Tips for Newbie Investors?

14 Replies

So- I feel I've been very active in trying to educate myself so that I'm comfortable and confident when I make my first deal.  I've been attending RE investing seminars, educating myself with books, attending webinars, speaking to investors etc.  What has been the most important resource that helped you get going in your real estate business?

BP and REI meetings are the biggest for me. All I really need is the motivation to get up every morning and start searching for properties to buy/flip/wholesale. It's also vital to have a place where you can ask people questions about the process and get some advice.

A Lecture for New Investors by Nancy Neville

Okay, I understand it.I’ve been there. You’re tired of working for somebody else. You want to be your own boss. You want to make money. Houses are still selling rather cheap, depending on the area, and you think, now is the time to become a Landlord! Just buy a house, rent it out and money rolls in, just like that.

I’ve been on Bigger Pockets for several years and I cringe when I read that someone has just bought a house or a duplex, or a 4plex and they are soooooo excited, that they are about to burst, and then they ask the question.“WHAT DO I DO NOW”?

Oh my goodness! You mean they’re asking this question now AFTER they purchased a home! Yikes!!!!

I see more and more people buying buildings for rentals and don’t have a clue what to do with them once they have them.

Being a Landlord is a very serious business!!!! I can’t stress this enough. The life of a landlord can be exciting and challenging, but it is 24/7 and it is a business of people management, and doing things legally and doing things right, and making decisions, bad or good.

This is a business of evictions, of fires, of break in’s, of damages, of being responsible for other people’s lives. What THEY (your tenants) do affect YOU!

There are laws to follow in order to make your building legally rentable. One is to have a C of A(Certificate of Acceptance) this is decided upon by the state or county or city where you live. They have to approve of this home to be a rental. Then you receive a C of O (Certificate of Occupancy) decided upon again by the local or state or county authorities. This states the home has been approved and available to be a rental. And some of these must be applied for every time a tenant moves. So check your state laws.

There are Landlord Tenant Laws, Building Codes, and laws that are not laws at all but based on a Judge’s opinion of whether or not a tenant did wrong or not. For instance, normal wear and tear. Judges have various opinions on what they deem normal wear and tear.

This is an Industry of thinking skills. This is an industry of holding your temper and implementing your lease agreement no matter what. You need to think like a Judge. You need to think reasonably.

You need to be a good listener. You need to be in control.

Once you buy a house you need to know how to keep that house and how to keep your tenant's long-term.

You need to know how to be all things in order to keep your tenants happy, yet make them know the rules of landlording and how to be good tenants.

I always say that one is only as good as the tools they have. You could be the greatest landlord in the world in mind and action, but if you don’t have the equipment, or the education, or the money to invest in the proper tools to make you successful, then you will never make it in this business.

It takes my breath away to read the stuff on here by new investors. And I understand that how can they know what they do not know? That is why I wish there was a Sticky Note on here for New Investors to post posts like mine (and maybe there is and I just don’t know it) that tells them to Read This First before Investing!!!

My husband and I were very successful in the business. (We are retired now due to his cancer). But we owned a huge house. And every time someone would come over and do work on something on the house, they would ask, “Wow are you a doctor?” and I would say no. And they would ask, “A lawyer?” And I would laugh and say no.I’m just a Landlord. And they would say, “Wow and that’s all that you do?”And I’d laugh again and say, “Yep that’s all that I do”.And they would reply.“Wow, I think I’ll become a landlord too”.

And that is the mindset of a new investor. When I say that’s all that I do, let me tell you what to expect in the life of a landlord and all that they do.

