BiggerPockets Podcast 020 with Josh & Brandon Transcript
Link to show: BP Podcast 020: 20 Deadly Mistakes For Real Estate Investors to Avoid
Josh: This is the BiggerPockets Podcast, Show 20.
You’re listening to BiggerPockets Radio. Simplifying real estate for investors large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online.
Josh: Alright ladies and gentlemen, I am Joshua Dorkin and this is the BiggerPockets Podcast. Thank you so much for tuning in. This is Show 20. It’s a big milestone isn’t it Brandon Turner, my famous and fabulous cohost.
Brandon: Number 20 is good. I like the introduction. You sounded like a, what do they call it, like a three ring circus leader. That was good.
Josh: Are you calling me a clown?
Brandon: Yes, you know—it was ladies and gentlemen, boys and girls good job.
Josh: Children of all sizes.
Josh: Or something like that. Well listen, I know I’m super excited and I know you are as well. Not only is this the big 20, but we just crossed a pretty cool milestone. We are now the number one rated podcast on iTunes and that’s pretty awesome, not only do we have the most ratings, but we have the most five star ratings. It’s awesome. I’m honored.
Brandon: For real estate that is.
Josh: Oh that is for real estate. Yes. Yes. Yes. No.
Brandon: We’re not beating Dave Ramsey yet.
Josh: That’s not happening.
Brandon: Dave, we’re coming for you.
Josh: Dave, you’re invited to join us on the BiggerPockets Podcast.
Brandon: Yes, that is true. If anybody knows Dave Ramsey, we could use an introduction.
Josh: There you go. Make it happen. Make it happen.
Josh: But yes, this is episode 20, I’m very excited that we made it this far and you and I haven’t choked each other.
Brandon: Not too much anyway.
Josh: Yes. Well, so for today we’ve got kind of an extra special show, I think. I think, I hope. Hopefully, we live up to our own, hopefully we do a good job guys, but so for today, we’ve put together a show for our 20th, dubbed the 20 Deadly Mistakes to Avoid as a Real Estate Investor. Now Brandon, deadly mistakes man, is that—seems a little of a hyperbole, seems a little bold. What’s going on here?
Brandon: Not at all. People die all the time investing—I’m just kidding. Yes.
Josh:Yes, it probably does happen and we are sorry.
Brandon: Yes, sorry if you’re out scoping out a house.
Brandon: The house falls on you. I’m sure people die. This could turn into a public service announcement.
Josh: This is not a laughing matter.
Brandon: It is not. No, this a 20 deadly mistakes because I like sensational headlines so.
Brandon: You can’t just say 20 mistakes. Today is the 20 Deadly Mistakes to Avoid as a Real Estate Investor. There are 20 and this is not that long of show. We’re going jump right into it after our.
Josh: After Quick Tip.
Brandon: Quick Tip. Nice enough.
Josh: For today’s Quick Tip Brandon Turner, what is today’s Quick Tip as your eyes glaze over in fear, unprepared to share the Quick Tip.
Brandon: Alright, the Quick Tip for today is to set up a Google Voice number because Google Voice is free and your tenants will stop calling you. They will call your Google Voice number. When I switched to that like three years ago, my life transformed.
Josh: That’s a great tip.
Brandon: Yes so.
Josh: Great tip. I’ll tell you what, the cool thing about a Google Voice number is you can set it to forward or redirect to any phone number that you want. The other really, really cool thing is, if you have annoying people that are bothering you and calling you at that number and you don’t want them to call anymore, you can actually block them. The cool thing about that is, when they call, it’ll sound like the line is dead. I’ve actually used this a number of times for people who I…
Brandon: I didn’t know that.
Josh: Who I really don’t want to talk to and you know, I’m dead to them I guess.
Brandon: That’s funny. I knew you could do like a special voicemail for each person.
Josh: I didn’t know that.
Brandon: Yes, I have one set up for my friend when he calls. It says like, Johnson’s Morgue. That’s all it says so yes, you can have fun with your tenants that way too.
Josh: How many can you set up? Do you know?
Brandon: I don’t know, but I think a lot.
Josh: That’s pretty awesome.
Brandon: Yes, so anyway.
Josh: Get a Google Voice guys.
Brandon: Yes, so, with that, let’s.
Josh: That was a good Quick Tip.
Brandon:That was a good Quick Tip so, you know, if I do say so myself. We’ve had a few guests say that, that’s why it suddenly popped into my head to say that.
Josh: Let’s jump in dude. We’re ready to go, we’ve got 20 deadly mistakes and why don’t we hop right in with number one. Mistake number one is not being educated. Now, certainly, we are not ripping on people who are not educated. We are saying it is a grave and deadly mistake to go in and pick up and jump in and buy property, get into real estate without having any kind of background, any kind of focus in real estate. I will tell you, I did that and it was a deadly mistake. It is actually the reason that BiggerPockets exists today because I made that mistake and found myself in a lot of trouble and I don’t want other people the same thing. Brandon, let’s talk about that; we created this UBG thing didn’t we?
Brandon: We did, the UBG, Ultimate Beginner’s Guide, which we also did the Ultimate Beginner’s Podcast, which was show number 11. The last time we had a no guest episode on the podcast. Today, I’m going to actually listen to that right now, we’ll wait ‘til this episode is done.
Josh: That’s BiggerPockets.com/Show11 and the Ultimate Beginner’s Guide is BiggerPockets.com/ubg or BiggerPockets.com/real-estate-investing. Either one gets there, so continue.
Brandon: No, that’s good so anyway, it’s totally free, check it out. If you haven’t read through the UBG, definitely read through the UBG so. I mean, there’s a lot of ways you can learn too, you’re obviously doing one of them now, the podcast, very, very fun way to learn real estate, but also there’s a ton of books, there are forums. The BiggerPockets Forums is probably, like the best thing on the internet so.
