The Professionalist Real Estate Investing Podcast
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The Professionalist Real Estate Investing Podcast
New to Real Estate Investing? Watch This Before You Buy!
Welcome to the Professionist Real Estate Investing Podcast.
Speaker 2:I'm with my guy who oh, you know, it's Marcus Harvey. Property Relief in the House for another episode the Professionalist. You know what it is.
Speaker 1:Yes episode Avoiding Costly Mistakes as a New Real Estate Investor.
Speaker 2:Let's do it.
Speaker 1:Yes, first part. Like to get into this. I don't like beating around the bush, I just like just going straight at it get at it. Hey, number one, not doing enough market research. You just can't be going out there just saying, hey, that property looks good, and just you know what, how much is it?
Speaker 2:I'm gonna buy that property right. Shoot me a number, I got this exactly right.
Speaker 1:I'm not gonna even do my research and my due diligence right now I'm just gonna. I just want this property because it's it looks good.
Speaker 2:Right, right.
Speaker 1:That's definitely not the way to go, so investing in the wrong location without checking local trends. And it says Over that the rental demand for property appreciation.
Speaker 2:Yeah, yeah.
Speaker 1:Yeah, that's just, that's just all bad. If a person goes through that, you just can't go out guns blazing and be like, hey, I like the way it looks, I just want to pay for it, right.
Speaker 2:Yeah, yeah, you got to do the numbers, you got to run numbers. It has to make sense.
Speaker 1:It does. So that brings another part overpaying for a property, getting emotional instead of you know it's just crunching the numbers and numbers, yeah, yeah, don't, don't get your emotions involved with it. You want to make sure that you're going to be paying for the right amount of something, right, right?
Speaker 2:Right. And the next one you have failing to negotiate or understand fair market value. Yeah, if you're going into a deal and you're not negotiating, you already lost. You always have to be able to negotiate, see if there's a better deal for you, um, and then you have to understand the fair market value. Um, you know people are going to want to list and put their houses for sale at fair market value, even if it hasn't been updated. The house hasn't been updated in years. They still think they can get fair market value, which is crazy to me.
Speaker 1:And I would say too, you know, if you are definitely uncertain about it, get a credible, reliable lawyer. I mean a lawyer, a lawyer to help you out and get in a realtor. Absolutely, you want. You want to make sure that you're just going about this. I've seen so many people just like hey, I like, I'm like, have you done your research or due diligence? No, I, just want to go by. I'm like hold on, let's do the comps around here for the past six months, six, nine months or maybe even a year, Right.
Speaker 2:Right.
Speaker 1:Right, so make sure you're not. Your money works for you.
Speaker 2:Yeah, yeah, because you don't want to just go in there and be like, oh, that's, that's how much they want. I think I got that, let me just pay for that. No, it's a whole process behind it. You've got to be able to buy right and be able to be at the right price point where it's going to benefit you in the long run, depending on no matter what strategy you're trying to do in the long run.
Speaker 1:Depending on no, no, matter what strategy you're trying to do. And then the next one says understanding, repair and hidden costs.
Speaker 2:Yeah.
Speaker 1:I think a lot of people get. They don't understand that part or it's not. It's not even understand it. It's like out of sight, out of mind.
Speaker 2:Yeah, it's not even. It's not even transparent to them. So they're just like oh, you know.
Speaker 1:I, you know type of thing yeah, I forgot about those total, those hidden costs and then like the hidden part with me when, when somebody says hidden, first thing I think about is plumbing yeah, yeah, that's that's one part. I see. I'm just like what you and like, how's the plumbing here?
Speaker 2:do you have septic, do you I?
Speaker 1:know you live way out in the country. Do you have septic? How's the plumbing here? Do you have septic? I know you live way out in the country. Do you have septic? How's your water pressure? Right, right, I know. Right now I have a house out in the country. The house is basically it's been built About 75 percent, but the thing about it is is he has spring water but the water pressure is not at the specification for the city so they have to, they have to.
Speaker 1:Um, I have to do my due diligence and tell whoever wants the place. Yeah, hey, that you're gonna have to build a well and that's gonna cost anywhere between 15 to 20k. Yeah that's gonna be pricey right there yeah, because you want to make sure the water pressure to the house is just right. You don't want it trickling into your house.
Speaker 2:Yeah, yeah, it all has to make sense, all the way down to the water pressure, to the electricity, to everything. It has to make sense.
