What Questions Are Not Being Asked That Should Be?

34 Replies

I read hundreds of questions in the forums every day. I see a lot of repetition in questions. People ask things like "Do I need an LLC" or "where do I advertise for tenants" or "how do you collect rent payment". We always seem to get the obvious questions, because of course they are obvious and common.

The harder part is the questions you should be asking, but don't even know you should be asking. More simply put: 

You don't know what you don't know.

This question is for experienced investors to share those things they wish they would have known or questions they wish they would have asked. Maybe you even have an area of real estate you wish you understood better and still have questions. I am hoping this thread can dig deeper and uncover some less obvious areas we all need to understand better. 

Nice idea for a thread, @Joe Splitrock . I specialize in list building for investors and marketing directly to sellers.

One questions folks should be asking from their marketing providers is this: What steps are you taking to maximize my chance at success? Everyone knows someone whos been burned by a bad list or a bad marketing campaign, and ultimately it causes them to lose faith in marketing. That's not a good situation for either party. Investor has a bad experience and is out $, and the vendor lost a customer.

Marketing and data providers need to be focusing on ensuring their clients success by providing them not only a quality product/service, but the expertise to navigate direct to seller marketing. Its not rocket science, but it isn't like tying your shoe either! It takes some practice and experience.

When I started I didn't understand construction ages and how that impacts rehab and functional spaces. I had no idea the differences in rehabbing a really old building (1900s) vs newish construction (1980s). I also didn't understand commercial lending worked. It is amazing to think back on my first project about 4 years ago and remember just how little I knew vs what I know today. 

Someone could write enough to fill an entire set of encyclopedias to answer your questions.

The short answer is something my father used to always say. "A fool and his money are soon parted"

The strange thing about people is they (not me) automatically focus on the positive side of most things. Suppose, I tell 50 investors I want to start a widget company and I want them to come to a meetup to discuss how we will get this company off the ground. When 50 investors show up I tell the investors I think each investor can earn a cool $1 million every year. The investors get so excited about the money they can't think straight.

So, the investors start shooting 100 ideas at me in regards to how to get the business off the ground. I'm a pretty savvy business man having more than 50 years of business experience and these investors' their ideas stink. So, I shoot down all their ideas. WHAT HAPPENS? My investors realize there is no viable solution and they walk away from the meeting. Ooops! There goes my investment capital! So, instead of telling the truth I lie and tell every investor that they have terrific ideas and they write me some fat checks.

What do I wish I learned after losing $1 million two times. Never believe what someone tells you. Never trust your CPA or a broker. A meetup group is usually the blind leading the blind, everyone talks b.s and nobody has viable ideas. Realize that we don't live in an ideal world because in an ideal world you could believe and trust other people. In a world that is not ideal you need to expect that everyone else has their own personal agenda and it does not align with your goals. If you really want to get rich then never believe what someone tells you and hang around with people who are already rich. Never count someone else's money. Did I just write in a post stating that I made $34 million since 2001. Don't believe me! Maybe, I am like all the other idiots who tell their b.s in the books they write and maybe some of those writers really did purchase one property.

How much money do you have to invest? Boy! Do I JUST HAPPEN TO have a great investing for you and it has been sitting on my desk for the past 5 years waiting for a great guy like you!

Learn to keep your money in your pocket. I see many people on BP who write that they are so excited to get into real estate. That is the wrong way to think. I wrote a few posts saying it is better to wait a few years longer until you have more money so you can start your career with 4+ units and you will be on your way to becoming filthy rich vs. purchasing single family homes and if you want to believe anything else then I guess you are not smart enough to do the research for what I just said and you will be like the millions of other losers who invest, maybe make a little money that they even brag about, but will never every be rich because they just can't get their self to do a little 5th grade math and their investments hardly keep up with inflation.

