Rental Property Investor · Tampa, FL · Member since 2017 · 20 posts · 10 votes
Question for all of the real estate veterans on here who have weathered the good, bad and ugly.
What do you know now that you wish you knew when you were beginning your journey?
I've searched the forums, but most posts look dated or didn't gain much traction. I'm primarily focused on buy & hold small multifamily / single family properties for cash flow, but I would welcome investors from all backgrounds to chime in!
Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes
6y
It's not over till it's over...so keep persisting until you make it happen.
So many deals fall through, either as a buyer, seller, or landlord, for so many reasons. But the key is to keep persisting to close the deal and simply make it happen, by taking each roadblock within a transaction as an opportunity to learn how to get creative and overcome it. Whether it is getting a potential tenant to rent with you, a contractor who ran off with an incomplete job, a seller who backed out of the deal, a lender who doesn't want to finance your deal, you will need to push through till you accomplish your task.
Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes
6y
@Max Baker I had a deal where I had found it off market, negotiated a great deal, and got it under contract. The preliminary environmental reports came back with issues requesting that a full phase 1 & 2 were needed (super pricey, and still no guarantee), and that the lender was not comfortable proceeding. I had gotten information from the seller who has owned it for nearly 40 years that the initial survey was false, there were no issues/contaminants. So I spent weeks with the city offices, utility companies, contractors, site developers from decades ago, etc. to try and get to the bottom of this and finally was able to prove it to the lending committee that there was no risk, their initial report was incorrect, and that they should not require further environmental studies. I finally got the lending approved, but then the seller had cold feet and backed out of the deal 2 days prior to closing. After an additional 6 weeks working with him and attorneys, in a respectful/amicable manner, we finally were able to close. There were a few other minor hurdles as well along the way, but for what normally should have been a 45 day close, it took 4+ months after I got it under contract with so many roadblocks.
If I had left this deal to fall at any point during the process without closing, I would've missed out on the best real estate purchase I've ever made.
The positive cash flow doesn't cover the costs you're going to incur over the life of the property.
If you're making any less than $300 per door, then 1 simple maintenance call will likely have you at break even for the month. If it's anything serious then you're red for that month(s).
One missed apartment turn = negative cash flow for a few months
One bad tenant is a full year or more of negative cash flow.
Everything can go great for 1-2 years, but you can have ALL of that cash flow sucked up with one bad occurrence. It's very likely that you'll have to use money from other properties or your W2 to keep it going.
The model really doesn't work unless you actually hold the property for 10-15 years (it takes this long until you really start building any real equity in the property). However, getting that far is really difficult unless you have an amazing property manager.
It's too difficult to scale and it doesn't generate enough profit to cover the costs of keeping it. The only time it makes sense is if you're in an appreciating market that creates equity for you while you sleep.
I'm in the process of selling off all my smaller buildings. They were essential to getting me to where I am now, but if I'd never do it again if I had the choice.
Rental Property Investor · Tampa, FL · Member since 2017 · 20 posts · 10 votes
6y
Thanks for the perspective, that's very interesting @Michael Ablan
I'd love to dig into your last sentence a little more. Given the wisdom that you've gained from your years of experience, how would you map out your first 3-4 years of RE investing if you were starting from scratch right now?
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
6y
So much.
1. I know this goes against the BP grain, but I wish that I would have attended a multifamily bootcamp and taken a course. I read books, but that only get's you so far.
2. I also would attend a lot more meet ups and conferences with intention.
3. Be more open to partnerships
4. Invest in a few syndications as early as possible
5. Not ever get comfortable/complacent. Push your limits and think big
Question for all of the real estate veterans on here who have weathered the good, bad and ugly.
What do you know now that you wish you knew when you were beginning your journey?
I've searched the forums, but most posts look dated or didn't gain much traction. I'm primarily focused on buy & hold small multifamily / single family properties for cash flow, but I would welcome investors from all backgrounds to chime in!
Best thing I know now than when I was beginning is to be "firm but fair" with my tenants. In the beginning I treated them like my friends. Rents would be late, I didnt enforce late fees, people made excuses, and my house would get messy fast.
Now I am much for firm and I tell everyone who moves into one of my houses the rules in plain english. I also explain what will happen if they dont follow the rules.