Speaker 1:It says not factoring in vacancy rates, property tax and the lovely insurance, especially in this state. You want to make sure, you want to know it's good to know and find out like up hand, like how much something is going to be. Yeah, and especially with the insurance, like because I know it was at home home warranty insurance, fire insurance, like I tell everybody, especially here california, everything's a fire zone yeah we're, we're, every, every, everything's at fire risk here when it comes to the state from southern california.
Speaker 2:What's going down in in in that area? Um, um, the the fires they just had um down there all the way up here. That happens every summer. Yeah, there's a fire all the time.
Speaker 1:Yeah, yep. And then choosing the wrong financial financial strategy. That's another one. That's huge. Yeah, it says high interest loans that can cut into your cashflow, and not having have enough resources for unexpected. We talked about this before Unexpected expenses. Yeah, we talked on other episodes.
Speaker 2:Have enough resources for unexpected we talked about this before unexpected expenses.
Speaker 1:Yeah, we talked on other episodes we talked about like capex and stuff like that and just other expenses that people just don't uh account for when it's time yeah, and especially, I was thinking too when, especially comes to investing, you want to make sure. So the main things I would definitely look out for is the roof.
Speaker 2:All is the roof.
Speaker 1:Yeah, how's the? How's the plumbing? Another one that a lot of people don't think about is is, I say what, their landscape? And they have a huge tree in the yard. How far are the roots in the ground? Is those roots uplifting the driveway Is?
Speaker 2:those roots uplifting the driveway? Yes, yeah, yep. Is it breaking any concrete up? Is it wrapping around any major plumbing or pipes that I might, you know, need concern, be concerned about? You know? Yeah.
Speaker 1:Like the upgrades. The hot water heater yes, hot water heater is a big one too, even when it comes down even to appliances one too, um, even when it comes down even to appliances. But that that the appliance one is not really a big thing, because if you buy something it's going to be up to your preference, like what you want anyway.
Speaker 1:So yeah, that's an easy fix, yeah, but it's the, it's a, you know the sight unseen with the plumbing, uh, the trees, uh, because those trees, even the trees, the, the, the line of what property is yours compared to your neighbors. You want to make sure you know exactly where, because there's a lot of properties where people they thought they knew something was at and that's not actually the property. You want to make sure that you get it at the right. You want to make sure you go right accordingly to what's your property and their property Exactly.
Speaker 2:Exactly. You definitely want to establish that right off the get go. But going back to the choosing the wrong financing strategy though you have high interest loans that can cut into your cash flow as an investor, you don't want to go that route. You want to make sure you have the right financing strategy, depending on the property or the situation of the property, and then not having reserves is a big one. It can really really just kill your deal for the rest of the year If you don't have reserves to do fix, to do repairs and to fix on your property.
Speaker 1:You know it's very important. Yeah, you don't want to look. You know it's very important. Yeah, you don't want to look. You don't want to look bad when you look in an area that has excruciating heat during the summer and the AC breaks down and there's a family of five living in, living in that investment property that you have and you don't got enough funds.
Speaker 2:And they just brought a brand new newborn baby home or something.
Speaker 2:So yeah, you don't want, you don't want to be that one, yeah, so you want to make sure you accommodate your tenants, to make sure, like, your property is working efficiently or your heater and AC works, your, your, your plumbing works, um, no crazy, um, electrical issues and stuff like that, and, um, you know, um, make sure you save for reserves, save for repairs and to get other financing other than a high interest loan. It's going to be way better for you and way better for your cash flow at the end of the day, especially here in California where cash flow is hard right now now.
Speaker 1:So yeah, and I was thinking also too, and also the more mortgage lender, whoever you're dealing with, let them know. Let them know that you want to get the best possible loan program for you in your your um situation oh yeah, because there's so many different. There is so many different options when it comes to the mortgage loans that you can deal with that you probably had no clue about right, right exactly the next one. This is a good one too.
Speaker 1:Yeah, trying to do everything by yourself yes, it's failing to build a team agents, contractors, lenders, mentors not learning from experienced investors.
Speaker 2:Yeah.
Speaker 1:Yeah, don't do this all by yourself, cause, yeah, you, you, you think you're going to be saving money. Actually, you're going to be spending more money than you thought. Yeah, yeah.
Speaker 2:And I've heard that so many times from other, like people on podcasts and other people, other experienced investors you have to build a team. You can't do every job by yourself. You don't even have enough time, you know during the day to try to do everything yourself. So let the mortgage lender do what they do, let the agent real estate agent do what they do, let the contractor do what they do and you know like. Like you said, learn from experienced investors yeah, it's like a, it's like not.
