10 Things We Hate About Real Estate Investing

Dave:
Real estate investing has given me a lot a career. I love financial freedom and something to talk about with all of you for tons of hours every single week, but I’ll be honest, sometimes I just hate it. What’s up everyone? It’s Dave. I’m here today with Henry Washington and we’re going to vent a little bit today and talk about the things that we just don’t like about real estate because we all know that those exist. So Henry, let’s just not waste any time. I know you’ve been itching to do this episode. It was actually, it was your idea at BP Con. We were just joking about this and now we’re here doing it. So tell me one thing that you just can’t stand about this business that we’ve voluntarily chosen to devote our lives to.

Henry:
Oh man. You know what really grinds my ears, Dave,

Dave:
Lay it on me.

Henry:
Investors who get their real estate license before they do a deal or think they need to get their real estate license before they do a deal.

Dave:
I can’t wait to jump in on this, but tell me why it bothers you so much.

Henry:
me. You don’t even know how you want to invest yet. You have no clue. You haven’t done a deal, but you’re going to go spend a whole bunch of time and money getting a license to do what

Dave:
Do you think? It’s just a stall tactic. People aren’t ready to invest and so you’re like, oh, I’ll just devote myself to more schooling or more education before I actually have to make any sort of decision.

Henry:
In all seriousness, I think it’s partly a stall tactic. I think it’s partly us attacking a problem the way we’ve been trained to attack it, right? Go study something and then get a license or get a degree. That’s just how we’ve been trained since we were kids. And thirdly, it just makes you feel like you’re doing something moving towards your goal in a sustainable way, but it’s really not a sustainable way at all. So I think it’s this false narrative that you’re doing something but you really aren’t. And I’m not saying that having your license as an investor can be helpful. It absolutely can be helpful, but you don’t know in which way it can be helpful to you yet because you haven’t done a deal. You have no idea

Dave:
If

Henry:
It’s going to be useful to you or not.

Dave:
Have you ever thought about getting your license?

Henry:
I have thought about getting my license for me. I don’t want my license. I don’t don’t need it. I can run my comps just fine without access to the MLS, I get plenty of deal flow. I have great relationships. I leverage an agent on my team to help me get all those things, and I don’t have the fiduciary responsibility that agents have. And I’m not saying I’m going out there and not being respectful of the people I’m buying homes from, but I don’t need my license. I don’t need the time that it takes to put in to get my license in order to be successful and so don’t what I wish. Now having done deals, what I would like a license for is I would love for my wife to have her license.

Dave:
Yeah, where’s Jess at? Let’s get her on this.

Henry:
You trust me, Jess on this would be perfect, but having her have a license would be great because now I know that the way I do business, the way I generate leads, what happens is I get a lot of people that I find through direct to seller marketing who just want retail. And so I take those leads and I pass them to my real estate agent and he gets listing leads from them, which is fantastic. I want that. But if my wife had her license, then I could pass those leads to my wife who could then pass them to my real estate agent. He would still get the listing, but now she would get a percentage of that because she’s a licensed professional providing a referral to a licensed professional. So I am leaving money on the table for some of those leads by my wife not having a license. But I wouldn’t have known that if I just jumped right into getting my license right away and it would’ve wasted a lot of time and effort and money.

Dave:
Yeah, for sure. I think there are perfectly good situations where people should become an agent before investing, but I sort of liken it to, so I really like outdoor activities like skiing and hiking. I like exercising, and there are those people who go out and buy all the gear before they do the

Speaker 3:
First

Dave:
Time doing the thing. It’s like before you ever go on a jog, you buy the nicest shoes, you got that stupid vest with the tiny little water bottles in it, and that’s for your first run. Maybe in your 10th you actually need all that stuff, but you don’t need it for the first one.

Henry:
Those straws that you can turn river water into purified water, you’re going on a one mile hike. Exactly. Civilization, don’t get me

Dave:
Wrong, I’ve definitely been that dude before, but I’m, I’m just trying to caution everyone that it’s not actually necessary. All right, well, that was a very good one. Thank you for bringing that one thing you don’t like about it. All right, I’m going to go to a second one that I think you share. It’s how bad some people in this industry are at just basic communication, picking up a phone, responding to text messages, answering emails. So I work both. I have a real estate portfolio. I also work at BiggerPockets at a corporation, and the standards for how quickly you’re supposed to respond to something are on total opposite ends of the spectrum. In my business at BiggerPockets, everyone’s engaged and is responding within a day or two to things, and when I go to work with a contractor or something, it could be like a week and a half, and they literally say nothing to you and it drives me absolutely insane.