Brandon: Yes, it’s like one above Google and Wikipedia. Just in terms of coolness so jump on there, ask questions and get answers. That really is an awesome place. You know, I used to be afraid of forums. I didn’t know what they were when I was younger. I thought there was some like weird creepy nerd thing. People were at like a Star Wars forum and that’s what it was. I didn’t realize all it was, was a community. Facebook is like a forum. It’s all it generally is. People talk, they ask questions, they give answers so anyway, jump on, start learning.
Josh: Yes, yes, and really quick, before we move on to the next one. Being educated, reading books, library, forums, podcasts, I mean, there’s plenty of different ways. Learning also, potentially means finding mentors, finding people to help you out. It doesn’t necessarily mean programs or gurus. Although, that does work for some people, certainly not what I personally like to endorse. Again, it does work for some people so whatever works for you, works for you. Just be careful how you spend your money guys. I mean, you know education is one thing, but spending the money that you might put into your deals on somebody’s boot camp or something else when you can get the same information free or for far less. Be aware there’s other options so, anyway.
Brandon: Oh, real quick, real quick, we’re going to put a link on the show notes to an article I put out a month ago called like, “The 21 Best Books for Real Investors.” Totally recommend if you guys are looking for a good books to read go to show the show notes, BiggerPockets.com/Show20 and I will have a link to that article there so.
Josh: It’s always about you, Brandon.
Brandon: Always about me, so speaking about me, number 2, waiting too long—mistake number two, waiting too long because you don’t know enough. This actually wasn’t—this wasn’t one of my mistakes because I jumped in like you did without enough education, but this is a very common thing that a lot of our listeners are probably facing right now. They don’t know enough. They don’t think they know enough so they don’t want to jump in so.
Josh: Yes, I mean so, I think that’s definitely one on the common mistakes that we tend to see. It’s this fear, right, I don’t know enough. What if I make a mistake. You know, I’ve got to—it’s got to be perfect. I’ve got to know everything and you know, the bottom line is, as any of the old pros on BiggerPockets will tell you or any old pro at your local REA or anywhere else, you’re never going to know everything. It’s impossible, there’s too much to know, you know, so make sure you’re prepared certainly, but you don’t want to just keep delaying the inevitable because you feel like you’re not ready. Part of preparing and making sure you don’t know is having a business plan, having some kind of plan to kind of get the ball moving and make sure, you know, you have the basics. You want to put things in writing. I think if you do that, if you write things down and plan, you’ll know when you’re ready because your plan will be at the point where you can start executing. You think that’s a fair way of putting it?
Brandon: I do, it’s a fine balance to strike, but it’s important to not get caught up in the “I don’t know enough, so.”
Josh: You all make mistakes right?
Brandon: Yes, we will and you learn from them and you grow. I always say, just push forward until you’re stopped and then you know, You might get 50% of one deal, 75% on the next one. You might get 50% to closing a deal and then 75% and then 99% and you’re going to encounter problems, but every time you get a little bit closer until you’re actually making deals happen.
Josh: The only thing is, you know, you don’t want to go in blind, A and B, you know, you certainly want to mitigate those losses by spending time asking questions if you don’t want to know anything. Again, the forums are a great place or just, again, at your local REA, which brings us to the next deadly mistake, which is do not—don’t speculate, don’t follow the herd, don’t just jump in and blindly buy because people are telling you to buy because the market’s hot and hyped. Don’t just go and buy long distance. Buy out of state because, you know, somebody says hey, it’s a good opportunity to buy out of state. You know, you want to make sure that you know the fundamental difference, first of all, between speculation and investing. Essentially, if you’re speculating, you’re gambling, you’re just taking a bet. You’re just saying, “Hey, I’m going to jump in. I’m going to buy something because I know or I think or I’ve got a feeling in my bones that things are going to go up because everyone else is saying it’s going up. Real estate is going to go up forever.” You know, that’s just sure speculation. You know, the market is hot and it is going to be hot forever. Investing is buying based upon fundamentals, making sure you have a solid education and maybe Wikipedia or one of these other sites will debate my definitions. You know, I mean, I think, that’s kind of how I see the difference between the two. Would you say that’s a fair assessment?
Brandon: Yes, definitely. I think there’s a quote I like. I think Warren Buffet said it, “Buy when everyone is selling and sell when everyone is buying.” That is opposite of the herd mentality. You know everyone is buying, you just want to start buying because it’s fun. You know, we see that in a lot of markets today. A lot of markets are really overheated and people are, they’re like, “I got to buy something. I got to buy something.” Well, maybe you missed it in that market. I don’t know, I mean, maybe there’s an area of that market that is not hot right now so something to keep in mind.
Josh: Yes. Yes, I agree. I agree and yes, just be careful, be careful and make sure that you’ve got a plan and you understand what you’re getting yourself into and ultimately, don’t buy just because you think you have to jump in because you’re going to lose on an opportunity or lose a deal, out of fear or losing possible gains. It’s better that you don’t jump in than you do jump in and you doing so for the wrong reason.
Brandon: Yes, I agree. Cool so alright, number four, mistake number four, falling in love with a deal. All the seasoned investors that are listening, I’m sure they’re nodding their head right now in the car, going yes, I’ve done that. You fall in love with a deal and for some reason you get attached to it emotionally. I mean, that happens to me a lot. I think it’s natural.
Josh: You’re an emotional guy, Brandon.
Brandon: I am an emotional guy, you know. You get attached to these things, it’s like, “Oh, the house is so pretty.” I once put probably an extra 20 or 30 grand into a house that I should not have probably done. I should have kept it simple and cheap and I just kept putting money in it because I loved the house so much and I just kept thinking it was worth it. In the end, I broke even on that house and I thought man. I mean.
Josh: You’re lucky.
Brandon: I am lucky. I mean, I could have gotten a lot worse, but you know I didn’t make a profit for all the work I put in even though I spent a whole lot of time and money because I fell in love with it so don’t do that.
Josh: Yes and there are ways to help yourself avoid falling in love with the deals and those include things like having.
