Here’s how to avoid them!
I went from being a terrible real estate investor to a good one. I’ll tell you what I did wrong so you don’t waste time and money.
It was Virginia 2005. The real estate market boomed. Remember? Everyone was investing in real estate. Why not me, I thought? My wife and I snatched up a 20-unit commercial property for weekly renters in West Virginia. The cost—$500,000.
Four years later, we lost our asses, including our house, in the market crash. Like many first-time real estate investors, we made several critical blunders.
Inadequate Due Diligence
I should have investigated each property’s market, neighborhood, and condition.
For example, due diligence on the 3-acre West Virginia commercial property would have revealed a red flag: The septic system clogged when foolish tenants flushed tampons, garbage, and toys down the toilet. Each clogging episode stopped up the entire building’s plumbing system. Unclogging the septic system cost several hundred dollars per event. Plus clogged toilets and an ugly mess in multiple rooms. Disaster.
Bonus disaster: The septic system drainage field ran down the property’s back hill to the neighbor’s property below. I shall assume the neighbor below called the West Virginia Environmental Quality Dept. The WV government warned me that the system wasn’t up to code, and I needed to upgrade it for several thousand dollars.
Lesson: Analyze any San Antonio investment property you want to buy. Hire an inspector you trust to check for critical, costly problems.
Underestimating Expenses
I failed to consider repair and vacancy costs. When I bought the West Virginia property in 2005, it had 18 tenants. Cash poured into our bank account monthly. I was excited.
The market crashes of 2008 and 2009 pummeled the US, and unemployment skyrocketed. Weekly renters are the first to lose their jobs in a tanking economy.
I had 12 vacant units, and my cash flow disappeared. Instead, I had to dig money out of my sweaty pocket to pay the mortgage and keep the lights on.
Lesson: Study the area’s vacancy rate when buying a San Antonio investment property. Expect a 10-15% vacancy rate in Texas. Adjust your offer accordingly.
Poor Property Management
Our West Virginia nightmare was 45 minutes from our house. I drove the winding roads through the NW Virginia hills weekly to reach our property. I relied on a live-in property manager to handle the place. Hoss, he was called. He had face tattoos.
I relied on an unreliable person to keep the property rented. Money disappeared, and repairs weren’t completed. Six months in, Hoss bailed and disappeared. I was left with a 20-room commercial property without a competent property manager, almost an hour from my house. The next property manager turned out to have a criminal record. He was arrested. I lost more money.
Lesson: Consider a San Antonio investment property near your home. The closer, the better. Always hire reliable property management without face tattoos.
Summary
Looking back, we were passionate about buying real estate and making money. Warning! Warning! Passion made us move too quickly and think too little about our properties.
Passionate people are often poor bets for buying a business or investing in real estate. Passion is okay, but it can blind. Besides, passion is transactional; after a year, my passion for West Virginia real estate drained like my bank account. Passion follows success and prosperity.
A better situation: Have zero passion for what you are purchasing. Investment properties are business transactions. Nothing more. Your business decision should be: Do the numbers work on paper before you? If so, buy. If not, move on.
Did you find this essay informative? I hope so! My mistakes might help someone find faster success with San Antonio under market value investing.