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Updated almost 7 years ago, 12/19/2017
Mistakes when starting out
I did not create partnerships soon enough. By that I mean, I've traditionally gone at things by myself and tried to figure out things by myself. There is a truckload of information available to you, right in your area. BP is great for linking up with those folks and learning, but get out and have coffee/lunch/drinks with potential partners and investors sooner rather than later.
I’m still pretty new myself but I’ve done a lot already including things I see all the time on here from newbies. I’m mainly referring to the small stuff like business cards, website design, and LLCs.
I made the mistake of making an LLC too early. That cost 900 bucks (had a lawyer do it). I didn’t get business cards or a website until about 8 months in.
Point is don’t spend all your time on the small stuff, go find deals or meet people. I see this especially with new wholesalers.
I am a new investor as well, but one thing I've learned is to not overload yourself with information you're not a point to use. For instance, I was looking at books about 1031 exchanges and I haven't even brought a property yet! Lol silly I know, but I caught myself before spending my time reading something that's far above my investing point, and even understanding. Of course, it's great to be knowledgable of things like that, but when you're just starting I think it better to stay inquire information that you can readily practice and use.
Jay Helms thanks for the advice! I'm looking to go in the first couple deals with my brother since we're new to investing! 👍🏻
Caleb Heimsoth that's great advice! Even with the very small stuff like business cards and a website, would you still wait to get those or get them already for networking opportunities ? And if I'm looking to buy and hold, what types of stuff would you put on a website ( for future reference)? Or would you only have a website just for flipping ?
Taylor Johnson I totally agree! I was about to start reading a book on taxes for real estate but I realized I shouldn't necessarily read it yet if I haven't gotten an property yet. Haha
@Garrett Vita business cards are probably fine since they're very cheap. I got mine for about 20 bucks. But stuff like an LLC or complicated website can cost much more and I don't think it's worth it. I do buy and hold and I have a website. It's still a work in progress but it has some photos and a brief bio about myself. That's about it.
The mistake that stands out most clearly was buying our first live-in flip (first property ever) and not understanding all the little intricacies on mortgages. We went with what some average joe broker suggested, a 5 year fixed at 3.09%. Then interest rates went down about 0.75%. Then when we sold we had to pay an interest rate differential penalty = $7200. And know that I know more and look back on it, I'm dang lucky it wasn't more. Some penalties that I've heard about have been $12k, $18k, and $32k. Always go variable with a simple 3 month interest penalty if you plan to get rid of the property.
The mistake I made was that I didn't start marketing the property soon enough. We bought one of our houses at the end of May 2015. I made a list of repairs and started doing all the work. When the house was finally ready about 3 weeks later, I put a sign up and started showing the house. I was trying to race to get a tenant approved and there just wasn't time to get it done in less then a week. We ended up paying another mortgage payment and waiting until August 1st to get a good tenant in there. I now start marketing the house as soon as we close on it. It's tough to be working on a house and having to stop to take calls or show the property but this has worked for me on the last 2 houses.
I also learned to get contractors lined up as early in the process as possible. Contractors are not the most reliable and if you wait to long you will regret it. I needed a new counter for a hall bathroom. I called the guy I use and I thought all was good. A week later, I didn't hear from him. I called several times and left messages but no reply. I finally got ahold of him and the counter was never cut. I finally got the counter top but I had to drive 2 hours away to pick it up and I installed it several days after my tenants had already moved in. This is not the way I like to do things. They moved in and had a remodeled bathroom with everything new except no counter or sink. They are a family of 4 so I know they needed that bathroom to be up and running asap.
@Garrett Vita I think the two biggest things are one just doing your homework by reading books, listening to podcasts and utilizing BP and two determining what niche you want to get involved with. I think you will have much more success if you concentrate and become an expert on one investment strategy. Good luck!
Learn how to analyze properties quickly and make offers quickly. Hesitation will lose you a deal in a competitive market.
Take action and network. Do not give yourself information overload from too much reading.
