What Has Been Your Biggest Expense in Real Estate Investing?

[Corey Dutton]

I had coffee recently with a retired real estate investor of 40 years. We talked about real estate cycles, flipping properties, the meltdown of 2008, and other things. He started telling me about some of his rehab houses, the ones who brought him the biggest surprises with regard to unforeseen repairs. He told me about tree roots in sewer lines, sinking foundations, and other big repairs to his rehab houses that cost him thousands of dollars. I asked him, ‘what was the biggest repair or replacement on any of your rehab houses that cost you the most money?’ His answer was a surprise to me.

“Realtor commissions have been by far my biggest expense in real estate investing,” he told me. When first time real estate investors are calculating their potential profits on a real estate flip, this is one expense that is most often taken for granted in calculating their final numbers.

If you are a real estate investor in either residential or commercial real estate, what has been your biggest expense in your career? Please share your story.

[Rob K.]

I would say that the biggest expense is vacancy. Not only do you not have rent coming in, but you now have expenses for utilities and grass or snow to pay for. You also have the time, expense, and aggrevation of showing the property to get it re-rented.