What are the scariest things about real estate investing?

[Bradley Buxton]

There are a lot of new and old investors on the forums. In honor of Halloween what are the scariest things about investing past, present, or future for experienced investors? What's the scariest thing for new investors?

[Bruce Woodruff]

You can lose all of your money. And more. It's pretty scary coming out of a flip deal owing money......

[Alan F.]

Quote from @Bradley Buxton:

There are a lot of new and old investors on the forums. In honor of Halloween what are the scariest things about investing past, present, or future for experienced investors? What's the scariest thing for new investors?

 Emphatically agree with Bruce, taxes are frightening too.

[Bradley Buxton]

Quote from @Bruce Woodruff:

You can lose all of your money. And more. It's pretty scary coming out of a flip deal owing money......

 This is probably the number 3 fear after public speaking and death. 

[Bruce Woodruff]

Quote from @Bradley Buxton:

Quote from @Bruce Woodruff:

You can lose all of your money. And more. It's pretty scary coming out of a flip deal owing money......

 This is probably the number 3 fear after public speaking and death. 

It should be #1. Ask me how I know. I'd rather talk all day and then take a bullet..... 😂

[John Mason]

Not having right exit strategy, bad contractors not showing up

[Mike Dymski]

Government actions are unpredictable and scare me the most.  Absent them, risk is controllable over time.

[Alecia Loveless]

@Bradley Buxton The scariest thing I’ve dealt with was a bad building inspector. He missed significant repairs that turned a $10,000 refresh into a $60,000, 8 month rehab.

Fortunately generous Covid Appreciation made it all ok some time later and I’ve since found a pitbull of a building inspector that I won’t do a deal without.

[V.G Jason]

When you think know what you really don't know. 

[Christopher Pride]

For me, in the LTR game, it's tenants.  One bad one can wipe out a whole year's profit.

[Becca F.]

Agree with @Bruce Woodruff on the losing money - I was going to attempt my first flip OOS (Indianapolis). The hard money loan interest rates scared me, renovations were going to go over, ARVs probably overestimated, got out of it. I've done a local renovation where I was on site at least once a week and thought I was ready to do a flip or BRRRR OOS...nope.

[Becca F.]

Quote from @Mike Dymski:

Government actions are unpredictable and scare me the most.  Absent them, risk is controllable over time.

I self manage a SFH in the Bay Area in a very pro-tenant city (some cities are a little less pro-tenant than others). Here are the new rental laws in California for 2024. One of them being you can't charge more than one month security deposit. Providing relocation assistance to tenants, for example, if I want to sell the property or move back in - this can range from one month's rent to thousands of dollars (e.g tenant has a disability, minor children, elderly it will cost you more), depending on the city. Kind of like a cash for keys

https://martinezlawcenter.com/new-rental-laws-in-california-...

Most of the long time investors I know haven't had problems but if you get a "professional tenant" in look out and call your RE attorney.  SFHs are largely exempt from many regulations such as rent control. There are so many local ordinances that can get confusing. 

[Charles Perkins]

REI comes with many fears. In the beginning I only thought I knew the risks. There are several things to fear money loss on a bad investment, government involvement in RE, bad tenants that cost time and money, hidden maintenance issues and/or land issues and the list can go on.

Today, I don't fear money loss or tenants,  the big unknown is how much the government wants to get involved in either taxes or landlord/tenant issues.

[David Fern]

Hurricane Helene shows us that natural disasters are part of the risk in REI. Very sad, and an eye-opener for me. Prayers to all involved. 🙏

[James Hamling]

I had thought it was finding good deals....    Until I faced it and got good at finding deals. 

Than I thought it was all the things that could go wrong in the flip, hidden gems like K&T hidden in the walls, shot main-lines, etc.....    Until i ran into it all, faced it, worked through it and got good at turning problems into profits. 

I than thought it was tenants, all the "what if's"; what-if they have a fire, what-if there is a shooting, dead body, drug raid, break-in, squatters, feces art, etc etc etc.....    Until I ran into it, overcame and prospered. 

