Recently I had the pleasure of interviewing Justin Colby on my “Common Denominator” podcast. Justin is one of the leading experts in flipping homes, having flipped over 2,500. And while he has had a ton of victories, he’s also experienced a few losses.

Here he explains why if someone tells you they’ve never lost in real estate – or in business – you shouldn’t take any of their advice.

“There’s no business owner, none, that hasn’t taken massive losses because they’re swinging big bats. They’re going for home runs. And it’s their ability to keep getting back up (that makes them great).

There are so many coaches, gurus, and mentors in the single-family real estate space – including, quite literally, 21-year-olds who have done maybe a handful of wholesale deals – and now they want to go and sell people on how to do real estate. And so, you know, there’s a lot of people who say, ‘I’ve never lost on a real estate deal.’

And you have to push back and say, ‘Okay, well, that’s because you did one flip of a home, you made money, and you can walk around saying you never lost.’  And, so, the people who want to flex and brag but not talk about those losses are, to me, not authentic and transparent.”

Here’s more on what you can learn from your real estate losses.

First, you can develop a keen market understanding. Real estate losses often occur due to misjudging market trends or not being able to anticipate shifts. These experiences can sharpen your understanding of market dynamics, teaching you valuable lessons about timing, supply and demand, and the importance of being informed about local and global economic factors.

Second, real estate losses shine a light on the importance of risk management strategies. They highlight why you need to diversify, conduct proper and thorough due diligence, and lean on risk mitigation tools such as insurance, contingency plans, and property inspections. Learning from losses will help you enhance your risk assessment skills and foster a more cautious approach to investment decisions going forward.

Losses in real estate can also sharpen your financial literacy. They emphasize the significance of maintaining adequate reserves for unforeseen circumstances, as well as the importance of budgeting and financial forecasting. By understanding the complexities of financing options, including mortgages, loans, and leverage, you’ll learn crucial tools for mitigating risks and optimizing returns.

A real estate loss can also serve to bolster your adaptability and resilience. It will teach you to remain flexible in your strategies, to pivot when you need to, and to learn from past mistakes rather than dwelling on them. Adversity creates the development of a growth mindset, enabling you to bounce back stronger and more resilient than you were before.

Finally, while real estate losses can be disheartening, they also serve to reinforce the importance of adopting a long-term perspective and mindset. Understanding that setbacks are often temporary, and that real estate is fundamentally cyclical encourages both perseverance and patience. Maintaining a focus on long-term goals helps you push through the short-term challenges and stay the course when the market fluctuates.