If you want to be rich do what the rich do. I know a lot of single family investors and not one is rich. I know hundreds of multi-unit investors and they are filthy rich. Again! Stick with your single family and struggle, or wait until you have a little more cash and be filthy rich. That is the mistake many investors made several years ago and will continue to be stubborn and continue in the future. No idiot who writes anything difference knows what he is talking about when it comes to multi-unit vs. single family and that goes for even investors with $20,000 or less. With only $20,000 to invest, I would still look for only 4+ units, or stay out of real estate and get a 2nd job until I have more money. Is there something hard to understand about that? Or...would you rather think about only the money and not have to over-tax your brain by having to do a little more thinking.

Originally posted by Eric James:

people want to know how to get rich quick. How they can buy "with little to no money down" . But they don't ask about learning financial responsibility and discipline. 

That is a great point. I think people look for the shortcut to many things in life. Look at how Dave Ramsey is treated in these forums. People act like he is either evil or an idiot. His main advice is have a budget and stop wasting money. I would argue his advice has hurt virtually nobody, but how many people ended up in financial ruin after seeking a get rich quick scheme? 

Tony Robbins has a quote that basically says the quality of our life is determined by the quality of the questions we ask. Maybe it is not even "what you don't know" that is the problem. It could be simply asking the questions that is the problem.

Originally posted by Lee Ripma:

When I started I didn't understand construction ages and how that impacts rehab and functional spaces. I had no idea the differences in rehabbing a really old building (1900s) vs newish construction (1980s). I also didn't understand commercial lending worked. It is amazing to think back on my first project about 4 years ago and remember just how little I knew vs what I know today. 

Do you think there was any better path you could have taken to learning or was "on the job training" the only way to learn those lessons?

I learned the same lesson on rehab. We rehabbed a 1900 building early in our investing career. I purchased it against the advise of a seasoned mentor thinking I knew better. The lesson I learned is don't think you know better than someone with 30 years experience. 
Originally posted by Jack Orthman:

Someone could write enough to fill an entire set of encyclopedias to answer your questions.

The short answer is something my father used to always say. "A fool and his money are soon parted"

The strange thing about people is they (not me) automatically focus on the positive side of most things. Suppose, I tell 50 investors I want to start a widget company and I want them to come to a meetup to discuss how we will get this company off the ground. When 50 investors show up I tell the investors I think each investor can earn a cool $1 million every year. The investors get so excited about the money they can't think straight.

So, the investors start shooting 100 ideas at me in regards to how to get the business off the ground. I'm a pretty savvy business man having more than 50 years of business experience and these investors' their ideas stink. So, I shoot down all their ideas. WHAT HAPPENS? My investors realize there is no viable solution and they walk away from the meeting. Ooops! There goes my investment capital! So, instead of telling the truth I lie and tell every investor that they have terrific ideas and they write me some fat checks.

What do I wish I learned after losing $1 million two times. Never believe what someone tells you. Never trust your CPA or a broker. A meetup group is usually the blind leading the blind, everyone talks b.s and nobody has viable ideas. Realize that we don't live in an ideal world because in an ideal world you could believe and trust other people. In a world that is not ideal you need to expect that everyone else has their own personal agenda and it does not align with your goals. If you really want to get rich then never believe what someone tells you and hang around with people who are already rich. Never count someone else's money. Did I just write in a post stating that I made $34 million since 2001. Don't believe me! Maybe, I am like all the other idiots who tell their b.s in the books they write and maybe some of those writers really did purchase one property.

How much money do you have to invest? Boy! Do I JUST HAPPEN TO have a great investing for you and it has been sitting on my desk for the past 5 years waiting for a great guy like you!

Learn to keep your money in your pocket. I see many people on BP who write that they are so excited to get into real estate. That is the wrong way to think. I wrote a few posts saying it is better to wait a few years longer until you have more money so you can start your career with 4+ units and you will be on your way to becoming filthy rich vs. purchasing single family homes and if you want to believe anything else then I guess you are not smart enough to do the research for what I just said and you will be like the millions of other losers who invest, maybe make a little money that they even brag about, but will never every be rich because they just can't get their self to do a little 5th grade math and their investments hardly keep up with inflation.

