How To Avoid "Stupid" Investing - Penalty Is Severe For "Stupid"

[Account Closed]

There are plenty of ways people get into trouble investing. This is just the "short list" of things to avoid:

1. Don't promise what you can't deliver

2. Always use a Title Report

3. Always close through escrow

4. Know your exit strategy

5. Never take someone's legal advice on Bigger Pockets. Ask a real, live, attorney in your area. You can start with AVVO.com which is real attorney's answering real questions (for free)

6. Walk the neighborhood you are buying in before you buy.

7. Get it in writing. (whatever agreement you agree to)

8. Know the difference between VA, FHA, Conventional, USDA, Jumbo, Hard Money, Private Money - and know when is the right one to use.

9. If you do Subject To KNOW what you are doing and have reserves! If you don't know ASK!

10. Not all Turnkeys are the same. There are HUGE differences. Ask if there is any "built in" equity. Ask if bullets are flying in the neighbor. Actually be an adult and do your due diligence. Nobody but you is looking out for your best interests.

11. Run the numbers on all real estate investments. See if it's profitable before you buy.

12. Don't think Wholesaling will solve your problems. It works in some circumstances but you have to be HONEST to the seller about what you are up to. Otherwise it is lying and fraud!

13. No, those shows on HGTV - "Reality TV" are not real. They are staged, pre-planned and programmed and no you can't do the perfect flip in 40 minutes.

14. According to the National Association of Realtors, the average flip grosses $65,000 but after subtracting the cost of the rehab, realtor fees, carrying costs, the NET (and that is the one that goes into your pocket) is $15,000 and takes 6 months. You are buying a job in the most highly taxed way.

15. Don't put 20% down to buy a property to get $100 to $200 a month cash flow. That's insane. One AC Unit, roof, water heater, trashed house or other common problem and you are in the hole for the year maybe two years. And the comment "It will appreciate over time" is crazy, maybe it will and maybe it won't. I've been through the cycles - real estate doesn't always go up. In fact in some areas like Ohio, Tennessee, Michigan, value hasn't gone up much at all.

16. Don't buy a $50,000 Turnkey and not expect problems.

17. Find a great Property Manager. Don't settle for nonsense. Some people just aren't cut out to be Property Managers. Dump them.

18. You are running a business, act like it.

19. Step back every 6 months and look at everything involved in your business as though you are starting new. Is it running smoothly? Is it producing the results you want? Are you doing enough of it?

20. Back up your records and store a copy in another location in case of fire.

21. Don't brag on whatcha got. That'll get you sued. Lawyers look to sue people who have assets.

22. Don't worry about setting up an LLC or C Corp or LLP before you buy your first property. You have nothing to protect. It's only an excuse to never get started. Buy umbrella insurance instead.

23. If you already have an LLC (or many LLCs) follow the Operating Agreement because that is what the whole protection is about. That is what protects you in a lawsuit. Nothing more, nothing less. If you got your LLC on legalzoom or fakellczoom or whatever, 1st make sure you even have an Operating Agreement, 2nd have a local attorney review the Operating Agreement, 3rd follow the Operating Agreement, 4th don't come crying to us if you didn't follow 1st,2nd,3rd

24. No, lenders won't lend to you if you can't show income.

25. Keep good records for the IRS

26. Don't do a Partnership, look into a Joint Venture instead. Talk to an attorney for why. Basically, in a partnership you are assuming all risk that partner has, inside and outside of investing in real estate. Why would you even do that? 

27. Do 1031 exchanges where it fits.

28. Your IRA and 401(k) stink. They are false security and the rules could/will change against you going forward. The current crop of presidential candidates have promised your money to everyone that isn't productive. At some point someone like them will be in power. Woe unto ye who don't take note. Set yourself up to succeed, not to depend on "passing promises".

29. Never Assume. It makes an *** out of U and Me. Get it in writing.

30. Learn to do your own comps. Others will manipulate the numbers and that alone will cost you thousands of dollars.

31. Be honest, treat the other guy fairly, build relationships.

Just ran out of steam. But, this is some of what 25 years of investing has taught me.