  • 3 am Christmas Eve Tenants call-Furnace went out. I get up, phone calls made, emergency call, expensive triple overtime to the Heating Contractor, Tenant has heat. Tenant Happy.Landlord sleepy.
  • 2 am Fire Dept. calls. Fire at such and such a place. We get dress. Blizzard outside. Drive to the home. Access the damages. Look at the big hole in the roof from the fire dept. Plan our strategy. Talk to tenants. Get our guys out to put a tarp over the roof. Meet in the morning with everyone to solve the problem, what to do with tenants, whose fault, where to go from here.
  • You have tenants parking their cars on the lawn
  • Having unauthorized guests
  • Doing Drugs
  • Having a dog they shouldn’t have borders
  • Hoarders
  • Complainers
  • (In my case…drive by shootings, bullet holes in rentals, thievery)
  • Water abuse
  • Dish on roofs when forbidden to have one on the roof
  • And
  • And so much more
  • On top of being ready to take care of emergencies any time night or day, and solving tenant issues. You need to also take care of the following.
  • 1. Fixing up a vacant rental so it can be rented out again.
  • a. We had handymen to do most of this, but with 40 rentals my husband and I had to pitch in a do the labor ourselves as well.
  • b.I would paint the house and garages.
  • c.Husband would fix the repairs inside
  • 2. I would take care of the tenants. This entailed
  • a. Taking care of advertising the homes (usually, we had more than one vacancy at a time)
  • b.Taking phone calls and screening tenants
  • c.Scheduling open houses
  • d. Staging the house
  • e. Interviewing the applicants
  • f. Making sure I double checked their application forms
  • i. Criteria
  • ii.Employers
  • iii.Verifying funds and income
  • 3.Typing up the lease and making sure they understood the lease
  • 4. Then making sure the Tenants abided by the lease agreement
  • 5.Paid their rent on time
  • 6. And sent that Notice to Quit for Non Payment of Rent the very first-day rent is late.

On top of that, I did my own evictions and I never lost a case and I dealt with the 36th District Court in Detroit.I won because I covered my butt by having everything in writing. I documented everything. Every phone call I made to them and every phone call they made to me.

I never complained to a tenant because they called regarding a repair. I listened when they told me they couldn’t pay their rent, but even though I understood their problem, I made them pay their rent anyway.

Landlording is about making tough decisions and doing things you don’t like to have to do.

Landlording is a Business.

You have to not LOVE YOUR HOUSE. I can’t stress this enough. If you don’t know or understand that this is a business of evictions, damages, and injustices, and fixing this house up over and over again, you aren’t going to be happy let alone successful.

How I wish I could be there for every new investor to help them understand what it’s like to be a landlord BEFORE YOU INVEST. But I can’t and that’s really a shame because it something every new investor should dig into before they invest.

One last thing. Yes, you need to have an accountant to file your taxes for you at the end of the year. Our industry involves huge sums of money in our rentals and other people's money. An Accountant knows how to get you back more money at the end of the year because they know the tax laws, not you! So please don't be cheap and try doing it yourself.

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@Elizabeth Roncevic

You are not going to be comfortable and confident when you make your first deal, no matter what. That's probably a good thing. But one of the biggest issues I have talking to new investors, and it ties rather nicely into some of what @Account Closed wrote here, is that many people tend to buy based on numbers, not on an understanding of residential structures. They rely on home inspectors, contractors, or even the sellers to tell them what they need to know about the property's condition.

It's a lot like buying stock in a company without knowing anything about the company and not wanting to know anything about the company. Could you do it and make money? Certainly, it's possible. But if you're thinking about buying stock in a big food processing company tomorrow, wouldn't it be good for you to know if their supply chain management team works effectively to ensure that the chickens delivered to their facilities are disease-free, or if that part of the company is so incompetent that a salmonella outbreak and massive chicken recall at some point in the near future is unavoidable?

Still, you see it all the time in real estate, especially here on BP. A new investor has all sorts of things to tell the BP community about how good a deal the expect the property to be because they ran the numbers through one calculator or another, and then they go silent for a while, and then they start posting about how this or that contractor lied to them about how long the A/C would last, or whether the hot water heater needed replacing, or wood rot issues, or a leaking roof that they insist that the home inspector they hired should have noted.

The other thing I hear that drives me up the wall for the same reason is an insistence that real estate is all about people, it's a people business. NO, IT'S NOT. It's about PEOPLE and STRUCTURES erected on LAND. If the hot water heater dies in a rental in the middle of the night, this is not a people problem. Yes, you will need to deal with the tenants, and possibly pay a extortionate amount to have a third-party contractor change out the heater, but that doesn't make it a people problem. The problem is that THE WATER HEATER IS DEAD.

So I would say one of the most important resources that got me into this was learning about home maintenance and improvement. There's a great book called "How Your House Works" that everyone buying single-family homes should be aware of. There are many others, but this at least is a start.

@Nancy Neville thanks for sharing. I guess the truth about RE investing can be found somewhere in middle perhaps?? Of course there are the effervescent “dreamer” types (not me) who want to make money quick and then people more like you (also not me) who are eager to talk about all of the hardships with RE investing and everything that could go wrong. I’m interested in RE investing because I am a realist and see the process as probably pretty rewarding and with potential to make a passive income (if you educate yourself properly and dont get too ruffled by all the potential setbacks that you mentioned). i am definitely THAT type of person. Im very fortunate to have a lot of free time with my business. I love what i do (probably because i work on my business-not in it) and i only work about 3 hours a day. I’ve had a huge interest in investing for years. Of course things WILL go wrong here and there. You need to be mentally equipped for the ride. You take the suggestions of others here and there and I think with perseverance ANYONE can find success.

