Making Mistakes like Motown and the beginning of Auben
The birth of SFR as an asset class after 2008…
In Motown founder Berry Gordy’s autobiography, To Be Loved, Gordy recounts a conversation with his father around the famous quote about a smart man profiting from his own mistakes. Gordy adds his own twist, stating “A wise man also profits from the mistakes of others.”
In my early investment career, there were many people around to teach me and the other rookie investors the ropes. But the no-mistake market was like a siren song luring beginner investors into believing real estate investing really was as simple as, “paint the house; raise the price.”
My partner and I took the market’s offering to the extreme and found ourselves having to “mistake-sale” our way out of some early ill-advised investment purchases.
- The downtown building without a roof was sold to someone more qualified to renovate
- Vinyl-siding made the dilapidated duplexes look a million times better and find an out-of-town buyer
- We rented the Grovetown properties so someone else could develop them later
It’s hard to overstate how fortunate we were in the unraveling of our assets. Even though at the time, I felt anything but lucky. My work weeks were easily 80+ hours and often longer when you factored in the time it took me to figure out investing and project management basic practices. It was also during this time that I learned selling to other investors took a lot more work (and time!) than buying from distressed sellers. Time was still on our side.
And not selling was not an option we considered. We listed on Loopnet, Craigslist and MLS. We incentivized our buyers and agents. A couple of years later, desperately needing to sell a flip so I could meet payroll; I put 10% commission just on the buyer’s side commission. Not surprisingly, the property sold fast.
Even though we initially were not planning on holding properties long term, the market softening communicated we had to adapt to renting properties. We tried to be creative in our dispositions, holding open houses and offering rent-to-own lease purchases. We found a book detailing a process to auction any house in 3 days and followed the process uniformly, unsuccessfully.
We had a lot of goals and an in-progress plan but what was really our saving grace was a market with tremendous stability, even in global real estate instability. The real estate bottom in Augusta was not nearly as bad as it was elsewhere. As we worked our way through the dispositions, I really began to question my career as a real estate investor. Several years in, I had worked harder and longer than I ever had in my life. And I only had more debt to show for it.
The fundamental aspects of real estate investing seemed hard to argue with, but I realized most of the people I was learning from were selling information first and tangible real estate second. They were in the information product business with a real estate background. Many of these people–although selling dreams to me and others–were very helpful assisting my real estate career. I stayed committed to the cause physically even if I wasn’t always with it mentally.
On New Year’s Day 2008, having sold nearly everything we owned so as to be able to get back to square one, I sat on the couch aimlessly watching football working through the haziness of a new year with a 2-year rearview of a lot of bumps and bruises.
Truthfully, I was ready to quit my career in real estate. I just needed someone to tell me I should. Talking to my girlfriend (who would become my wife), she pointed out I had never pursued real estate with my vision and my direction. I agreed even though I was unsure how relevant this detail was. The more I thought about it, the more I realized she was right. I needed one more turn of the screw to know if I could or could not make real estate investing work. And so in January 2008 I founded Auben Homes which would eventually become Auben Realty.
It wasn’t all sandy beaches and umbrella drinks after that moment. However, Auben’s intentional focus on creating an organization for SFR investors built by an investor who had struggled to figure it out, became something the market communicated a strong desire for.
Come meet some of the Auben team taking our early lessons to the next level of SFR management and proficiency.