Lessons I Learned From My Biggest Loss EVER

what's going on everybody welcome to ryan pineda show where we talk all things money real estate and entrepreneurship and in today's episode i'm gonna have a lot of pain because i'm gonna be talking about a deal i lost over 60 000 on so if you want to feel my pain if you want to shed a tear for me keep watching [Music] [Applause] so a lot of gurus and people teaching don't ever want to acknowledge the bad things that happen i can see why it sucks talking about your failures but one of my goals for this channel is to be transparent be transparent about the big wins be transparent about the big losses and pretty much let the chips fall where they may this house is not the first time we've ever lost money in fact i've lost hundreds of thousands of dollars on bad deals i've never had one that lost this big but as i said it's not my first bad deal when you buy hundreds of homes you're bound to lose on some and this can happen for many reasons you could predict wrong on your arv if you overestimate your arv and get significantly less you're probably going to lose money you can lose big because of rehab if your renovation costs are significantly more than what you predicted you can lose money you can also lose due to money costs if you're getting a hard money loan or even a private money loan and the property takes a really long time to sell you're accruing interest during that time and that can definitely make you lose money if you're really unlucky like in this case you can do all three wrong and then you're pretty much screwed if you do all three wrong you're gonna lose a lot of money typically on the deals we lose money on it's usually not arv i would say we're pretty much always right on arv it's usually renovation and time rehab is very easy to go over budget crap just happens when you open up walls maybe you just bid it wrong there's a lot of reasons renovation ends up being the thing that kills you and typically they go hand in hand because if renovation goes over budget and takes a really long time it ends up increasing your hold time and your whole time is interest that you just keep on accruing so it's not uncommon for those to be together but maybe it ends up being just hold time you get the project done really quick and nobody wants to buy it and that could also be an arv issue maybe you're just overpriced so it ends up taking way too long to sell and then those dollars just add up they add up and you either drop your price to get it sold or you just wait it out and finally get your price but by then it's cost you a lot of money so usually it's gonna be two factors that make you lose but if you happen to have all three you're gonna get hurt really bad so without further ado let's go to the computer analyze this deal figure out what went wrong and how you guys can avoid it all alright so let's go over this deal here is the address 3312 cape cod drive i never want to see that address again fun fact i played in the cape cod baseball league which is a very prestigious league for college baseball players and it was the best time of my life playing baseball i shouldn't say the best but one of the best and i loved every minute of it when i flipped houses on cape cod it now has given me a sour taste in my mouth so you ruined it for me cape cod mobile home anyways off topic we bought this house back in 2018 so one thing to know in 2018 is that las vegas had the most appreciation out of any city in the country so i was routinely buying deals and getting 20 000 over arv all the time like i was i couldn't believe how quick they were selling how many offers how much we were making like i was getting deal drunk so i got into a really bad habit of buying pretty much anything and everything i could and it served me well we actually did make millions of dollars in 2018 but towards the end they ended up raising interest rates and our market got really cold the market actually really chilled all the way across the country towards the end of 2018 and all those deals that i bought in q3 q4 of 2018 i ended up having to pay the piper come 2019 because they didn't sell over the winter i had a lot of holding costs didn't get what i thought i was gonna get was buying way too optimistic and i paid the piper i ended up losing on a lot of those deals in 2019. so with this deal in particular i bought it for ninety two thousand i estimated a twenty thousand dollar renovation you know it's a thousand square foot mobile i'm thinking that it doesn't need that much we ended up buying it sight unseen and we figured we'd sell it for 145 so let's take a look at the deal calculator at 145 20k rehab with our cost we were guessing a four month hold at 92 000 purchase price we end up making 18 600. in my mind that was perfectly fine back then i'm good making 18 000. um the market's hot it might even get more i might get 25 000 that's honestly how i was thinking turns out i was wrong the market was cooling down by the time i bought this property let's go over what this property looked like here are some pictures of it um last video i did of a deal evaluation i went through the pictures really fast so i'm going to try and go through them slower so you guys can see them so here's the dropbox um i don't really know how to go to the next picture not like super oh here you go there's no clicker you just gotta use the arrows on your keyboard okay by the way guys i'm like not super tech savvy anytime i need people to do stuff i pay them okay so kitchen's a piece of crap