If you want to be rich do what the rich do. I know a lot of single family investors and not one is rich. I know hundreds of multi-unit investors and they are filthy rich. Again! Stick with your single family and struggle, or wait until you have a little more cash and be filthy rich. That is the mistake many investors made several years ago and will continue to be stubborn and continue in the future. No idiot who writes anything difference knows what he is talking about when it comes to multi-unit vs. single family and that goes for even investors with $20,000 or less. With only $20,000 to invest, I would still look for only 4+ units, or stay out of real estate and get a 2nd job until I have more money. Is there something hard to understand about that? Or...would you rather think about only the money and not have to over-tax your brain by having to do a little more thinking.

Great commentary. Responding to your last paragraph about single family versus multifamily, the issue isn't the type of property. The issue is scale. There are plenty of wealthy people who own single family homes, but they don't just own one. This is really true of any business. You don't get rich owning one gas station, one restaurant, etc. 

The more important detail, in my opinion, is how you manage your business. Anyone can buy real estate or start any business, but it takes a certain level of intelligence and common sense to be successful. As you say, relying on others blindly can have a horrible outcome. I double check all my CPA's work. It takes me hours, but without a check and balance system, it opens the door for costly mistakes. 

Ooops! You just did it. Better watch out when you talk about people getting rich with single family homes. Yes! I purchase 28 homes in Las Vegas at auction.com's live auction between 2008 and 2010, paid 30 cents on the dollar, gifted 6 of the homes to my children legally through the IRS, sold 20 of them last year, still have two I own and my I paid capital gains taxes in 2020 for $3.5 million (profit I made). I own single family homes in Las Vegas, Colorado, Idaho, Massachusetts and California. So, I know the math very well and it is like this. For all the homes I made in every state my total profit is I had sold every home, by today is about $4.5 million. Now let me tell you how much I earned from my multi-unit properties. SInce 2001, without even trying to make a lot of money, I earned $34 million and here is the seriously bad part of my investing. Had I been just a tad bit smarter and invested that same money I invested in single family homes, I would have probably made another $34 million and be worth about $68 million today because during the past few years, in California, apartment buildings were doubling in value every year for several years.

The benefits for owning multi-unit properties is they increase in value almost exponentially when you increase the rents. I don't understand why people don't understand that single family homes do not increase in value when you increase the rents and why people don't understand that when you own multi-unit properties e.g. a 20-unit property, or 5 4-unit properties you now own a goldmine where you have all the profits and appreciation you do not get with single family properties.  Below is a chart showing the profit for a 2-unit property when you increase the rents. If you own 20 stinky homes you cannot make these profits. Maybe, you don't have the money to purchase 20 units, but if your funds are low and you don't get yourself the mindset for the business model below you can earn $4.5 million vs. $34 million during your good investment career with the same amount of money. Do you know why people won't heed my advice. Seriously! It is because most people can't fathom being as successful as I am telling you can be easily accomplished.

I actually get angry. Suppose, you are smart enough to listen to what I am telling you and you learn enough to speak to other people with conviction. It would not be difficult to get relatives and friends to loan you some money when you know what you are talking about. It would not be difficult to get your spouse to support you. But, if you keep talking about single family crap then you are talking about being an average investor who will struggle for 30+ years to collect rents, earn a little from appreciation and hardly keep up with inflation. 

Just look at these numbers. I did one image for 20 units and 1 for 4 units. You will never earn these profits with single family properties.

Image for 4 units that you can purchase for less than the cost of many single family properties. Sure! You need to do a little work and don't ever expect a broker to help you. Brokers tell you every property for sale is great for you. Sometimes, it takes me a few years to find the right property, but most of multi-unit properties I purchase doubled in value within one year and most of my properties increased in value by 500% to 800% in the past 20 years.

