Our Biggest Real Estate Mistakes – Learning From Mistakes

Our Biggest Real Estate Mistakes – Learning From Mistakes

Okay, today we’re talking about the biggest
mistakes that I’ve made in real estate. I’ve even invited Steven Michael Miller to
come on the channel to share his biggest mistakes and today we’re going to share with you the
5 things that we hope you learn from out mistakes that cost us a lot of money. Okay, so I’m leaning on my friend, Steven
Miller, cause like, Steven, come on out, I’m shooting videos on the worst things I’ve ever
done in real estate. Hey, will you come and share, will you open
up closet door and share with us the worst mistakes that you’ve made? And there’s such valuable training to be gained
when you actually learn from people that have made mistakes. Steven, how was that useful? – You know mistakes are something that we
are all going to make at some point or another but the reality is we don’t all have to make
all the same mistakes. This is what mentorship is about, you could
learn from people that have gone before you and we’ve got this amazing group that has
been asking us now for a couple of weeks. Hey guys, you talk a lot about what to do
and the great things about real estate but what were some of the biggest failures that
you’ve had? Kris, have you had some failures in real estate? – I certainly had some failures, I’ve had
some things that I’ll never do again and it reminds me one of my college professor said,
“Hey, you don’t have to stick your head in a garbage can to find out that it stinks.”
and that’s what we’re going to do today. We’re actually open up the big dumpster on
our failures and take a whiff – This is going to be nostalgic. I used to get in dumpsters. We never talked about that here. – I’m sure we’ve done your dumpster diving. Steven is a self made man who truly came from
the bronx, down and under. – Yeah okay so let’s jump in. I mean, these failures that we experience. Number one, how do you take that information
and before we get into our story because we all have them, how do you take those failures
and really begin to learn from, Kris? – You know, first of all, you’re doing the
right thing by being here and watching these videos because we’re actually going to share
as many failure moments as possible that can be useful for you in not making them and I
think that’s actually part of the education and once you learn, you got to have pen and
paper, you got to write it down so that you get your real estate journal. As you watch these videos, I hope you’re journaling
what you’re learning, what to do, what not to do, right? And so here’s the first couple of what not
to do’s. First of all, write this down. Due diligence. Steven and I are going to share an example
here. I don’t know what you got but I’ll tell you
what I got. I had done this property and this was a property
that was built in the 50’s, it was an older home and come to find out just after I bought
it that we had sewer backing up in the basement and I’m like, alright, we’ll clean that up
and that was the big problem, I did not like cleaning that, that was nasty. Trying to figure out how to clorox and clean
and sanitize all that and then it did it again and I started to quickly realizing, oh my
gosh, you can’t put anything down the drain, we snaked the line. That’s where they take a camera bumping down
there, in front of that, there was a belly on the line and the belly in the line, it’s
because some roots from the trees had actually gotten under one of the sewer pipes that went
out of the main sewer of the street, bumped it up and what it did, it created a back flow
and that was the problem that we had. Now, legally, the people that have lived in
that house for 50 years should have disclosed that and didn’t and there was legal recourse. I didn’t pursue it, I paid $5,000, I had a
license in bonded city contractor come out and dig up. My problem, relay the pipe and it was a lesson
in due diligence so due diligence means you’re excited you’re getting a property. Remember, properties, they’re complicated
and what that means is that there’s a lot of moving pieces and you only need one bad
sewer line that will cost you $5,000, maybe some frustration and maybe some tenants that
live in your basement that are not so thrilled about living there anymore cause the poop’s
coming up everywhere, right? What about you, Steven? Due diligence, biggest mistakes. – This is big. So I bought my first home in Tampa, Florida
and when I bought a home, I was really excited, first home syndrome, right? Everything was great, wonderful, took the
advice of a few different people. – Was this the investment property or the
one that you will live in? – This was the one that I was going to live
in. I eventually turned it into an investment
property and that’s another story but when I bought it, I didn’t realize it had massive
termite damage and you can’t see termite damage necessarily from the outside, a home inspector
probably won’t catch termite damage unless they are certified to do a WDO inspection
which is a wood destroying organism, termite inspection. – So real quick, I want to be clear, everyone
that buys a home normally pays to get in an inspector and by the way, unless you’re a
contractor, a handyman, an inspector is going to do basically a visual, they’re going to
look at the house visually and look for errors, problems and so if you know your way around
the house and you’re confident in all house systems, you may not need to pay for an inspection
but if you are not familiar with that, that might be in best $200 $300 $400 that you spent
to create awareness of what are they looking at but even an inspector had Steven pay $300
and wouldn’t have necessarily caught the termite. Now by the way, in Florida, is termites a
deal? – Termites are almost always going to be around
especially in wood home and this is an older wood home, my home was a 1924 I think, when
it was built. Old old bungalow wood frame construction. Anyway, should have done the due diligence
didn’t, ended up having to my home, ended up remodeling the home, we ended up having
to actually take it down to the studs. – What did that cost you? – Oh, about $60,000 or so. – Okay, so just pause for a minute. – And that was a big deal. – Just pause for a moment. Right now here where I live, we wouldn’t really