Brandon: Defined specific criteria. Yes.
Josh: Defined criteria. Yes.
Brandon: Exactly, the math—the math doesn’t lie. I think we say this all the time. Stick with the math. Don’t fudge with the numbers. Just have your criteria. Know exactly what you want, you’re not going to get as emotional then, so.
Josh: Absolutely. Absolutely. If you know what your limits are, stick to them no matter what and that’s it. I mean, you know, if you say, “Well, if it only goes for you know, I’m only going to bid it up for another thousand.” Well, that thousand is suddenly 5,10,20,50 and you’re suddenly in a lot of trouble.
Josh: Don’t fall in love with the deal.
Brandon: Number five, having one exit strategy and I’ve told this story a number of times in different blog posts, but one of my very first flips I jumped into it back when the market was you know, I think it was 2008 and it wasn’t quite falling yet and I bought a flip. I couldn’t sell it because the market started falling and I had no exit strategy other than sell it. I learned a lot of lessons on that one. I ended up discovering creative finance that way. It was a terrible experience. Ever since then, I’ve learned have two, three, four exit strategies so very important.
Josh: That is. We covered that, I believe it’s chapter eight. I think it’s the last chapter of the Ultimate Beginner’s Guide. Definitely check that out, there’s some good information, maybe it’s seven. I don’t know, but it’s in there. Certainly, a lot of information, I mean, you know, you can sell retail, sell wholesale to investors, refi, do solid financing, lease options. I mean, there’s all sorts of exit strategies and if you’re aware of them, you have a very solid understanding of them. One exit strategy doesn’t work, you know, look at the next and look at the next and look at the next, maybe, do one for a little bit or go to the next or whatever. As long as you have options available to you and you don’t have options available to you, you may just not understand them or know what they are. Knowing what they are is half the battle.
Josh: The more you know.
Brandon: Well, just to touch on that, real quick too, you know when I buy a property now, one of my requirements for any flip I do and this doesn’t have to be a rule, but if I find a flip that I want to do, it has to cash flow if I were to refinance it. Like I don’t want a property that my—that won’t cash flow. I want to be able to turn it into a rental if I have to. That’s always my first, my exit strategy if I can’t flip it so, anyway, yes, I don’t know if that works for everyone, but around here it does so. Anyway, let’s move on to number six.
Josh: Number six, buying just because it’s cheap.
Josh: That is a killer mistake that I think that’s probably one of the worst mistakes that I hear about the most from people who don’t have a background in real estate. You’ll hear them say, hey, you know, here I go again, are you ready? Houses in Detroit, poor Detroit man, the mayor of Detroit is going to kick my backside. I mean, I am beating up on that city, but houses in Detroit are really cheap. You know, you can buy a house for a couple thousand bucks. You know, it might even cash flow. Does that mean it’s a good deal? Well, I don’t know, there’s a lot of factors. Right? Is Detroit a growing city? Or is it a dying city? Is the area you’re in losing jobs or gaining jobs? You know, cheap properties don’t necessarily mean good opportunities. Particularly, I’m going to focus on things like war zones, which is kind of like a term for saying, you know dangerous, bad neighborhoods that have crime and troubles. You know, do you want to invest in tougher areas just because they’re less expensive, as a new investor, in particular, I would say, you certainly want to stay away from those because, you know, there’s a lot that comes along with it. Things like higher eviction rates. You know, screening tenants is a lot more difficult, finding qualified people, crime, other problems that come along with it, stolen.
Josh: Vandalism, I mean, I’ve dealt with it all. I definitely think that those are the areas that you definitely want to wait to explore until you become a more sophisticated investor. Ultimately, your—the big question is, are you going to spend more time, energy, and money, resources, managing. Cleaning up after bad tenants or you know, does it ultimately become worthwhile? That extra cash flow that you think is there may vanish, due to evictions and other problems.
Brandon: Yes. Definitely, so number seven, not having a plan and just winging it. I always use this analogy, I’m sure you’ve heard it before that you wouldn’t probably wouldn’t drive from like Canada to Peru without like a GPS or a map because you’re bound to take a wrong turns. I mean, just knowing that it’s south isn’t good enough so in real estate, I think you have to have a plan. It doesn’t have to be a formal business plan, those are fine. It doesn’t have to be, but just having a “I want to buy, you know, properties between $100 and $150,000 that cash flow at $200 per month per unit in this town, using this money.” I mean that’s a plan. I think it’s important people have those. That goes back to what we talked about earlier is not getting emotionally attached because when you have a plan, it’s a whole lot easier to stay on that plan. Then if you do get off track, it’s easy to get back on again.
Josh: I think on that really quickly you know, I think it’s not only about having a plan. I think I’m going to raise you one here. I think it’s about having a plan, writing that a plan, and revisiting that plan.
Josh: Because if you come back and you look at it periodically, and that goes with goals as well, you know, that’s one way that you can hold yourself accountable to that specific plan.
Brandon: Yes, I have a plan that I wrote down, ’07 I think. It was my very first—before I bought anything I think. I still look at it every few months, I pull it up with George, just kind of to see where I’m at on it. Now, I’ve definitely deviated a little bit, but generally speaking, I’m pretty much right on where I wanted to be. It’s fun to do that. It kind of reminds me of the principles and how I learned so.
Josh: Yes. Sounds good. Well, that brings us to number eight, which is not investing in your marketing. You know, a lot of people will jump into real estate investing, frankly, people jump in as real estate agents. I knew a lot of people back when I was an agent who were new and I thought hey, I can be an agent and really what’s the cost? The cost is of the test, they don’t realize you got to spend money marketing to get those clients. I think the same applies in real estate investing. If you’re having difficulty finding deals, you probably aren’t marketing enough. There’s so many different ways to market and you know, things like direct mail, online advertising, door knocking, just one on one networking is really a form of advertising, right. You know going to your local REA and handing out cards and letting people know about who you are and what you’re looking for that kind of stuff, setting up websites.
