Mistakes when analyzing first property

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Mistakes when analyzing first property

Quentin Jivery

Member since 2022 · 92 posts · 11 votes

I am curious what mistakes everyone else made when analyzing their first properties?

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James DainardPro Member

Real Estate Broker · Bellevue, WA · Member since 2015 · 415 posts · 1k+ votes

One of the most common mistakes we're seeing right now is not using the right comps.

People are using comps that are from too far back, when interest rates were much lower, to justify purchases now, in the face of interest rates rising again.

Make sure you're using accurate and timely data to justify your purchases!

Another mistake that we see a lot is overspending. Spend on your renovation to match the comp, don't go above and beyond where you don't have data to support your reno. We see this a lot with newer investors who are looking to make the most of their projects. We all want to do a good job and make nice products but we have to conform to the market and provide what it demands. If the demand shifts like it has recently, you should be able to shift your projects and your trades to adjust and pivot your business to meet the demand where it's at. This means cutting back on finishes in some places to save both time and money where we would've spent the money a year ago to get a higher final value.

Podcast Guest on Show Seeing Greene: Paying Off Rentals, Partnerships Splits, & Using Home Equity

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Matt Guignon
Real Estate Agent · St. Louis, MO · Member since 2017 · 74 posts · 20 votes
3y
@Quentin Jivery I am an active investor in St. Louis and would love to serve as a resource. We work with a ton of out of state and international investors serving each facet of the investment process. From Acquisitions, to rehab, and of course managing properties. Furthermore, we also have offices in a few other mentioned markets that struck your interest including Memphis, Nashville, Chattanooga, Columbus, Toledo, Little Rock, Atlanta, Orlando, and more. If you're looking for resources or to assemble teams out of state I would love to connect and answer any questions that may arise, specifically about the St. Louis market. Best of luck as you identify your markets and embark on the out of state investment journey.
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James DainardPro Member
Real Estate Broker · Bellevue, WA · Member since 2015 · 415 posts · 1k+ votes
3y
One of the most common mistakes we're seeing right now is not using the right comps.
People are using comps that are from too far back, when interest rates were much lower, to justify purchases now, in the face of interest rates rising again.
Make sure you're using accurate and timely data to justify your purchases!
Another mistake that we see a lot is overspending. Spend on your renovation to match the comp, don't go above and beyond where you don't have data to support your reno. We see this a lot with newer investors who are looking to make the most of their projects. We all want to do a good job and make nice products but we have to conform to the market and provide what it demands. If the demand shifts like it has recently, you should be able to shift your projects and your trades to adjust and pivot your business to meet the demand where it's at. This means cutting back on finishes in some places to save both time and money where we would've spent the money a year ago to get a higher final value.
Podcast Guest on Show Seeing Greene: Paying Off Rentals, Partnerships Splits, & Using Home Equity
14 Reply
Simon Ashbaugh
Realtor · Columbus Ohio, Cleveland Ohio · Member since 2022 · 849 posts · 830 votes
3y
One thing i've been seeing is overanalyzing, and no, I'm not talking about running too many numbers.
A perfect deal will fall in someone's lap that cash-flows 15-20k per year and they don't make a move because they feel something HAS to be hidden in the details that will turn the deal upside down. this is usually not the case. If you've crunched the numbers thoroughly and they work, then get a move on, because in places like Columbus Ohio good deals don't sit.
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Darius Ogloza
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
3y
Underestimating the cost of cap ex and due course repairs/maintenance over a reasonable time period. This one gets the vast majority of investors every time.
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Ashley Cross
Lender · Columbus, OH · Member since 2020 · 202 posts · 214 votes
3y
I second @Darius Ogloza. Something may cash flow on paper until you have a small leak in your home that you are unaware of for over a year & the house starts to get mold. *Speaking from experience*
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John Mathew
Real Estate Agent · Member since 2019 · 143 posts · 74 votes
3y
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Aj Parikh
Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
3y
I didn't account for property management but you should always account for PM even if you are self managing in case you decide to go that route in the future.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
3y
@Quentin Jivery most investors fail to take into account the different challenges associated with each property Class.
Class A is different than Class B, which is different than Class C, and newbies should really stay away from Class D.
[email protected]248-209-6824
Logical Property Management4.9450 Reviews
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Quentin Jivery
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Member since 2022 · 92 posts · 11 votes
3y
Quote from @Simon Ashbaugh:

One thing i've been seeing is overanalyzing, and no, I'm not talking about running too many numbers.
A perfect deal will fall in someone's lap that cash-flows 15-20k per year and they don't make a move because they feel something HAS to be hidden in the details that will turn the deal upside down. this is usually not the case. If you've crunched the numbers thoroughly and they work, then get a move on, because in places like Columbus Ohio good deals don't sit.
Yeah that is a hard one to get over!
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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
How over budget you will be with rehab
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Travis TimmonsPro Member
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
3y
Lack of focus. You mentioned BRRR, flips, and short term rentals. All 3 of those are very hard to execute. You also mentioned out of state investing. That's like a word salad of really hard things. Pick a market, pick a strategy; ideally, it will be one where you have some domain expertise. FOCUS.
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Khari F.
Kissimmee, FL · Member since 2018 · 150 posts · 27 votes
3y
@James Dainard Hi is 0.25 - 1 mile and 3 months the standard comp for volatile market? < 30 days on market.
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Khari F.
Kissimmee, FL · Member since 2018 · 150 posts · 27 votes
3y
@Scott E. Hi I picked up J scott book but Besides getting hands on experience - what tricks did you learn for getting more accurate rehab costs?
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Scott E.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
3y
Quote from @Khari F.:

@Scott E. Hi I picked up J scott book but Besides getting hands on experience - what tricks did you learn for getting more accurate rehab costs?

You need to have a general contractor help you with this in the beginning. Have them verbally give you a rough idea on what it'll cost to remodel an average home in your area. Then once you actually have a deal under contract, invite that contractor out during your inspection window to give you a more formal estimate.
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Khari F.
Kissimmee, FL · Member since 2018 · 150 posts · 27 votes
3y
Quote from @Scott E.:

Quote from @Khari F.:

@Scott E. Hi I picked up J scott book but Besides getting hands on experience - what tricks did you learn for getting more accurate rehab costs?

You need to have a general contractor help you with this in the beginning. Have them verbally give you a rough idea on what it'll cost to remodel an average home in your area. Then once you actually have a deal under contract, invite that contractor out during your inspection window to give you a more formal estimate.

Would it be wise for me to allocate a budget for paying reputable GC for their time and knowledge even if they cant accept the job ? $200 a walkthrough?
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Scott E.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
3y
Quote from @Khari F.:

Quote from @Scott E.:

Quote from @Khari F.:

@Scott E. Hi I picked up J scott book but Besides getting hands on experience - what tricks did you learn for getting more accurate rehab costs?

You need to have a general contractor help you with this in the beginning. Have them verbally give you a rough idea on what it'll cost to remodel an average home in your area. Then once you actually have a deal under contract, invite that contractor out during your inspection window to give you a more formal estimate.

Would it be wise for me to allocate a budget for paying reputable GC for their time and knowledge even if they cant accept the job ? $200 a walkthrough?

That is certainly an option. In fact some GC's may expect it. But you don't want to have to keep shelling out $200 for too many estimates. Once you have a sub-market and a type of house you are targeting, it will become pretty easy to estimate the rehab costs. They run about the same for every house (assuming square footage, bathroom count, etc are about the same)
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Rob Chiang
Rental Property Investor · San Mateo, CA · Member since 2017 · 108 posts · 49 votes
3y
Biggest mistake: Having to "love" the property to buy it. Who cares? Just make a big profit.
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