order a termite but if you live in an area for example where there’s a specialty condition
regarding a real estate like that, then you learn, okay, here’s the next thing that we
want you to write down from us. Look at what is unique problems to your area
like for example, do you live in a flooding zone or do you live in a zone where you have
these deep winter freezes that can freeze your pipes and burst them, do you have termites? – Do you live in a hurricane zone? You know, hurricane straps the whole roof
down. I mean, those are the big things that a lot
of people miss so get an inspector, a competent inspector, get the inspections that are additional
that you might need. Maybe you’re home is in a raid on area, you
may not know what raid on in, it’s a cancer-causing gas. Check on for it. Those are the things that you might want to
do. – Alright so I think the first that we’re
hitting on so far on our stories today is due diligence. You’ve got to do your due diligence. Here’s the second thing that I want to hit
on. Insurance. Everyone gets property insurance and they
think, it’s covered. Will insurance cover termites? Maybe not. Will they cover up broken pipe? Maybe not. Will it cover mold? Maybe not. Will it cover a broken sewer? Maybe not. – Or an earthquake? Maybe not. – So the reality is, just because you have
insurance on the property doesn’t mean you’re protected. I want to share with you, I had bought my
very first house and these people have previously lived in it for like 50 years, it was from
the 50’s actually and they were by law supposed to give me a disclosure document telling all
known problems of the home. They didn’t do that. I bought a home, I moved in, fixed it up a
little bit, moved a family into my basement, start collecting the basement rent, everything
is going great until all of a sudden, the basement backs up with sewage and it’s just
coming right out the toilet, it comes on to the bathroom floor, into the kitchen and starts
heading into the living room. It’s like, that’s a really crappy situation. How do you even clean that up? But I just want to tell you right now. I was wearing gloves up to here, I felt like
I want to put on a full hazmat, it was gross but you know what, after I cleaned it up,
we didn’t know why it happened. 2 days later, it happened again but even worse. So I thought, there’s a problem, there’s a
pattern here. So we hired a roto-rooter to snake the line
where they put a big wire, snake down, they churn it, move it and they’re trying to push
any blockage debris because someone could’ve flushed something down the toilet, right? Well it turns out that they put a camera down
there and there was a belly on the line. Now the sewer pipe is supposed to go downhill
downhill under your house until it hits the sewer but there was a root from a tree that
had gone over and done this and created a belly in the line by bumping it up. This was a pre-existing condition from a long
time ago and basically, if you were putting a tampon down the thing, the thing was going
to back up, it was a problem. So by the way, paying someone first of all
was a big problem cause if you want to fix that, it’s going to cause $5,000 to $10,000. I paid I think $6,000 to have someone dig
up the line and actually do it appropriately and the city got involved because it started
moving into the street. I needed a license to bonded city contractor
and I thought, man, how did this happen to me? Well, two problems on this one. First one, I could’e bought insurance that
covered it but I didn’t know that. I’ll tell you the moment my list of what I
wanted insurance to cover but number two, the other bigger lesson that I learned is
that I could have had recoursed to the seller and said, you guys, you should have disclosed
this problem with the house and you didn’t and legally, you’re responsible. I could have engaged in a lawsuit over that,
over $5,000 $6,000. I am glad that I didn’t because it would have
caused a lot of negativity, a lot time, a lot of energy and I may have had to pay $10,000
legal fees to get my $5,000 rewarded. It’s not worth it when you’re getting that
small but here’s what I look forward to in insurance today that you may not know. Mold, broken pipers, sewer pipes. Those are some of my biggies that insurance
companies will not cover because you know what, you’re going to have a storm where you’re
going to have a micro burst and all of a sudden the window breaks and water comes in the basement. You could break a pipe if you’re in an area
that freezes. All of these different things, you get a little
moisture in the house and all of a sudden, you’re ripping out dry wall and you’re ripping
stuff out and you’re replacing pipe and it costs a lot of money. Insurance will cover that. I’ve experienced another one of my houses
where I had it in a $20,000 remodel, they paid my rent in the mean time, I wind up with
a way nicer house and like, yay for insurance, I learned my lesson. Learn yours. Get appropriate thorough insurance. I don’t care if it costs 3 extra dollars,
that’s worth it. – I want to talk about the third thing here
which is, we say this all the time, if you want something done right, don’t do it yourself. And I found myself in this situation, this
is again with the first home but this is after I had moved out, I had put a tenant in myself. Now this is before – Is this the stripper
story? – This is the stripper, stay tuned. Yeah, this is interesting for me because this
is before I really learned a lot about real estate. These are some of my first adventures in real
estate. Before we had created our system and all of
that and I decided, okay, I’m moving out of state but I can handle this, I can put someone
in my home, I can find someone to do that. So I put out some ads and I had some applications
on the home, this one gal came and she and her boyfriend looked great on paper and yeah,
I’ll put you on my home and so I did. A few months later I started getting phone
calls from all my neighbors and they called me and e-mailed me and said, “Steven, who
did you put in your home?” I said, “Well what do you mean?” They said, “Well, we’re pretty sure that she’s
a stripper and not that it’s the worst thing in the world. Everyone can do what they want to kind of
