When I started investing, I struggled most with...

Question

Starting out it in real estate can be overwhelming. What was the thing you struggled with most and how did you overcome it? My biggest hurdle was not knowing when I had a good deal because I struggled with understanding house values and rehab costs. I overcame it by looking at A LOT of houses. I would look at a ton of properties online, then call the listing agents on the ones I thought would be decent deals for investors and ask them to show me the listed house. Then I would get to know them and ask them to send me any investor deals they got. Going on these showing appointments was invaluable both for looking at the houses and starting relationships with agents who sold "fixer" type properties. Once I had been through enough houses at certain price points, I started to know what a $100K house felt/looked like vs. a $150K house.

For estimating rehab costs, I spent a lot of time in home improvement stores learning costs of commonly used materials (paint, doors, trim, flooring, windows). I also made friends with several contractors, so I would always bug them for rough ideas on how much labor costs would be for common remodeling projects. This helped a lot.

Granted, I still get rehab estimates wrong all the time even after 15 years, but hey, you gotta start somewhere.

James De Stefano · Answer

Great points!   As someone who's been in over 100 houses, some flooded, some looking like war zones, some 1/2 way remodeled, and some fully fixed up, it gives you a good sense of the full scope of work needed.

Good advice and it's a good step towards getting the ball rolling.   Getting your money/ lenders and contractors lined up is another adventures, but none of it works if you pay too much or buy wrong.

Owen Dashner · Answer

Exactly.  You can't smell pictures!  I have been really wrong about houses before that I looked at online.  Then you show up to the house and the smell is horrific, there might be room pictures omitted, the foundation is failing, the plumbing is bad, etc.  There is no substitute for a walkthrough.

Jonathan Greene · Answer

You nailed it. Most new investors fail because they, especially these days, evaluate homes online and think doing that 50 times is the same as seeing homes. What they miss is basically everything. You have to see 25-50 houses before you buy unless you want to lose money. You could still make money on a deal, but you won't make as much as if you've seen 25 homes and know what all values and repair looks like in the market.

Also, one more thing I think that is a big failure mechanism for new investors is ego. They get brainwashed by gurus to hop in and get started so they rush their first deal and think they know everything because they took a weekend course and read a couple of books, but all ego gets you in real estate is loss.