Henry:
Oh man, yes, I agree. And all my friends and family listening to this would probably be like, Henry, you can’t talk about this because you’re the worst at responding. I am the worst at responding, but I am not in the customer service industry. I don’t know how these folks make money. I tell people, when you’re building a team, one of the most important things you need to look for in a team, yes, you want them to have the skillset you’re looking for. Yes, you want them to understand investing, but what’s important is are they willing to communicate with you in the way you want to be communicated with? Everyone’s different. Some people just want emails. Some people want text. Some people want a phone call. How you want to be communicated with. And when you’re picking that team or building that team out, setting the expectations that this is the way that I communicate and would like to be communicated with on the front side, and if they’re willing to do that, man, that goes a long way. I will pay a little more for a service from somebody who’s going to communicate with me in the way I need to be communicated with.

Dave:
Totally. It doesn’t happen to be in any other part of my life. Even with other service businesses, like when you call the doctor, they call you back or yeah, if you need an appointment at the barber is usually pretty communicative if you want to have an appointment. But there’s just this funny thing, and it’s not all people, this is obviously just a generalization, but it happens quite a lot and it’s not just one part of the industry. People like to hate on contractors. Some contractors are great

Henry:
Agents have that stigma too.

Dave:
Agents do it too. Totally. Yeah, absolutely. I actually, yeah, it just happens all over the place. It drives me nuts. It just makes everything harder than it needs to be.

Henry:
100%. I couldn’t agree with you more.

Dave:
All right, let’s move on to number three. What’s the third thing you hate about real estate?

Henry:
The third thing I hate about real estate is when people buy just purely based on an exit strategy or say differently when they’re looking purely based on an exit strategy. So when you hear people say, I’m want to flip a house, and so they’re looking at everything through this lens of flipping a house or they say, I want to do a short-term rental, and so that’s all they’re looking for and I don’t think that they have any clue how much money you could potentially be leaving on the table by not taking the exit strategy lens off of your looking glasses and just look for a good deal. Because a good deal might want you to monetize it or might need to be monetized in a different way than you’re thinking and you could be leaving a whole lot of money on the table because you are only looking through one lens.

Dave:
So what do you look for? Just value?

Henry:
Yeah, man, I look for value. I look for, I want to walk into value or equity as they call it on day one, and the more value or equity that’s in a deal, the more options you have for an exit strategy. And a lot of the times we want to do an exit strategy, but we may not be set up in order to do that exit strategy
Right away. In other words, you may want to flip a house, but you could get a lead that the lead isn’t great for a flip, nor you are set up great for a flip. You might not have your contractors ready yet. You might not the money to take down the deal with the funding, you need to take down the deal yet there’s a lot that needs to happen. And so what I tell people is understand what a good deal looks like in the market that you’re looking to buy the deal. So that requires you to go do some research and get some market expertise so that you understand, hey, in my market I need to buy traditionally at 60 cents on the dollar I need to buy at 50 cents on the dollar. It’s going to be different for each market. It’s going to be different for sub neighborhoods within each market. I have neighborhoods here where I’ll buy 90 cents on the dollar because it’s just the value and appreciation in that area is tremendous, and I have some neighborhoods where I’m not going to buy it unless I’m getting it at 40 cents on the dollar, right?
Totally right. And so you just need to understand that about your market, understand what a good deal looks like. It’s an example yesterday closed on a house and this house, I was thinking this would be a good flip, right before I even went and saw the property, but I knew I was getting it at a good price. We got the deal locked up at $60,000. I had that agreed to before I go look at the property, I go and I look at the property and it is across the street from a lake. It’s up on a hill. It’s got these beautiful views and I’m like, you know what? This would be a phenomenal short-term rental. I should think about doing this as a short-term rental. It did need a hefty rehab. It needs about an $80,000 rehab, but because I have it at such a low price, I have options now. I bought it for $55,000. I can now, if I want to clean it out, get all the stuff out of it, stick it back on the market in the current condition that it’s in, probably sell it for 85 to $90,000 without doing a thing. Wow.

Dave:
Yeah. Unbelievable.

Henry:
I could also renovate it, put it in good condition and list it as a long-term unfurnished rental and get about $1,800 a month. That would get me cashflow right now in this market because I’m all in for what, like 150 or less, or I could do it up real nice, furnish it and keep it as a short-term rental, or I can sell it for $250,000. There is so many options that are open to me because it’s a good deal and we don’t want to take that money off the table by only looking at deals through one lens.

