Author Topic: Old Self Advice...  (Read 3317 times)

ECrew28

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Old Self Advice...
« on: March 06, 2013, 08:24:59 AM »
I am planning on getting into the real estate side of things within the next year to year and a half.  So I was wondering, if you could go back and give yourself one piece of advice or educate yourself differently to avoid a "gotcha", what would you do?  What lessons learned would you pass on to someone just starting out? 

Please, I understand there are some amazing people on here, so I am not looking to waste your time.  I am not looking for a step by step to get started, I can search the posts for all of that.  I just want some things that you would pass on if you were mentoring or something you wish you could go back and do differently. 

Thanks in advance all.

Another Reader

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Re: Old Self Advice...
« Reply #1 on: March 06, 2013, 08:49:27 AM »
Be very careful with the numbers.  Don't talk yourself into buying something that really does not pencil out because you want to get started.  Be patient until the right property comes along.  Study the actions of others that are active investors close-up.  Read as many of the real estate investing blogs and web sites as you can, but realize not everything published is accurate.  Figure out how much you really want to be involved in the operation and management of your properties.  Learn as much as you can about repairs, construction, and maintenance.  Whether you do the work yourself or hire people, this alone will save you a lot of money.  Save up a substantial cash reserve, because expensive repairs and other issues can crop up randomly.  If you are financing, get your house in order so you can show organized and documentable financial statements to a lender.  Get pre-approved for financing before you start making offers. 

arebelspy

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Re: Old Self Advice...
« Reply #2 on: March 06, 2013, 09:12:37 AM »
You don't need to jump into a "deal."  There are always more opportunities out there.  (And, in that vein, it's better to wait for a good deal than rush into a mediocre one.)

Be overly conservative with your numbers.

Treat it as a business from day 1.

Some of these are sort of "duh" common sense, but despite that, they don't actually sink in until much later, believe me.
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FI@2022Jem

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Re: Old Self Advice...
« Reply #3 on: March 06, 2013, 08:57:20 PM »
Think Cash Flow.  I was hung up on getting the lowest rates for mortgages (ie: 15 year vs 30 year) on my first investment properties because it saves money in the long run.  If I had a do-over, I would think more about cash flow and maintain 30 year mortgages over 15 year (especially in these low interest times).  The flexibility is worth it for me, especially since I am not very high income and although I can afford extra mortgages because of my low day to day expenses, I look higher risk on paper.  Oh well, lessons learned. 

Seeking the Brass Ring

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Re: Old Self Advice...
« Reply #4 on: March 07, 2013, 07:25:25 AM »
One of the best ways to maximize advantages and minimize risk is to owner-occupy by living in one side of the duplex you own.  This will allow you to get some experience without committing huge resources and there are a lot of tax advantages as well.  It's also easier to have all of your tools at hand without having to cart them around town when/if a project arises. 

Along the same lines, if you are going to manage the property yourself it's best to look for something that is close enough that it's not a journey to get there and back.  Walking distance is ideal.

GoCubsGo

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Re: Old Self Advice...
« Reply #5 on: March 07, 2013, 12:18:11 PM »
Pick one or at most a few local markets and get to know them inside out (study comps, have a realtor show you inventory, tour neighborhoods and actively follow rental rates).  Have your financing in place so that when you do identify your choice you are ready to move on it.  Be conservative with your estimates and don't ONLY look for homeruns or "steals" (a double or triple is definitely OK if you are a long term investor).

Have a good network of contractors/service people in place as they can be invaluable for keeping costs down (assuming you aren't doing the work yourself).  I often use them when evaluating properties to help cost out major projects for myself or clients.

Don't get too caught up in the "quick profit" shows you see on TV.  I worked with two investor clients last year (both first time RE investors). One only wanted to "steal" everything and low-balled close to 20 offers in a competitive market... net result was zero properties (and our market went up 11% during that time). His model was to flip the homes and it really hurt him as he missed out on some great projects and regretted it.  The second investor was more realistic and was able to flip two homes (doubles in baseball terms) and gained invaluable experience and capital for upcoming projects.

momo

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Re: Old Self Advice...
« Reply #6 on: March 07, 2013, 01:24:45 PM »
Things I wish were stressed to me when I first started out include the following:

1) The importance of using conservative numbers with cash flow and building up considerable savings. One repair such as a crack in the cast iron pipe under a lawn can cost a few thousand, add in reparing a roof, etc cost add up faster than you can breath. I found the only buffer was considerable savings and having good people easily accessible who could help out.

2) I would take time to really understand how safe the neighbors truly are and the types of crimes too. Sometimes the real estate agents honestly does not know this information. And if you plan on living in the property, wouldn't you want to know? Also, if you are getting your real estate license (agent or brokers) you will want to distinguish your services from everyone elses.

3) As for researching individual properties for yourself to buy for income, the number one thing I would say is build up a huge network to support you. Perhaps you are already skilled in repairs, maybe you are not (yet). Regardless unlike others I do not advocate being a jack of all trades, mastery a few and surround yourself with people who fill in your gaps.

For investment properties I found since my first purchase I wanted to ease my burdens, minimize costs, while increasing time & effort efficiencies whenever possible. So as much as possible be patient with yourself and the market while building up your team of people who can help you (licensed contractors, local utilities, lawyers, financing, and building inspectors). I use to spend most nights and weekends studying the markets I was considering (visiting them during random times to study the neighbors, schools, crime, and resources).

These are three main ideas I wish I practiced early and I recommend doing the same if you really want to understand new areas and bringing greater value to your prospective buyers/renters. Good luck! Cheers!
« Last Edit: March 08, 2013, 12:39:16 PM by Stashtastic Momo »

DoubleDown

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Re: Old Self Advice...
« Reply #7 on: March 08, 2013, 12:00:36 PM »
Old DoubleDown to Young DoubleDown:

- "Don't count on appreciation. You got mostly lucky with that in an overheated local market. It did not make you an instant real estate investment expert."

- "You don't need a real estate agent, and their interests are not likely your interests"