room's a piece of crap bathroom's not very good but for us guys this is what we see every day we fix and flip homes for a living so it is what it is exterior definitely needs work anytime you get these mobile homes with that metal outside it always sells worse and i didn't realize this until you know now when i bought this i just assumed all mobile homes sell pretty similar but they don't year plays a big role if they're converted plays a big role and then the exterior how it looks plays a big role we can fix the interior all day to make them all look the same but you can't change the year built you can't change how the exterior looks unless you stucco the outside which we should have probably did here you know that has an expense yep so this is a standard mobile home we flip a lot of mobile homes i don't mind them we've made plenty of money doing it that ac obviously does not look good so right out of the gate we mismanaged our budget i mean i'm looking at this now and i'd be budgeting at least thirty five thousand you know by the looks of it i would have stuccoed the outside the interior is what it is we're gonna have to change that that ac looks really bad we don't even have pictures of the roof but i'm sure it's bad just looking at everything else you can assume the roof is probably not good either so we should have budgeted 35 40 000 right from the beginning on this let's take a look at what actually happened with it we fixed it up and we sold it about two years later almost two years later we finally sold it it wasn't quite two years but man is brutal but you know ended up looking nice for if if there's any consolation it ended up looking nice okay so let's take a look at it ended up turning out nice as you can see that exterior looks much better i would have taken down this wall i think this was one of the reasons it took forever to sell i don't know why we kept this the way it is you know kitchen looks fine we should have converted this to a third bedroom and we never did it that is a huge reason this failed because it was only a two bedroom i don't know why nobody changed this to a three bedroom but i don't know par partially my fault well it is my fault my money right we had so many projects going on that i just trust my project managers to do what they're supposed to do and when they don't i just didn't hold them accountable and this was unacceptable not making this a third bedroom that killed us so they screwed up the layout they did not add a third bedroom and that is part of the reason it did not sell um another thing that happened during this sorry i'm going i'm going through the i'm going through the pictures fast again i just i'm so used to being able to just scroll through things really fast and see the condition i need to slow that down so i don't make these same mistakes and buy these bad properties again it ends up being way more rehab in fact it ended up being 47 000 we fixed it up to the way that you see it and we went to list it and the thing was we had thought that the mobile home was converted when a mobile home is converted to real property you can go and get a loan on it when it's not converted to real property somebody has to pay cash for it so obviously if you have loan buyers you're going to have a bigger buyer pool they're usually going to pay more cash investors want a discount makes sense and so we ended up getting a loan offer at 145 000 right where we projected we got the offer early and it turns out that it's not converted even though the record said it was i guess a lot of people were converting mobile homes back in the day and not doing it properly and even though they were getting the certificate saying is converted when you actually go to check it it's not truly converted i don't know the full conversion process in detail but i know that they strap it into the ground to make it attached and i guess those straps and things were never done they filed the paperwork saying as if it was done but it really wasn't so we ended up losing that buyer because they couldn't get a loan on it and we ended up paying to convert it after the fact but that buyer had already moved on they were on to a new house and that was the first time in my life i had ever encountered a property being fake converted so that sucked and by the time we listed it again once it was finally converted it was just crickets we just could not sell it nobody wanted it and this property was on the market for over a year we did multiple price drops and then the market heated up again and we ended up raising the price to only have to drop it again it finally sold this year in 2020 we bought this in 2018. as i said before we put about 47 000 into it ended up selling it for we ended up selling it for 125 dollars so we were complete we were off by 20 grand on the sale price we were off on the rehab by 27 grand so that's 47 grand we're already off in the hole okay if you remember our estimated profit was 18 grand so right there when you're working on those margins and you're 47 000 wrong uh you're gonna lose that's about 30 000 right there that we were wrong we did not mention time time is where we really got killed we got a hard money loan on this at three points and 12 and those three points kept getting renewed every six months i don't have that deal anymore you know that was a deal i was doing two years ago just to do more volume i don't pay anyone anywhere close to that anymore but i was then and i had to keep that loan until i sold it and so i ended up paying over thirty thousand