What Do People Get Wrong Most Often

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

Some questions that get posted in the forums have no "right" answer, but rather just different approaches. In other cases there is a clear right and wrong answer. In those cases where there is a clear right answer, what do you see people get "wrong" most often?

3 Reply

39 views

Most Popular Reply

Dennis M.

Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes

Biggest thing I see is Assuming the rent minus the PITI equals cashflow

21 Reply

See this reply in the discussion

60 Replies

Jump to latestLatest

Sort by

Meir Greenblatt
Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes
6y
@David Dachtera
I agree with what you said.
I think a new real estate investor can definitely can his so called education from BP by listing to the podcasts reading books and forums and going to REI meetings. You can study wholesaling by listening to all the podcasts on the subject and then go and contact a local investor that is doing just that in his area to get started. For legal and asset protection it's a must to talk to a CPA, financial planner, lawyer. But you don't necessarily need to be an expert in all of that fields.
In all the podcasts they talk about how the best way of getting education is actually doing it, and I think that once you got started and you start finding your RE niche then focusing and expanding your knowledge in that niche will help make you a sophisticated investor.
(I'm a new REI and I have almost no experience, the info I know is just from the podcasts etc.)
1 Reply
Fred Tichauer
Member since 2019 · 6 posts · 4 votes
6y
1.They fall in love with the property rather than the deal.

2. They don't know what their BIG WHY is . ( Wealth building , retirement income and financial freedom). They put way to much emphasis on cash flow

3. They don’t have a Realtor helping them that is Residential Investment Specialist . Nit all Realtors are created equal , just as not all Doctors have the same level of training or experience. If they have a someone helping them and they own a real estate investment business or flipped any properties what value are they bringing to the table? All they are earning is a commission check .

1 Reply
Aaron Peterson
Investor · Akron, OH · Member since 2017 · 39 posts · 15 votes
6y
@Dennis M. Yes yes yes!!
0 Reply
Ian WalshBusiness Member
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
6y
Buy too high and under budget construction. Easily the top 2.
3 Reply
Joe SplitrockPro Member
Moderator
OP
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
@Account Closed not knowing laws is a problem that doesn't only affect new landlords. How many landlords can honestly say they have visited their city or state website in the last year to look at landlord/tenant/rental property laws?

@Lynnette E. great list. LLC is probably the most misunderstood issue that new investors run into. They think they need an LLC to have a business, yet they have no business or money.

@Odie Ayaga I know what you are talking about. I see countless posts where someone wants to start wholesaling. They have less than ten posts on BP and they disappear as fast as they showed up. Anyone who is really successful in real estate will tell you it took considerable effort to get going. Most people just don't have the drive to stick with it.