Brandon: We talked—Danny Johnson talked a lot about marketing. That was two podcasts ago, episode 18. I know Danny, he’s really—he’s got a good marketing machine going on right now. Almost every guest we’ve had, that’s a pretty common theme. Everyone has really good marketing, but I especially liked Danny’s discussion on marketing. Anyway, podcast, BiggerPockets.com/Show18 has a lot of good ideas there. One more thing I want to bring up when you said website. I want to add Google ads and Facebook ads, I’m a huge fan them. I don’t do a ton yet with them, but I really, really like the idea behind them and I want to do more and more with them and I’m actually taking a course right now, like, an online course on how to do Facebook ads so. I’m a huge fan.
Josh: Let’s not forget the BiggerPockets market place.
Brandon: That’s true. BiggerPockets market place so, yeah, I’m actually going to be listing a couple things there in the coming weeks. Everybody, go check it out.
Josh: BiggerPockets.com/marketplace and do check out Brandon’s deals. Yay.
Brandon: Yes, there you go. Alright, mistake number nine is not networking with local investors. This is again one of those things that I think there’s a lot of myths out there in the real estate world, in the investing world. You’ll hear a lot of, you’ll hear it from some of the gurus and you’ll hear it just permeate through the community, like oh I can’t interact with those guys because you know, they’re my competition. I got to be careful, I got to—and know people will get all like weird and funny about like connecting with local investors. You know, yes, these guys are certainly your competition, but they can also be a fantastic resource and they can be the people that you sell your deals to or find your deals from so you know, you have to know your local market. You have to know your local investors, you know, sharing contacts, referrals, helping people out with good contractors and just gathering and getting together. I guess Brandon, there are various ways to invest local, to find local people both online and at local meetings. Maybe you can take the lead on those.
Josh: Yes, well, obviously BiggerPockets with over 120,000 people now, there’s mostly likely people in your town so I would start there, definitely. The key word alert system on BiggerPockets is probably one of my favorite ways because basically, you set up an alert for, like I have one set up for Washington, because I’m in Washington. I also have one set up for Aberdeen because I’m near Aberdeen and I have one for Olympia and anytime a new member joins BiggerPockets, you know they usually write a little introduction and so if you’re a new member and you haven’t left an introduction, go do it right now. Positives, go leave an introduction, but they leave an introduction and say hey, I’m from Olympia and I’m getting into real estate. Like of all the sudden, I get an email saying, hey, John from Olympia just introduced himself so that’s a huge area, meet ups, BiggerPockets, we actually do meet ups once in awhile, some are official, some are unofficial. It doesn’t matter. I mean, people just get together to talk real estate.
MeetUp.com is a phenomenal place to find lots of local meetups as well.
Brandon: Yes, for sure. Definitely those are some of the best ways that I know of.
Brandon: Oh yes, REAS. I don’t have a REA in my town, which I should start one. We talked to Anne Ballamy about that on her podcast a little bit about starting them, so, yes.
Josh: Yes and sorry, and I was going to say just on REAS, you know, a lot of people might—I’m not a fan of many of the REAS because I think a lot of them are all about kind of hyping and upselling people, but the value that comes, even at those REAS comes in that local networking. You know, linking up and sitting down or standing up and hanging out with local investors, there’s a ton of value in that so even if you’re not loving your local meet up because it’s all about the hype and the salesmanship and all that nonsense, you may still want to go just for that networking component that comes with it, which brings us and I don’t know this transition. There’s really no transition here, but we’ll just jump to number ten anyway. What is mistake number ten Brandon?
Brandon: This one is one that hits home, is not hiring the right lawyer or accountant when you first start out. I mean when you’re starting out, you probably don’t have a lot of money and you’re trying to cut—you know cut expenses or whatever. You know, you’re like, oh I can set up my up my own stuff or I don’t need to talk to an accountant or a lawyer or whatever. I did that when I started and the first few years I just kind of tried to hack it out myself, that was not a good idea because then when I did, I went to my lawyer and I handed him this stack of paper like a foot high and said I need you to clean this up for me, yes. Let’s not go there.
Josh: Yes. You know, one of the things that happens is people get sued. You as a landlord or flipper is I mean, you know is really anything, any occupation of sorts in the investing space. You want to be protected and having appropriate legal counsel is definitely going to be important and on the accounting side, you know, you want to know what you can write off. What you’re expenses, I mean, we’re all doing this, you know real estate investing because you know, we’re trying to make money. Well, you know, an accountant is going to be able to tell you how best deal to with know, your gains and taxes and that kind of stuff and it’s super important.
Definitely, make sure you jump out and hire the right people. Really, quickly, if you are listening, this is the BiggerPockets Podcast Show 20 and you can follow any of our show notes at—not of the show notes, but the show notes for this particular show at BiggerPockets.com/Show20. Let’s jump right into number 11, not hiring the right contractor. I can tell you that I have not hired the correct contractors on many, many occasions. I’m not happy about not hiring the right contractors. It is a horrible experience when you get stuck with a bad contractor. You can find yourself in an inordinate amount of trouble. You can find yourself costing yourself a lot of money so not hiring the right contractor is definitely a mistake. How Brandon, can we go out and find good contractors? I know one of our guests, Mr. J Scott has shared, I think, one of the best tips for this in a previous podcast.
Brandon: He did. J Scott had the suggestion for me that I love. He said—well not for me, he said it all over the place. It affected me a lot. He said to find the good contractor, go to Home Depot at 6 AM on a weekday and the guys that are there, the guys surrounding the pro-desk, those are the guys you want to talk to they’re the ones that are not sleeping in ‘til noon. You know, they’re there getting their materials at 6AM. They’re working early, they’re working hard. They’re not showing up at 10 because they forgot something. I love that idea and if you guys haven’t checked it out yet, he talks about that in the book on flipping houses, which was a book that BiggerPockets released, written by J Scott, honestly, one of the best books I have read in general, but obviously the best flipping book I’ve ever read. Really, really solid and then he also wrote the book that comes with it, the book on estimating rehab costs. If you guys haven’t got that yet, definitely, definitely, go pick up a copy. You can get it at BiggerPockets.com/flippingbook so support the team.