It's always the next thing that's scariest. The fear of unknown and the bad potentials, but then sh_t happens and ya remember that we got a choice to lay down and be done in by it or roll-up the sleeves and get to work and be a solution maker. 

So at this point, IDK, I think maybe the Boggy-man looks under his bed to see if I'm there, lol.    I'm not too scared of anything, I'll deal with it as it comes, that's what I am, solution maker. 

[Kristi K.]

Quote from @Bradley Buxton:

What's the scariest thing for new investors?

The snake behind the water heater during rehab. 

[Dan H.]

Quote from @Becca F.:

Quote from @Mike Dymski:

Government actions are unpredictable and scare me the most.  Absent them, risk is controllable over time.

I self manage a SFH in the Bay Area in a very pro-tenant city (some cities are a little less pro-tenant than others). Here are the new rental laws in California for 2024. One of them being you can't charge more than one month security deposit. Providing relocation assistance to tenants, for example, if I want to sell the property or move back in - this can range from one month's rent to thousands of dollars (e.g tenant has a disability, minor children, elderly it will cost you more), depending on the city. Kind of like a cash for keys

https://martinezlawcenter.com/new-rental-laws-in-california-...

Most of the long time investors I know haven't had problems but if you get a "professional tenant" in look out and call your RE attorney.  SFHs are largely exempt from many regulations such as rent control. There are so many local ordinances that can get confusing. 

Prop 33 is trying to get the exemption on rent control of SFR removed. This is the third time in the last few years that this has been presented to CA voters. The same prop is trying to remove the no rent control on new builds and no rent control between tenants.
  So if prop 33 passes it will be possible to cap rent increases from one tenant to the next.

A recipe for blight. LL would have no incentive to paint, update flooring, etc. have a rental next door to your SFH would likely mean being next to a delapidate SFH.

The aids health foundation has spent over $40m trying to get this to pass.  If I donated to the aids health foundation expecting it to go to aids care or research, I would be very disappointed with this use of the money. 

The last polling I saw showed that the large spending by the aids health foundation was working.  The polling showed its passage was likely.   The difference between this attempt and the two previous attempts that failed badly is the large amount of money the aids foundation is spending.  Their commercials seem higher quality than the no on prop 33 commercials (who have similar budgets but from much more sources).

Hopefully voters educate on this and strike down this proposition for the third time. 

By the way if I see the same proposition that was previously on the ballot and got struck down, I automatically vote against it on principle regardless of how I voted for it when it was initially on the ballot.  I may give an exception if at least 5 years have elapsed, but not for something that recently got voted down.

[Shiloh Lundahl]

Suddenly realizing that what you don’t know can hurt you a lot.

[Todd Anderson]

With many of the investors I work with the number one fear is :  Taking The First Step and saying YES. 

So many new REI get stuck in the "paralysis of analysis". Many times even looking at a good deal it is hard to say yes to that first deal.

[Bradley Buxton]

It sounds like the biggest fear is getting funding and getting started without making a big mistake. I think people forget the risk involved with all the guru's making it seems easy in their "classes" and it's good that a deal might be a bit scary. Those scary clowns will change as you get bigger and more deals. Having a healthy fear going into any deal can keep your sense sharp to avoid potential pitfalls.  Even David Greene had some bad experiences that last few years.

[Isaura Orellana]

Buying an out of state rental property from a realtor, wholesaler or off facebook or zillow etc as opposed to from an operation or turnkey provider who has an active, substancial, and effective boots on the ground team or teams to support you after you close on the sale. 

[Becca F.]

That's crazy. I don't remember what Proposition numbers Prop. 33 was in 2018 and 2020. The way Prop. 33 is presented ("rent is too high") I could see people voting yes on it. As a general rule, I tend to vote against anything that favors rent control and will increase property taxes. I have 25 special assessments on my property tax bill, which I think is insanely high. 

[Becca F.]

More scary things: sewer line and foundation issues. Get a sewer line scope and use that as a point of negotiation if you're the buyer. 

Horror story #2: while selling off one of the Class C Indianapolis properties, buyer asked me to pay replace the sewer line before closing... absolutely not...here's a partial credit (check to written out to contractor from closing proceeds so buyers don't pocket the money)