In the beginning, I'll be honest with you, we made many mistakes and had the wool pulled over our eyes time and time again. You will learn that one of the most valuable things you need to incorporate into your endeavors is how to verify the people you're working with. There are a wide range of people that claim to be "Real Estate Investors" and there are many amateurs that haven't done their homework on what it takes to be a part of this industry. There is nothing wrong with being an amateur, every one has to start somewhere - but you need to be aware that you will run into amateurs that aren't taking their education and understanding of this business a seriously as you do.
The main point you need to draw from this is make sure the people you choose to spend your time working with are who they say they are and that they can do what they say they can do. I want to share these examples with you so that you can have some food for thought when you start making your own contacts.
LESSON #1: Protect Yourself
The first lesson we learned is that if a buyer is serious about working with you they will have no problem signing a Non-Circumvention, Non-Disclosure Agreement with you and providing you with a Proof of Funds letter. What we thought was going to be our first deal ended up being a pretty big slap-in-the-face wake up call.
We had found a buyer. We knew exactly what he was looking for. He sent us a POF. We found a great bank owned rehab property in the exact area he wanted. We were right on track! This was going to happen! The only snag in the plan was that our strategy was to lock this property up on contract with the bank and then assigning the contract to our buyer, but the bank had a contingency that an assignment of contract couldn't be done unless the end buyer provided a Letter of Intention (to buy) to the bank. This meant we had to give our buyer access to the all the information about the property without having any security for ourselves. We didn't have a contract with the bank, nor did we have a NCND with our buyer. We went on our buyer's word and put our trust in him and proceeded to send all of our hard work to him. After a few days he contacted us and told us that their investing money was tied up due to a family emergency and that he would contact us once he was back on his feet. We said we understood and looked forward to hearing from him, honestly believing that we would hear from him again - how wrong we were. Come to find out, shortly after speaking with us he proceeded to purchase the property that we had put weeks worth of work into finding and researching AND we had know way of proving our time and efforts put into this deal and were unable to profit from everything we had done for him.
Moral of the story - PROTECT YOURSELF FIRST - EVERYONE ELSE IS!
LESSON #2: Protect Your Contacts
Not long after the above example, a little worse for the wear, but still pursuing our dreams, we made a really good contact. He was a bulk buyer of single family homes. We had never worked in bulk before but saw it as a great opportunity to expand our business. The task was simple - him and his partner had $5 million allocated to purchase homes, they provided us with a POF, we were to find the homes, do our due diligence to make sure they were good buys, and they would buy them. Simple right? Only if you have the right team of professionals working with you. At the time were were using a Realtor that was fairly new to the game, but we liked his ambition and thought we would see how it worked out. Unfortunately, he required that we get an updated POF (even though the original one was only 2 months old). We trusted him and his professional opinion and contacted our buyer about providing us with an updated POF. He was willing to oblige but was out of state at the time so told us to contact him the next week. We did contact him to remind him and he told us he would have it to us in a couple days. But after multiple phone calls and emails (due to our inexperience and our Realtor pushing us to provide the POF), he ended up ignoring our constant requests and we lost our contact.
Moral of the story - KNOW THE CORRECT WAY TO CONDUCT BUSINESS - ONE SLIP UP AND YOU MAY NOT HAVE A SECOND CHANCE AT BUILDING THAT RELATIONSHIP!
Just some food for thought...
Kelly
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