Josh: It’s on Amazon too by the way.
Brandon: It’s on Amazon too, but, yes, support the team. Pick up a copy. Maybe pick up a copy for your brother and mom too.
Josh: There you go Brandon, nice, nicely done.
Brandon: Alright, cool.
Josh: Let me extend on that really, really quickly, people, I think a lot of newer investors are often tempted to hire the cheapest guy and you know, I think you definitely want to make sure that you’re not just shooting for that cheap guy. You know, it doesn’t mean the cheapest guy is not the right guy, but don’t just hire them because of they’re the low bidder because often times, the low bidder will be somebody who’s not going to be the right guy for you.
Brandon: I always notice—well I always notice that there’s like three levels of contractors, there’s really, really cheap guys, then there’s kind of guys in the middle, then there’s guys that do you know the $100,000 kitchens. I don’t want the $100,000 kitchen in my rental, but I don’t want the guy that’s going to come in and work for you know, $6 an hour and a pack of cigarettes either. There’s a guy in the middle there and that’s who you want to find. Definitely aim for that.
Josh: Do they work for cigarettes up in Washington Brandon?
Brandon: They probably do, I don’t know. I don’t hire those guys anymore.
Brandon: I go for the medium guys now.
Brandon: Number 12, not doing routine inspections. This one, I told a story in a blog post a couple of months ago called “What I Did Wrong As a Landlord,” but basically, I had this rental property, a lady moved in. I think she had five kids when she moved in or four kids she had when she moved in. Two-bedroom house and then she had a baby. Then she got another kid somehow from a relative and her sister moved in with seven kids and somehow it ended with 15 to 20 kids during the day were hanging out in a 700 square foot two-bedroom house.
Josh: Nice, daycare.
Brandon: Yes, it was basically a daycare that most of them—most of them lived there majority of the time. It was bad and I just kind of left that house alone, I didn’t really look at it very often because it was kind of out of the way and I didn’t inspect it very often. Had I known that, that was all going on, had I done more inspections on it. I mean if I had sent my manager over there every few months, I would have been fine. Instead, we had five thousand dollars worth of fees when they moved out, to fix it up took five grand. I lost two months of rent I think on it. It was just a mess. It was a disaster to deal with. I mean, there was color crayon from both four foot down around every single wall in that house.
Brandon: Yes so, anyway, do routine inspections. Trust me.
Josh: Nice and I think, you know, the routine inspections are a great way to train your tenants. It’s also useful. Tenants often don’t like to report problems and they can get worse so if you do those routine inspections. You can learn about them. Really quickly, you mentioned you would tell your manager to go in. I don’t believe that we have this on our list of 20, but I think it’s important to mention briefly that, you know, hiring a property manager is a serious to do and you certainly want to know and understand, how to best hire a manager. We’ve got a ton or articles about it on the BiggerPockets blog, but staying on top of your managers is potentially a killer mistake if you’re not doing that and you’re.
Josh: I know I have personally experienced a ton of strife because of hiring the wrong manager having them at a long distance, overseeing properties that I personally couldn’t inspect. They weren’t inspecting and led to a lot of problems, many evictions and you know, so make sure you keep an eye on your managers, stay on top of them. You know, as a new investor, it’s a—I think it’s a big mistake to necessarily trust that a manager is going to do everything. It would be great if they did, but you know, trust but verify I think is a safe way to go. What do you think?
Brandon: Yes. I agree, a thousand percent. It reminds me of the book the E-Myth which a lot of our podcast guests recommended so I went and read it. I thought it was good and one of the things that stood out to me a lot in that book was he said a lot of people hire a manager or they hire their first employee or whatever and all of the sudden things start get easier on them and they just kind of let go and they let that manager run with things and then all of a sudden their business a few months later just starts crashing. It’s because you can’t just let somebody take over and back up all the way. You really got to hold on to them and like you said, manage.
Josh: How’s the blog coming along Brandon?
Brandon: The blog?
Josh:Yes, the BiggerPockets blog.
Brandon: The blog?
Brandon: Oh yes, the BiggerPockets blog is going well now that you’re checking in and you’re managing your manager of that blog. Good job Josh.
Josh: Thank you. Thank you.
Brandon: I didn’t know where you were going with that so that’s good. With that, let’s go on to number 13. I think we’re on thirteen. Not listening to the needs of the other party. This could be whether you’re buying or selling, but if you’re dealing with somebody else in the situation and you really got to listen to what they really want internally. I mean like, they might say they want the highest price for their property, but a lot of times, it’s really not that. Sometimes, they want convenience or sometimes they just want to be hugged, I mean not literally, but they just want to be walked through the thing. If you can care and if you can find out what really matters to them, what’s their motivation, like I said buyer or seller. If you can listen to them, don’t talk so much, just listen, I think it’s important.
Josh: Yes and we’ve heard that on many of the podcasts.
Josh: I know that there’s a great article, maybe we can dig it up for the show notes that J Scott who we mentioned previously wrote about negotiation.
Brandon: Yes, that’s a really good article. I link to it all the time.
Josh: Yes, yes, yes, but you know, it’s all about hearing the other side, you know, understanding where they’re coming from, for example, if it’s you know, you’re doing a probate deal. You know, what do these guys really need, why do they have to get rid of the property, what can you do to help serve them, you know, pressuring people in certain situations is going to be completely counter productive, but you know, being there for them and giving them support and being helpful. We’re not—we see ourselves as real state investors not psychologists or psychiatrists, some of them need psychiatrists, but a lot of getting deals is about relating to other people and if you can do that and shut your mouth and let them talk and kind of, you know, help work with them and solve their problems. You’re going to get more deals.