@Russell Brazil that 4 dimension thinking was a pretty deep comment, haha. I decided to sleep on it before responding. Most of us get caught in the here and now, but having the ability to see how an investment will look 1, 5, 10 or 20 years in the future is very valuable. I think too many investors sell early or get out of land-lording due to the daily struggles. The truth is 10 years from now, will you remember that XYZ tenant was late on rent in January 2020? When you have a property that your tenants have paid for 2X over and now it is worth 2X what you paid, that is all you really care about. I remind myself all the time that I passed up on deals as "too expensive" that today I wish I would have done. It is all about perspective.
4 Reply
Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
6y
I think too many people try to make reality fit their magic spreadsheet. How many times a week do we get someone here in the forums trying to pass the cost of replacing a 5-year-old oven or a 20-year-old water heater to their tenant? I still remember one guy last year blaming his degrading decorative bathroom mirrors on the too-long showers of his tenant and wondering how to make her wash faster. Quick-quick, scrubby-dubby, save my mirrors. That one was very special.
5 Reply
Ryan LubyPro Member
Rental Property Investor · CT · Member since 2016 · 258 posts · 227 votes
6y
@Joe Splitrock Maybe this isn't what you're talking about but for me I feel people most often go wrong from resulting. In personal life, relationships, business.. everywhere. This is why Thinking in Bets - Annie Duke is one of my all time favorite books. I think the principles covered in this book need to be constantly revisited, refined and practiced.
Essentially where people go wrong to me is in seeing their results as the whole picture and then changing their process wildly until they feel their results are good. Most are not paying enough attention to the process and giving variables their true weight. For example some decisions are massively influenced by luck and others are not. Thus we can have a horrible process and still experience success at times, or the opposite. Our process can be sound but the results aren't clear yet..
Either way I feel it's important to stay process-focused, and do your best to get wise to understanding how to evaluate processes. Otherwise you are moving blindly and will always fall victim to resulting. Changing your approach when results aren't obvious, and sticking to potentially horrible approaches when results look promising.
Strongly recommend everyone read Thinking in Bets - Annie Duke, and Principles - Ray Dalio
4 Reply
David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
6y
Originally posted by @Meir Greenblatt:
@David Dachtera
I agree with what you said.
I think a new real estate investor can definitely can his so called education from BP by listing to the podcasts reading books and forums and going to REI meetings. You can study wholesaling by listening to all the podcasts on the subject and then go and contact a local investor that is doing just that in his area to get started. For legal and asset protection it's a must to talk to a CPA, financial planner, lawyer. But you don't necessarily need to be an expert in all of that fields.
In all the podcasts they talk about how the best way of getting education is actually doing it, and I think that once you got started and you start finding your RE niche then focusing and expanding your knowledge in that niche will help make you a sophisticated investor.
(I'm a new REI and I have almost no experience, the info I know is just from the podcasts etc.)

Yes, we learn a LOT from experience. However, even the BP podcasters note that "The School of Hard Knocks" is the hardest, most expensive education there is. In Brandon Turner's case, he notes that he lost $100K+ in his early dealings. That would have paid for his education five times, and he could have avoided costly mistakes and perhaps reaped a higher profit for having the greater insight / knowledge.
0 Reply
Nick Rutkowski
Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
6y
@Joe Splitrock
1. Over zealous millennials who think they own the land they walk on. Purchase bad deals and display them on social media claiming they are millionaires. Then not taking advice from professionals how to run their companies better and crash their investments to the ground.
2. People not wanting to invest their money in fear of risk. Then being caught later in life with regret.
However, I can truly speak for the second one but have a lot of experience with the first one!
1 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
6y
Thinking a Land Contract is a proper and protective form of seller financing.

Using old rules of thumb like 70% minus repairs when analyzing deals instead of identifying the seller and their problem and solving it.

Having Pet policies instead of Animal policies in this age of ESAs and comfort/therapy animals.
4 Reply
E.S. Burrell
Rental Property Investor · MI · Member since 2019 · 192 posts · 205 votes
6y
@Joe Splitrock
What about this?
Fixing up my rentals as though I’m going to live there myself. I spend so much money and time on it. I really want to break this mindset/habit. But is this wrong?
5 Reply
Joe SplitrockPro Member
Moderator
OP
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
Originally posted by @E.S. Burrell:
@Joe Splitrock
What about this?
Fixing up my rentals as though I’m going to live there myself. I spend so much money and time on it. I really want to break this mindset/habit. But is this wrong?

This is definitely one of those things many of us have done this. I have trained myself to not think so much about what I want, but what would the largest number of potential tenants want. That means neutral colors, even though it may seem boring. I also look at it from a maintenance standpoint. Things that can break or harder to maintain should be eliminated, even though I may want them in my own home.
3 Reply
Joe SplitrockPro Member
Moderator
OP
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
Originally posted by @Steve Vaughan:
Thinking a Land Contract is a proper and protective form of seller financing.

Using old rules of thumb like 70% minus repairs when analyzing deals instead of identifying the seller and their problem and solving it.

Having Pet policies instead of Animal policies in this age of ESAs and comfort/therapy animals.