Suppose, is 2001, you purchased a home in Torrance California when middle-income 1200 sq foot homes near the Torrance courthouse were selling for $900,000 to $1.2 million. Today, those homes are still selling for the same price and maybe a little less. Since 2001, multi-unit properties increased in value by up to 800%. 

What I see mainly is newbies asking for advice on how to buy their first property without doing any research at all. Maybe a sticky thread on this forum entitled - "Newbies, look here first'.....?

Another issue  and one that I wish I'd known about before I got into business 40+ years ago is - You need to know how to RUN a business before you will ever be successful. I don't just mean accounting, but the whole deal. From the beginning...how to get customers, how to talk to customers, how to take care of customers, how to figure mark-up, how to, how to , how to.....

Good thread!

Originally posted by @Joe Splitrock :

That is a great point. I think people look for the shortcut to many things in life. Look at how Dave Ramsey is treated in these forums. People act like he is either evil or an idiot. His main advice is have a budget and stop wasting money. I would argue his advice has hurt virtually nobody, but how many people ended up in financial ruin after seeking a get rich quick scheme? 

Tony Robbins has a quote that basically says the quality of our life is determined by the quality of the questions we ask. Maybe it is not even "what you don't know" that is the problem. It could be simply asking the questions that is the problem.

A more nuanced position on Dave is that he vehemently states that no debt is good, including debt on cash-flowing real estate. All because he allegedly lost a ton of money by being overleveraged with a high-risk real estate strategy many years ago. 

Originally posted by @Taylor L. :

A more nuanced position on Dave is that he vehemently states that no debt is good, including debt on cash-flowing real estate. All because he allegedly lost a ton of money by being overleveraged with a high-risk real estate strategy many years ago. 

IMO, his advice is better suited to people just starting out.....it is good to get the 'debt is bad' concept in your head at some early point. Then of course, learn how to USE debt, not let it use you.....

@Joe Splitrock  I think you should be asking investors who are already doing what you want to do how they estimate their expenses. After having some rentals for a few years I now understand that when i started i underestimated things like repairs, capex, and property management. I see people doing this all the time - in lower cost markets, 5% for capex and 5% for repairs simply isn't enough.

Originally posted by Taylor L.:
Originally posted by @Joe Splitrock :

That is a great point. I think people look for the shortcut to many things in life. Look at how Dave Ramsey is treated in these forums. People act like he is either evil or an idiot. His main advice is have a budget and stop wasting money. I would argue his advice has hurt virtually nobody, but how many people ended up in financial ruin after seeking a get rich quick scheme? 

Tony Robbins has a quote that basically says the quality of our life is determined by the quality of the questions we ask. Maybe it is not even "what you don't know" that is the problem. It could be simply asking the questions that is the problem.

A more nuanced position on Dave is that he vehemently states that no debt is good, including debt on cash-flowing real estate. All because he allegedly lost a ton of money by being overleveraged with a high-risk real estate strategy many years ago. 

The only thing that every failed business has in common is lack of cash, which usually involved overleveraging. 

Ramsey is just taking a low risk position based on his real world experience. Risk is a not a right or wrong question, it is a scale from low to high. Paying cash makes your risk near nothing. The higher the leverage, the higher the risk.  

Yes his advice is conservative, but he has helped the financial position of more people than any single person I can think of in modern history. I don't see it as all or nothing. You can follow his advice on reducing spending, having a budget and not using consumer debt. I would disregard his advice on mutual funds and investment debt. 

Originally posted by Dan Portka:

@Joe Splitrock  I think you should be asking investors who are already doing what you want to do how they estimate their expenses. After having some rentals for a few years I now understand that when i started i underestimated things like repairs, capex, and property management. I see people doing this all the time - in lower cost markets, 5% for capex and 5% for repairs simply isn't enough.

@Dan Portka this is a great one! People can get too comfortable using a formula they found online and forget that every market and property may not fit that mold. If you are charging $900 rent and collecting 5% for CAPEX, that is $540 a year. If you need a new roof and it costs $8000, that is 15 years of CAPEX! You need a new HVAC for $5000 and that is 10 more years. You can see quickly that the math doesn't add up.

