I try to keep track of lessons I have learned on my note deals, borrowing from a process I learned in the aerospace industry. Sometimes the lessons learned involve people or vendors, who are either good to work with or should be avoided in the future. Sometimes they are related to due diligence, and how the condition of the outside of the home can or can’t give you clues to what the inside might look like. Other lessons learned involve pricing. I have one deal that was outside my normal model, and I paid too much for it. (fortunately I did that one with my own funds). But others have shown me situations where I could have paid more, and my pricing model has caused me to miss out on other good deals. Other lessons learned involve things to be aware of when working certain cities or states. By writing these things down you can keep from forgetting them. When something is fresh in your mind it may feel like you aren’t going to forget, but a few years down the line and numerous deals later it can be very easy.
The lessons learned process actually works a lot better for a small notes business that it does in a big company. In the aerospace industry there would sometimes be a concerted effort to document lessons learned after a program was completed. The next similar program may not happen until a few years later and it may be staffed by different people, so having this written record was very important. In theory that all made sense but in practice I don’t know that it was always well executed. The problem in a large company is the lessons learned could get very political, and no one wanted a documented record of mistakes they made, even if they were small or entirely reasonable under the circumstances. So as an engineer I found lessons learned documents could be very sanitized and not always contain the most important lessons. I would have to get those by talking to some of the individuals who were involved in the various projects.
Fortunately in my business there are no such political considerations, so I can be brutally honest with myself. I think this process will help me improve as a note investor over the years. If you aren’t already doing it, I highly recommend you keep track of the lessons learned on your deals.