Great points! Number three is one of the most common trouble areas for tenants. I love your tip of asking "How many animals do you have?" This reduces the chance of someone sneaking in an ESA.
1 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
6y
I've learned some of these the hard way...

real estate is passive

my way is the only profitable strategy

no money down means no money needed

contractors, management companies, and residents will do things the way that I would do them

getting profitable deal flow only takes a couple of months

profit equals monthly cash flow

turning appreciated primary residences into rentals, unaware of the capital gain exclusion

thinking that a HELOC accrues interest differently than an amortizing loan

thinking that ROI is still a relevant metric years after purchase

we won't buy in a stable economy but will when the economy is crashing

we are investing in "the real estate market" rather than individual properties

overestimating AVR and completion dates and underestimating costs
i can't go to school or work and invest in real estate at the same time
8 Reply
JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
6y
Originally posted by @Account Closed:
Regarding new landlords, not learning the landlord-tenant laws for their jurisdiction, not screening tenants really well.

This is part of what I was going to say. A good number of BPers are landlords/want to be landlords. The other part of this is getting your lease wrong. Leaving things out that should be in, adding things that are illegal/immaterial. At the end of the day you have a promise to pay from a stranger, and if they don't pay the lease is your legal framework to force payment from a court. If you've screwed it up, you are in trouble.
Podcast Guest on Show #243
Skyline Properties
View Page
4 Reply
Joe SplitrockPro Member
Moderator
OP
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
Originally posted by @JD Martin:
Originally posted by @Account Closed:
Regarding new landlords, not learning the landlord-tenant laws for their jurisdiction, not screening tenants really well.

This is part of what I was going to say. A good number of BPers are landlords/want to be landlords. The other part of this is getting your lease wrong. Leaving things out that should be in, adding things that are illegal/immaterial. At the end of the day you have a promise to pay from a stranger, and if they don't pay the lease is your legal framework to force payment from a court. If you've screwed it up, you are in trouble.

I love it when a landlord has some totally illegal clause in their lease and they say, "well my lease says" acting as though you can put whatever you want in a lease. People download a free lease from the internet, modify it themselves and think it will be legal in their state.
4 Reply
Ola Dantis
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
6y
@Joe Splitrock

what do you see people get "wrong" most often?
Some people are not humble enough to take feedback, learnt from it, and ask for more.
In general, forums and/or its corresponding questions can elicit a mix of reactions and emotions, both of which are neither good nor bad, it's just, I guess, LIFE!
8 Reply
Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
6y
This is something that came up recently.

Failure happens, and it hurts, and it changes your world. No one is an inexhaustible tower of power that can just shrug off one failure after another with some positive visualization and good vibes. I feel I very much lost sight of the forest for the trees trying to explain how I feel about accepting failure in that discussion.

Failure is like grief. There's no getting past it. There's no constructively dealing with it. There's acceptance and bargaining and rationalization (not necessarily in that order, Kubler-Ross and the "five stages of grief" linear model is more an artifact of pop psychology than useful cognitive-behavioral therapy). But ultimately, while your reasons for continuing in whatever you're doing have to be strong enough, in order to start again you have to be able to accept that YOU WERE WRONG. You have to let a piece of yourself go, and find a way to heal. A lot of that (almost all of it for me), involves laughing at myself, reminding myself that "I ain't all that and a bag of chips (fingersnap)." Comedy has helped me a lot in my life.
7 Reply
Ola Dantis
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
6y
Originally posted by @Jim K.:
This is something that came up recently.

Failure happens, and it hurts, and it changes your world. No one is an inexhaustible tower of power that can just shrug off one failure after another with some positive visualization and good vibes. I feel I very much lost sight of the forest for the trees trying to explain how I feel about accepting failure in that discussion.