Originally posted by Bruce Woodruff:

What I see mainly is newbies asking for advice on how to buy their first property without doing any research at all. Maybe a sticky thread on this forum entitled - "Newbies, look here first'.....?

Another issue  and one that I wish I'd known about before I got into business 40+ years ago is - You need to know how to RUN a business before you will ever be successful. I don't just mean accounting, but the whole deal. From the beginning...how to get customers, how to talk to customers, how to take care of customers, how to figure mark-up, how to, how to , how to.....

Good thread!

This is an amazing point and I think the reason most businesses fail. You may have a person who is a great carpenter and they decide to start a contracting business. They know nothing about marketing, accounting or managing people. They can get the job done and manage the work site, but fall short on other important tasks. I have witnessed it first hand. I have a great landscaping contractor who does great work and charges fair prices. It takes him months to bill me for jobs. I used to send him multiple reminders to get the bill. He took a tree out for me two years ago and I still have not received a bill. My friend is a contractor but only does business by word of mouth. He does no marketing. He doesn't even put his phone number on the side of his truck or signs in the yard when he is working there. He has no website and you have to hound him to get the job done. 

You don't have to be good at everything, but you have to be self aware to know where your strengths and weaknesses are. Hire or partner with people who have strengths where you don't. 

One of the reasons I recommend business school to young investors is to get a broad background education in business. You don't need college, but a good business program will teach you how all the pieces of a successful business fit together. 

I think real estate investing is a mental exercise for most wannabies. They are simply "trying it on for size". Once most see that there is work and consistency and time and knowledge and risk and money involved, they move on. Everyone is "new" the first time and has to go through that process on their own. Hence the repetition in basic questions on the forums. 

However, real estate investors self select. The few who do enter in and actually start the journey have to have a bit of explorer in them. There are lions and tigers and bears and snakes in the woods. A few learn to navigate the dangers. Some even enjoy the adventure. Others get eaten.

When I first started out, I had read a couple of books & I simply started making off market offers. In my case I wasn't using real estate agents so I didn't know to even write up an offer. It was on a yellow pad with the seller. I had no money really, so it was all creative financing.

It would have helped to know the basics. But I was focused on buying properties not on the formalities. Escrow and title, when I learned about them, sorted out the rest. I was buying preforeclosures and learned by experience. 

I wasn't aware of REIAs (Real Estate Investment Assoc) clubs. The big thing I'd recommend for wannabies is to first decide if they love hearing the word "No!" and the words "get out of my face". Prospecting can be hard. And second, join a REIA and take people to coffee and become a sponge of what they have to tell you. (I pay $20 a month for our REIA. It shouldn't be expensive.)

Take action, join, participate. That's how you learn the questions to ask that you didn't know to ask before.

@Joe Splitrock Thanks for starting this thread. I think about how difficult it is for experienced investors to go back in time when they knew nothing and can have the viewpoint of a total noob. It seems so obvious now but it wasn't to us then, either. 

Some great questions I think should be asked to the really successful investors on here: 

1) "What do you believe that very few others believe when it comes to RE investing?"

My answer: Action is unequal. Only spend time on tasks that have huge impact (more properties, better loans, new relationships).

2) "Which aspect of this business (finance, management, construction, etc) will allow me to scale the fastest?

A: Finance. Understand the banks requirements and reverse engineer that. Your buying power will go through the roof.

3) "What have you completed changed your mind about when it comes to RE investing?"

A: Fix/repair everything. The next tenant will want it anyway.

Originally posted by Will Gaston:

@Joe Splitrock Thanks for starting this thread. I think about how difficult it is for experienced investors to go back in time when they knew nothing and can have the viewpoint of a total noob. It seems so obvious now but it wasn't to us then, either. 

Some great questions I think should be asked to the really successful investors on here: 

1) "What do you believe that very few others believe when it comes to RE investing?"

