19 Nov 14 Mistakes New Real Estate Investors Make: Part Three
Hey, welcome back to the 14 Mistakes Every New Investor Makes. If you’re an experienced real estate investor, recognizing these mistakes will help you as well. In fact, you can help me if you just scroll to the bottom and post your experiences or questions in a comment! I’d also like to ask if you would help me and Wealthbuilders by sharing and liking the posts on this website. So let’s dive in: today we’re going to talk about mistakes #4 and #5.
Mistake #4: Overlooking Having a Good Team and System on the Ground.
- With a good team you need a good real estate agent. Find an agent that has bought his or her own investment property. If you can’t find an agent that knows how to buy their own investment property, then find one who is willing to work with you by your formulas. That main formula should be that the gross rent on the home is 1-1.5% per month of what you paid for the home. You have to take a real estate agent and train them on what you’re criteria are, because most agents assume good cash flow to be if it cash flows on the 20% down on the investment property. But I want you to look for good cash flow on the total investment. Once you have an agent you like, they will be able to screen a ton of properties for you.
- Secondly, you need to have a contractor you can trust. The contractors are the ones who will do rehab work on the property. This is absolutely critical. Do an intentional job of vetting the contractors. Talk to other people who have used them as references. Go see work the contractor has done. You want to develop a great relationship with one or two contractors. After time, they can come in and save you a ton of money.
- You also want to have a good property manager. Again, this is critical. Never work with a property manager who doesn’t own their own investment real estate similar to the real estate that you have in your portfolio. First of all, they’ll have handymen and repairmen that just charge a fraction of what others charge, because that property manager knows the importance of being able to save money on repairs. Secondly, they’ll have a good understanding of how to keep renters in the pipeline. This means that when you do have vacancies, this property manager will understand exactly how important that is.
- The fourth person you want to have on your team is a good mortgage broker. A good mortgage broker knows how to find the loans that you need as an investor. Right now, you can only really get four mortgage loans on a property. Which is why….
- Your next team member should be a good banker. You want to find a banker that will do portfolio loans for you. This will open you up to a lot more possibilities in growing your portfolio.
- You also need a really good insurance agent. You need an agent that knows how to insure you against lost rents, hazard insurance, flood insurance (if that’s relevant for your area), etc. Find a good insurance agent who has already been insuring other properties.
- Find a good accountant. Again, this is critical. Find an accountant who knows how to do 1031 exchanges and how to advise you through that. They’ll also be able to help you get a full time real estate designation if that’s something you’re looking for.
- Lastly, you’ll need a good attorney. A good attorney will know how to set you up in the entities or types of companies that you need. They’ll help you with LLC’s and LLC trees. They’ll know how to protect you against liability and other areas of real estate. It’s important to have these 8 people on your team as you grow your real estate business. This group will save you a lot of money in the long run.
Mistake #5: Not Obtaining a Professional Opinion On Everything You Do—Sometimes a Second Opinion!
For example, look at property values. If I’m in a brand new area and I don’t know what property values are in that area, I want to make sure that I’m bringing several people in to make sure I fully understand property value. I get a second opinion to confirm the first opinion. And sometimes a third opinion.
Another example is with repairs. Sometimes you need to have a contractor that will get you a second opinion. See, the three most important words in real estate are not Location, Location, Location.
No, the three most important words in real estate are Verify, Verify, Verify. If you learn to verify the information you’re getting, it will keep you out of trouble. In fact, I recommend you have a great property inspector who you trust to give you good information. Sometimes on more difficult properties, I’ll have two inspections done because I want to verify, verify, verify.
These were mistakes #4 and #5 that will help you as a new investor if you avoid them. This is Billy Epperhart, I’ll see you again in another vlog. Thanks for watching.
I hope you enjoyed this video and I’ll see you next week for Mistakes #6 and #7!
Join me every Thursday for my new real estate vlog. See you next week!