As investors we tell newbies all the time on the Forums that one of the biggest detriments you can have starting out is analysis paralysis — that no deal will be the same, and one needs to just “jump” in and get started at some point. I personally have told newbies that waiting on the sidelines for that “dream house” is only putting you that much farther away from the dreams that you are trying to achieve.
This week has tested my resolve as a real estate investor. Honestly, for the first time it became “trying,” and the “game” began losing its fun. As I sit down for the first time all week after battling sleep deprivation and insomnia, I have had a chance to reflect. While I am certainly out of the woods and will be back on track to having fun in my hobby again, this week has made me sit down and think about this rut.
I started to realized that without evening noticing it, I’d fallen into a rut. While different than the newbies in the sense of I’m not necessarily paralyzed by inaction (I own 5 houses); at the same time, I’m certainly not an expert (check out some of the BiggerPockets Podcasts — WOW). That being said, I realized I have made some huge mistakes, sometimes the same ones that I council our young “Padawons” against in the Forums — but for me, these mistakes take a slightly different shape.
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9 Ways for Experienced Investors to Ward Off Real Estate “Ruts”
1. Drop Ineffective Team Members
If a team member is not working for you, drop them. I recently made the mistake of keeping a team member longer than I should have because of her connection to another dear team member. Not only did it cause a great deal of unnecessary stress, it also cost me money, and still potentially lost me that team member.
2. Re-Instill Company Values
Don’t let your history with other members get in the way of your other relationships. As crazy as this sounds, it is just as important to make sure your team still works for your mission as it is to train newbies on your company’s values.
I have gotten burned for letting loyalty stand in my way and not keeping my eyes wide open. While it has served me very well at times, it has also gotten me in a lot of trouble. When your gut says “run,” trust me — run. Always listen to your gut; it just might not be as early to the game as it should be, but it’s almost always right!
3. Keep an Eye on Your Properties
Once you have a great team in place, the demand for you to personally put eyes on your properties becomes smaller and smaller. You will also get busier and more successful, and it will be harder to go look at the houses in person. Don’t do yourself and your house a disservice; go look at it!
I had been hearing from a lot of people that that my carpets were shot in one of my houses. I almost spent $4k replacing them because I was told they were shot. Another realtor looked at them and gave me the honest opinion — they were fine. So my not going out there almost cost me $4k! Be sure to keep an eye on your own properties, or it might end up costing you.
4. Raise Rents to Market Value
Not raising your rents and staying on top of the market is also shooting yourself in the foot. You are SO much better raising rents slowly at $50 or so a year than trying to jump in the hundreds! Not only is that loss of money, but you usually lose your tenant. While slowly raising rents might still cause move out, it usually won’t be as drastic as if you try to make up for it with a dramatic raise down the road.
5. Revamp Your Leases
There are always “live and learn” situations. Your lease is your opportunity to make sure these situations don’t happen again. Therefore, it is imperative that you are updating your lease as you learn these lessons. Not only does it keep your stomach ulcer-free, it also saves you money, as you are not “fixing” problems with your cash flow!
6. Keep Enforcing Your Leases
Make sure that as you get “older,” you are getting wiser and not laxer. There is a reason why you revamp your lease after incidents. It 1) prevents you from the stress of the incident again and 2) prevents the money loss. Make sure you are enforcing your lease and not taking the easy way out. I know I have been guilty of not following my own words of wisdom, but it is imperative. In the long run, giving an inch can mean 3 miles and a whole lot more stress.
7. Look Out for “Leaking” Money
We all get tired and lazy. We think to ourselves that the opportunity cost of getting X back is not worth the time and effort. While that is certainly true with some things, many more times, this is false. The next time you don’t want to do something, think about what that is going to cost you. Not fighting with a handyman over an over inflated price, etc. can really add up in the long run.
8. Embrace Mistakes
Remember, we tell newbies to take a leap of faith and try something new! Well, we need to follow that same advice. I don’t know about you, but I get stuck in my ways. I have figured out what “works” for me and getting out of that “rut” is hard.
Have I mentioned that I only buy in one neighborhood in Charleston? So I know I am guilty. As often as we tell newbies to take a leap of faith, it is even harder for us older investors to keep being innovative. So be a old investor with new tricks. 🙂 Check out new areas, go out on a limb and continue looking for new avenues.
9. Don’t Get Hooked on the Old Market
As an investor who was lucky enough to get started investing during the low times, I am experiencing sticker shock now. While it is VERY important that you evaluate if the deals still work, it is equally important that you don’t miss out investing because the market is more expensive. Remember all those guys who were hurt by the crash give us stories that they were idiots for not investing at the “low?” That is the same thing for us. While the low now isn’t the same “low” as before, don’t get stuck low balling the markets and missing the new potential. I say this from someone who lost a good 9 months in a great market because I was being cheap!
With these tips and tricks, not only will we be able to keep up with the newbies; we will be able to continue to invest and prosper with new purpose!
What do you do to keep your investing business fresh? How do you avoid falling into ruts?
Leave me a comment, and let’s discuss!