dollars in money cost on this little rinkadink mobile home because it took so long to sell because i had to pay so many extension fees and between those two things being wrong on arv being extremely wrong on rehab being really long on hold time i lost over sixty thousand dollars one thing i'll add to this guys is that my lender knows what happened you can see from this text right here we're talking about it i told him dude we lost 60 grand just so you know some people might say oh man the lender will not want to invest with you again and that might be true if you were doing a 50 50 profit split or something like that and if you lost money for them they're gonna be pretty pissed but in this situation my lender made over thirty thousand dollars knowing that i lost sixty thousand and what does that do for a lender it gives them way more trust in you as a borrower because they know that when things hit the fan you're still going to pay a lot of people might just choose to let it go into foreclosure let the lender deal with the bs but if they see that you're going to pay even when things are really bad they know they can trust you for the long haul and he actually sent this text message chain to his partner to show him look this guy is rock solid and we need to continue to give him more money and for me my reputation's worth more to me than anything i don't want to owe anybody any money i want all my lenders and investors to be made whole and it's easy to do that when things are good and everyone's making money but true character comes out when things are bad it sucks it's definitely humbling but there's a lot to learn from it number one the thing i learned was i should have checked that bedroom issue right away i allowed it to remain a two bedroom because i just was like somebody will buy it somebody this market's hot we'll do it if i would have just closed that off and made a three bedroom right from the beginning i guarantee we would have had a way better result by not doing that i pretty much cost myself thirty thousand dollars i would guess because our 145 comp had three bedrooms and was converted we were only two bedrooms not converted so you see why we didn't hit our comp second thing i learned was you can lose big on a cheap deal in my mind i'm thinking hey expensive properties you can lose big there's no doubt about it it's easy for a million dollar property to sell for 900 and that's a huge gap that could cost you a lot of money but i'm thinking with a mobile home i should be safe it's very hard to be that wrong on arv when you're wrong on arv hold time and rehab yeah you can lose big obviously third thing i learned was mobile homes aren't always converted when they say they're converted so i would have a property inspector check to make sure that the conversion is legit before you ever buy a home you think is converted all the paperwork said it was legit the county assessor said it was legit but it was not legit and that error caused us to lose a lot of money because if we would have just had that one buyer right from the beginning we would have got a better arv and we wouldn't had all that hold time so even though we went over budget on rehab we could have still really limited the losses if they would have bought so that's how i lost 60k i'm definitely not proud about it but that is what happens sometimes when you're flipping houses any investment it doesn't matter whether it's stocks real estate or even investing in your business or yourself there's always risk if you're trying to live life risk-free good luck it ain't gonna happen and when you're doing a large volume of homes it's bound to happen we've flipped hundreds of homes and we've lost on many other deals now thankfully we've won way more than we've lost so it ends up being okay and when you average it out over a full year it doesn't really hurt us but the risk is always there on any investment and it's tough for me to talk about it i know a lot of gurus and people selling education and courses only want to talk about the wins and the good things it's much easier to sell when you're only talking about the good stuff and it's much easier to only talk about the good stuff it's not easy to make this video right now but i think there's a lot of lessons to be learned from this so i hope by making this video it brings you guys value it brings some transparency to the flipping world and that you guys don't make the same mistakes i did hopefully i made this mistake and it helps many other people out because i know i'm learning from it but if you got value out of this video do me a big favor guys go hit that like button hit the subscribe button if you hit that little bell notification you'll get notified every time i release a new video hopefully the next video is on a deal we made money on but it could be another one we lost money on who knows and as always follow me on all my socials i'd love to interact with you and until next time take care

Channel: Ryan Pineda

Views: 25,815

Keywords: real estate, house flipper, cash flow, financial freedom, entrepreneur, future flipper, house flipping, rental properties, passive income, real estate investor, real estate investing, wholesaling real estate, ryan pineda, graham stephan, meet kevin, max maxwell, bigger pockets, grant cardone, Real estate investing for beginners, investing for beginners, home renovation, house flipping 101, house flipping for beginners, real estate investing with no money

Id: gBh_CUbhxuI

Length: 15min 49sec (949 seconds)

Published: Tue Sep 15 2020