Learning From Investment Mistakes As A Beginner

You won’t hear this often admitted from someone who’s raising capital for real estate…I made a poor investment. A MISTAKE..... It was a LP deal in my personal portfolio, invested with a multifamily sponsor I didn’t properly vet. I had some cash and wanted to put it to work quickly. They have 6,000 units, so I figured they had a “track record.” It was an assumable, fixed rate deal, so thought I was fine given the macro. But….they didn’t conduct adequate property level due diligence of their own, so their cap-ex & op-ex budget has exploded. They've had property management issues on top of that, with finger pointing. They didn't provide a K-1 until September, lol. They haven’t paid distributions in about 18 months, 2 years in. I’m hearing some their other assets are in foreclosure. Come to find out, they were volume-driven and with a fee-based focus. Pretty big variance from my typical approach and what I talk about on this platform. Well, I MADE A MISTAKE. I took a flyer and it may cost me. Maybe it won’t, but I'm pretty sure it will. I definitely regret it. To be clear, I would never be as flippant with investor capital. The due diligence level is very involved in that case. The commitment to stewardship of other people’s capital is more important that making money for myself. The latter isn’t why I do this, frankly. I realize I’ll probably lose some people here, but I think this topic is important enough that I don’t care. If someone you are considering investing with says they haven’t lost money before, they are either inexperienced, overconfident, or lying. There’s still time for this deal to work out, but here’s the lesson….always evaluate the deal as a passive investor, don’t just trust the sponsor. No matter who they are. I hear a lot of passive investors put a sponsor’s track record above all else. The deal metrics are barely a consideration. Careful of the track record….It might just be a track record of shooting fish in a barrel. I KNEW this, but sometimes a reminder through pain is the best teacher. Sponsor, deal, market, macro/micro…all very important factors in outcome. 

Things I messed up at my last investment I’ve made good bets. But this one taught me more than most. Here’s what I got wrong no sugar coating: 1. I trusted charisma over competence. The founder could pitch the stars out of the sky. But when it came time to deliver? Silence. I saw the charm. I ignored the gaps. 2. I assumed market size = market access. Huge TAM on paper. But I forgot how hard distribution is without the right connections, especially in regulated industries. 3. I was too hands-off, too early. I thought we’d be “supportive, not intrusive. Translation: I didn’t ask the hard questions until it was too late. 4. I underestimated burn. Great tech, long runway, right? Wrong. Spending went up faster than traction. And my scenario planning didn’t include reality. 5. I confused ‘early traction’ with product-market fit. A few pilot clients ≠ are a scalable business. The signal was noise. I didn’t press hard enough on retention or usage. I own it. Every investor has their graveyard of deals. This one hurt financially and personally. But every mistake made me sharper. And if you’re not willing to be wrong, you shouldn’t be in the game. I don’t invest because it’s safe. I invest because I believe.

Never forget the lesson behind your worst investment. Even if it stings to remember. You know how it goes, right? ❌ The numbers looked solid ❌ The pitch felt right ❌ You thought you’d done the math But the cash dried up. The returns didn’t show. And suddenly, you were learning the hard way. That kind of mistake? 💸 Costly 💸 Humbling 💸 Necessary Because the only way to become a great investor is to accept that you will make some bad investments. Especially when it comes to cash flow. Here’s what separates seasoned investors from shaken ones: 1/ Know the difference between profit and cash – You can be “profitable” on paper – And still run out of money 2/ Ask hard questions about liquidity – How fast can you get cash out? – Revenue means nothing if it’s locked up 3/ Don’t chase trends over fundamentals – Excitement fades – Cash flow stays or it doesn’t 4/ Build buffers – Emergencies aren’t rare – Having dry powder keeps you calm 5/ Treat every mistake as tuition – Don’t hide from it – Document the lesson, apply it forward 6/ Diversify your bets – One bad investment shouldn’t break you – Balance risk with resilience 7/ Stay in the game – The best lessons come from experience – But only if you’re still playing Never forget: Great investors aren’t the ones who never lose. They’re the ones who learn faster and keep going. What’s your most expensive lesson been so far? Follow me Marc Henn for more. We want to help you Retire Early, Supercharge Your Cash Flow, and Minimize Taxes. Marc Henn is a licensed Investment Adviser with Harvest Financial Advisors, a registered entity with the U. S. Securities and Exchange Commission.

My attitude 4 years ago as a beginner (Rookie mistakes, not to be repeated) - Trust everyone - Believe what they say - Awed by social media hype - Mistake self-promotion as truth - Too naive to see-through their bias - Ready to passively invest my dollars - Without asking the necessary questions 1st mistake: Bad location 2nd mistake: High upfront fees 3rd mistake : Inexperienced team 4th mistake: No boots on the ground Result : Passive deals losing money or making “capital calls” (wanting more money from me to save the deal, instead of cash flowing to me). As an experienced investor, this is my new attitude: - Network - Get references - Verify the numbers - Thorough due diligence - Experience in that market - Who are the team members? - Do I know the decision makers? - Projections vs results of full cycles Result : Deals making $$$ I created a checklist from all my mistakes. So you don’t make my mistakes too. ➡️ Trust but verify ❌ Don’t blindly trust 😉 What you see in social media ——————————————— P.S. Which of these resonate with you? #Passiveincome #LiterallyLinkedIn #Raisemasters30

Invest in 10 deals and 1 will underperform, 1 will crush it, and 8 will do just fine. The 💩 part is when the 1 that underperforms is your first deal. Here’s why my first deal went wrong and what adjustments I made to correct it: 1 - Bought with no in place cash flow My first deal was a very heavy renovation project on a vacant building. I underestimated the amount of red tape it takes to bring a building up to code and how long that process would take. Having no cash flow meant every delay was a nail in the coffin, even if most of the delays were caused by inspectors having inconsistent requirements for the building. 2 - Gave too much control to my property manager My first property manager was horrible, I just didn’t know any better. I thought I could hand the property off to them, they’d manage tenants and the contractor, and I’d own remotely and collect checks once tenants started leasing. The reality was without being local and expecting real estate to be hands off like social media told me, I left a ton of profits on the table in inefficiencies and opportunity cost. 3 - Bought with short term debt This deal had an 18 month window to be completed. Not enough time when you factor in delays. I chased the high IRR of a short deal timeline instead of being patient, sacrificing some potential return, and taking a safer position with a long timeline to renovate. Want to avoid high risk deals? Just do the opposite of what I did on this deal and you’ll take a lot of risk off the table. And no I didn’t have any investor cash in this deal so I’m grateful I got to learn these lessons before I started taking on investors. What big mistakes have you made in your investing journey?