What should be avoided when buying you first rental property ?

Question

What should you avoid when purchasing your first multiplex or property for rentals ?

Joe Villeneuve · Answer

Losing money.

Rationalizing a bad deal, into a good one, and losing money.

Staying with a bad deal that's losing money, thinking it will change...it won't.

...Did I mention losing money?

Getting emotionally tied to your first deal, that's losing money?

Thinking you can fix a deal that's losing money, by throwing more money at it...and losing that money too.

Thinking if you did a larger down payment, to counter negative cash flow by getting a lower mortgage payment, was a good idea since you would be now getting positive CF. Not realizing that by doing this, all you've done is paid all your negative CF upfront...and you're still losing money...just faster.

There's one more thing...right on the tip of my tongue...let me see. Ih right...

Don't lose money. If you find yourself in that situation, don't spend your way out...you can't. Bail out, and move forward.

Account Closed · Answer

Not learning the landlord-tenant laws where the property is.

Jacob Sampson · Answer

1. Avoid over paying.

2. You are likely to make the most mistakes on your first property so make the mistakes small ones but not purchasing too much property straight out of the gate.

3. Don't buy for appreciation, buy for cash flow.

4. Make sure your property will actually cash flow. Gross rent - 30% (vacancy, maint, and capex) - PITI (Principal, Interest, taxes, and insurance) = true cash flow.

5. Do not take any money out of the business for the first 5 years.

Joseph Cacciapaglia · Answer

The number 1 mistake I see new investors make is not getting started. For every 1 person I know that had a really tough first deal, I probably know 20+ people that have talked about investing for years, but never took the plunge. No matter how much research you do, you will make mistakes. Build a strong team, buy something smaller than you can safely afford, and look at each bump in the road as a learning experience. Perfection is the enemy of progress and profit.

Bjorn Ahlblad · Answer

@Erik Lee make sure you know how to underwrite and don't buy a property that does not make money. Don't believe what you are told. Learn how to verify things for yourself.

Theresa Harris · Answer

@Erik Lee Look at the numbers, be realistic about what you can and can't do, don't get in over your head and make sure you get it for a good price. When buying, get copies of the leases, ensure the info is correct, get the deposits and prorated rent at closing.

Erik Lee · Answer

Thank you everyone for responding. You've all been a big help !!!!

What should be avoided when buying you first rental property ?

What should be avoided when buying you first rental property ?

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