Dave:
Yeah, that’s a good example. My only question though to you is do you think it’s beneficial for new investors? If you’re looking for your first deal, does it make sense to sort of narrow down what you’re looking for?

Henry:
It does in terms of narrow down what your buying criteria is, what price point you think a good deal is, that’s it. Go find a good deal because how you monetize that deal is going to depend on your financial situation at the time. It’s going to depend on the resources you have available to you. It’s going to depend on the team you have around you. You could want to do a short-term rental and not be set up to do that successfully when you get that deal. So in other words, go find the good deal and then monetize it in the way that makes sense for the deal and your financial situation.

Dave:
That’s great advice. Well, thank you. And way to turn something you hate into very good actionable advice to everyone listening to this right now. That’s why you’re here. Alright, it’s time for a break, but we’ll be back with more things we hate about real estate in just a couple minutes. Thanks for sticking with us. Here’s more of me and Henry on bigger news. All right. I’m going to go on to my second hatred, which is unrealistic expectations and is I have to say, this isn’t really real estate investors. This is more our industry, Henry, which is the real estate investing education industry, and a lot of people on social media who just spout out stats and ideas that make real estate investing seem so much one more profitable

Speaker 3:
Than

Dave:
It is, but also at the same time, it makes it feel less attainable, right? Because if you’re going out there and saying, I’m buying 15% cash on cash returns, no you’re not. First of all, you’re just not, unless you’re buying in a rough neighborhood and doing a ton of rehab. And second of all, that sets this unrealistic expectation for people who then go out and probably to your earlier point, find good deals. But there are only means of comparison now is to these unrealistic just not true deals that people are talking about on social media, and so they don’t wind up getting into real estate or buying a good deal because they think it’s not good enough.

Henry:
Yeah, this is true. You do have to be careful what you expect getting into this game. And so there’s two sides to this coin. You need to understand what real expectations are and then you need to understand how to evaluate someone if you’re thinking about learning from them. As an example, yesterday I shared a video about how I screwed up a project. I screwed it up pretty good, right? Nobody’s batting a thousand out here, so you need to listen to people with a grain of salt. But yeah, I literally talked yesterday, I sold a flip. Well, I’m selling a flip. It should close today or tomorrow, but I held this thing for two years. Two years.

Dave:
Were you renting it?

Henry:
No, it was vacant. Oh, for two years. I waited too long to hire a contractor before we got started, and then I hired a bad one who just took four to get anything done. I did not hold them accountable. I didn’t do a good job making sure they showed up every day and got things done because I had so much other stuff going on and this wasn’t at the top of my priority list. And before, you know, it months had gone by. Very little work had been done, but I had paid him a substantial amount of money
Also, I under budgeted this thing by a lot. I probably underbid it by about $50,000. And so I ran out of my rehab budget money before the project was close to being done. I screwed it up royally and to fix my mistake, I had to bring in a partner to bring the rehab money and then give up 50% of my deal to this partner for bringing the money that I needed. And at the end of the day, we got the house done. I got it on the market, we got it sold, and I’m going to walk away making about $20,000. And I know that sounds awesome to people, but I should have been walking away with about $120,000 to put that into perspective.

Dave:
And you have $150,000 worth of headaches. This was a

Henry:
Six figure flip that I’m now walking away with 20 grand and thankfully I bought a great deal that I could sustain that big waste of time. But this happens to experienced in investors,

Dave:
But it just happens what it is. Yeah,

Henry:
This can be you too. Exactly. So be careful who you’re listening to.

Dave:
Yeah, exactly. Honestly, a lot of it’s just a volume game. If you do it enough, you’re going to be successful. If you get your average up high enough, then you’re going to be fine. But these things are totally going to happen. And I just want to say before we move on, I think the other thing about unrealistic expectations is that you have to be a full-time investor or you need to become some tycoon for real estate to be worthwhile

Henry:
Or you need a hundred doors.

Dave:
Exactly. Yeah, I know a ton of people who have three doors and are super happy with it. It’s three

Henry:
Paid off doors would be unreal.

Dave:
Amazing. Unreal. Exactly.

Henry:
Yeah. Life changing.

Dave:
Yeah. If you buy three doors now pay them off. By the time, if you’re retired 20 years from now, that’s your retirement. That’s enough, that’s enough. That’s going to be enough. Just do the math. I’m not just making that up. That’s real. So anyway, that’s my number two hate. Let’s move on to your third one. What do you got?

