Today I want to talk about something that I fell prey to many years ago. I’ve talked about how I started in the business with no money, no credit, and no experience. I made a LOT of mistakes, and today I’ll tell you about some of my biggest ones.
In 1986, I bought an 8-cabin lakeside resort. I had no idea how to really research or analyze properties to see if they were a good deal. I talked with the seller and they agreed to give me the property on terms. I asked for a list of guests that came through, the expenses, and the income. I believed what the seller told me and pretty soon, I realized some of the info he gave me wasn’t true, and I was in deep.
The guest list the seller gave me wasn’t for guests coming through for a year, it was for the entire time the property had been open. He fudged the numbers for the expenses and lied about how much maintenance was required to keep it running. That property ended up being a huge struggle for my wife and I to maintain, but we did keep it for 10 years.
From those mistakes I made, I learned that I needed to do a much better job of researching any property I was thinking about buying. I thought I had learned this lesson, but another property I bought in 1990 showed I was wrong.
My wife wanted to buy a convenience store during this time, and I thought I knew exactly what we needed to know to buy it. The seller’s CPA provided the numbers and I thought I was set, so we purchased the store. The problem is, even though we made more sales than the previous owner, our profit margin was nothing like what the seller had presented. We struggled with that store for 2 years, with my wife working in the store herself because we couldn’t find quality help.
Don’t believe what sellers tell you when they need to sell a property. When it comes time for the numbers, ask the seller for 4 to 5 years worth of tax returns so you can see the truth.
Don’t try to save the world. You’re already in the business of helping people, but if you try to help every single person you come across, you’ll simply replace them in the quicksand. You can help more people by keeping your business successful than if you’re doing bad deal after bad deal because your heartstrings are tugged.
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Good Luck and Happy Investing!