When confidence gets ahead of experience
I think five years into the business can be the most dangerous time for a real estate operator.
You’ve bought properties. Finished projects. Made money. Learned some expensive lessons and lived to tell people about them. Things that used to intimidate you have become routine.
It feels like you discovered fire.
Naturally, the next step is to start mentoring people, sell a class and announce that you’ve figured out real estate.
I never got around to selling the class. I did, however, develop the head size required to teach one.
The problem is you don’t know what you don’t know. And after five good years, you can become surprisingly uninterested in finding out.
Five years in. Three painful projects.
I started developing properties in 2013. In 2018, five years into that business, I had three painful projects. All three landed in the same chapter of my career.
By then, I had enough experience to feel confident in my decisions. I also had people offering outside opinions that I should have been listening to.
I shut them down. My head was too big to hear them.
Looking back, the warning signs weren’t limited to those projects. I had started treating success as proof that my judgment was always right. Those are two very different things.
Five years can give you a lot of repetitions under similar market conditions. It can teach you how to operate successfully in the environment you’ve been working in. It doesn’t necessarily tell you how you’ll perform when that environment changes.
I should have understood that already. My career had required plenty of changing directions.
The market has changed my plans before
- 2008
Foreclosures and short sales
When the housing market crashed in 2008, we had to change how we acquired properties. We dug into foreclosures, learned the process and figured out where we could be useful. A lot of our money came from facilitating short sales.
That took work. We had to understand situations that were complicated, frustrating and usually moving slower than anyone wanted. What had worked before wasn’t going to carry us through, so we learned something else.
- 2013
Development and hedge fund work
Then, in 2013, I started developing properties and working for a hedge fund.
The experience came quickly. So did the money.
I thought it would never end, and I spent like an asshole.
It ended.
- 2018
The fund leaves. The education continues.
In 2018, the hedge fund did what hedge funds do. They packed up and left. Their plans changed, and I had to figure out mine.
Around the same time, those three painful projects gave me an education I hadn’t been particularly interested in signing up for.
- 2019
More ways to find the next opportunity
By 2019, I was spreading things out. More marketing. More wholesaling. More ways to find opportunities and generate income. I was rebuilding the business around a broader set of activities.
- 2020
Lenders pull out. Construction keeps moving.
Then 2020 showed up.
When lockdown was called, lenders pulled out of my deals. Financing I had been counting on disappeared, and I was back to square one.
There’s nothing quite like rebuilding your business and then having the entire world call a timeout.
So I leaned further into construction. That work kept me moving during lockdown. I had experience I could put to use, and it became a bigger part of how I made money.
- As rates change
A different way to put the deal together
Over the years, interest rates have required more adjustments. When rates shoot up and conventional financing makes a deal difficult to put together, we look harder at seller financing.
The property might still present an opportunity. How we buy it has to change.
That’s been a recurring theme throughout my career. Foreclosures. Short sales. Development. Hedge fund work. Wholesaling. Construction. Seller financing.
Each became more important at a different time because the circumstances demanded it.
Getting comfortable with being challenged
And yet, five years into development, I somehow convinced myself I had reached the point where I could stop listening.
That’s the part I want newer operators to pay attention to.
Early on, you know you’re inexperienced. You ask questions. You double-check things. You’re aware that a mistake can hurt you.
After some success, you can lose that caution without realizing it. You’ve seen a similar deal before. You know the neighborhood. You’ve handled a difficult renovation. Someone raises a concern, and you’ve already prepared your response before they finish talking.
I’ve been that guy.
The lesson from those projects was bigger than a budget adjustment or a better acquisition checklist. I needed to get comfortable having my judgment challenged again.
Someone questioning a deal deserves a hearing, especially when you’re excited about it. A successful project deserves an honest look at how much came from your decisions and how much help you got from the market.
And money being good today deserves some respect for how quickly that can change.
I still trust my experience. I’ve worked hard for it. Part of that experience is remembering what happened when I became too impressed with myself.
If you’re five years in and things are going well, enjoy it. You’ve probably earned some confidence.
Just leave enough room in your head for somebody else’s opinion.
Mine was full in 2018. Making room got expensive.