project manager stole from the company by having contractors mark up the bids, then pay him the markup directly after our company paid the contractor
- Had more than one failed 1031 exchange
- Fully finished a basement, then had it flood while the property was on the market...more than once
- Had a house burn down completely
- Many projects broken into and had appliances stolen
- Contractor didn't pay his people, and then his people took it out on my house by breaking all the windows and knocking out my other contractor on site
- Lawsuits...
- Lost $150k on two deals in 2022
- Entire ceiling collapsed on a house due to water and flooded the entire house when it was almost finished
- Lost $90,000 on a flip in Savannah last year...yay.
- Sold a house for a million dollars...and made $3,600 net profit
- And the list can go on...and on...and on...
Despite the fact that each one of these problems really sucked going through at the time, they each ended up making my business stronger, yet these "problems" can still take a mental and even emotional toll. They can hurt the morale of your team, disrupt your home life, and even age you if you let it.
So how do I handle something potentially catastrophic in my business?
A couple of years ago I had the pleasure of testing my mental and emotional strength again when my events company was frauded multiple six figures through an elaborate hack (I told the entire story at Limitless this year on stage).
This significant loss of money would destroy most businesses, yet when it happened, I was able to set that worry aside and begin to deal with "what is" right away.
With that, here is my process for dealing with the sh*t when it hits the fan:
- Immediately accept the situation (or as fast as possible), and recognize the problem for what it is and not what I wish it would be.
- Take full responsibility. Extreme ownership, it's not just a book.
Contractor stole from you, who hired them? Your team member hired them...who hired the team member...or who didn't train them well enough? Losing money on a house...who bought the house?
Accepting full responsibility gives me the power to fix the situation (or prevent it from happening again).
- Stop the bleeding. If it's an active crisis, handle it and focus on the solution and not the problem.
I can analyze "why" and "how" it happened later. In the meantime, stop the bleeding and handle the crisis.
- Go through a list of the worst-case scenarios, and the likelihood of them happening.
I begin to accept the possibilities of the more likely worst-case scenarios and determine if I can "live with it," and most of the time, I can.
Also, most of the time, the scenarios usually never play out. My favorite quote is "my life has been full of terrible misfortune, most of which never happened." (Montaigne, I think.) We are our own worst enemies.
- Mitigate damage as best as I can, and once I've done all that I can, accept it and move on.
The damage is done. I don't let it damage other parts of my life and my business by carrying it with me everywhere I go.
This is one of the most important steps of the process...and the one most of us skip.
Problems, big and small, will always happen in this business. We can learn from them, or we can let them poison us and those around us.
All of this is not easy to do.
However, dealing with problems and working on solutions is the cornerstone of all entrepreneurship.
If you cannot handle problems, you will not survive long in this business. It's why we are the owners of the business, and not an employee of it. Employees want the safety of a paycheck and a for-sure thing. If you wanted that, then why start a business?
Get better at solving bigger problems, and you will make bigger money...it's all part of the game and it's what we all signed up for, whether we knew it or not.
Good luck, itβs that sort of market right now,
Tarl Yarber
(Once again, I personally write these...)
Do You Want My Help?
I don't promote this publicly. In fact, most people who have reached out to me directly asking for it, I have told "No, I don't do that"...or I convinced them they didn't need it. I don't like saying no to people that ask for help, which is why I don't promote it.
But I have a confession: I do private consulting and coaching for real estate investors that are at a certain level in their business. And I have a couple of spots opening up in December.
Why now? This market requires people to be extra sharp. You have to know what's actually going on, tighten up your operations, and run lean and mean. That's what I've done for years, and it's exactly what I'm doing in my own business currently.
There are also some real go-getters out there right now looking to take advantage of this market. If you're looking to go lean and mean, looking to grow, or you're looking to take advantage of this market, those are the people I like talking to most.
To be clear, I do not enjoy coaching "newer" investors, I cannot help them. I work with experienced investors running a business or at least trying hard to: at least 10 investment deals completed, a team or building one, and wanting it to run better with less of you required.
Everyone I've worked with has become a friend. And many times I end up doing business with them. Some of them own businesses with me today, including my lending company.
If you're interested, there are some hoops to jump through first to make sure we're a fit. Read the details and apply here. I read every application personally. Not joking.
Got a deal you want me to tear down with you? Submit your deal for our next Deal Teardown, coming up in November. We work through real deals live, and you can stay anonymous if you want. Submit your deal here.
PS: Need funding? We are actively lending on single family deals, hard money, DSCR loans, plus small multifamily, in 40 plus states. Go to www.fixatedfunding.com, or just email me and it comes straight to me.