My Biggest Real Estate Investing Mistake Ever!

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If you’re new to my channel my name is RJ Bates III. Myself and my partner Cassi DeHaas are the founders of Titanium Investments.

We are nationwide virtual wholesalers and on this channel we share EVERYTHING that we do inside our business. So if you’re looking to close more deals - at higher assignments - anywhere in the country… You’re in the right place.

Who is Titanium Investments and What Have We Accomplished?

Over 10 years in the real estate investing business
Closed deals in all 50 states
​Owned rentals in 12 states
​Flipped houses in 11 states
​Closed on over 2,000 properties
​125 contracts in 50 days (all live on YouTube)
​Back to back Closers Olympics Champion
Trained thousands of wholesalers to close more deals

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With over 2,000 Videos, this is the #1 channel on YouTube for all things Virtual Wholesaling. SUBSCRIBE NOW!    https://www.youtube.com/@RJBatesIII

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Chapters

• 0:00 Framing The Biggest Mistake
• 1:00 MLS Roots And Weak Dispositions
• 2:12 Expansion Beyond The Local Market
• 2:45 Shiny Object Pressure From Social Media
• 3:35 Partnering Into New Markets
• 4:18 Early Wins Flipping In Hawaii
• 5:00 Deciding To Scale Fix And Flips
• 6:09 Volume Without SOPs Or Bandwidth
• 7:20 Hidden Defects And Cost Overruns
• 8:20 Rob Peter To Pay Paul Spiral
• 9:10 Wholesaling Suffers And Focus Fractures
• 10:44 Returning To The Hedgehog Concept
• 12:03 The Core Lesson And Call For Feedback