Brandon: Yes, I agree. I concur.
Josh: That’s a good one. Alright, let’s jump to 14, letting tenants run the show. That is definitely a mistake that many, many landlords tend to make. There’s a lot of burned out landlords out there. You want to train your tenants from the beginning. You want to have rules policies, guidelines and you know, stick to them, essentially, you know, if you set up the rules and then you start to bend them, you know, you’re tenants are going to learn and they’re going to take advantage of you so you know, making sure you have established a set of policies, whether it comes to paying your rent or maintenance, repairs, you name it, and holding your tenants accountable to those things, you’re going to protect yourself, you’re going to protect your investment and you’re going to minimize problems, late rent, evictions, things like that.
Brandon: Plus, do you remember that kid’s book If You Give a Mouse a Cookie?
Josh: I do, I actually read that to my kids once every couple of weeks.
Brandon: Nice. I think that’s probably one of the best business books ever written. If you give a mouse a cookie, they’re going to ask for a glass of milk and then they’re going to ask for this and this. I mean if you let people get away with something little, they’re just going to keep asking for it and I find that with tenants all the time. If I waive a late fee, I am guaranteeing that next month, they’re probably going to be late again. If I accept a rat or a mouse, you know, like a pet rat or something, they’re going to have a dog the next week. It’s like if you give them a little bit, it’s not like you have to be mean, you just have to be strict, fair, but strict and it’s huge, not that I’m calling my tenants mouses with cookies.
Josh: Do you just want a cookie, Brandon?
Brandon: Anybody who knows me knows I’m a terrible chocolate chip cookie addict. It’s really bad.
Josh: Yes, that makes two of us.
Brandon: If anybody wants to send—if Glen Schwarm is listening, you can send me chocolate chip cookies next time.
Josh: The brownies were awesome Glen.
Brandon: They were great.
Josh: but we’ll take cookies.
Brandon: Alright, number 15, not knowing your market. This kind of relates back to what we talked about earlier, with the problem with some people jumping into the turn key, not that there’s anything wrong with turn key, but it’s not knowing the market. If you don’t know your market, you’re going to have a problem. I mean even in my town, there are areas I would love to invest in and there’s areas I would never invest in, even though the prices are almost identical. It’s because I know the neighborhoods really, really, well, I have a very small community and I know every street and I know which street I would invest in and which I wouldn’t. If you’re new, I mean, go drive around, walk around, talk, meet the neighbors. I actually love—it’s one of my favorite things to do in the summer is go pick a neighborhood and just walk up and down the streets and talk with everyone who’s outside mowing their lawn and you know having dinner, you learn so much about a neighborhood by doing that so.
Josh: Nice. We had a realtor in town here, what that scooter called, that you know you’d lean back and you lean forward and it moves—remember what that—Segways.
Brandon: Oh yes, yes. I was like what are you talking about?
Josh: This guy—is the Segway realtor, I’ve never seen anyone else do this. What this guy did was he went out and bought a Segway and he’s go—you know whenever he went to meetings, whenever, to see houses, he would be strolling along in his Segway and he got to meet everybody in the neighborhood and he got to become known as the Segway guy and you know, he was always helpful and you know, we all got to know him right, but you know, I’m not saying go out and get a Segway, though if anyone wants to send me one, I still haven’t gotten to ride one, that would be awesome.
Brandon: They are fun.
Josh: Oh there you go, you don’t have to show off Brandon.
Brandon: Yes, you know.
Josh: Yes, walking in neighborhoods is so important and knowing where you’re—you know you got to know that inside and out, you want to know, you know, I say for new investor, go out and look at a hundred houses. There’s a lot of us, we all kind of say the same thing, right. Go out and look at a hundred houses in your neighborhood every open house, every for rent, every for sale, you know. Know the inventory in your market because that’s going to benefit you as a buyer. That’s going to benefit you as a seller, knowing what’s out there so if you’ve got that market cold, you know, you could, a listing is going to come on, and you’ll know instantly. You may not even have to walk in, I mean often times, experienced investors will see a house and they’re going to say alright, this house is going to be 576 and literally they’re going to have it within five bucks and they’re going to have the listing price. Okay, I’m exaggerating, but you know, they’re going to get really darn close because they know that market so well and when they something that’s over priced, obviously, they know what’s up, but if they catch something that’s underpriced, they instantly know and they can attack. They can jump in and put in their good offer so knowing your market is so, so key.
Brandon: Very good, you know, I can’t stop thinking about the Segway, I was thinking the Segway realtor, that’s such a good idea. Like this is kind of random, but I just—what a great marketing thing.
Brandon: You’re like, yes, the Segway guy. I once had this I idea where I wanted to do—when I was out doing maintenance and stuff, I wanted to be the limo maintenance guy. I thought wouldn’t it just be clever to have a bright, you know, hot pink limo and that was you like, maintenance car. You know.
Josh: You want a hot pink limo?
Brandon: Now I’m wondering, can I get a limo and put “we buy houses” signs all over it and it’s the “we buy houses limo.”
Brandon: I don’t know, anyway, random. I just think that’s a cool idea. Alright, number 16, moving on. Somebody is going to steal that idea from me now, if you do, send me a picture.
Josh: Yes, we want a picture of the hot pink limo. Please.
Brandon: Yes, yes, alright. Not—number 16, not screening your tenants good enough. A lot of landlords, a lot of them trust their gut. I was at a meeting a couple years ago and the guy was, “I don’t do screening. I just shake their hand and if they have a good handshake, I know they’re going to be a good tenant.”
Brandon: That was his theory. Oh, terrible. I mean, I think terrible. I don’t know. I don’t do it, maybe it’s perfect. I don’t know. Don’t trust your gut. You got to screen, you got to figure out what their income looks like. I recommend three times the monthly rent so if the rent is a thousand, they got to make $3,000. Look for past evictions, their job, their job history, how much they make, how long they made it for. Landlord references are probably one of the biggest things and don’t discriminate. That’s bad, understand laws, understand the rules.
