BiggerPockets

I wanted to know what were some of your biggest fears or concerns when getting starting with R.E. investing.

My first concerns were; who do I turn to for help. Once I found a person already doing it, I picked their brains and felt more comfortable and went full speed ahead.

I was also scared of getting bad tenants and not knowing what to do about it

My biggest fear was not being able to get out of a property that I couldn't handle.

After a nice visit to the book store and a few training programs I feel A-okay!

I just wanted to get an insite of what you went through.

My fear was being old and helpless one day and being a burden on others. I want to leave something for my children so they will have it a little easier in life. My mother in law is 72 and has health problems and lives in a basement apartment. She lives on social security and a low paying job that she walks to. She struggles, as do so many others. I want to one day have security and not to depend on anybody.

I fear not finding my next deal too. I mean what if I just got lucky once? What if it was just some kind of mishap? It's kind of a ridiculous fear I know, but it lingers in the back of my head, especially since I have no other income.
But tell you what - what I fear even more than that is having to spend my life wasting away at some miserable 9-5'er. The fear of that is way greater and it keeps me motivated to keep pushing on.

i think every newbies biggest fear is making a mistake that will cost you dearly... and i also think that not getting in over my head has overcome that fear

I totally disagree with the idea that you have to first fail before you can succeed. I don't even understand that philosophy.

There is no business that the typical person undertakes that has not been done literally tens of thousands (or even hundreds of thousands) of times successfully by others. To simply ignore the facts of the business and try to re-invent the wheel regarding a business is simply foolish.

Real estate is a very simple business. In fact, buying at a big discount will eliminate the vast majority of problems with real estate investing. Yet, the majority of newbies fail in a short period of time. Why is it necessary to fail? Why can't a newbie simply learn the basic business principles and succeed right from the start? Why do most newbies fail when the answers are simple and available?

I JUST DON'T GET IT!

Mike

I dont find it necessary but rather beneficial.

BENEFICIAL TO FAIL? You're kidding us aren't you Charles? I can't believe that you think failing is a good thing.

The person that has never failed knows not what to look for.

C'mon Charles. Do you really think that you need to fail to know what to look for? Quite the contrary, I have not failed BECAUSE I know what to look for! You've got this one backwards.

Yes, you can read about others failures and try to not follow the same steps but only when YOU fail that do you take the horror story to heart.

I don't not need to have bad things happen to me to take them to heart. Isn't that the reason that you're on this forum...to learn from others? Surely, you don't have to make every mistake yourself! That would be ridiculous!

When I first joined my local REIA, there was a woman there that owned and managed about 50 rentals. She had been in business for 20 years. I became friends with her and considered every word she spoke to be worth its weight in gold.

Here's just a tiny example of a piece of information that she gave me that literally saved me thousands of dollars. She taught me MANY things about screening tenants. One of the things she told me was that you should always check the applicant's driver's license and make sure the picture on the license was actually the applicant (because tenant applicants who are criminals occassionally pretend to be someone else to pass the screening).

I didn't think to myself " I can ignore that piece of wisdom because I'll have to suffer this horror story myself before I can take it to heart" . Just the opposite, I thought it was a great tip that would help me avoid making a costly mistake. I immediately started checking the driver's license of every applicant and have probably avoided 5-6 major problem tenants as a result. These problem tenants would undoubtedly have cost me thousands of dollars. All avoided because I learned this lesson from someone else.

Multiply that one example by 100 and you can see how the lessons of other successful investors are so valuable.

That is why I say that it is totally unnecessary and inexcusable to fail. With a lot of work and study, you can get it right the first time and every time!

Mike

First we have to recognize some semantics here. Failure, mistakes, errors, etc. can mean different things in different contexts. If you define a failure as a mistake, an error, or even a lack of success (even if its temporary), then I think I can safely say that you, Mike, along with everyone else, has failed before, no matter what your mentor taught you. Now if you define failure as a permanent state of a lack of success, then I think its arguable.

Ryan,

I agree with you that we're getting caught up in semantics. Here is how I would define these terms:

Mistake - an error or fault resulting from defective judgement or knowledge

Failure - committing a series of mistakes that leads to a major setback, such as losing money on a deal or being forced out of business (even temporarily)

Ryan, yes, I have certainly made mistakes. However, because I studied hard and learned from other successful landlords, I have not made any serious mistakes (like paying retail for property or failing to deal properly with tenants, which are the two main causes of failure by new landlords)

My argument is not that I am perfect - FAR FROM IT. I have not succeeded because I am a genius or a great entrepreneur. Quite the contrary, I have succeeded because I followed in the footsteps of those successful investors who have gone before. Real estate has been around forever, therefore there is nothing really " new" in this business. Every mistake has already been made and every path to success has already been paved. My job is simply to duplicate what they did right and avoid their mistakes.

The fact is that the majority of new real estate investors fail (are forced out of business) in a short period of time. That is also true of every other type of business. My point is that this is entirely preventable IF the newbies would simply do their homework and learn the business. It is totally unnecessary to make major mistakes (like paying retail for an investment property), yet this is one of the most common and most devastating mistakes and it leads to failure. We see these mistakes repeated over and over in posts on this forum, even though the information on doing it right is perfectly clear and absolutely free.

Are you saying Mike that you have never failed in any single endeavor in real estate? You got every deal you were shooting for? You've never been burned by a contractor, or a seller, or a buyer, or a tenant? You've never fell short on a projected time frame or profit margin? You've always gotten exactly what you wanted? Have you never failed?

I have never lost money in any of my real estate companies. Why should I? This isn't brain surgery. It is a simple business. If you follow proper business principles and stay disciplined, there is not much excuse for losing money.

I have not gotten every deal that I looked at. It is certainly not a mistake to not get every deal. In fact, that is one of the secrets to success in this business - don't fall in love with any property. It's all about the numbers for me. If I can't buy a property at my price, I don't buy it.

I have been burned by contractors, sellers, and tenants. Again, not a mistake. I did the proper due dillegence on these people and NOTHING I could have done would have prevented these people from burning me or predicted that they would do so. However, none of these incidents has caused my rentals to be unprofitable because I use real world expense numbers and these incidents are a normal and completely routine part of the business.

I don't want to give the wrong impression that I don't think I've made mistakes. So, here's an example of one of the mistakes I made.

One of the first properties I bought was a SFH house in a blue collar neighborhood. The previous landlord knew nothing about the business and allowed it to become a crackhouse. It was almost completely destroyed. EVERY door and window were broken. There were holes in all the walls. It was a mess.

I bought the house CHEAP and rehabbed it. During the rehab, I developed pride in the property (STUPID) and over-rehabbed it (STUPID). We put hand stained crown molding; NEW appliances; and even a dishwasher in the house (EXTREMELY STUPID). This was a serious mistake, but fortunately I bought the property right and this didn't result in negative cash flow (although it certainly resulted in lower cash flow than I should get). This was a lesson that I didn't get from books or other investors, although I certainly should have. This incident was entirely preventable if I had only done a better job of studying or learning from others.

Mike