Henry:
Alright, my next hate, and I’m going to get a hall of hate for this man, I hate working with contractors.

Dave:
It was only a matter of time to,

Henry:
I hate it. I hate it so much.

Dave:
Now, I always think that I always start a clock in my head every time you’re in a room with real estate investors until how long does it take until this conversation starts? A minute, two minutes.

Henry:
We should play over under on long it takes before bad contractor story pop up. Look full caveat here guys, I do hate working with contractors and it’s a hundred percent my fault. It’s not the contractor’s fault. Yeah,

Dave:
I agree with myself too.

Henry:
Yeah. A lot of it has to do with my lack of organization at times. My lack of having standard procedures at times, like I am a free spirit by nature. I like to fly by the seat of my pants. I like to give everyone the benefit of the doubt. One of my life rules is I start everybody out with an A. If you’re on a grading system for people when I first meet you, everybody has an A and then you got to work your way down from there.

Dave:
How far have I gone down?

Henry:
I mean, you’re a solid C minus right now. And that

Dave:
Was my GPA in high school. I’m used to that. I killed it as a C student.

Henry:
Are you kidding me? Yes.
Oh man. In all seriousness, no. Dave’s my guy Dave. Dave’s still rock. Dave’s gone up, right? Dave’s gone up in value. Thank you. But that’s my life motto. Give everybody the benefit of the doubt and as they betray your trust or give you reason to downgrade them, then you downgrade them. Right? And that’s bitten me in the butt with contractors because I’m just going to assume that you have my best interest at heart and that’s not going to be true all the time. I’m just going to assume that you’re going to show up when you say you’re going to show up. And obviously that’s not always going to be true. I’m just going to assume you’ll bill me for what you said you’re going to bill me for. And that’s not always going to be true. I’m just bad at I think managing contractors and expectations and it’s forced me to have to be a better operator, which is a good thing.
I know now that when I work with a contractor that I need to do it in a standard way. I need to have checks and balances in place to make sure that they’re doing what they say they’re going to do. They’re showing up when they say they’re going to show up. And so I have gotten better at it. I truly have, and I’m much better now than I was when I first started because it’s forced me to have standard processes and procedures and to hold people to the fire and to not trust anybody from day one. But it’s so against how I like to operate as a person that I don’t enjoy it at all. And so I just hate working with contractors and it’s not their fault, it’s my fault.

Dave:
I sort of agree with you. To me, it always reminds me, I got this advice before I started working at BiggerPockets. I had started a business, not real estate business, and someone gave me this advice that every degree of separation someone you work with is from founding the company. The less they care. And that’s not their fault, but it’s frustrating as someone who really cares about your business to be working with people who care about their own business. That’s what they’re supposed to be doing. But it’s kind of this constant reminder that you’re like, this person doesn’t really care about me and does not care about my business. And I feel on guard. I’m always more, you said yourself, you usually trust people. I find myself being way more skeptical around contractors. I am with normal people and I just don’t like being that

Henry:
Way. I don’t like operating that way and I want to operate in my natural state and can’t. That’s how I ended up with the property for two years. Right, exactly. You made 20 instead of 120. Totally. And so for people to have some practical advice from this, it’s like understand this from day one, you’ve got to have a standard way that you work with people and just at a high level, some of the things that I do now are before I have a contractor come and bid a job, I put together a very high level scope of work and I send it that a contractor. Because what I learned through this process is not every contractor wants to do every type of job. They’re comfortable with certain levels of rehab, certain types of homes, certain years of homes, certain types of things. And so what I’ll do is I’ll put together a high level scope of work and I’ll send it out beforehand. That way if they’re like, Hey, this isn’t my cup of tea, we’re not wasting time in looking at a project that they’re not going to want to bid. Because when a contractor sees a job they don’t want to do, they may still bid it, but they’re going to give you the craziest, most expensive bid. They’re trying to make it worth their while for doing it.
So then you have this negative interaction already off jump with a contractor. So I send ’em the scope of work on the front side so they know the size of the prize if they even want to do that job before they get there. The second thing we do is once they put together a bid, we take my scope of work and their bid and we break the project out into phases so that there’s a phase one, phase two, phase three, sometimes phase four depending on how big the project is. And we establish on the front side, I’ll give you X amount of dollars upfront for you to get materials
And that’s it. You don’t get any more money from me until phase one is done. We both have to walk the property and make sure and agree that the phase is complete. And once that phase is complete, you get your money for that phase. And then they use that money to buy whatever materials they need for phase two. And we do that same process three or four times until it’s done. That way everybody’s on the same page and we literally sign off after each phase. That is a very structured way of working things. It is not my natural state, but it’s the way things need to be done for me in order to make sure that I don’t end up in the position that I was in before.