Josh: Fair housing, a lot of people will unknowingly make discriminatory remarks or put ads with discriminatory comments on them. You know, the laws are kind of, I mean, I don’t even think you can advertise, perfect house for children because suddenly, you’re now discriminating against families without children. I mean, the laws are really hardcore, I guess is a fair way of seeing it. You certainly want to have a good understanding of it. Actually, on screening, you know, we, being Brandon of course, but we—I think I collaborated on that.
Brandon: You did on that. Quite a bit.
Josh: Alright, thank you. Yes. Thank you. Thank you. Thank you. Okay, back to reality here. Yes, we wrote this really, really in depth Ultimate Guide to Screening Tenants where we literally, we talked about everything that you can say, that you can’t say. It’s got a lot of rules, tips, hints, for screening tenants. You can find that at BiggerPockets.com/tenantscreening and that’s really valuable for new and experienced landlords alike to, you know, just kind of get refreshers or new information on screening rules and regs so to speak.
Let’s jump onto 17 here, which we kind of hinted on before, hiring high priced trainers versus—or taking really expensive courses versus working with local mentors. I think one of the big issues comes to level of commitment, right? If you’re committed, it doesn’t really matter what you do. It doesn’t matter what path you take if you are truly, truly, committed, you are going to be fine. It’s the uncommitted guys, you know. Those guys go out and they think hey, a course is going to make me successful or it’s going to make me, you know, I’m going to be rich overnight or whatever. That doesn’t happen. If you’re not committed, this is not a single battle. It’s a war, right? Building your investment, business, takes a lot of time.
There’s a lot of battles and you know, you’ve got to go through a lot to become successful. It doesn’t happen instantly so, you know, those guys who can succeed with a program could probably succeed without a program. Those who couldn’t with, couldn’t without, courses certainly might teach you something. Not every class or trainer is evil as some people think that I believe. That is not true, but BiggerPockets, we really want to encourage people to learn as much as they can for free and low cost sources. There’s—information has been democratized, okay. I really believe that. I think that was one of my big reasons for building out this site. Was can we democratize the information that’s out there for real estate investors. I think we have. The amount of content on BiggerPockets that is 100% free is astounding. You could spend many years reading and you’ll never get through it all. You’ll never stop learning, but you know, let’s quickly jump back to local mentors versus taking a course. I encourage anybody who is like, “Hey, I need a mentor, should I pay this guy who’s got this national mentorship?” I say you know what, no. I say you should go to a local REA or go to BiggerPockets or find somewhere else. Find that local guy who’s successful in your market, who’s been around, who’s been doing it, who can help you out because that guy has—first he has that local knowledge which is so important which we talked about. Secondly, he’s got the experience, but that local knowledge, I think that almost trumps everything. What do you think?
Brandon: Yes, I think it’s huge. I learned a lot from my mentor. I have a guy who lives here in town. I started painting houses for him originally and slowly started investing. I learned a lot about the local area. What works here and what doesn’t here. He’s also become one of my—I mean I’ve wholesaled properties to him. I’ve remodeled houses for him. He’s bought properties from me. I’ve bought properties from him. We just kind of work together and it works really, really well. It’s a good relationship so. Definitely, definitely, local mentors is kind of the way to go. If you don’t have a local mentor, if you really can’t find one, I really want to encourage people again, I know I’m harping on this today, but the forums are like a gigantic mentor.
I mean, it’s like, what is a mentor to you? Ask some questions, they answer questions. They might analyze a deal for you. They say hey, this is not a good idea. Don’t do this. Brandon this is stupid and then—it’s exactly what the forums do, you just ask questions. There’s so many people on there willing to help and people ask.
Josh: It’s free.
Brandon: It’s free and people ask one question and then they disappear. It’s like, I mean just yes. Treat BiggerPockets like a mentor.
Josh: Don’t do that.
Brandon: Yes, come on. Commit.
Josh: I agree. I agree. I’m going to jump in and you know our goal with the show is not like hey, let’s hype up BiggerPockets. Like, honestly, it was not, but you know, the forums, I can’t tell you. I’ve been doing this for over eight years now. I cannot tell you how many thousands and thousands and thousands of people that I’ve met through the forums and how many people I’ve seen just, you know, they needed help, they asked a question. They followed up and they asked more questions. They didn’t stop. Right, they kept going.
Many of these guys, I think Brandon, I think even you, you jumped on, you might have even, you know, gotten a lot of your start from just the forums and the blogs. I mean it’s—don’t be afraid to ask questions. There are no stupid questions. That’s one of the things that a lot of people fear, whether it’s on our site or again, elsewhere. You can’t mess up by asking a question.
You’re never going to ask a wrong question because you know, the most experienced, sophisticated investors have all had their same questions at some point in their career. Now, certainly, if you’re not doing your homework, you know, you might, people might say, hey listen, before you ask a hundred questions, go and do a little reading. Go do your homework and then come in. You know, if you couldn’t find the answer or there’s some specifics, you know, asking more detail or deals or things like that, but don’t be afraid to ask questions ever, ever.
Josh:I thank you.
Brandon: Should we go to number 18?
Josh: That was 17. Okay. Yes, 18, treating your business like a hobby.
Brandon: Not good.
Josh: No, buying real estate is not a hobby. Buying real estate is definitely a business. You want to run it like one. We’ve talked about things like business planning. We’ve talked about things like jumping in blindly. You know, you want to set up systems. You want to set up processes. You know if you’ve listened to the podcast and heard some of the successful guys that we’ve had on. These guys have gone from, hey I want to buy one house and rehab it or I’m going to buy a house and you know, buy and hold it or wholesale it or whatever to I’ve got a team of six people and we’re doing 12 houses at once. That doesn’t just happen because they’re smarter than you are. That happens because they’ve developed systems. They’ve developed processes. They’ve put together manuals, rules, guidelines, things like that. They’ve run their business like a business and you know, the key is really trying to systematize and work on your business versus in your business. I think that’s something that I know you love to harp on.
