What's the #1 thing you wish you knew when you started RE that you know now?

Question

Specifically, what process/system do you have now that wasn't readily available when you started? Something you had to "learn through experience".

All thoughts welcome!

Kuriakos Mellos · Answer

Brock!  A few things:

A) I would never shop around for mortgage rates, the first few properties I just 'felt' that my mortgage contact had the best rate for me and never shopped around.  That was a mistake and has cost me I am sure a ton of money.  I always shop around on the onset and have mortgage companies really do their due diligence.  I am down to two contacts now that I use (or have used) for purchases and refinances - and feel like they truly have the best interest out for me.

B) Contractor Drama:  I swear books should be written on contractors.  It is very hard to build up a reliable set up of contractors/handy men/lawn people and so on. The first thing is: once you find people that are reliable and have good communication, pay them promptly and be respectful to them.   As your business grows and you use them more and more, you will see that they will respond to you faster, and work more efficiently for you and ALWAYS treat them with kindness. For larger projects (any remodels and so on) get a detailed scope of work: set timelines: and NEVER pay up front.  Always ask for receipts as well and keep tabs on progress.  My first rehab that was suppsoed to be a ten day project ended up being a 8 week drama filled adventure - with the contrator sneaking in at like 6 AM to begin work (because he was doing several jobs at once) finishing stuff mid way and then disspearing for a few days again.

C) RESERVES:  NO matter how strong cash flow is, how solid your tenant history has been, how new your property is - things ALWAYS break down. I know many people talk about the path to financial freedom away from work via real estate (which is the dream!) but it is almost better to have a solid w2 job if you could while you are beginning because you never know what could happen. People get greedy - and expand fast - and don't prepare for a broken water heater, a vacany and an AC unit going out in the same week.  A big hit like that can really put you back if you can't take the blow.  Keep saving, even when you think your reserves are in a decent spot because one or two big things going down can put a dent in your trajectory forward.  I had a rehab project that ended up being an absolute disaster and went over budget (electrical wiring had to be rerun, washing machine broke the first day the tenant moved in, water heater broke the next day meanwhile I had to replace a dryer at another property).  Reserves and savings helped me ride that out.

Hope this helps!

Kuriakos Mellos · Answer

@Brock Lanoza it's funny I look at the goals I wrote when I started just over two years ago and it was to hit about $5,000 a month in passive income in 5 years. I think I am averaging about $5,600 now at just two and a half years. I am aiming to try and do one more primary house hack at the end of the year - hopefully a duplex and then maybe add one more SFH rental by mid 2024.  From there - we will see! I am a HUGE of house hacking. Live in a house or dupelx and rent out a room and/or the other half of the building and then move on after a year. Rinse and repeat. I also and try and stray away from rehab projects. I know some investors LOVE that and it is their forte, I would rather try and buy something that needs more cosmestic touches than a full rehab. Lastly, I am going into a mode of saving up reserves and cash right now as much as I can.

Mario I Fernandez · Answer

I use Follow Up Boss. It is very flexible in many ways!

Todd Jones · Answer

That contractor section hit home. Everything mentioned here, I agree with.

There was a TV show with Adam Corolla called “Catch a Contractor “. Excellent idea. Not the best execution.

https://en.m.wikipedia.org/wik...

Andrew Syrios · Answer

Budget more for rehab than you initially think you'll need

Jill Addison · Answer

@Brock Lanoza something I just realized recently is that if you have a large, say, plumbing expense, like $4,000 or more, do not have your property manager manage that for you. Instead get at least three quotes and work directly with the contractor yourself. You care more about getting a good deal than your property manager does, and there is a huge spread in how much different contractors charge for comparable work. Also, you need to understand the big repairs that are needed and be more hands on involved with that. I have learned this the hard way.

Henry Clark · Answer

I have added the following as we have grown:

1.  Always calculate failure on a deal.  Know your downside.  You still may be cash flow positive, just not what you thought.

2.  Insurance- make sure you have enough coverage on Personal Property, not just Real Property, Business Income loss coverage, Clean up coverage.

3.  Scaling- See the path before you go down it.  We are lucky doing Commercial/Industrial, each deal stands on its own.  Once you are successful bankers want to loan more.  In SFH/MFH recommend you build a scale worksheet to see how much investment you need to get to your goal.  Then see what financing, leverage, support teams, cross collateralization will be needed ahead of time.

4.  Turn the violins off, stop listening to the stories, raise rents and do evictions as fast as possible.  Go for quality tenants.

5.  Nasty properties are the true money maker deals.  Everyone else is looking for clean and bidding it up.  Take the 99-940 Iwaena St Aiea just listed.  Great central location.  Clean looking building.  Nasty-   Most people would look at it and say who am I going to lease this to, it's too big or too small.  How am I going to finance and carry this property and note if I have to clean and build out for new tenant or what happens if they leave, and it sits empty for 6 months or a year.     I see 19,825 square feet, that I want $1.25 per square foot NNN per month.  Against a $800,000 ask.  Now how do I get that and who are my potential tenants.  Plus, it has I-2 zoning.  Didn't research but most cities have very limited Industrial zoning.  I like hard to find zoning, plus strategic location.  Want you to go sit outside a corner store or grocery store.  Watch the delivery trucks.  Make a list and follow them back to where they are storing.  Check out the auto detailers or paint shops.  Any craft people or a craft brewery.  Let your mind go with the flow.  Create value.

Brock Lanoza · Answer

Makes sense, @Peter Sosnow. Anything in particular around mortgages/debt?

Thanks for replying, @Mario I Fernandez. What do you use as your CRM?

Mario I Fernandez · Answer

The most important thing for me is having a Follow up system with my leads.

Having a CRM made a huge difference in my business. It is impossible to have everything on your mind when you have more than one deal going on.

Also, I think having a mentor can make a big difference in the amount of mistake you make when you area starting.

Best Regards

Peter Sosnow · Answer

@Brock Lanoza. Better understanding of mortgages/debt

What's the #1 thing you wish you knew when you started RE that you know now?

Most Popular Reply