Dave:
That’s one of the things that you learn over time too, is where to set the standard. I think it’s hard for investors at the beginning. You don’t know what’s normal. That’s why forums like BiggerPockets exist. You can go on there and try and understand what’s normal and why you listen to podcasts like this and you could do things like Henry said, but as time goes on, you get used to what a good relationship with a contractor it looks like. And unfortunately sometimes they go in and out and you have to trade ’em out, but you should stick to your standard going forward. And unfortunately that means finding new people sometimes.

Henry:
Absolutely.

Dave:
Alright. This is such a stupid one, but it just drives me insane. I just hate the way that real estate agents write descriptions of properties.

Henry:
Everything is the most lovely place on the face of the planet.

Dave:
If you describe a property as a quote investor special, I know that just means trash. $50,000 overpriced. It is deeply overpriced for what it is or saying that it’s a unique opportunity. So I had this freshman year of college, I had to take a writing class and I wrote this paper and my teacher told me that I had the quote, he called it the freshmen vernacular, which was basically like you just put as many adjectives into the writing as possible to make it sound really fancy. I am looking at this description right now. Just someone wrote with modern updates and unprecedented proximity to essential amenities. No one talks like that. Don’t write your descriptions that way. Just talk like a normal person. That’s all I got. It just annoys me.

Henry:
That means they painted the walls of neutral color and it’s close to a bike shop. Yeah,

Dave:
It’s right. That’s still a Midas. Hey, that is an essential

Henry:
Amount. That’s fair. Chick-fil-A is delicious.

Dave:
Well, that one was quick, but that’s all I got. I can’t read them anymore. I just don’t want to read them.

Henry:
Investor special means the a RV is 350 and they’re selling it for 2 95.

Dave:
Yeah, it’s special for investors who have no idea what they’re doing perhaps.

Henry:
Yeah, that’s fair. Fair.

Dave:
Alright, that was mine. I think we’re on your fourth. Number seven. We’re up to things you hate about real estate.

Henry:
Oh boy. Boy, this one. This one really grinds my gears. I hate virtual staging. I hate it

Dave:
Like the AI st thing,

Henry:
Like the AI virtual staging when you list a property. And so for those who don’t know virtual staging is you can now use AI or tools that’ll basically take the pictures of your house and then place virtual furniture in it for the listing photos. And so that when people are browsing the listing photos, they can see your place staged what it would look like with furniture in it. And I hate it. Here’s why I hate it because when it first came out, before AI was even a thing, there were tools that would do email your pictures to someone and they would do it for you

Dave:
And the couch would always be floating three inches above the crowd.

Henry:
So I was shopping for a personal home at the time and we browsed this house and I’m like, oh man, it just looks amazing. The freight staging looked so good that I thought it was actual staging and it just looked fantastic. And so we go to look at this house and I walk in the door and the house smells stale because it’s been sitting vacant for so long, there’s nothing in it. It had been listed for a while, so it was dusty and there were dead bugs on the ground. And those things are normal. In a vacant house, you can walk any vacant listing. If it’s been vacant for a while, you’re going to see a couple of dead bugs. It’s going to be a little bit dusty,

Dave:
Right?

Henry:
But the expectation was set so high for the virtual staging that my first feeling walking in the door was a giant letdown.

Dave:
It’s like you hear those stories about people on dating apps who put photos of them from 10 or 15 years ago, I got catfish. You got catfish by a property. But it’s like what are you expecting? You’re just setting people up to be disappointed.

Henry:
Yes, yes, absolutely. And so when you’re showing a property, especially now guys, so again, practical advice here now it’s different. The market has slowed down guys. Home sales are slowing down, which means you have less eyeballs on your property than you did a few years ago, and you have got to capitalize on the eyeballs that you get into your listing if you want it to sell sooner than later. And you do not want people’s first sentiment when they walk into your home to be disappointment or let down. You want them to be excited. So we physically stage properties every chance we get, and we do it in a way that we only stage living areas, bonus spaces and dining spaces in office, things that people need help seeing what furniture would look like in there.