In the 30 years that my husband and I have been in this business, I found that new investors, not knowing what they do not know will quit within the first year and some within three years.  We made it and made lots of money.  But my husband and I are a little "rough around the edges", and have seen it all, been there and done that, prior to us being Landlords.  So we made it, despite the odds. 

Throughout our Landlord Career, people would see the car we drove, or the house we owned and wonder if we were lawyers or doctors, (not our tenants, we never drove the good car to our rental homes and they never knew where we lived) and when I told them that we were Landlords they would say to me, "Landlords!  Is that all you do?" And I would laugh and smile and say "Yes, that's all we do".  And they would answer back, "Gosh, I think I'll be a landlord too" because they didn't know all the things I posted above about being a landlord and what it entailed.  And that is the mindset of so many people who invest in this business today.  

I want to know the worst because we all have the knowledge of how much money we can make being landlords.  That's easy.  That's a no-brainer.  But if you don't know the rest of the story, then all that money, all those dreams and what being a landlord can do to you mentally, physically and financially, is a game changer.  It can make you or break you.  It could mean jail time if you do an eviction the wrong way, and sometimes even cause your death by a mentally irate tenant.  

Plus, we are RESPONSIBLE for other people's lives and our neighborhoods. and their children who live in our homes.  We are more responsible for everything and anybody than any other profession. So it is not something to be flippant about it.  

Nobody wants to hear the bad stuff about anything.  And how can one be realistic about anything if they don't know anything? 

Thus the reason I wrote the above in great detail.

Nancy Neville

@Elizabeth Roncevic having a mentor someone to bounce ideas off of. Having someone that has what you are trying to achieve helps ALOT cause now you can ask questions and get the answers tailored to you. You don’t have tp reinvent the wheel. I feel like the path is easier to walk when it’s been laid out in front of you.
@Nancy Neville I completely understand. And I expect it’s going to be a lot of work. So thank you for your detailed response. It def sheds light and it’s always great to hear the perspective of those who have been there.
Originally posted by @Elizabeth Roncevic :

So- I feel I've been very active in trying to educate myself so that I'm comfortable and confident when I make my first deal.  I've been attending RE investing seminars, educating myself with books, attending webinars, speaking to investors etc.  What has been the most important resource that helped you get going in your real estate business?

 Become a master at SEO. There is NOTHING better than this, no matter what busness you are in.

Then Be a master at Credibility.

When you have both... you get this

SEO + Credibility= Deals

My personal advice. Forget networking. In my experience people will just keep you down. No one works harder smarter better longer than me. Establish yourself first on your own, then, see what is around.

The power of a website goes unnoticed, but make this mistake and you will fail in the long run.

Ask advice but create your own strategies.

Never stop thinking and conducting new novel strategies concerning SEO and credibility.

Originally posted by @Elizabeth Roncevic :
@Jerryll Noorden it’s funny- I have a digital marketing agency. One of my main services is SEO so this shouldn’t be too hard haha

Be careful there...

The degree of difficulty is NOT due to knowledge of SEO w.r.t. Google...

It is knowing more about SEO and how to apply it compared to your competitors.

You need to out "SEO"  your competition. Which can be quite hard if you are going against.. well ... guys like me ;)

Building SEO backlinks, citations, internal links etc. etc. means NOTHING if your competition is also doing the same thing!

Most people with SEO companies often do it wrong,  almost ZERO exception. And all my competitors rely on these companies to rank. And they simply have no chance!

How do you get your SEO guidelines?

From Google?

Then you already failed!

I am counting on all these SEO "experts" to follow the masses (listening to what google says). This makes me beat them every single time.

It all comes down to this one simple fact.

Having an SEO company is all great  sure, but if your site is not ranking #1, having an SEO company is quite useless.

There is no 2nd place here.

You rank 1 or you don't. Being good at SEO but not on the 1st page, simply translates to  "you are not good enough at SEO". This is not a jab at you, and this does not reflect you. You can be a MASTER at SEO, but if your competitor is better.. i.e. ranking #1, you simply are "not good enough"!

Yeah, it is actually quite hard. Don't underestimate this. Being 1 means the entire state is gunning for you! It is hard enough to become one, then even harder to keep that #1 spot!