Brandon: I do. It’s another one of those E-Myth references so the book, the E-Myth, he talks all about that. Stop working in your business and on your business. Take care of the whole process, automate what you can and that’s the thing J Scott talks a lot about. His podcast was automating and letting other people manage the things that you don’t want to do or you don’t have the time to do so that’s how you scale a business so. Number 19, let’s go on there, how about assuming that works in one market works in another. Now I know, this happens on BiggerPockets probably quite a bit, somebody like me, I might talk about how I’m buying a duplex and doing this or that. Somebody says, well, I’m going to do that too. Well, they’re in LA and their duplex, you know, it just doesn’t work out there. What works in LA, it would never work out in my market. There is some specifics with markets that you really have to understand. That just comes back to having local mentors and having guys that are near you. It’s good to ask some questions too because they understand it so definitely do what you can with that, so.
Josh: Nice. Nice. I think that about covers it. You know, one size does not fit all.
Josh: Yes. Well Brandon.
Brandon: Well, Josh.
Josh: Yes. Yes. What’s up? How you doing?
Brandon: Hello. Why don’t we go to number 20?
Josh: Okay, number 20.
Brandon: Let’s close this thing up.
Josh: Yes. Number 20 is not sticking with it and you know, if you don’t hustle, if you don’t work, if you don’t stick it through, you’re not going to get anywhere. That’s true for not only real estate, I mean, that’s just kind of the rule of life I think. You know, you need to work through the hard times, you need to work through the downs and the ups to kind of find your success and to find true success. You know, we see it, look, we see it on the site all the time. You know, you’ll see people who are like, “Oh, oh my God, I’m so excited. I’m going to be a real estate investor. This is awesome. I love it. I love it and I’m gone.” You know, like a week later. You know, they’d ask five questions and then they’re like, this is hard. It’s not everything that it’s been hyped up to. You know, they’re like, I’m not going to do it. Those guys are not going to make it. You know, you’ve got to stick it out. This is why we ask the question on every podcast, what sets those apart, we being Brandon, of course, what sets those apart who succeed and those who come and go quickly because I think, it is so important, you know, for us to get different perspectives on that. The most common answer I think that we get is those who make it are the ones that are most determined. They work hard, blood, sweat and tears. You know, they definitely, you know, you’ve got to hustle, you’ve got to work hard. If you do, you will find success so.
Brandon: Yes, definitely.
Brandon: That’s pretty much it I guess, maybe we should wrap this thing up, you know. We really, really want to encourage everyone just to get connected with other people on BP because BiggerPockets is a gym membership. You know, Curves, I think you attend that Josh.
Josh: That would be a gym membership for ladies Brandon. Okay. Thank you now. I appreciate it.
Brandon: You’re welcome.
Josh: I, frankly have not gone to my gym membership they’ve all gone to waste over the years so.
Josh: It’s probably not a good connection.
Brandon: No, but Curves is a really, really successful. I know a girl who lost 250 pounds. She looks amazing today. She was a friend of my sister’s growing up. She said the reason she lost all that weight is because Curves is not about the actual, like—it’s not like their diet is any better than any other diet or their exercise is burning more calories. It’s because Curves created a community, like you go there and you work out with people that are your friends and you work out together and you encourage each other and I love that, like that community. That’s what BiggerPockets is.
Josh: We’ve got community.
Brandon: It works, it really, really works.
Josh: I have seen so many successful people come through our community. You are one of the many, many, success stories I think of the BiggerPockets community. He’s—you guys, remember that hair club for men commercial, I’m not just the owner, I’m also a customer and the guy flips up his weave or something. You know, what was his name, like Sy Spilling or something from you, I don’t know.
Brandon: I wasn’t even born.
Josh: Born back in the day, but yes, so you know, we are, we’re here to help—we want people to be successful and we want people to help each other and I think we’ve built, I think what is hands down the best community in the world of real investing. I know you’ve got a couple of tips, many of which we’ve covered before, but let’s quickly rehash them before we bounce out of here, Brandon.
Brandon: Really, like I said before, introduce yourself in the forums if you haven’t yet. It’s the best way to start getting connected with the community. Set up keyword alerts, stuff you want to know about which is BiggerPockets.com/alerts if you’re logged in. Ask questions on the forums, ask them on blogs and send colleague requests. Go to BiggerPockets meetups, just get to know people. It’s really, really important. We want you to succeed. We really, really do. Join on us on Facebook. We have a lot of conversations there, so cool, well that about does it. Doesn’t it Josh?
Josh: That does about do it.
Brandon: Alright well.
Josh: Doesn’t it Brandon?
Brandon: We don’t have the typical four questions at the end so.
Josh: We don’t have the typical and if you were to ask me, I wouldn’t be able to answer and I know it would be too hard for you, but listen. Thank you guys for listening, this was our 20th show. Hopefully you enjoyed it, hopefully you found some value in it and if so and you haven’t listened to our other shows, please go back and check them out. There’s some great stuff. It’s not just Brandon and bloviating for an hour here. I want to thank everybody for listening. Again this is BiggerPockets podcast show 20, you can find the show notes at BiggerPockets.com/Show20. Beyond that, I want to thank again everybody for listening. Everybody who has left us reviews and ratings, if you haven’t, again we would love more even though we are the top rated show on iTunes. Yes, that’s pretty—it’s a cool milestone right, I mean.
Brandon: It is a cool milestone.
Josh: Then beyond that, listen, jump on the site, ask questions. We’re here to help. Share your deals, share your successes. Check us out on Facebook, Facebook.com/BiggerPockets, YouTube, YouTube.com/BiggerPockets, Twitter, Twitter.com/BiggerPockets and you know, thank you so much again I think we’re done. I am your host, Joshua Dorkin, signing off until episode 21. See you later.
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