Reflections from a Real Estate Investor: If I Could Go Back . . .

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What would you do if you could go back and do it all again?

This is my favorite question to ask those who have found significant success in any field because they’ve been there, they’ve seen the choices, made the actions, and lived with the results.  Today I want to share my thoughts with you on what I would change (and do again) if I could go back and do it all over, as well as get your thoughts on the question as well (in the comments below)

Obviously, the question is meant to stir up conversation and teach others from experience – not fall into a lengthy debate about the “butterfly effect” and how our past mistakes make us who we are so we wouldn’t change anything.  Of course we can’t actually go back. The point of this question is to help those who have not yet been there to learn from past mistakes and successes of those who have been down the road so they can grow faster.

So without further suspense, If I could go back I would:

1.) Start Sooner

This is probably the first and most obvious answer most investors will give.  While I started significantly earlier than most (at the ripe old age of 21) I still wish I would have started earlier. No, not buying property. If anything – I probably jumped in too soon for that.

However, I wish I would have started focusing on real estate investing sooner, growing in knowledge before jumping into the game.  I never gave much thought to real estate investing until I stumbled into it with my first personal home. I made mistakes starting out that I may not have made had I known more before my first purchase.

The point: You “start” investing long before your first purchase. So start now.

2.) Connect faster

During my first few years as an investor, my wife and I were on an island. Not a real island like Hawaii (I wish) but a metaphorical island where we were the only ones we knew investing in real estate. Most of my friends were too busy getting drunk or going to college to engage in any sort of serious conversation about the financial world, and most adults I knew were lucky to even own a home.  I began getting involved at BiggerPockets and found a wealth of information and connections – but I still didn’t have anyone local I could talk with.

The problem wasn’t with my location, the problem was me.

I didn’t find any local investors because I wasn’t looking.  It wasn’t until several years in that I met other local investors and began engaging face-to-face with them. I discovered a vast treasure trove of wisdom and information that can only be found through experience.  I found a local mentor (who I still talk with daily) and began discussing deals, strategies, and stories over cups of coffee.

The point: Make an effort today to find these local investors and connect with them. They will become your closest friends, allies, and business partners.

3.) Stay Away From Stupid Debt

I once believed that debt was a tool and could be wielded like a sword for great power. I’d do the math and see that I could save X amount of money by applying for this credit card or that line of credit. I even fell for the “save 10% by opening up a store credit card” trick.  I thought I was too smart for the credit card companies.  The thing I didn’t take into account was my own weaknesses and unforeseen circumstances.

I now see debt a little different.

Debt is like a sword with no handle. It does have a lot of power and can magnify your purchasing power, but it can cut you up quite a bit in the process. If I could go back, I’d stay away from stupid debt (credit cards, store credit, and maybe even student loans) and change my belief that there is “good debt and bad debt” to “bad debt and worse debt.”

To steer away from the hypothetical, let me give you an example of what I’m talking about. One of my first flips was funded primarily using hard money and credit cards. I maxed out several Home Depot credit cards while remodeling the home (a technique I’d read in a book from a guru). I saw this debt as “good debt” because it was 12 months interest-free. (I’m sure you’ve seen the same promotions.)  However, Home Depot and CitiBank (the bank behind the card) are not stupid nor generous. They understand human nature.

When prices began to drop suddenly I was forced to refinance the home and turn it into a rental. The bank, however, would not include the Home Depot cards into the refinance and as a result I carried that debt for a long time – paying huge amounts in interest and severely affecting my ability to get future mortgages.

The point: Get your credit in shape now and stay away from credit cards. You are not smarter than human nature and the inevitability of unforeseen circumstances.

4.) Stay Away from Renting to Family and Friends.

I’d read it a million times. It made perfect sense. I understood the concept.

However, I still did it.

To this day – I still regret it. When you begin obtaining rentals – you will have family and friends looking for a place to live. This never turns out okay. I’m sure you’ve heard that lending money to family or friends almost always turns out bad – but renting to them is even worse.  It creates a “slave-master” type of relationship and often ends with a severed relationship.  The landlord will always be the greedy bad guy.

The point: NEVER rent to family or friends.

5.) Make a Plan

Not everything I did at the start was a mistake. A lot of things I’m actually quite happy with and I would do again and advise others to do the same. Perhaps the most important was creating a plan.

Like, an actual written plan.

