What hurdles do I need to be prepared for?

Question

Being that I am young and wanting to get into investing in rental properties, what are some hurdles that you think I may encounter that I can be better prepared for? For example; lenders not taking me seriously, agents trying to take advantage of me, etc. I know my journey will be different from everyone else's, because it's mine, but just want to hear about some common difficulties young investors have that I may run into when trying to close a deal. Thank you for taking the time to respond!

Jim Pellerin · Answer

But do you know WHY you want a rental property? The biggest hurdle I see with new investors is not having short term and long term goals. Do you need short term cash? Are you buying for long term equity growth? What strategies are you most interested in? How will you be funding these projects? What skills do you have?

James Wise · Answer

It's not really that complicated to rentals in or out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible. Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.Make sure your property manager is a licensed real estate brokerage.Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estateUnderstand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Jaron Walling · Answer

Regardless of your age you can avoid some of those hurdles by being prepared. I would do research on the location you want to buy in, get pre-approved with a lender, and follow a game plan. Once you know the numbers it becomes second nature to spot a deal, or even better to make a good deal. You can't jump into real estate just to make money. It takes patience, networking, and rubbing people's shoulder for nothing in return. Be honest with people and they will return the favor.

Jose Batista Abikarram · Answer

Hello @Stephanie Money. Being young myself I’ll tell you the most common one and how to be prepared. People will say no even if you prove them you are ready. My recommendation is to simply ask kindly why they are saying that, take note learn from it and then go to another professional in the field and say what that person thoughts you. By the time I talked to my third lender they were a lot more willing to negotiate and take me seriously because they saw how serious I was!

Kyle Shankin · Answer

@Stephanie Money the biggest hurdle is wasting time, typically through analysis paralysis and "being busy". This is true for more than just real estate. A lot of people try too hard to accomplish a goal in the "most correct" way, without committing any mistakes or failures. Emphasis is often placed on how a project unfolds instead of the end result. Ironically, this can tank your project/goal or drag it out forever, where there's no completion/success. It's important to take action and be ready to persevere. Using your examples, if a lender doesn't take you seriously, it's because you've failed to give them a reason to do otherwise. If a lender will not give you a loan because they've judged you instead of your deal and financial soundness, then they're probably not someone you should be working with anyway. Move onto the next lender, there is no shortage of them. Regarding a potential issue with a real estate agent, it'll be near impossible for one to take advantage of you if you've done your research on the type of property your buying and the terms of which you buy it.

Jim Pellerin · Answer

Sounds like a good plan. I was just curious what your short term and long term goals are. Based on what you told me it sounds like you're heading down the right path.

Stephanie Money · Answer

@Jim Pellerin thank you so much!

Stephanie Money · Answer

@Jim PellerinJim, Thank you for your response. Yes, I have established my "why". As far as the short-run goes, I do not have a why for real estate since I am so young and starting to establish myself in my career which is my short-run goal right now. In the long run I want to get into real estate investing for many reasons:1) I do not plan on just relying on my 401k for retirement and SS is out the door, so I would like to leverage real estate to help my retirement portfolio. I am aware that mutual funds can be good as well, but I do not feel comfortable putting money into the stock market. ( I know real estate markets can fluctuate but historically aside from the crash have been relatively stable and increasing at a consistent slow rate )2) I have two sisters but I will be the one to take care of my parents when it gets to that point in life and I want to be sure that money is not an issue when it comes to getting them top shelf care, if needed. 3) Real estate gives me motivation that is long term rather than a project at work that is not infinite. I feel like real estate gives me a bigger purpose and something to look forward to as far as setting goals and reaching them in a longer time period goes. (My purpose in life is not to be a real estate investor, it is to help others and real estate will help me do that in the long run)4) I am not looking to get into real estate to quit my full time job, I love what I do and find purpose in it, I want the passive income from real estate (once I've broken even and have more than just a few doors), to allow me to give back and help others have a quality life. Initially I am interested in the most basic kind of investing without any fancy strategies (I'm sure Im missing out on opportunities but not every strategy is for everyone. ) I would like to save 20% to put down for the first handful of homes, with 15k in reserves to cover vacancy and maintenance. I plan on purchasing turnkey properties. not from turnkey companies but just from the mls. Once I have advanced in my career as well as have a bigger portfolio I would like to try the BRRRR method as a challenge and my dad is very handy and I think it would be something fun for us to do together and keep him busy during retirement. This is something he has always wanted to do as well so I won't be throwing anything on him that he has no interest in.My boyfriend (future husband, we've been together 6 years) is also on board and we both have very good salaries starting out and together have committed to high savings rates. We will not be "partners" on any deals until we are married, because as life has it you truly don't know what will happen. Lastly, I am a very motivated and determined person. I am type A and probably have a little OCD as well (haha), therefore I am skilled at time management, organization and when I find something that I am interested in I jump in eager to learn learn learn. (which is why I am on BP now, about 2 years out from when I plan on buying my first rental property). I have, what I would consider great people/communication skills (my parents raised me very traditional and I can talk to a wall better than I can communicate on social media lol). As I wrap up from this novel, I am genuine and I truly care about making a difference and I believe that can take anyone as far as they want to go. Greed and being money hungry like most people will only lead to an unfulfilled, depressing life and that is not something I am interested in.

Stephanie Money · Answer

@Jaron Walling great advice! Thank you. I have been doing research for about a year now and know exactly where I want to buy my first rental at. There are a few neighborhoods that are just starting to get developed in a town that I am from so I am very familiar with the type of people, schools, crime rate, etc in the area.

Stephanie Money · Answer

@Jose Batista Abikarram thank you so much! I think that is going to be my biggest hurdle, as it has been my whole life. I am a female (I work in a male dominant industry and so I am Accustomed to “proving” myself in that aspect), but also I look like I’m 13 even though I’m 23 so I am prepared for people to not take me seriously at first glance but I really like the strategy you suggested!