Dave:
Will a king size bed fit in here? People want to know that. Is this a comfortable workspace for me?

Henry:
Absolutely. So we typically aren’t staging bedrooms unless they’re very small and we want to make sure people realize that yes, you can get furniture in here. Other than that, we’re not staging bedrooms. We’re only staging main living areas or bonus spaces. As an example, I have a house that we’re about to list on the market right now and there’s a weird smallish room that’s almost like a super wide hallway that’s between the kitchen and the primary bedroom. And so I don’t want people to think, is this a bedroom you have to walk through? And I don’t want people to think

Dave:
That’s a good point.

Henry:
This can only be used as a hallway. And so we’re staging it with a desk, like a work desk and an office chair in there to show that this could be a flex office space if you want to. Rather than that way, I’m forcing people to think about what this could be versus letting their minds wander about this is a weird room you have to walk through.

Dave:
I like that.

Henry:
And so we’re physically staging when we can and when we can’t. I don’t like the virtual staging now when you do virtually stage because I think it can be a good tool if you do it properly, when you do virtually stage, make sure your house is clean, make sure that thing smells good,

Dave:
Or just put the dead bugs in the virtual state so people know what to expect.

Henry:
One of the things people should do is go and get those glade plugins and put them right by the front door and then into the living room and get a food smelling one like vanilla

Dave:
Cookies. Plug it in,

Henry:
Plug

Dave:
It in

Henry:
So that smells good when you walk in. And then also when you virtually stage, make sure you put the virtually stage picture and then right after it, the picture of the same room vacant.

Dave:
I like when people do that. Actually, I’ve been seeing that a lot more recently. That’s a really good, it is more honest and straightforward about what you’re doing. Expectation. Yeah. It’s like, here’s an example, here’s what it actually looks like right

Henry:
Now. Exactly. Don’t just put the virtually stage pictures, put the picture that it actually looks like right after it so people understand that it is vacant and understand that this is just an example of what it could look like. Stop lying to people. Stop lying to people with virtual state.

Dave:
Yeah, I love it. That’s a great one. I hadn’t thought about that one, but once you said it, it is just the worst and it’s just misrepresented so much. Okay, time for one last break. We’ll see you on the other side. Thanks for sticking with us. We’re back on the BiggerPockets Real Estate podcast. All right. My fourth and number eight on the list of things Henry and I hate about real estate is just the volume of paperwork I still have to do in real estate. I see the soul leaving your body right now. Thank as I’m talking about it, it’s just like why is it so common? This is another one of these things that’s just like, I don’t know if other industries are like this, but why do I still have physical paper all the time? No other part of my life do I still have to sign things with a pen and have to keep records and I’m filling out forms with the government all the time. I’m talking to utility companies. Why isn’t there just the button I can press? You

Henry:
Could tell me what I want to buy from the grocery store two weeks from now, but I have to actually physically sign a contract.

Dave:
Yeah, exactly. It’s similar. I don’t know how often you rent cars, but it’s like when you go to the rental car booth, they have all your information and then when you get there, they just make you enter all the information again, it is just so stupid. I feel like that’s half of the transactions in real estate. It’s like half the time a managing your portfolio is just reentering your EIN and your mailing address into just more forms that people are just making you fill out.

Henry:
It’s so true.

Dave:
It’s the worst. I just, why do I have a sticky note on my computer with all my EINs on there? I shouldn’t have to do that.

Henry:
You know what it is? You gave it to me government.

Dave:
Yeah, exactly. Exactly. If you don’t know what an EIN is, it’s like a social security number for your business. It’s a tax ID number basically, but it’s just a stupid number that you have to memorize.

Henry:
That’s how I feel about taxes too in general. It’s like the government’s like, Hey, we need you to fill this out. We know exactly how much money you’re going to have to pay in taxes or not pay in taxes, but we’re going to make you fill all this out and guess. And if you’re wrong, you go to jail.

Dave:
Yeah. It’s like when you got in trouble with a kid, your parents were mad at you and they know what you did, but you, you’ve done so many things wrong. You don’t know which one they caught you for, so you’re just sitting there guessing. But honestly, it’s true. Living in the Netherlands, taxes here are ridiculous. It’s so easy. They just tell you exactly what you need to pay. It takes a couple of minutes, and then if you pay too much, they goes right into your bank account. They don’t even ask you. It just goes right into your bank account. It’s so easy. It just doesn’t have to be that way. All right. Well, that’s my one. What’s, what is your last number nine thing that you hate about real estate?