Originally posted by @Taylor Johnson:
I am a new investor as well, but one thing I've learned is to not overload yourself with information you're not a point to use. For instance, I was looking at books about 1031 exchanges and I haven't even brought a property yet! Lol silly I know, but I caught myself before spending my time reading something that's far above my investing point, and even understanding. Of course, it's great to be knowledgable of things like that, but when you're just starting I think it better to stay inquire information that you can readily practice and use.
I have to agree with this. There are so many different strategies to investing into RE. Spend time learning as much as possible about the side of REI you want to do.
Only other thing I will add is that there will still be that feeling of unknown and nervousness when making that first purchase or two. Doesn't matter how much you learn from reading there still isn't anything like hands on experience.
Don't ever go with the cheapest contractor... pay more for someone you trust and does higher quality work. Build relationships with the contractors you like working with, they're worth every penny! In the beginning we got burned by bad ones, and it really stings!
Don't try to do it all yourself! We wasted months on our first rehab, trying to do all the work ourselves after our regular jobs. Could have had the thing rented out much earlier, but I stubbornly thought I was saving money. I wasn't. The holding costs made me go way over budget.
I still do the things I'm good (and fast) at and enjoy, but the rest gets farmed out to the pros.
Always keep an eye on what's going on in the market around you.
My first rental property was 2 blocks from where I went to college. Easy! I have a guaranteed pool of potential tenants who want to live off campus for larger rooms, less restrictions, etc. For 3 years, it was.
But in my 4th year of owning it, the university poured millions into new on-campus apartments that weren't being lived in (for all the above reasons). So they changed the rules and instead of only requiring freshmen to live on campus, they now required freshmen and sophomores to live on campus. Overnight (or what seemed like it) my pool of potential tenants was cut by 1/3! After that it got much more difficult to find tenants and I ended up getting students I wouldn't have normally allowed in because I just wanted some rent coming in.
After 2 years of struggling to collect, I sold the property. I made a 38k profit on the sale...but I learned a good lesson about keeping up with what's going on around my houses.
So many things, and I'm still picking up new lessons:
1. Focus on relationships that will scale. I bought my first house with USAA, a great bank that I still love, but I know now that they don't offer business checking, or portfolio lending, which I'm learning are a must to expand beyond the basics. Same with contractors, every time I hire a contractor to do ANYTHING now I write down their info on my list and keep them in mind when I'm looking at other properties and projects.
2. You WILL make mistakes, but in my opinion if you are buying an appreciating asset and adding value, you're more than likely going to come out ahead in the long run if you make a good effort to do it intelligently. Just don't buy too high, price is king.
3. Ask lots of questions on BP and surf the forums. (Check!) :)
4. Listen to the podcast whenever you have downtime! Can be done for free, so why not?
5. Identify your strategy and master it before branching off and trying to do too much. Wholesaling, BRRRR'ing, Flipping, Notes, House Hacking, there's just so much... Try not to chase the butterfly TOO much, so to speak. Some will disagree with that.
@Caleb Heimsoth ahh ic! Ill start getting on some business cards as well! I never really thought about having business cards as a buy and hold investor because I usually only see business cards with affiliates, wholesalers or flippers. When you're done with your website, would it be possible if you can send me a link to it, so I have some kind of example for when Im ready to make one? thanks!
@Brianne H. yikes, that sucks, but yeah you're right. thank goodness it wasn't more! ill keep that simple 3 month interest penalty in mind if I get rid of a property. thanks for the advice!
@Richard Beatty i totally agree! I will try to do that as best as possible. I feel that it's easier to fall for that especially since Im new. thanks!
@Alan Pederson When you start marketing the house at the time of closing, what pictures/ what do you show your prospective tenants if they ask to see what it looks like especially if you're going to remodel parts of the house.
Yikes, Im sorry you had to deal with that, Im sure your tenants weren't happy about having to wait for a sink and counter.
thanks for your input!
@Joe Vastola that's great advice! thanks ! thank goodness BP is here haha
@Account Closed I agree! I think it gets easy to get caught up on learning, so you think you got to read even more, but sometimes the best thing is to take action.
@Derrick E. Yeah! I think the best learning sometimes is just hands on experience. Books can only get you so much information, whereas experience gives you a different type of learning.