What were you the least prepared for?

Question

As someone with very little experience, I'm curious to what was the thing that caught you off guard about you journey into real estate investing. It could be when you started out or even something going on today. Any advice is super helpful it doesn't matter what you're specialty is, I'd just like the chance to learn.

Jaron Walling · Answer

@Richard Poist Financial IQ, as Robert Kiyosaki puts it, comes in many forms so don't think real estate investing is the only path. THis is a REI website full of great people but keep an open mind. Don't be discouraged by other peoples success. Learn from it, research it, use it as fuel, and ignite your motivation for investing. If you don't you'll sit on the sidelines for years.

My biggest regret was renting and just living in my city for 6 years, taking no action. Had I scraped together enough cash for a down payment who knows where I'd be. Getting the investment train up to speed takes a long time.

If you can do that you'll be in a position to take risks and buy ____ (insert an asset). Understand the cash-flow of working a 9-5 job, compared to working your own business. It's very different and utilizing the income correctly pushes you away from working a real job.

Stacee Evans · Answer

This is such a broad question, but the mistakes that lead to the worst outcome were poor tenant screening for my rentals and even air BNB's.  If you have rentals, have your criteria and stick with it.  It's better to have a property vacant or charge less than market to attract a high quality tenant then to get someone in fast.  It's easier than ever to screen tenants with all of the companies that can do the work for you.  I use mysmartmove.com, but there are plenty of other ones too.

Marcus Holloway · Answer

On our first deal, there were a lot of trial by fire situations. Most of the situations, for me, that had the largest learning curves all involved dealing with contractors. We learned very quickly that we needed to grow a network of contractors and not put all of our eggs in one basket. In hindsight, our 1st GC treated us pretty good and didn't gouge on pricing. We were really fortunate in not being taken advantage of going into a full gut rehab as 1st time investors.

On our 2nd project in a different market, we weren't so lucky. We had to fire multiple contractors that had every intent on taking advantage of our lack of experience. Get good references, check reviews/previous work and get multiple bids on everything.

Lynnette E. · Answer

What caught me off guard is how much people are influenced by those around them.  And it seems that it is often in a negative way.

A stable female single mom, 6 years of renting, never late, always clean, gets with a 'fun' guy, good job, accepts her kid.

Then BAM! they both quit their jobs because they will not give them a week off immediately to go to Disneyworld with their stimulus money.  Then decide they need a break from work.  And feel entitled enough to just say they I do not get rent until they have their 'break' from working and they 'feel' like getting jobs.

Or a married couple, 3 kids, near teens and teens.  Paid rent, kept the house and yard up. Never a problem.   She decides to leave, then stories, late rent, pigsty,  new papered puppy, now ruining my hardwood floors because dad and 3 kids clean up nothing.  New girlfriend snuck in, still no rent.  Supposed to leave this month, supposed to do a lot of things though.  Lies and stories.

So, I really did not expect the change in behaviors with a new person or loss of one person.  Relationships have a major influence on some people.

Ian Plocky · Answer

@Richard Poist - congrats on starting your RE journey!

I think the thing that I was least prepared for was accurately predicting cash-flow from a spreadsheet. What they say is true - if you find a smoking hot cash-flowing 4-plex in a cash-flowing market (say, C are)... you're going to have vacancies! And possibly, a lot of them. Youre going to have bad tenants, and possibly - many times!

I live in Southern California... while its a pretty tenant-friendly state, the "Class" and income level is so high - I rarely see REALLY bad tenants and don't know any friends or family that has needed to deal with an eviction.

However, in other markets... that's just not the case. Be EXTRA conservative with your numbers. And at the same time, the only mistake you can make in Real Estate is not starting earlier.

Hope this helps. Reach out anytime!

Kyle Ly · Answer

Something that caught me off guard was how slow it seems in the beginning of my investing journey. I'm still working on saving up for my down payment and safety net for my first investment property, so I'm right there with you!

Scott Lundgren · Answer

@Marcus Holloway This was a costly lesson for me.  I believed that I could research and find the same answers or solutions that experienced investors or partners knew, but without having to include them in my deal and split my profits with them.  And for most of the time I could, but when I made a rookie mistake it would cost me far more than splitting profits.  The greed of telling myself that I could do it on my own and make more was the biggest mistake of my RE career.  It took me many 'rookie' mistakes, or using your term 'trial by fire' losses before I realized that its just not worth trying to be a jack of all trades investor.

Treat it like a business from day one, if you were to open a restaurant would you be the cook, server, greeter, janitor?  Of course not, so decide your role and find a quality partner or sub for the rest.

I started off wholesaling but now I'm heavily invested in rentals.  I don't want to be the property manager so I hire a PM team.  I don't want to rehab so I sub that out, but I love to hunt the deals down so I focus my time on acquisition.  This allows me to stay in my area of expertise but still have the business running smoothly.

Rodney Lorenzo · Answer

I was the most surprised in thinking that having enough for a down payment and a credit score above 700 would land me my first deal with no problem. WRONG. It's challenging as it is for a newbie, but in a sellers market, you're competing with more experienced buyers that beat you out with no contingency offers. I also didn't expect lenders to change terms after going into contract, wiping out my cash reserves and closing costs, thus killing the deal. In this market, lenders don't seem interested in your first time business hoping to make you a repeat customer. I was also flabbergasted at thinking RE agents do more than just sign you up to get leads from the MLS and sit back letting you bring them deals. How many times did I have to reach out to the listing agents for financials because by the time the agents got them, an offer was already accepted. Some take on too many clients, making you feel like a number. Educate yourself by networking, reading books, listening to podcasts, etc, because no one will do it for you. Will this deter me from investing in RE? Not by a long shot

What were you the least prepared for?

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