Henry:
Boy, this is a big one for me. This is specifically for wholesalers of real estate. When wholesalers say, well, if I can’t assign it, I’ll just back out that whole methodology.

Dave:
Can you explain what that means just for people who don’t wholesale?

Henry:
Yeah. So when you wholesale real estate, essentially what you’re doing is you’re going and you’re finding a deal typically direct to seller, and you contact that seller and you look at a property and you make an offer, right? You say, I will buy this property from you for, let’s call it a hundred thousand dollars. Let’s say that house they put under contract for a hundred thousand dollars is worth $200,000, right? A RV is $200,000. They’ll go and they’ll find a flipper and say, Hey, Mr. Flipper, I’ve got this property. I’ll sell it to you for $110,000. It’s worth $200,000. And that flipper goes, that sounds like a great deal. I’ll take it. So then that flipper then gets assigned that contract, which means they have to sign an addendum to the original contract. That addendum says that they are now taking the place of the original wholesalers spot in that contract, but they are going to purchase the property for $110,000. And so you get to closing and there’s a $10,000 difference between the a hundred thousand dollars purchase that was originally put under contract for and the 110 the new buyer is buying it for. And that $10,000 is an assignment fee that goes to the wholesaler who originally found the deal. I think there are ethical ways
You can wholesale real estate. I’m not saying wholesaling is unethical. I’m saying that there are a lot of people who do it very unethically when they first start out because it’s sold to people as this way to get into real estate with no money and no experience and no credit.

Dave:
And just so I can clarify, the reason it’s unethical is because you’re basically lying. You’re lying. Yeah. You’re not being forthcoming with the seller about what you’re doing, and you’re basically taking their potential sale off the table when you don’t necessarily intend to close on it.

Henry:
And so you put the property under contract as a wholesaler, and a lot of them will say, well, I’ll put it under contract and then I’ll go try to find a buyer. And then if I can’t find a buyer, I have all these clauses in my contract that allow me to back out. And this happens so frequently, and it’s just a bummer for the person that’s impacted is that seller, that person who has a problem property or a problem situation that they’re needing to sell their property. You’ve said that you’re going to buy it and they believe you, and then you go and you try to find someone to buy that property and they can’t buy it because you didn’t find a good enough deal. And so now for a month or two months or however long you have it under contract, they can’t go sell that property to anybody else. They’re the ones who are left out in the cold. If you back out of that contract now they’re stuck with the same problem they had a few months ago, but now they’ve lost all this time and you really aren’t impacted as the person who didn’t do what you said you were going to do. And I think that that’s just the wrong way to approach this business. And so many people do it, and it pisses me off.

Dave:
Yeah, man, I totally respect that. That pisses you off. I totally agree. I think first of all, like you said, it’s unethical and it’s just bad business. It’s like you’re not setting yourself up to be successful over the long term. It’s just like trying to do something shortcut your way into a quick buck. It usually it doesn’t even work. And that’s not the main point though. The main point, as you said, is that it’s just not being a good operator. If you have to do that to make money, then your business isn’t good enough. I know that’s just the way it is. If you can’t do it right, don’t do it.

Henry:
If you should be able to operate on the premise that I’m only going to put something under contract that I will close on if I need to. And if that’s the mindset that you take, you’ll get a bunch of deals that I think people would love to buy off of you, but you’ll also not want to put anything under contract if you know that at the end of the day, if I can’t find somebody, I’m going to buy it. You’re going to think long and hard about that offer before you make it.

Dave:
Totally. I completely agree. All right. Well, that’s a good one. And for our last one, our 10th thing that I hate about real estate, mine’s a little bit serious here at the end as yours was, so we’re getting a little more serious and introspective here at the end. But my last one is this perceived adversarial relationship between tenants and landlords that for some reason, I don’t understand why this industry works in a way where tenants and landlords are presumed to not like each other and to not have each other’s best interests at heart.

Henry:
It’s a symbiotic relationship.

Dave:
Exactly. I don’t understand it. And I know there are bad actors, and let’s be clear, there are bad actors on both sides. There are bad landlords and there are bad tenants.

Henry:
Absolutely.

Dave:
But I think 90% of relationships between landlords and tenants are positive. At least in my experience, they have been. And so I just don’t get this idea. You hear a lot on social media, people hate their landlord. Landlords complain a lot about tenant. Why can’t it be like every other industry where there is voluntary exchange for mutual benefit? That’s the basis of our entire economy. That’s how this works. And I know there’s a lot of emotion related with homes and housing as there should be, but I just think it would be so much better if we could reframe this as a positive relationship because it can be, and it should be.

