Young Oklahoma City Investor Went From Zero To 60 Doors And Toward 100 In Under 2 Years, Then Crashed Back Near Zero On Short Term High Interest Hard Money

About seven years ago, Oklahoma City had a real estate hot shot. He was in his mid-20s, and in less than two years he had gone from zero to 60 doors and was heading toward 100. Everybody in town talked about him.

A residential street lined with rental-style houses with mountains in the background.

Then it all came crashing down. He fell from about 100 almost back to zero, and according to Cameron of @CamburkeRealEstate, the reason was simple. He did not stick to the fundamentals.

Cameron says the young investor was buying with short-term, high-interest hard money debt, got in over his head, and scaled too quickly. Cameron, who has bought and sold real estate in Oklahoma City for seven years, says he watched it happen while just getting started in the business.

That story is why Cameron now invests the sustainable way, and why he walks viewers through five mistakes he sees again and again.

Mistake One: The $30,000 Rehab That Was Really A Guess

Cameron says the most common error among new investors is looking at a house and saying, “I think I can do that rehab for $30,000,” or $50,000, simply because the number sounds big. His rule is to get hard numbers from a contractor before closing, based on a real scope of work.

Going over budget can be brutal right now, he says. You might not be able to pull your cash out of the deal, or worse, you might not be able to finish the project at all.

He has been the buyer on the other side. Cameron says he has stepped in and bought deals from investors who never nailed down their rehab cost, ran out of money and could not finish. His advice is to overestimate rehab costs, especially while inflation is high and labor and materials keep climbing.

Six Houses, Bad Comps, And A Wholesaler’s Numbers

The second story is about an investor who came to Cameron about six years ago with six freshly fixed-up properties he wanted to sell. When Cameron looked at them, he found the investor had bought them at the finished, after-repair price.

The wholesaler who sold the deals had pulled bad comparable sales, so the investor thought he was getting a bargain when he had actually paid far too much. He had no equity, and it took a while to sell the houses. Cameron says most were eventually offloaded.

The lesson Cameron takes from it is ownership. No one is to blame except the investor, he says, so do not rely on wholesalers, realtors or lenders to make the final call. Verify every number on your own before you buy.

His quick test is a good one for any buyer. Can I sell this property today to another investor and make money? If the answer is no, he says, you may not actually have a deal. His favorite line is that you make your money when you buy.

The Tired Landlords With 30 Doors And A Shot Roof

Mistake three is skipping reserves. Cameron says he sees packages from worn-out landlords with 15, 20 or 30 doors who want out of the business. When he looks at those houses, the windows are old and the roofs, foundations and HVAC systems are shot.

The reason, he says, is that those owners never set money aside. In Oklahoma he underwrites about 7% per year per property for vacancy, plus money for maintenance and for capital expenditures, the big items like a roof, hot water tank or HVAC.

Houses need upkeep whether they are new or old, he says. Tenants flush things they should not and doorknobs break. Cameron wants a nice asset five, ten and fifteen years from now so he never has to take a discount at sale.

“Do As I Say, Not As I Do” On Inspections

Mistake four goes against what Cameron himself does, and he admits it. Last month he bought a property without inspections, and sure enough the sewer line is shot and has to be fixed.

You may get away with skipping inspections on one deal, he says, but over the long term it will catch up with you. He recommends checking the roof, foundation, hot water tank, HVAC, electrical and plumbing, so nothing fails in the next two to three years when you cannot afford it.

He gives a roof example. A wholesaler may say the roof is in great shape, but if it is 8 years old and roofs in Oklahoma last about 12, a major expense is only about four years away. That changes the cash-on-cash returns and every other number in the underwriting.

The Day Emotion Enters, The Numbers Leave

Mistake five is letting feelings drive a purchase. Two investors Cameron mentors recently brought him a mobile home for $150,000 on a subject-to deal. They wanted to put in $30,000 out of pocket, and it would bring in $150 to $200 a month.

When he asked why, they said they liked the neighborhood and wanted to hold it. Cameron asked whether they were attached to the neighborhood or thought it was a good deal. They told him he was right, and Cameron says they are good investors who simply fell into a common trap.

“The day that emotion enters the decision, the numbers leave,” Cameron says. He traces most of the deals he lost money on back to a feeling that something was a good deal.

What Any Buyer Can Take From His Five Mistakes

Cameron says he has bought and sold close to $20 million in real estate and currently holds over $10 million. You do not need that kind of portfolio to borrow his checklist.

Get a contractor’s hard numbers before you close, and pad them.
Check comparable sales yourself instead of trusting the person selling.
Set aside money for vacancy, maintenance and big repairs.
Inspect the major systems and note how old the roof is.
Stick to the numbers, even when the numbers are boring.

Cameron says winning in this market comes down to operating correctly and having the right systems in place. The young investor who hit 60 doors learned that the hard way, and Cameron hopes you will not have to.

Willow and Hearth