Last month I talked about how I created a near disaster for my family because I got too big for my britches and thought I could buy 100 houses in one year when I truly was not prepared to undertake a monumental task that large that has so many tentacles I had no idea I had to deal with.
I now realize that every one of these people provide a service I desperately needed if I had any chance of buying anywhere near 100 houses in any year. Without the services of these people there would be no way I could have achieved my goal of buying 100 houses in any year
Each of the ten deals I did in that one-week period were good deals and bought at prices that would have given us a good profit. I had bought each of the ten properties with Hard Money loans from local private money lenders who knew and trusted me. Because I couldn’t get the repairs completed, I quickly ran out of the money I had borrowed in a very short period of time. To keep my name good with my lenders, I had to take out personal loans to make the individual monthly payments for each property that was sitting empty and not bringing in any money. I had to borrow money I needed quickly to make those monthly payments. It didn’t take long for me to realize I was out of money. I was scared to death I wouldn’t be able to continue to fund these empty houses and ruin my name and reputation with the lenders.
One thing I was happy I did though was I continued to talk to the lenders. I didn’t hide from them. I called them numerous times and we talked and we worked out how I could restructure the loans I had made so I could make my payments and keep everyone happy. We restructured some of the loans. We added the payments I eventually couldn’t pay on the end of some loans. We reduced the payments on other loans and a couple of lenders allowed me to take a period of time where I didn’t have to make a payment to give me time to find more money and finish my projects I previously couldn’t complete. This is a real problem I continually see investors make, they hide from their lenders when they don’t have a solution how they can make payments when no money is coming in. My advice is DON’T HIDE!
The secret to preventing what happened to me so you never get into the mess I created for myself is: Don’t take on more than you are currently prepared to handle. Don’t get “Big Deal Itis” like I did. Before taking on a project of that size you must understand that your profit from each deal diminishes because you will need more staff and your overhead will increase greatly. If you plan to take on this monumental undertaking, be sure you are prepared with enough crews to complete your rehab work, lenders to fund your deals, staff to complete the bookkeeping and paperwork you will need and staff that understands how real estate investing works and is familiar with the skills needed to get the jobs done.
PLEASE, think about what you are undertaking before jumping in blindly and nearly go bankrupt like I did. That is a problem I wouldn’t wish on anyone. Work Smart, Not Hard and you will always make more money in the long run!
Be sure to follow me on my Facebook page “Larry Harbolt – Education” for my daily real estate mini-lessons. You can also find numerous courses about all parts of real estate investing on my website, www.LarryHarbolt.com.
Until Next Month,
Good Luck and Happy Investing!