Having a written plan is like having a road map – it shows you the best way to get from A to B and keeps you from easily deviating to C, D, or Z.

When I decided that I wanted to invest in real estate for the long haul (and retire by thirty) I made a mathematical plan that would get me there. This plan simply penciled out my strategy to buy small properties until I could “trade up” for larger ones. In essence, it was my Monopoly strategy on paper.

Sure, there have been deviations from this original plan due to inevitable changes, both internal and external, but overall I’ve followed the spirit of it and as a result am actually much further along than my plan had suggested.

The Point: Write down your plan, then simply follow it.

What About You?

No matter what stage of investing you are at (newbie, pro, or inbetween) what are some lessons you can share from your journey?

If you could go back -what would you change? What would you do the same?

Please let me (and the BiggerPockets community) know by adding a comment below! I look forward to learning from your past as I hope you can learn from mine!

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About Author

Brandon Turner (G+) is the BiggerPockets.com Senior Editor and Community Director. He is also an Active Real Estate Investor (Flips, Apartments, and Buy-and-Hold), Entrepreneur, World Traveler, Third-Person Speaker, and Husband. Come hang out with him on Twitter!

15 Comments

  1. Brandon,

    Great post, I would add just a few points.

    Do not try to reinvent the wheel; the landlords that have come before have figured out this business, you might tweak the status quo but save yourself a lot of grief and pay attention to the example set by your elders.

    For example, if the rent is not in your had by the date on the lease, a notice to vacate should be placed in their hand. If you believe the story concocted by your tenant you WILL be sorry over time.

    If you do not enforce all the terms of a lease, things will go badly. In the end, when in court your tenant will use the same lease they ignored to club you into submission.

    My early regrets are not taking the advice above.
    Not continuing to buy after my first experience in REI at age 23, the regret above is why I stopped.
    Selling two of my 3 unit buildings, one of which I was able to buy back.

    If I had it to do again I would have listened to my elder mentor who told me to sell everything in 2005 and buy gold at just under $500 an ounce. He has since sold his gold buying up the bad notes on 90% of the REI he sold. This allowed him to receive an average discount of 50% on some very nice properties.

    I took his advice on two of my least renovated 3 units, selling for six times the price I paid and later buying one back for slightly over twice my original purchase price. The real boon was the new owner along the way totally over renovated the building. Replacing all of the mechanicals, leaving me to paint and put new flooring in.

    The most important lesson I have learned over the years is not to blind oneself. A bad deal is just that, and paying for potential is not a good idea. Never fall in love with a property, crunch the numbers and use your profit formula. Square pegs never fit into round holes.

    Always have a secondary exit if your primary strategy does not work out.

    Never hesitate at a good deal, your competition will not.
    I lost $300,000 profit on an estate house, by putting off signing a purchase agreement by 8 hours. The estate lawyer was a young man who was panicked by a burst water pipe on a second floor of a property, it was his fault as he did not pay the gas bill allowing the heat to be shutoff.

    In an effort to cover his tracks he agreed to sell the place for $35k, comps he was looking at where from across the tracks showing $85k. The investor that offered $55k got the deal and sold the place in the bubble for $380k with $5k towards repairs.

    • Brandon Turner

      Great comment Dennis – thanks! Paying attention to those who have come before is huge. I think that’s one of the things that makes BiggerPockets such a powerful tool for investors. And yeah, Gold would have been nice to get at $500 :)

  2. Great post! I completely agree. I would add stay away from long distance investing. I had a bad experience with this, and I just feel like you lose too much control being far away. I recommend investing within an a hour drive from your home. You can read about my experience in the link below.

    Your comments about using too much debt are great points too. Rookie investors seem to be trained to take lots of risks, leverage every penny, and do whatever they can just to acquire property. I’ve been there and done that too. Owning 5 highly leveraged properties all dropping in value was a scary position to be in. I’ve switched gears to a much more conservative approach, and it’s a much more comfortable position. :)

    • Brandon Turner

      Thanks for the comment. I agree, long distance investing seems like it would be tough (at first anyways.) I’ve considered what would happen if I moved, but I think my properties are at a good place that I could now leave and they’d be okay (but not great, because no one manages property like yourself.)

  3. Good insights. For what it’s worth, I did buy gold at $280, back in the 90s. Still have it in my fire safe, and won’t sell it, since it’s the best hedge in history against any meltdown that could appear in the future.