Henry:
This may be an unpopular opinion, but I feel like the responsible party in this relationship for it to be better is on the landlord. This is the landlord’s responsibility to make this better. Why is it the landlord’s responsibility? Because we as the landlords are the service provider. We are providing the service to the community. They are our customer. And too many times landlords get this holier than thou attitude because they own the property. And when you approach things from a holy and thou attitude, you’re going to get people who respond to that in a negative way.

Speaker 3:
It’s

Henry:
Not the situation where you want to look down on a tenant. It’s a situation where you don’t make money or build wealth without a tenant. You have to have the tenant and you want to have good tenants. I understand that. Yes, I get you want to have good tenants, and that’s on us again, for sure. To be good at evaluating tenants. That is our responsibility. But if you want to build wealth, you need to have good tenants. If you want to have good tenants, you need to know how to look for good tenants. And if you want to have lasting tenant relationships, you need to take care of your tenants. It is on us to fix this relationship.

Dave:
Period. Well said. Completely agree. I’ll add one more thing before we get out of here. It’s just also about having realistic expectations because sometimes you hear like, oh, the dishwasher broke. The tenant must’ve done something. No, dishwashers just break. No dishwashers just they stop. They just break.

Henry:
None

Dave:
Of them are good. They’re the worst. They’re truly the worst appliances known to man. They’re so terrible. That’s number 11. Dishwashers, dishwashers far though. But anyway, it’s like people act like repairing and maintaining a property is some money that is being stolen from them, which this is just part of the business. Every business has expenses. These are your expenses. It just comes back to having these realistic expectations.

Henry:
And I think that the basic lesson is we got to treat people like people. Totally. You just treat them with respect and they’ll treat your property with respect. Set that expectation. When I was managing my own properties for every tenant that before they signed a lease, I would meet up with them and I would just set expectations. I would say, look,

Dave:
Totally,

Henry:
My job is to give you a clean, comfortable place to live. If something’s broken, I want you to tell me about it. I want to fix it, and I want to fix it in a timely manner. I know not a lot of landlords do that. I’m not that guy. If it’s broken, let me know about it. Give me an opportunity to fix it. Let me take care of it. Lemme take care of you in that property. And that sets the expectation that they know on the front side, like, Hey, I want to be a good landlord. I want you to have a comfortable place to live. I say, and then at the same token, I say, that’s my job. Your job is to pay rent and pay rent on time. If you continue to do your job, I will do my job and I will try to exceed your expectations as much as humanly possible. And that just always set a good tone so that people understood that I want to take care of them. That’s our job to take care of people. And when I did hire a property manager, because now a property manager takes care of my properties, one of the selling factors, what one of the selling factors was for me to pick them
When I was interviewing them. They said, when they were talking about their tenants, they corrected me. They said, yeah, we don’t call tenants tenants. That’s not what they are to us. And I said, well, what do you call them? They said, they’re our residents. And I said, I like

Dave:
That.

Henry:
That’s what I need. I need someone who’s going to manage the properties, who understands that the residents are just as important as the landlords. And if we both don’t have this symbiotic relationship, then nobody’s happy and nobody’s making money.

Dave:
Totally. Yeah. I completely agree. And it’s honestly, it’s not that hard. Like you said. It’s just being reasonable and setting good expectations and genuinely caring about it. And you can have a great relationship with pretty much any tenant. That was a good way to end. So let’s get out of here. But Henry, thank you so much. One for coming up for, actually, I think it was your wife Jessica’s idea to do this show. This was

Henry:
Jessica’s idea. Yes.

Dave:
But so thank you to Jess for this and for coming with these very funny and cathartic stories that we could share about the industry. Don’t get us wrong, we love this industry. It’s been wonderful to us, but there are downsides to every business, and these are just some that bother us. All right. Well, thanks for being here, man.

Henry:
Thank you so much for having me. This was a ton of fun, man.

Dave:
Absolutely. Thank you all so much for listening. And if you’re watching on YouTube, let us know the things you hate about real estate in the comments, or you can always hit Henry and I up either on BiggerPockets or on social media.

Henry:
Don’t have me, bro. I said what I said.

Dave:
Let us know if any of these things resonate with you, you disagree, or you want to add one on top. Thanks for listening. We’ll see you next time.