What are some mistakes you made starting out?

Question

Hello BP, as a new member I would love to hear any stories investors may have of when they first started investing in real estate.

Did you make any mistakes, do you have any regrets, what did you learn?

Chris Baxter · Answer

Fantastic question...

1) Mistake: communicating with a tenant when property management was in place. I thought I was being helpful by seeing why the tenant was constantly late on rent... best to let PMs do their job!

2) Regret: scaling slowly and cautiously.  We spent a decade buying condos and duplexes before getting into MF.  I would have made the jump sooner knowing what I know now.

Still learning every day :)

Matthew Irish-Jones · Answer

@Gurjot Grewal

The two major mistakes I see seem to be universal.

1. Chasing cash flow and thinking you will get 20% returns in D class areas.

2. Taking on large renovation projects without knowing what you are doing.

Jim K. · Answer

I honestly thought I had to pretend to be a tough guy as a self-managing landlord. I didn't understand that, as a 6'2", 350lb guy in my late 30s at the time, I didn't need to look intimidating to the people I was renting to, I was intimidating enough just standing there. I need to look competent and mostly bored with the whole process, sure of my outcomes, sure of my choices. I'm sure it's a whole different story if you're getting into the business in your 20s with a fresh face and kind eyes, but that wasn't me.At the same time, I learned a very, very valuable lesson growing up that translates well to landlording. If you have to choose between looking like someone who is overly suspicious to the point of paranoia or someone who's trusting and credulous (and some of your tenants will certainly make you choose) PICK PARANOID EVERY TIME. Nine times out of ten with morally weak, silly people, it's the right choice. It solves a lot more problems if they're ridiculing you for your paranoia behind your back than ridiculing you for your innocence behind your back. Rest assured, they're desperately trying to put you down behind your back either way, because that's what morally weak, silly people tend to do to feel better about themselves, and, well, you're the landlord, and that's all they know.

John Morgan · Answer

Not leveraging and paying cash for my first two rentals. Worst decision ever. Since then, I’ve scaled up by using other peoples $.

Huong Luu · Answer

The biggest learning for me was not understanding the difference between the mortgage options when I started out. I would sign up for and renew at the 5yr fixed. It was only years later that understanding the variable rate, that I knew I left money on the table.

The other big learning was not increasing the rent by the allowable amount per year. The 1-2% adds up over time.

Another big learning was thinking family would help/be at the same mindset about money, risk and work ethics.

Everyone who commented gave you great advice. Just a few points for you to consider, as every coin has 2 sides:1. Scale at your risk level, that means leverage at your risk level too.

2. Having a great relationship with your tenants (if you are a small operator) can be a good thing. They are your customers.

Good luck

Sam Yin · Answer

Biggest regret was not going into multifamily sooner. This was because there was not as much information out there as there is now. Without a mentor,  and without the internet,  I spent early years working hard and saving to buy a SFH every few years.

Wasted a lot if time, minimal cash flow,  and slow scaling.  Hit the internet hard a few years ago, learned a lot, scaled, and achieved FI. This allows more risks taking for higher profits and diversifying portfolio.

But the flip side is learning from those slow growing years. It's worth something on it's own as well. Be careful not to jump too high or run too fast at the start. You may hear a lot of success stories by younger people... but you haven't heard all the unrecoverable failures either.

Jake Guthrie · Answer

Me? Took on to many properties at the start not understanding everything a landlord or property manager really had to deal with. It takes people a lot of time and money to get things going and even more time and money if they don't understand what they're getting themselves into.

Theresa Harris · Answer

Be realistic with what you want.  Listen to others, but know what your comfort levels are and stick to them.

If I buy more places, I'd avoid condos.  The strata fees add up and they don't appreciate as much as houses.

Get the longest mortgage possible (eg 30 years).  This will keep your payments lower and give you more room when you go to buy other places.  You can always pay them down faster if you want.

Look for homes with legal suites.

Eliott Elias · Answer

1. Putting to much trust into people. Not everyone is untrustworthy but you should always make sure you protect yourself as much as possible. There are some people looking to make quick unethical money out there

2. Rushing into things. Always do things the right way, even if it means taking more time

What are some mistakes you made starting out?

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