My answer: Action is unequal. Only spend time on tasks that have huge impact (more properties, better loans, new relationships).

2) "Which aspect of this business (finance, management, construction, etc) will allow me to scale the fastest?

A: Finance. Understand the banks requirements and reverse engineer that. Your buying power will go through the roof.

3) "What have you completed changed your mind about when it comes to RE investing?"

A: Fix/repair everything. The next tenant will want it anyway.

Nice I like the questions:

1. Great point on how you spend your time. I see new investors who will spend hours on demolition or cleaning. Then they hire a property manager to lease and manage. You are better off hiring the low impact work and doing the high impact work yourself. Nobody can screw up demolition, but a bad property manager can cost you thousands.

2. This is a great question about what aspect will allow you to scale the fastest. I have never considered this and I have honestly scaled slowly over time. It is my side hustle and we have intentionally done it that way. In my case I feel like I have limited myself more than outside factors. I think that is true of many investors. I see investors with one property saying, how do I buy properties 10-20. My answer is always the same, start with property 2. 

3. What I have I completely changed my mind about when it comes to RE investing? I used to fear vacancy and it lead me to accepting less qualified people with cash in hand. I have learned it is better to wait for the right tenant. I embrace vacancy as an opportunity to get more rent and better tenants. 

I agree with your comments about fixing everything. If you never leave things in disrepair, it leads to less issues over time. We have actually gotten even more proactive, trying to update things before they get too bad. So many landlords refuse to spend a penny and their asset just deteriorates to junk. Then the only tenants they can find are tenants who are ok living in junk properties. 

What questions should newbies be asking? 

Through the 1970's or even well into the 1980's - because of prohibitive broker trading fees and other barriers to entry - real estate was THE poor man's ladder - the only open investment option for many ordinary folks. Now, since the advent of cheap/free trading, index investing and innovative products like ETF's and the 401(k), the ordinary citizen has alternatives to the standard purchase of singles and/or multi-units. Now, participants on the site self-select to a very great degree insofar as Bigger Pockets is a real estate investment site; however, too often, it seems to me, the question that repeatedly comes up of "what should I do with $5,000 or $10,000 or $20,000" elides this important first question and too often it seems people who genuinely do not know what they are doing aren't pushed enough on their initial investment choices. Why throw your money at a turnkey when it's pretty clear you are looking for a regular public REIT like return? Maybe an index fund would be a better choice until your capital grew sufficiently to sustain a rental through a hard year or two?

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@Joe Splitrock ,

I think many investors on BP are passive in some capacity.  They may also actively invest as well, but many have passive investments. Whether an investment includes the word Turnkey or not, I think the biggest question investors fail to consider is "how do the numbers I see on paper actually come to fruition?".  Heck, this probably involves a lot of active investors as well!

When we ask this question, it should lead us to ask a whole lot of other questions about all of the moving parts of an investment.  Such as, "what impact does the scope of my renovation have on my final outcome?".  "Can I charge a higher rent for a more thorough renovation?".  "Will a better renovation attract a longer-term resident and therefore save on my vacancy costs over time?".

I think investors always default to the averages instead of asking why and how.

In my experience, it is the investors and the properties that "save" on renovation and management costs that actually make up the upper half of the average and it is the investors and properties that invest on the front end that actually make up the lower have of the averages.

Knowing how you are actually going to reach the number on the piece of paper you use to run your calculations is much more important that plugging in what makes you feel comfortable.  Knowing how those numbers are achieved to begin with will give an investor a major leg up in this business.

@Chris Clothier great insight.. To achieve market rent and maintenance stability of property, a front end renovation is absolutely needed. Thats why best to buy vacant rentals. 

Also a diligent screening of tenant is necessary to avoid turns and evictions. its better to have a vacant property extra two weeks rather than loosen the screening standards to achieve immediate tenancy

The above criteria and third party property management has helped us in growing our memphis and southern ca rentals.