We've all made dumb decisions in our investing journey.
What's one of those BIG "Oh wow" mistakes you've made in your career? What was the reason for the mistake and why would you do today to ensure it never happens again?
I'll start.
In my first year as a land investor, I found a small triangle-shaped parcel for sale and made the owner an offer for $327, which they accepted.
When I ordered the parcel map from the county (it was harder to get parcel maps in those days), I got completely misunderstood the North and South directions on the map. It wasn't the county's fault, it was just me getting confused.
I originally thought I was getting a cleared parcel with enough space to put a billboard (as it was on the highway) or even build a small home.
Unfortunately, the ACTUAL property I bought was on the other side of the highway, in another township, and the parcel was so small (and not even zoned correctly) that I couldn't do anything with it.
After many months of trying to sell it, and every prospective buyer eventually coming the the same conclusion (that this property was mostly useless), I decided to look up the neighboring owner and deed the property to them for free, just to get it off my books and move on.
In the end, I lost $327, several hours and my pride.
My biggest lesson was to look twice (even three or four times) at the map, and even look at the property on a few different maps to make sure I'm seeing and understanding everything.
I hadn't yet realized how easy it is to miss details, and how a seemingly small detail can end up becoming HUGE deal-killing problem if it isn't caught ahead of time.
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Ouch! @retipsterseth that stinks!
For me, recently I bought:
Thinking Frontier Trail gave road access to my property. Well come to find out... it's a private road so this property is landlocked! đź¤
Luckily I sold it but... it was one of my biggest mistakes of all time.
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@Jarenb danngg, but how would you have known frontier trail was a private road??
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For me it was the beachfront condo i bought last year that I had to sell this year at about a $5,500k loss. Reason being was when i bought it, i didnt ask the right questions regarding the health of the HOA or any potential litigations. I did not know that the HOA and Developer onsite had a history of a very bad relationship and the seller, of course, didnt mention it to me. Had i spoken to the HOA directly(instead of just the property manager), i would of found that out. Litigation between the HOA and the developer started about a week after i bought the condo but i didnt find out about that till like 3 months later. Long story short we got hit with over 3k worth of assessments due to legal fees for their litigation. Luckily the condo rented extremely well all year and I was able to cover all expenses with no money out of pocket up until a couple months ago when the pandemic hit lol. All the vacation rental income stopped at that point. Luckily i did find a buyer who was ok with the HOA drama in exchange for a discounted price. I sold it this month. So all in all I lost about $5,500 but i figure it could of been worse. Lesson learned about asking the right questions!
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@Ladymarmar2 I could have called the county and they would have told me. But it looks like a normal road so I didn't even think about it!
Normally the title company would have caught it too but they didn't this time 'round.
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@Jarenb - was it a private road or private driveway? Seems you’d still have access with a private road if it literally touches your property (unless it’s gated and the gate owner won’t give you access... but it seems like there should be some kind of law against that).
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@Ladymarmar2 that’s a bummer, I’m sorry to hear about that.
HOAs can be a real dysfunctional mess... I’ve heard and seen so many horror stories. I understand why some people are scared away by their mere existence, if they aren’t managed well, there are PLENTY of opportunities for things to go awry.
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@retipsterseth yea apparently it was gated and my agent didn't catch it on the front end.
Oh man. THAT's unfortunate.
Trading options with near term expirations. Tempting but rarely works. Need time on your side not against you.
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hahahahaha
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@retipsterseth Upvote for Kevin.
Biggest investing mistake, financial planner recommended annuities when I was naive. I was following the plan through the financial collapse, and stayed in the market. When I realized that the market reached pre-crash highs, but my investments did not recover, that is when I took my money out. Lost close to $7k.
On the land investment side, worst investment was buying a property that had a dry creek running through it, and it was too small to build. Neighbors didn't respond to my letters. I held it for several years, and even stopped paying taxes on it. Hoping that the county would take it from me. But eventually, someone came around and bought the neighboring property and asked if they could buy mine. Broke even on that.
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@VictorNoriega - that's cool to hear your creek property didn't end up being a total bust in the end (funny... you never know where a deal will lead until it's actually done).
Those were some tough times back in the financial collapse (in hindsight, I think the struggle for me was more psychological than it was an actual financial struggle). It's hard knowing what to do when you can't see a light at the end of the tunnel. And of course, the answers see so obvious when you're looking back on it, years later.
@victornoriega
Was the dry creek an issue? I actually just bought a property with one on it. It's a 12+ acre property, so there's still plenty of room around to build in theory...but since you specifically mentioned "dry creek", wondering what the main issue was with that characteristic? I was thinking worst case they can just build a small bridge to cross it if absolutely necessary, as it is a narrow width.