Transcript

SPEAKER_00: 0:12

Today, we're gonna talk about the biggest mistake that I have made in real estate investing. Now, some of you may have heard me talk about the hedgehog concept and how I went into cookie monster mode back in 2018, 2019, and 2020, and how that almost bankrupted our company. But I'm gonna dive a little bit more into detail into the specific time frame in which I made the biggest mistake in my career in all of real estate investing. Now, this stems from the fact that we were wholesaling real estate and we were doing it fairly decently. We were making good money, but it wasn't great. We weren't great at wholesaling yet. We were still trying to figure out our ways. Now, some of that came from the fact that when we bought into the education program for$65,000, we learned how to get deals directly off of the MLS. And we didn't really get taught how to do dispositions correctly, right? It was use Craigslist, use Facebook groups. And granted, we didn't have the disposition softwares that we have available to us nowadays, which it's kind of understood as the why we were having to bootstrap our way to finding in buyers. And this is also why my perspective is that we're in the golden age of wholesaling nowadays because it's easier to get leads and it's easier to find your end cash buyers. So that being said, we were at times struggling to understand how we could expand out of our local market to make more money. The reason why we had to expand out of our local market is because we had already seen all of the deals that were listed on the MLS. We had already made offers, and so we needed more opportunities so we could make more money. So we started expanding, and eventually that led to us understanding that we had to move away from the strategy of only doing deals off the MLS, and we had to learn how to do direct-to-seller marketing. Now there is a learning curve that comes with direct-to-seller marketing, and so we were doing all the things that we were taught to do: cold call, direct mail, SMS, ringless voicemails, and we were trying all of those different processes. But there was that learning curve. And so, because of that, there was kind of a dip in our production. But also, there was the pressure that we felt through social media. And now that we started following all these people that have been in real estate investing and wholesaling for years, where the pressure was wholesaling is not the final destination. There's always something better. You need to have passive income by owning rental properties, you need to be doing fix and flips. And then why not own an Airbnb and have you done creative finance? You could be buying properties subject to the existing mortgage, you could be getting sellers to sell or finance you property. So we started dabbling in all of these different strategies. Now, where we really got ourselves into trouble is simultaneous to us starting to look at different strategies, we were expanding our wholesale operation to new markets. Now, strategically, we had a partner in each one of the local markets that we were wanting to go to: Arizona, Ohio, Alabama, Hawaii, Alaska. We had people in our life that were willing to come on and be partners in those local markets. One of those being Hawaii, the most remote location in the entire United States, but also one of the higher price point areas in the United States and relatively small houses. So this led us to deciding that we should do fix and flips inside the state of Hawaii. Now, this makes sense on paper, and it made sense, especially when we first got started. We bought a property on the west side of Oahu from a wholesaler, and we fixed it up and we sold it, and we made$100,000 profit. That's amazing. Then we bought a second property one street over on the west side of Oahu, and we fixed and flipped it, and we made$75,000 profit. Now, the issue that we got ourselves into was instead of slowly and organically growing as an organization, we looked at this and we said, we need to scale this up. There is a massive opportunity for us to be doing these fix and flips in the state of Hawaii. And there was. We did not build out SOPs and the manpower needed to bring on volume to be a fix and flip operation. What we did bring in in volume was future deals. We had access to private capital, we had the hard money lenders, and we also had found a location where finding deals that were highly profitable was easy, it was simple. And so we leaned into the opportunity without even contemplating the risk and liability of what happens if we don't perform. And because of that, we started bringing on volume and buying a lot of deals. And before long, we got ourselves in a position where, in order to do this project, we needed to buy another one to rob Peter to pay Paul. And what I mean by that is we bought several properties at once. Why? Because the opportunity, it's hard to look at a deal that you could potentially make a hundred to two hundred thousand dollars profit and say no. Now it sounds silly because you know the end result, you know that it doesn't go well, but if you're staring on paper and you know that you have successfully done it twice, why can you not do two at once? Why can you not do three at once? And so we looked at this and we locked up a property that on paper seemed like it was going to be an extremely simple fix and flip. So what we did was we took down a hard money loan and we borrowed private capital for the gap funds. We went out, we started rehabbing the property, and we found out the downside to doing fix and flips in Hawaii. There are issues that could be unseen or unknown to us at the time due to the lack of due diligence that we did, going back to the lack of standard operating procedures that we had as an organization because we were wholesalers. We really weren't fixing flippers, even though we had successfully done a couple of flips. And so, because of that, we found out this property had extreme termite damage. We found out that underneath the foundation, we had rotted plumbing. So then it turned into we didn't have enough money for the actual rehab needed on this property. We started getting eaten up by the interest on our hard money loan. And so we found ourselves saying, we need an additional$30,000 to finish this property. Let's buy another one that we could potentially make$150,000 on and take$30,000 of that to finish this deal. And that spiraled out of control because what happens is your cash conversion cycle and fix and flips is so slow that even though you're making quite a bit of money, it evaporates very quickly when you have multiple properties that are not going well. And that's what spiral out of control for us. Simultaneous to these deals not going well, what suffered the most? Our wholesale operation. See, we were now our focus is on how we can stop the bleeding on these fix and flips that are not going correctly. So instead of focusing on lead generation, closing deals, follow-up, transaction coordination, and dispositions, we're focused on hiring the next contractor, getting a loan on this other property, talking to our private money lenders, talking to realtors about what can this property sell for now that four months has passed since we've owned it. A lot of conversation, a lot of mental bandwidth that has now moved past what our core focus was as a business. And so inevitably, what this led to was a spiraling out of control as an organization to where we had a bunch of properties that we were selling for either minimum profit or minimal profit, no profit, and some even for a loss. And this continued throughout the organization as our wholesale revenue continued to drop because our focus was spread too thin. So, as an entrepreneur, what I have learned is you have to have a singular focus inside of your business on what you are focusing on. For us on the real estate side, this is why we have now developed the hedgehog concept of nationwide virtual wholesaling. We no longer do fix-the-flips, we no longer do rentals, Airbnbs, and we really try to minimize the acquisition strategy to primarily cash. Will we do sub two and seller finance? Yes, but it's going to be very few and far between and for the perfect scenario. Now, because of that, we now no longer are spread thin mentally in trying to solve a problem that's outside of wholesaling. Yes, do we have things that go wrong inside of our wholesale transactions? For sure. But as an organization, our focus is still on wholesaling. And so when we do have a problem that comes up on a wholesale transaction, we can fix that by focusing our attention on the standard operating procedures inside of the wholesale organization. Maybe we need to hire someone, maybe we need to have a new position, but it's all centered around wholesaling. So the biggest mistake that I've made in real estate investing was moving away from wholesaling because we weren't good enough. We should have stayed there and worked on our procedures, our skill sets, and our training that was needed instead of looking elsewhere and saying that's the solution. The$100,000 and the$75,000 profit on those first two deals was fantastic. And we needed it at the time. But realistically, what I needed more than anything was to say no to those deals and focus more on becoming a great wholesaler. That was the mistake that I made that almost killed titanium investments. If you've made a similar type of mistake in your whole real estate investing journey, let me know in the comments. Regardless, show me some love. Like today's video. We'll see you guys tomorrow.