Big Mistakes I've Made

We all like to talk about the successes we have and not always the failures. But a lot of times, the best way to learn is from those failures and the failures of others. I've been investing in real estate for a little about 3 and a half years now, and I've made plenty of mistakes. Not doing enough due diligence, not having systems in place, and not managing my property manager well enough are probably the biggest ones. 

Due diligence is so important when looking at real estate. You have the structure itself, which would include deferred maintenance, age of appliances, things like that. In addition to the building, you have to consider the deed, the neighborhood, average rents in the area, and the types of tenants you'll attract. With my first deal, our triplex, I didn't think to check into this exterior set of stairs that led up to one of the units. 3 years after we purchased it and were going to replace the staircase due to disrepair, we found out it was never permitted to be built in the first place, and was actually build on city-owned property. 

So instead of replacing the stairs, we needed to hire an architect, have them submit plans to the city to utilize a set of stairs inside the building (thank God they were there) and go that route. Fortunately the cost didn't actually change that much for us to do it this way, but it could have been a whole lot worse since I didn't look into permits pulled on the property during the inspection contingency period. Lesson learned, dig deep on the property during your inspection period. 

Systems. Systems, systems, systems. I am probably the most disorganized person I know, and generally I don't do a good job of setting up systems. However, without any systems in place, there's no way you can handle owning more than one rental property at a time. For the first couple years, I had no systems in place and filing for taxes was a very tedious and drawn out process. Now, when I receive a statement or a work order from my property manager, it gets saved to a specific folder, and those folders are used to keep me organized around finances, taxes, and forecasting. 

Unless you're managing the property yourself, you'll need to hire a property manager. When doing this, it's important to have a set of questions you ask them instead of hiring the first one who gets sent to you and taking their word at every turn. That's how I picked my first property management company, they were referred to me. I didn't know what I was doing and didn't know which issues to watch for and question. Finally, I got wise to some serious issues happening with them and got rid of them in favor of a company I sought out myself. So lesson learned here, make sure you develop your own set of questions to ask a property manager when you're interviewing them and don't just take the first company referred to you.