My biggest investing mistake - my first two house flips ever were done out of state, and both full guts. Whoops. I hired a project management company to handle both projects and I thought I could trust them as they seemed to be fairly legitimate. They were supposed to turnkey, manage their vetted contractors, etc. Long story short, my trust was very misplaced. I had to short sale one house before I even got insulation in the house, bringing $20k to the table at closing when I finally got rid of it. The other one took forever to finish and sell and was done with poor quality. After what I paid out to this company, closing costs, hard money costs, and all other holding costs etc, we lost about $130,000 when all said and done. We ain't millionaires either, rest assured. Maxed out HELOCs, credit cards, sold my rental property which was the one good investment for us, took all of my Roth IRA contributions out to cover. Sold our house eventually to pay off the HELOC. It was a pretty gut wrenching experience to say the least and significantly pushed our trajectory backwards. This was 2017-2018. Still feels fresh sometimes when I look at what opportunities we have missed out on/still can't take part in, investing or otherwise, specifically because of the tangible impact of that stretch of time. Not to mention that our second child was born during this stretch too. Some of the hardest and scariest two years and beyond of our lives. I should've done a better job cutting ties sooner, maybe doing some more due diligence on the front end. Live and learn, move forward. Brag on my wife who still to this day continues to support my real estate investing endeavors despite all of that.
the worst land investment mistake so far: Florida Gopher Tortoises
in a more general sense, i'd say it was panicking during the great (as in large, not wonderful) market crash of 2008 so that I sold low, instead of taking advantage of that wonderful opportunity to buy low.
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@Tae_Cho My property was 1/4 of an acre lot. part of a subdivision, and septic was required to build.
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Well, I think that selling bitcoins several years ago was the biggest mistake that I made. Honestly, I never believed in crypto and thought that bitcoin is not a valuable currency. It’s hard to imagine how much money I lost because of my skepticism. I also made many mistakes at the beginning of my trading career following wrong investment plans, especially in forex trading. But thanks to my ability to learn, I was able to evolve as a trader. I have read many articles and guides on Investous and many other platforms, which helped me boost my expertise and general knowledge.
Okay, why not, here we go… In August 2019, I entered into a [documented] business agreement with an individual who happened to also be my property manager at the time (for a duplex I own in Richmond). Based on my positive experience with him as a PM and the positive returns I was receiving from him from his car flipping business, I increased his line of credit from $10,000 to $20,000. He had originally approached me months before about funding this vehicle flipping business that he had in connection with his auto dealership-- he would purchase cars at auctions, fix them up, then sell them for excellent returns. After giving him a $10,000 line of credit and receiving a regular positive return on this investment, I offered to increase this line of credit so he could continue to expand the business and I could make more easy passive income. The returns continued for a time, however I had to regularly check in with him to get him to pay me my portion of the profits. After close to a year of these gradually decreasing payments, he ended up getting arrested this fall for violating a protective order. I decided to end our agreement and asked for the line of credit to be closed out and repaid. It never was. Once released from jail, payments trailed off, then ceased completely. He originally made assurances that I would be paid back, but now doesn’t answer my calls. I doubt that he still has a dealership, but he proclaims to be working as a real estate agent again. A call with the broker he advertised as working with on his Facebook page was surprised by this information. I’ve reached out to some lawyers, but I doubt litigation would get me any money back.
In a whole separate soap opera, he is currently the tenant in a property that we once bought in a separate partnership with plans to lease-option together. I put up all the money and he managed the rehab-- we planned to split the profits 50-50. After a “45 day” rehab that took six months, he was unsuccessful in finding a lease-option buyer. He then offered to take the lease-option offer himself and manage it as a boarding house. Again, after good results initially, things deteriorated. He hasn’t paid rent in months, has multiple vehicles parked in the grass outside the property, refuses to let my property manager inside, and has trashed the back yard. Thanks to COVID, I’ve been unable to evict until now. The notice is finally going out April 1.
Extreme ownership, right? I have no one to blame but myself in the the end. My vetting involved a call to a trusted individual who worked with him in the past (obviously not long enough) and doing a basic google search of his name. When I saw that he was (supposedly) an ordained minister, I thought, “Oh, what a great guy.” I obviously missed some key indicators (like a massive criminal record… to include ATTEMPTED MURDER) and have learned a rather expensive lesson. The silver lining in all of this is that once I get him evicted from the rental he’s squatting in, the property will still cash flow pretty well.