thing but she’s bringing clientele home, there’s drugs being trafficked and the police are
being called almost every other day to come out to your property.” I’m like, I had no idea about any of those
because I’m out of state now and you know, this situation could have been a much worse
situation but I ended up having to pay this gal a thousand dollars to get out just to
leave my home. To get out of contract cause there was nothing
that I didn’t have evidence of anything, all I had was these neighbors, their word so there’s
nothing legally that I could do yet so I paid her a $1,000, got her out of my home, got
a new individual in there that was much better. I learned from that mistake but again, from
here on out, I said that I will not manage my own properties. From there on out, I said, I’m never going
to do from out of state real estate, I’m going to have someone do that for me who is competent,
who knows the area, who knows how to screen the tenants appropriately so that was a big
mistake trying to do it myself. – Which by the way, led to Steven and I building
a system nationwide, entering the best markets and building a team with 200 experts and realtors
and property managers and lenders and people specific to those markets where now we’re
transacting, we have markets with hundreds, even a thousand homes in that market and we’re
big brother with a big property management property leaning and making sure that things
are done to the highest level. It’s experience just like Steven’s that actually
needs these upgrades. So you’re not very grateful for it maybe in
the moment but you learn and you get better and Steven did just that. I want to share another one here that I think
is super powerful that I want to end with and it’s when I bought, it’s when I over leveraged
myself and I had bought property, I allowed myself to be seduced by a home that I can
get for $3,000 that I whole heartedly believe was worth $400,000 and you know, when you’re
doing that I was like, $100,000? I got seduced by thinking this is going to
be my biggest and I had done that, you know, that time I had probably done 8 or 9 deals
so I was still brand new but I thought I knew what was going on and I broke my rules, I
went above the median substantially, meaning I was buying homes at the $200,000 price,
I bought it $300,000 and you’re like, oh that’s not big of a deal. Friends, look at the linear regression on
individuals that combine that $300,000 home versus a median priced home and there’s a
drastic difference between everyone that can get into that home and yearly nobody that
can. So I get this $300,000 home and I do some
fix-up and repair on that, I put in on the market to flip it and I’m just trying to sell
it for $365,000. Not being greedy right? It’s worth for, you’re going to give someone
$5,000 of equity, I’m going to sell this home for $365,000, I’ll pat myself for being so
generous. But it didn’t sell, I had no bites, I had
no nothing on that listing and then I lowered it $350,000 $340,000. By the time I ended up actually selling this
house, I broke purity even and I am so lucky that I broke pure even but this $100,000 that
I hope would be would $50,000 turned into nothing really fast because I over leveraged
myself and over leverage can mean two things. One is, I bought something I didn’t have the
financial responsibility to take care of. In this case, it means I bought something
that went beyond my rules or my system and I’ve done both of those and neither of them
feel good. So I would add that to today’s biggest mistakes
is don’t over leverage yourself. Make sure that you’re staying in an appropriate
price range or if you have investing rules. The moment you break them, you can’t expect
this system to pump out what it could because you’re stepping into unknown territory. Maybe they’ll give you more, maybe that’s
the risk worth taking but what I really love is making real estate as boring as possible. For those of you that partner with Steven
and I and do deals with us or join our community and teams, you know that we’re huge on systems
and we define that box and what it’s got to fit in and when it does, it’s going to be
like all the other properties and it’s going to perform very predictably but the moment
that falls outside of that then you lose that predictability and usually enter into a far
greater level risk than you actually want. So Steven, any final words and advice today
for our friends that are like, what are the biggest mistakes? How can we help them avoid them? – Yeah, I mean, you know, there are plenty
of mistakes that you can make. The reality is, you don’t have to if you’ll
listen and learn and hopefully, you’ve got your notebook out, you’ve been taking your
notes. You’re going to keep those things close, you’re
going to learn from our mistakes. We’ve made plenty of them, there’s probably
another video or two that we can do like this as well so keep tuned. The reality is, you will learn from those
mistakes and you’ll move forward confidently based on that learning. You’re going to avoid a lot of things that
you otherwise may fall into. You’re going to see a whole lot more success,
you’re going to be a whole lot happier and you’ll be able to grow even more exponentially. So Steven, let’s balance it with one final
piece of advice. Never allow fear of risk or fear of failure
to ever keep you from taking action. Super important that you understand. We are encouraging you, go out there, be a
gladiator, make it happen and just be smart about it. Get that education, get that knowledge. If you have a chance to secure mentors, individuals
that can guide you through the process, that you can speak to and work with, they’ll be
able to generally help you avoid all the pitfalls that they had made on thousands of prior deals. We’re in a point today where mistakes really
don’t get made, we know our system, we know what we’re doing, we’re not infallible but
that’s the benefit you get when you learn either from someone else’s mistakes carelessly
or from your own. So friends, hopefully you enjoyed today’s
learning lessons. And my friends, those are the crappy mistakes
of Kris Krohn’s adventures in real estate investing land. Hopefully you’ve enjoyed this video. If you have not, please subscribe, ring the
bell and check out some more of our awesome videos that we got.