Failure is like grief. There's no getting past it. There's no constructively dealing with it. There's acceptance and bargaining and rationalization (not necessarily in that order, Kubler-Ross and the "five stages of grief" linear model is more an artifact of pop psychology than useful cognitive-behavioral therapy). But ultimately, while your reasons for continuing in whatever you're doing have to be strong enough, in order to start again you have to be able to accept that YOU WERE WRONG. You have to let a piece of yourself go, and find a way to heal. A lot of that (almost all of it for me), involves laughing at myself, reminding myself that "I ain't all that and a bag of chips (fingersnap)." Comedy has helped me a lot in my life.

Mic 🎤drop! WOW so true!
1 Reply
Jonathan R McLaughlin
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
6y
@Joe Splitrock overrating the risk of doing something and under assessing the risk of doing nothing.
2 Reply
John Matthew Johnston
Investor · Beaver Falls, PA · Member since 2015 · 275 posts · 82 votes
6y
@Russell Brazil How do you figure out what will appreciate? Up and coming areas? I buy properties in B neighborhoods and sometimes feel like I should be buying properties in up and coming C neighborhoods. Any insight?
0 Reply
Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
6y
Originally posted by @John Matthew Johnston:
@Russell Brazil How do you figure out what will appreciate? Up and coming areas? I buy properties in B neighborhoods and sometimes feel like I should be buying properties in up and coming C neighborhoods. Any insight?

Appreciation isnt magical. It is a factor of 2 economic forces. 1) Inflation, and really, that is just a small part of it....and 2) simple supply and demand. If supply is constrained, and demand is high and rising, prices rise. If supply is plentiful and demand is weak, prices stagnate. Metro areas like San Francisco, DC, Manhattan, Boston.....you have huge demand because A) Population is growing and B) incomes are growing. Combine that with a restriction on supply, you have no place to build and more people wanting to move there than available housing, and prices rise strongly.
Now that doesnt mean every property in those locations appreciates. When we go to sort of the outlying areas where there is room to build, then you might have situations where it is very east to add to the supply with new construction, and that supply might outpace the demand in those locations, and you might get stagnant prices.
[email protected]301-893-4635 Podcast Guest on Show #192
District Invest Group546 Reviews
Website View Page
1 Reply
Account Closed
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
6y
Originally posted by @Joe Splitrock:
Originally posted by @JD Martin:
Originally posted by @Account Closed:
Regarding new landlords, not learning the landlord-tenant laws for their jurisdiction, not screening tenants really well.

This is part of what I was going to say. A good number of BPers are landlords/want to be landlords. The other part of this is getting your lease wrong. Leaving things out that should be in, adding things that are illegal/immaterial. At the end of the day you have a promise to pay from a stranger, and if they don't pay the lease is your legal framework to force payment from a court. If you've screwed it up, you are in trouble.

I love it when a landlord has some totally illegal clause in their lease and they say, "well my lease says" acting as though you can put whatever you want in a lease. People download a free lease from the internet, modify it themselves and think it will be legal in their state.

OMG, you so nailed this one. And the sad thing is, tenants (and others) think that just because something is in writing in a contract, that it must be legal. I ask people who ask me for landlord advice - if your lease said you have to chop off your left leg if you are ever one day late on your rent, would you do it? Would you think that was legal? No? Well, just because something is in your contract that seems like it might be legal, doesn't make it so. Everyone needs to learn their rights and the laws that pertain to them, both landlords and tenants.

But, yep, 99 times out of 100, a landlord can take advantage of this one and it really gets my Irish up. I have no problem with landlords wanting to make a profit, but it's easy to do it legally.

And even if a landlord just doesn't know they should put something in a lease, whatever they put in it says a lot about them as a human being.
2 Reply
John Matthew Johnston
Investor · Beaver Falls, PA · Member since 2015 · 275 posts · 82 votes
6y
@Russell Brazil Thanks
0 Reply
Jonathan R McLaughlin
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
6y
@ Russ

@Russell Brazil the only thing I’d add to Russell’s cogent analysis is changes in use, usually correlated with demographic changes. Just as an example families combined with two wage earners made a lot of urban multis obsolete...changing use to condos drove appreciation. Single floor living experiencing a similar boom as population ages, and so on.
1 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.