Casey Serin – Mistakes we can learn from for now, one to watch in the future


I just read an article on CNET about would-be real estate mogul Casey Serin — at just 24, he bought 8 properties within a year, taking cash out at financing, planning to flip them all to turn a profit.

He’d done his homework; he’d gone to some real estate training seminars, read the Robert Kiyosaki book(s) (Most notably “Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money–That the Poor and Middle Class Do Not!“). He knew about creative financing (a powerful tool, but also something you can get yourself into trouble with, as he soon learned).
He bought his first house, and flipped it within a few months, turning a $30,000 profit, which he used to pay off his credit card debt. Nicely done. With his credit scores improved (due to paying off the debt), and a good track record, he went off to purchase additional investment properties. The second house didn’t cash flow, however. He apparently couldn’t sell it, and ended up renting it for $1000 less than his monthly mortgage payment. The solution? Buy more properties, get more cash back, flip more properties to get more cash coming into the pipeline (after all, you win some and lose some in any game.)

But alas, due to the market slowdown, some hasty and risky decision, and perhaps just general bad luck, things did not go so well for him, at least in this round. He now has a popular blog at iamfacingforeclosure.com He’s sold three properties and been foreclosed on in 6 properties (yep, six.) He’s gotten a lot of press, including an article in the USA today, detailing the things we can learn from Casey’s story (they were a little harsher than me, and call them his 10 mistakes). The lessons to be learned, as written in the USA Today article, are summarized below:

Mistake No. 1: Using ‘liar loans’

He used a stated income loan – a type of loan created for the self employed, or other people with variable incomes, such as people who work on commission, qualify for loans. You don’t have to use your paystubs or W2s to verify income, you just state your icome. (And apparently they take your word for it, although they do charge you a higher interest rate). In order to get 100% financing and cash back, he overstated his income, which allowed him to get a loan for more than the bank would have otherwise given him.

He also told the bank that he planned to live in each house, which got him better financing. I’ve heard of other people doing this too. Sounds like a good scheme, but lying on a mortgage application is apparently a federal crime, which could land a person in jail.

Mistake No. 2: Overpaying

In order to flip his house in Sacramento, he agreed to purchase the buyer’s existing house. He also helped the buyer out with the 20% down payment and penalty to the bank (for ending his mortgage early), resulting in him paying more for the house than he should have.

Mistake No. 3: Lacking cash

He couldn’t afford the monthly mortgage on the second house, so he put it on the market as a rental with an option to buy. He found a tenant – but at $1000 less than the monthly mortgage. If the tenant had exercised their buyout option, he would have come out ok on this in the end, but the tenant didn’t.

Mistake No. 4: Quitting your day job

He quit his day job earlier than he should have, in order to spend his time on getting enough deals in the works, and more cash back in the pipeline. Probably would have been wiser to slow things down a bit, keep the much needed steady income, and acquire the properties at a slower and more meditated pace. In his situation, though, it seemed that the quick cash back from more deals was the way to remedy the negative cash flow on house number two.

Mistake No. 5:Hiring an unlicensed contractor

He bought a house that needed repairs before it could be flipped, as is usually the case. He found a contractor who could do the work within a month or two. Unfortunately, after three months, the work was half done and the contractor wanted more money. And there didn’t seem to be any record of his license number. All the while, the mortgage keeps coming due, but the house is unsellable….

Mistake No. 6: Buying sight-unseen

He bought a house from a developer in Utah who said that the only problem was that the house was “outdated.” Not knowing that the “outdated-ness” included old (colored) carpet in every room, and nature-scene wallpaper murals, and that the renovation woul d cost much more than the amount of cash he got out of the deal, he gave up on fllpping this one for a profit, and just put it directly back on the market.


Mistake No. 7: Buying out of state

On the way to Utah, Serin stopped in New Mexico. Apparently he had two homes there, one of which was rented, the other was not (although he was trying to sell it, unsuccessfully). He tried to find a renter, with an option to buy, but the week and a half he was there wasn’t enough time to find a tenant and get them into a lease, even with less than stringent qualifications.

Mistake No. 8: Buying too many properties too fast

He kept buying more and more properties, to get the cash back, to keep everything afloat. One property turned into nine, and the operation required a lot more cash to keep everything going.

Mistake No. 9: Underestimating remodeling costs

He found a house in Dallas that he thought would be the best deal so far. He estimated repairs at $15,000, but it ended up costing more like $30,000, which ate away his potential profits. He was also spending more than he estimated traveling between all of his different properties.

Mistake No. 10:Having a poor exit strategy

Out of cash and living off of credit cards, Casey tried auctioning off his properties. Worked for one property in New Mexico, with a tiny profit; a week later in Texas, but only receiving three lowball offers. He tried to keep getting more loans, but was eventally rejected. He’s left with mortgages and bills totalling $20,000 a month, and soon the foreclosures are eminent.

He’s getting a lot of traffic on his blog, however, and gained a lot of notoriety, so I think he’s well on his way to achieving his goal of creating passive income. I’m not condoning running up bad debt or anything, of course; Casey writes on his blog that he intends to make good with all of his creditors, and it doesn’t sound like his real estate investment days are over… more likely just beginning. Here’s a link to
video of Casey telling his tale to none other than Robert Kiyosaki himself.

Good luck to you, Casey Serin. You’ve made some mistakes, but this has most likely been an extreme learning experience. And you’ve certainly got an appetite for risk, which is something that all of the great entrepreneurs have in common. Thanks for sharing your story with the rest of us.


Related Articles:

One thought on “Casey Serin – Mistakes we can learn from for now, one to watch in the future

  1. After tiring myself out trying to figure out what the heck this dude Casey Serin is actually up to, I finally found a place that catalogs his activities, history, associations, and purpose.

    The site bills itself as “the leading semi-satirical wiki about foreclosure blogs”, and I’d say that’s accurate, given the predictably rather vertical market for “semi-satirical wikis on the topic of foreclosure blogs.” Still, it’s a good read.

    Address:
    http://www.caseypedia.com/

    Hotlink:
    Casey Serin

Leave a Reply

Your email address will not be published. Required fields are marked *