Im a newbie investor no deals under my belt still just learning. I want to start off my journey in investing rentals .What are some major DO-NOTS when it comes to real estate in detail and examples would be great as well.
New York City, NY · Member since 2019 · 52 posts · 38 votes
5y
@Sam Shi well for one, none of the loan officers now like me, I suspect even the one I ended up going with, lol.
Honestly I just kept pitting them against each other. I would go back to one and say the other was giving me ____ could they beat it? I also got pre-approved from them all - which means they had put in their time with me. Pre-qual takes hardly any effort. They were fighting back and forth all the way until about 2 weeks from closing, lol.
The first place I bought was in NYC so even .3% mattered drastically because my loan was so high. It was a lot of work, headache, and honestly I pissed a lot of people off but in the end I can’t say I care that much because I saved myself thousands of dollars.
Real Estate Broker · Moore County, NC · Member since 2020 · 169 posts · 141 votes
5y
@Selena Williams
Yes, you got the best loan terms you could.... will you need those lenders again? They may decide that your business is just too much work with no loyalty from you....
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y
@Antony Charlier avoid buying in a bad location. People looking for good deals will often find properties in bad locations that are not selling and get a "good deal". You are better off overpaying in a good location, then underpaying in a bad location.
@Nadia O. just to add to what you said, I would focus less on asking price and more on value. You can pay $15,000 under asking price and still get a bad deal. You can pay $15,000 over asking price and get a good deal. I am assuming your point was to buy things under value, which may more may not be under asking price.
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
5y
Count all the costs of owning and managing the property. Everyone counts the taxes, insurance, some maintenance and CAPEX and occasional vacancies. But there are other costs, not just money, but time, relationships, and emotional health.
Consider the cost of the evictions -- the money cost, the time, the stress.
Plan how you will deal with relatives or friends who want to rent from you, partner with you, etc. Have a well thought out plan and reply on what you will and won't consider.
Consider the cost of travel to your property location when all goes bad--the time, the rental car, air fare, hotel, meals out, gas. Before you buy a house across the country see what airfare cost, how many connections will you need, total travel time just to get there, hotel costs staying in one you would actually stay in, etc.
Consider whether the area is over utilized for trades people or say housekeepers for STRs. Will you spend hours looking for a good PM and be stressed out?
Look at the money, but look at the big picture of how real estate will/may impact your life...time, mental health, relationships, etc.
_______________
More practical, know what a flood plain and flood zone is and the types. Know if your property and its building are in or out.
________________
At first when you get a property, it will be exciting and you may want to get another and another. See one through the process to the point it is making money and learn from it before you jump in too deep. Slow and steady wins the race.
_____________
Always keep money or guaranteed access to money in reserve because bad things do happen to good people.
_________________
Don't give away your money. People get paid when they work, not when you want them to work. Rent is due when it it due in the lease, not when the tenant runs out of sad stories.
New York City, NY · Member since 2019 · 52 posts · 38 votes
5y
@Antony Charlier I always get a loan/pre-approval first. I would hate to shop for a deal, find a great one, and can’t get a loan to make an offer.
If you find a really good deal, chances are you’re not the only one that found it. In the time it takes to get a pre-approval in place you could lose the deal.
New York City, NY · Member since 2019 · 52 posts · 38 votes
5y
To be clear, get a pre-approval then make an offer. You don’t have to go with the loan that gave you the pre-approval. Once your offer is accepted you can then start shopping around for the best rate.
Rental Property Investor · New Haven, CT · Member since 2020 · 15 posts · 9 votes
5y
@Joe Villeneuve,
Would you recommend a buyer put a 20% DP if he/she can? Wouldn’t a 20% DP increase cashflow and equity; especially if the buyer got a good interest rate?
Would you recommend a buyer put a 20% DP if he/she can? Wouldn’t a 20% DP increase cashflow and equity; especially if the buyer got a good interest rate?
The DP is usually based on what the lender requires...unless the offer is a form of seller financing.
Cash flow based on the DP is only part of the picture. If the higher DP brings a higher CF, but the net result is it takes longer for the new CF amount to recover the new DP amount than the lower DP combination, it's better to go with the lower DP.
Equity generated from the DP is not a gain. All you're doing is paying for it, and the net result is simply taking cash from your bank and transferring the exact same amount to the property equity. There's no financial gain in doing so.
The interest rate isn't picked by the borrower. The interest part of the payment is part of the CF, and is paid by the tenant through the rent.
Rental Property Investor · New Haven, CT · Member since 2020 · 15 posts · 9 votes
5y
@Joe Villeneuve, thanks for responding. Ok, I got it. The short of it is to invest as little of your own money into a deal in order to recoup your investment faster and make profits thereafter.
@Joe Villeneuve wondering how much cash flow is needs to consider something a good deal. I struggle how to account for maintenance and turn over cost.
I am looking at a fourplex that may have about 400 cash flow per month after you deduct all fixed costs except for maintenance and turnover.
It is a nice unit, good area, nice schools and nice layout and all, but assuming not ideal for cash flow.
I general I struggle how to determine if there is a rule of thumb for cash flow. I know the more the better but what is considered the breaking point
I don't have a set number I use all the time because the reason for cash flow is to cover specific, not general, financial needs. The number you are looking for is based on those needs. Those needs can and will change as you move through the timeline of your overall plan.
The reason why you and many others probably struggle with that number is you haven't developed a plan that defines those numbers.
@Joe Villeneuve, thanks for responding. Ok, I got it. The short of it is to invest as little of your own money into a deal in order to recoup your investment faster and make profits thereafter.
@Joe Villeneuve Still waiting to Joe to write a book........ With examples :)
Book written...three times. 4th on the way...none published...I keep adding and changing. However, if you want examples, I have given probably enough to fill two books on this site. LOL.
@Joe Villeneuve Still waiting to Joe to write a book........ With examples :)
Book written...three times. 4th on the way...none published...I keep adding and changing. However, if you want examples, I have given probably enough to fill two books on this site. LOL.
"...enough to fill two books on this site." It's a big site. Put all those examples together and self-published on Amazon. Every person whom you get their attention with your insight (as well as all those following later) will be indebted to you. Time to pull the trigger Joe :)
@Joe Villeneuve Still waiting to Joe to write a book........ With examples :)
Book written...three times. 4th on the way...none published...I keep adding and changing. However, if you want examples, I have given probably enough to fill two books on this site. LOL.
"...enough to fill two books on this site." It's a big site. Put all those examples together and self-published on Amazon. Every person whom you get their attention with your insight (as well as all those following later) will be indebted to you. Time to pull the trigger Joe :)
I've published a couple of times on Amazon and Barnes and Noble. Publishing is simple..maybe I need a ghost writer? LOL