    Though I own around 60 properties, I’m always looking for the cheapest, fastest financing. Credit cards can be used strategically. I’ve been getting (and churning) 0-4.99% CC “loans” for years–still–though I never go over 50% of available credit to keep my scores high. Capital One’s “biz” cards (which report as personal cards, ask my how i learned that lesson!) have has pretty good offers recently. I have nearly $100k in CC debt–which I consider working capital–and my scores are still in high 700s). I’ve been finding more investor-friendly banks lately, have refi’d about a dozen in the past year.

    Always try to buy on terms. Always offer 0% interest with higher-than-amortization monthly payments like you do it all the time (I do!), and watch how often it is accepted. And I agree with above poster, you need multiple exit strategies, and always have “renting” as a fall back position, if only to get to the long-term cap gains place.

    Keep debt manageable. Don’t wring every $ you can out of properties when you refi, if you’re that hungry (or broke), back up and regroup. Oddly, I do cut tenants some slack even have some that seem happy to pay late with late fee every month. When they do flake, as a few do, I explain how an eviction will follow them and send the link to the website where they appear, for free, online in my state, which I suggest is used extensively by landlords (like me! YOU GOTTA SCRUTINIZE EVERY APPLICANT!), employers, and acquaintances, which it is. Hope your state has this info online too, not all do. I did have one tenant drag it out for months by asking for and getting a jury trial, but that was a fluke.

    And be optimistic. It’s contagious. And people always respond better to hope and optimism than fear.

    • Brandon Turner

      Hey that’s good info. Your credit card strategy is a bit different than I’ve done- but everyone has better strengths/weaknesses so I can’t knock ya on it! Now if only I can get some of that $280 gold you have…

  4. As a Newbie, I’ve spent the last year reading, learning, watching videos, with no real action. the first thing I would do different, “pick one strategy and stick with it”.

    Before I found BP I had purchased at least two books and training materials, read through them and didn’t follow up. It’s funny to me that everyone is offering a lot of great information, however, they only offer enough information and set you up for additional sales. ( A mentor cost, additional materials cost etc, etc) the whole you can get started for only $00.00 – 99.99 pitch.

    Second, “No excuses” I would have not allowed an injury to prevent me from attending any REI group meeting.

    Third, is what I plan to do now, which I have never done until recently in the form of a letter, is write out my plan.

    Thanks for your question and post, I’m glad I read it.

    • That’s the beauty of this place, Darial — you get all the information you want and you get it for free. Write that plan out and start to put it to action. AND if you have any questions, jump in and ask on the forums.

      Good luck; we’re here to help!

    • Brandon Turner

      Hey Darieal – thanks for your great comment! You hit the nail right on the head in so many ways. I think the idea of “pick one and go with it” is monumental for getting over “analysis paralysis” and jumping in. There are so many ways to make money you just gotta pick something.

      Good luck on the written plan – it makes a huge difference! And like Josh said – dive into those forums. They are like three dimensional books!

  5. All great points Brandon. For me definitely starting earlier seeing I am in my forties and it took me over 20 years to make a move into real estate. No regrets however. Connecting faster for sure as it would of introduced me more quickly to some very successful players in the industry to draw from.

  6. Brandon
    I can relate to #2 on your blog. We’ve met other investors at REI meetings but have yet to find a mentor or someone we can sit down with on a regular basis to discuss REI. We have high hopes for the most recent REI group we’ve joined (they come and go so fast).

    I’ve paid for mentoring and I did learn some but I believe there is something to be said about a mentor mentee relationship that is not founded on monetary compensation.

    Thanks for the post!

    • Brandon Turner

      Yeah, (good) paid mentors have a place in the real estate world – but they can’t take the place of true relationships. The funny thing is – older and successful investors are eager to share their knowledge and pass along wisdom (most, anyways.) I found a small group simply by doing maintenance work for them over the years. Good luck and thanks for taking the time to comment!

  7. Awsome post Brandon, love the ones that make you think! A couple of things i would have changed. Keeping my 9-5 job longer after i started investing. It would have provided greatly needed cushion, even if its minimum wage, i highly suggest sticking it out. Secondly, much better control of my income, i would race to the bank, with cash especially. I think its just human nature, but being “frugal” after those first few deals, tends to go out the window. That alone would have stopped me in my tracks, even though my plan was sound, had it not been for my dads, qe1,qe2,qe3:)

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