The Journey: Real Estate Investing Lessons

Buying my first house for real estate investing. Mistakes and what they don't tell you

After my dipping my toe into the entrepreneurship world and the dream of becoming rich didn't come true, In late 2005 to early 2006, fresh out of college, I found myself living at home and working full-time as an engineering technician for a fabricating company. My job mainly involved drawing shapes into CAD software and printing and folding large blueprints—a typical entry-level position.

During this period, I was contemplating purchasing a vehicle with my earnings. Then, out of the blue, a long time high school friend reached out with an intriguing proposition: partnering up to buy a house. I crunched the numbers, comparing the monthly mortgage costs with what I was planning to spend on a new pickup truck.

The calculations appeared even. It seemed like the monthly expense for a truck would align closely with what I'd pay for a share in the house. However, my knowledge of the real estate market and investing was minimal. Little did I know that this lack of understanding would foreshadow some challenging lessons ahead.

We scheduled an appointment with a realtor to inspect the property. The house itself was modest and in need of extensive renovations, but the land held potential. It could possibly be subdivided, or if not, the existing house could be replaced with a larger, more modern one. Thus began what I thought would be an exciting journey into real estate investing.

The Actual House

However, glaring mistakes were evident from the start. I had no prior experience in real estate or home ownership. This partnership involved a significant financial commitment with someone whose background and reliability I hadn't thoroughly vetted. Inexperience coupled with the absence of mentorship set the stage for a challenging learning curve.

More Costly Learning

In hindsight, there were critical steps I should have taken. Verifying with the town whether the land could be subdivided would have allowed for quicker returns on our investment. Additionally, consulting with a bank to determine a reasonable mortgage based on my income level was essential. With an annual income of approximately $40,000 CDN, online research and conventional wisdom suggested that my mortgage payments should not exceed 25% of my earnings.

However, we proceeded with the purchase, totaling approximately $126,000 CDN for the house at an interest rate of around 5.5%. We earmarked an additional $20,000 for renovations, bringing the grand total to just under $150,000. Despite the seeming feasibility, there were crucial oversights in our planning.

Our enthusiasm blinded us to the practicalities. While the bank agreed to finance the mortgage, they declined to extend credit for the renovations. Instead of considering a phased approach to renovation over several years, we rushed to complete everything at once. This shortsightedness led us to pursue a secondary mortgage with exorbitant interest rates, a decision I now recognize as a grave error.

The entrepreneurship journey must go on, over the next six months, alongside my full-time job, we embarked on extensive renovations. From rewiring electrical systems to installing plumbing and new drywall, the experience was a crash course in home improvement. Yet, despite our efforts, the outcome would not fulfill our entrepreneurial ambitions.

The Entrepreneurship Journey Continues

During the time after renovations and living in the house my partner (friend) and I, both being entrepreneurial-minded, decided to start up a screen printing business.  

A little bit on screen printing:

Screen printing is a method of printing images onto various surfaces using a mesh

screen, ink, and a squeegee. The process involves creating a stencil, known as a screen, which allows ink to pass through onto the desired surface while blocking areas where ink shouldn't go. To print, the screen is placed over the surface, and ink is applied to the top of the screen. Then, a squeegee is used to push the ink through the mesh, transferring the design onto the surface below. Screen printing is commonly used to print designs on clothing, posters, signage, and other materials, offering a versatile and durable way to create vibrant and detailed prints.

Yet again I didn’t know much about this type of business, but my partner had done it in the past.  We retrofitted our shed to a small screen printing production shop and did a few jobs here and there.  Hockey season came around and OFSAA was coming to town.  We had some local connections and had a few meetings with the board.  We ended up winning the contract for OFSAA apparel, great right?  The problem was we had to front all the inventory and hope it sold.  We reviewed past OFSAA results from previous vendors and utilized this information to purchase what we thought we would need.  More on this in another blog post.

Financial Concerns

As time went on about 1 year later I found myself in financial concerns.  We had used up the renovation money and on top of that, we had to furnish the house.  Unfortunately, I took on credit card debt to purchase most of the furnishings.  Also it was not just me my partner had financial trouble too (more than I knew at the time) exacerbating the strain on our partnership. 

The initial plan to flip the house and make 20,000 to $50,000 in 3 to 5 years did not come to light, unfortunately.  We could not sever the land either so that avenue did not work out.  Long story short my 1st real estate investing adventure did not go too well.  I ended up moving back home to save money and worked with my partner to sell the house.  I ended up losing about $30,000cdn on this real estate investing “deal” not to mention a lost friendship.

This was one of the greatest and worst learning experiences of my life.  But I have not given up on REAL ESTATE INVESTING, I promise you this.

See you in the next post!

MY YOUTUBE ► HERE

MY IG ► HERE

MY SHOP ► HEALTHHQ