This morning I watched a video presentation by world-renowned motivator and educator Brian Tracy. He spoke of a study performed by the Harvard Business Review that included interviews of Fortune 500 CEOs. One of the questions asked was, “What was your biggest failure and how did you react to it?”
This question stumped the CEOs. They would often look perplexed and ask what the interviewer meant by failure. The interviewer would then bring up products that had cost these executives’ companies hundreds of millions of dollars — offshore ventures that had to be closed because they weren’t profitable… things of that nature. The CEO being interviewed would then say, “Oh, you’re talking about learning experiences.”
The interviewers were astonished to learn that these great leaders wouldn’t use the word failure. Instead, the CEOs viewed these failed attempts as what they really were — learning opportunities.
Now, the CEOs were the first to admit that these events were costly and sometimes even painful learning experiences. But in the end, they viewed them as education.
In real estate, every deal you do is a seminar. The cool part is that most of them pay you to learn. That being said, some of the best and most memorable “classes” you take are the bad deals you do.
Ashley and I have done our share of those. After watching Brian’s video, we reminisced about some of the deals that had taught us the best lessons. There was the house we bought next to a railroad track. Even though the appraised value was great, the location made it hard to sell; everybody knows the old adage, “location, location, location.” Sometimes you have to learn this the hard way — we barely broke even on that house.
Then there was the house with green tile throughout. I made the executive decision to keep the tile because it was in good shape. After putting in granite counter tops, a travertine back splash, and stacked stone on the fire place, I realized that ugly tile had to go. We were almost done with the rehab, however, and demoing that tile made the new install more costly, and it left a thin layer of concrete dust on everything. Lesson here: don’t be cheap. It’s more expensive in the long run.
But the deal that taught us the most was the burnout we bought when we first started investing. The first thing we did wrong was get excited about doing a deal, and over paid for the property. You should never get emotional about a deal. Not only did we pay too much, but our excitement led us to buy it too far away from our house. It was almost lunch time when we arrived at the house each day. This posed a hardship because we had made the decision to rehab the house ourselves, necessitating daily trips to the property. This particular rehab took us forever.
But the biggest lesson we learned here came when someone offer us more than we paid for the property before we started rehabbing it. We declined their offer. The main reason was, in our minds, we had already spent the potential profit. This deal taught us the meaning of “a bird in the hand is worth two in the bush.”
During the course of this deal, I cut my finger on a table saw, I got sick and tired of driving to kingdom come to work on the property, so we sold it to break even. We never saw our potential profit — I guess that’s why they call it potential. Lesson learned was we should’ve taken the money and run.
When a bad deal happens, you need to have the fundamental belief that you didn’t fail; you simply had the opportunity to learn. The education you get from these deals will make you a great investor.
Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.