What Advice Do You Wish You Had on Day 1?

Question

Hi guys,

I'm brand new to the REI world and am diving in head-first.

Quick background: I'm 24, working on building my own personal training business (therefore not at a W2 job), have fantastic credit but not a massive savings, currently rent about 40mins outside of Boston, and am open to any and all worthwhile opportunities (though my interests currently trend towards house hacking and OOS).

My question is: What's one piece of advice that you wish you had when you were just starting out? Whether it be resources to use or what not to do, I'd love to hear anything you guys have to say!

Thanks in advance, I'm fired up and so excited to learn.

Account Closed · Answer

I second educating yourself on everything you can.  But, one of the pitfalls people fall into (hmmm, how do I know this) when looking for an affordable property, is buying something with a homeowners association or looking at mobile homes with space rent.  I highly highly recommend that you never buy any property with a HOA or space rent.  It's an additional cost that can change dramatically over time, and you rarely get your money's worth for whatever it's supposed to cover, and you lose complete control over your investment.  You just really don't want someone else telling you what kind of plant you can put on your porch when you're the owner, or choosing some god-awful color of paint for your building, on and on and on.

I'll add another one - be sure and look at the property taxes.  Don't get lured by a low purchase price without looking to see why it's affordable.  It might be because the tax base is insane.  Learn about that - can the county keep reassessing the value of your property and then taxing you to death year after year, keeping you from getting decent cash flow.

Theresa Harris · Answer

When looking at deals, look at all the costs including property taxes (mentioned by Sue), sewer and garbage.  Also check if there are property purchase taxes or other one time fees.  I'd look for places where you have legal suites.  In the US, I think most duplexes sell as a single unit, in Canada you only buy half.  Those can also be good deals.

Think about the type of tenant you want to attract and how that will affect turnover and the condition of the rental and time spent managing it. Don't be afraid to buy something that needs a little bit of work as it will give you the opportunity to add value.

House prices can go up quickly in some areas, so if you see something you like, don't sit on the sidelines.  I bought a few places in one market, prices went up (A LOT-almost doubled in a few years) and while I am glad I have those homes, I don't have enough to buy more in that area.  Do not count on appreciation as other areas have not seen the same increase.

If a property isn't working out, don't be afraid to sell it. Plan on keeping it for a few years as you will lose money on closing costs.

Jonathan Bombaci · Answer

Networking and partnering up is key to growing quickly while remaining strong. I started with a househack and did the first 29 units with just my wife and I on the loans. Then partnered up for the first time on a 12 unit and ended up doing 59 units this year with that partner. You can go alot further when you start working with others than you can go on your own and I wish i knew that 10 years ago when I started.

Avery Heilbron · Answer

@Ashley Goes Don't limit yourself to learning and education. Those things are highly important and you should do them everyday. However, you should be analyzing deals, getting pre-approved, finding the right agent/lender and actually going out to look at properties. Action is key and it's a hurdle some people starting don't get around.

Account Closed · Answer

I thought of another one - some places require you to get a license for a rental that allows so many tenants to live in it, or they may have limits on how many unrelated tenants can live in it (to prevent some rentals for being used for student housing, for instance), and there are additional inspections and hoops you have to jump through and additional costs associated with them.

Be aware of occupancy limits - the term "occupancy limits" can be kind of an oxymoron, as you may have to allow more tenants than you thought.  Here, we have to allow basically 2 persons per bedroom plus one.  I saw once somewhere like NYC has occupancy based on square feet and it's nuts - like for every 5 square feet you can have a person live in the unit (don't hold me to that number, it's out of thin air), but it meant a crazy number of people could live even in a studio apartment.  The reason this matters is for things like utilities - they may use a lot more water, if you're paying for water, they may fill up the garbage cans to overflowing, may put a strain on septic systems, parking problems, noise, etc., etc.

Sometimes, you can get around an occupancy limit if your building just can't handle a large number of tenants, but you will need to be ready for fair housing to call you on an ad or rejection of tenants and have your reasons clear - age of the pipes, size of septic, size of parking lot, whatever.

Peter Schafer · Answer

@Ashley Goes make sure you have a good team. You don’t need to be an expert, but you should very well know an expert

Forrest Williams · Answer

Hi Ashley! Just because you don't have a W2, doesn't mean banks won't approve you. If you can show you've been making a profit with your business for 2 years, you may be able to get a bank loan. I would also highly recommend house hacking. It teaches you lots of homeowner skills you can't get through renting. If you buy a 3br/2ba and get two roommates, you'll have a desirable house and probably be living for free. I currently have a two-unit, my mortgage is $9 a month because of my tenant.

David Richter · Answer

Hi @Ashley Goes,I wish I would have read Profit First at the beginning of my career so I could’ve kept more money from the deals done.

Marlen Weber · Answer

Greta, smart question @Ashley Goes. @Jon McCarron advice to start with house hacking is ideal as well as continue your self education. It will take you far. Good luck on your journey.

Bradley Padula · Answer

@Ashley Goes Welcome! Start networking with everyone in the space, lenders, realtors etc. It is always better to have an initial relationship when you don't need anything and get to know them a bit and they get to know you and can tell them what your goals are. From there as you have questions down the road and need things, you aren't hitting up someone you've never talked to for loan, advise etc

As Jon mentioned, house hacking is a great way to get into real estate. It is how I started with my first property, a house hack fixer upper.

Feel free to shoot me a message anytime if you want to connect on a call, I'm also local to Boston area

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