Are you trying to turn a bad investment into a good one?
Backstep Forward Newsletter
by Kyle Mast
A short, to-the-point, weekly newsletter.
One challenge to take a step back.
One idea to propel you forward.
In 2019 I purchased three fourplexes in Ohio for about $100,000 each. They needed some work, but the potential cash flow looked very appealing. A steal, right? Well, anyone who has been in real estate for any time knows there is more to the story.
I was fairly new to real estate investing. Before this, I had purchased a townhome in Oregon as a rental and another duplex in Ohio. Both were great buys and performed very well.
So, naturally, I was ready to scale and increase our investment cash flow with these fourplexes. However, these buildings took me for a ride over the next few years. They were in a very rough neighborhood. Tenants wouldn’t pay. The property manager wouldn’t get back to me. Everything broke. The worst was a sewer line under one of the buildings that filled the bottom floor tenant’s unit with stuff you would never want in your home.
I kept fixing the buildings, hoping to redeem them and the little neighborhood they were in. And they kept costing more and more.
Finally, in 2022, I decided enough was enough and sold all three of them for about $175,000 each, which seems like an amazing 3-year profit. However, we barely broke even on these properties due to selling costs and all the cash we had pumped into them. Thankfully, we were fortunate to have bought these in a market upswing, which made this mistake hurt a bit less.
One, I should have never bought these properties. It pains me to think about what I could have done with those funds instead over those three years.
Two, I should have sold these properties much sooner and moved on instead of pouring more time and resources into something that was not a good long-term investment.
Backstep
Have you sunk a considerable amount of time and resources into something that you know is not working? Would you jump into it now if you didn’t already own that investment or weren’t already vested in that activity today?
Is what you’re doing the best long-term use of your time and resources? It may cost to switch directions in the short term. However, the long-term cost of not switching now could continue to compound negatively.
Forward
Identify a great, long-term replacement for these resources and time. Compare that to the long-term costs of staying where you are (stress, finances, time). Do you need to make a move?
Exiting a bad decision for a better one may cost initially. But in the long run, it’s simply an investment in a better future. (share this on Twitter)
Kyle Mast
Blessed husband, growing father, business founder/owner/seller, real estate investor.
P.S. Here is a recent podcast where I was a panelist discussing what people should do with their first $50-$5,000 to invest. It’s a great discussion with a lot of different ideas!