My first rehab project was definitely a learning experience, and that’s how I justify the $6000 I lost on the deal — it was the price of education. It also got me moving. The mere act of taking action is worth something. I’d learned enough in real estate investment seminars to look for a bank-owned property (REO = real estate owned). My agent recommended a townhouse in a well-kept complex. She said it was bigger than others in the neighborhood because it had a finished basement, and that the smoke damage upstairs kept it from getting sold. Once it got painted and recarpeted, it should sell at the top of the market

I didn’t know how much to offer (number one in how not to buy an empty house), and I accepted her recommendation. As I know now, my offer was too high.

The rehab went well. I had a home inspection done before I bought the townhouse, I found good contractors, and the three-level townhouse was beautiful when finished. Then came item number two in how not to buy an empty house. I hadn’t investigated the neighborhood and didn’t know that 80% of a value of a house is its neighborhood. Number three was that I didn’t plan any marketing until it was ready to sell.

But the market had dropped while I was rehabbing this townhouse, and many of its neighbors went into foreclosure. “For Rent” signs sprouted. Although I received contract offers, they weren’t high enough for me to make a profit. When I finally accepted an offer, the FHA appraisal came in too low and the deal fell through.

That’s when I became a motivated seller. I didn’t want to turn this beautiful townhouse into rental property, and it sat empty for seven months before I accepted a contract. By then, I was really motivated and just wanted to get rid of it so I could move on with my real estate investment career. I was frozen and didn’t want to invest in anything else until this one was settled. To get this deal to go through, I had to pay the buyer’s closing costs and part of the downpayment.

So how to avoid my errors? Learn the MAO (maximum allowable offer) formula and use it to price your offers. Know ahead of time what you can expect to get when you sell. Pay attention to what is happening in the neighborhood.

I don’t regret the experience, and I am now educated enough to not repeat it. I have continued my education and learned how to avoid such errors. Because I didn’t know at the time what later seminars would teach me, I had to go forward with what I knew. If I had waited for more education before making my first deal, I might have never gotten started. So I did that part correctly. My investments since then have been profitable.

buymyemptyhouse.com is a group of real estate investors in Prince George’s County, Maryland, established to stop the bleeding caused by an empty house and to turn these houses into homes once again. We are seeking to buy empty houses in Upper Marlboro, Bowie, Clinton, Hyattsville, Temple Hills, Suitland, and surrounding towns. If you own a house and can’t make the mortgage or tax payments, contact us here.

buymyemptyhouse.com is a group of real estate investors in Prince George’s County, Maryland, established to stop the bleeding caused by owning an empty house and to turn these empty houses into homes once again.

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