16 thoughts on “Our Biggest Real Estate Mistakes – Learning From Mistakes

  1. 16 YEARs old …is india a good market for realty…and do you mentor people in india!??! really curious!!!!

  2. Hey Kris, would I be able to work with you getting into the real estate market in Melbourne, Australia?

  3. Hi do I have any videos on land properties and commercial properties?

  4. Great video btw

  5. How do you find out what the median price of homes in the city you live in?

  6. Legit harmony! Video too 😉

  7. Excellent insight. Im looking forward to doing business together someday

  8. Good one!

  9. Thank you for sharing your lessons learned. I have a question about your first lesson learned-due diligence. What would you do differently today that you didn't do when you bought the house that had the sewer back-up problem? In other words, what due diligence are you engaging in now that would lead to the revelation of this problem that you didn't do when you bought the house that had this problem?

  10. Plumbing video? 🤗 jk love your videos. opening my eyes to a lot of concepts society keeps under veil. currently getting a credit card to build credit and hopefully in a year or so get a loan for first house. cant wait to be at a similar level than you. 5 years is my goal is for 5-10 houses. Grind Time!

  11. He told the same story twice in 1 video

  12. Exact same story twice. Once at 2:50 and again at 7:31.

  13. Kris can you show me a link to your strait path real estate website

  14. Love how Nate it looking at Kris when Kris tell the same story again.

  15. hey guys KRIS KROHN back with a new video REAL ESTATE FAILURES and such

  16. Wow seriously love the honesty fellas thank u for free info! Def. liked and subscribed already!

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