Speaker 1:you're not necessarily a big puzzle, but it's a small puzzle that each piece play their part and then, the picture comes all together as one.
Speaker 2:Yeah, exactly.
Speaker 1:And then, um, here's what you need to do. This is the part that strategize how to avoid these costly mistakes. The first one is you need to have a mentor, or I should say, master, market research, so you utilize tools like Zillow or Ritameter or the or the MLS. It is not not the MLS that um realtors use, but it's the other one.
Speaker 2:Yeah, the public. The public one um realtors use, but it's the other one yeah, the public, the public one.
Speaker 1:Yeah, you use those, as you can use those as your research tools. Zillow I will say this zillow is a great tool, but do not use the zillow meter as the reference is using of how much the house is.
Speaker 2:Right.
Speaker 1:Right, that's just a guesstimate of what they think it is, but it's not the best credible.
Speaker 2:Yeah, I think Zillow calls it a zestimate.
Speaker 1:Yeah, the zestimate Using the Z.
Speaker 2:Yeah, I like Zillow too, but I feel like sometimes the range is off with the properties and some of the numbers might be off. But you know, I'll look at other listings and then they'll be exactly what MLS is.
Speaker 1:So it's just a hit and miss sometimes with Zillow, but you know Zillow's still good it is, I tell, as long as you got options, you know just don't just don't use one, use a conglomerate of right, conglomerates of them, and and then then you use your judgment, use good judgment and if you, if you need any help, talk to talk to a realtor, broker, realtor, yeah, investor, someone that kind of just, you know, just get their opinion, hey, their opinion.
Speaker 2:Hey, what are you using, like, what are you using to comp properties or to even estimate what properties are?
Speaker 1:Yes, you know and then it says running the numbers like a pro yeah, you want to run these numbers. You want to make sure that you are not spending unnecessary money. You're trying to make profit, not lose money off of this money. You're trying to make profit, not lose right money off of this. Yeah, exactly. And says how to you know how to stress test your investment. Um, worst case scenario planning yeah, and that comes also.
Speaker 1:That comes with it too, with, you know, putting that collateral on the side for a rainy day if something breaks down also, yes, unexpected expenses, yeah, yeah it says budget for unexpected, which we just talked about, setting aside reserves for repairs and vacancies, especially the vacancy part.
Speaker 1:So it's not like, especially with the home, if, uh, if you have somebody move out and you don't get a person to rent the house and you know in in a, and you know that in that month's time, right, who's stuck with that rent? You, as an investor, you're stuck with that rent.
Speaker 1:you got a mortgage payment yeah yeah, but then if you deal with you know, with you know, like we've talked so much about multi-family syndication, everything you have leeway because you got, you have doors, you have doors that can help you out right, but when it? Comes to single-family homes, you don't have that privilege. You still, you know that's where that collateral comes into play, because you don't, you don't, you don't know if you're going to get the good, the renter that you need to be in that house. You just, and the thing is, don't take any type of renter.
Speaker 2:Also, because they got money, exactly, exactly, even the even. Even with the two to four doors, um, multifamily, one can one person leaving is just going to hurt you because you gotta oh, you gotta turn the prop, you gotta turn the unit over, you gotta get a new tenant, um, make sure everything's good again. It's just starting all over again. So like, yeah, two, two to four is it's just like having one, one single door it is, you know, you lose one or two tenants out of the two to four and you're back to. You're back to square one, almost so and what it makes sense too.
Speaker 1:Because, yeah, because, when you get that, no matter from one to four, that's still that, that residential loan still residential it's not even a commercial commercial yeah still dealing with residential rules exactly. And then it says, uh, picking the right financing strategy, conventional versus hard money or creative financing. You know we got our guy Pace. I love Pace to death.
Speaker 2:Yeah, he got that creative Shut up, Pace.
Speaker 1:Morby, he has that creative financing down to a T.
Speaker 2:Oh yeah.
Speaker 1:And then you got the regular conventional loan and then the hard money, the hard money loan. It can be a plus to you. I think of the hard money like kind of like a loan shark.
Speaker 2:It is kind of like that, because it's like you know, hard money, they're going to charge some points, they're going to charge that high interest, but you need the money.
Speaker 1:We got the money for you, but this is what that interest rate is going to be Right. Or your credit is like this oh, don't worry about it, we got you, we'll get this deal done, no matter what. And this is surround yourself with experts. It says finding a mentor, joining an investor group, building a strong team, realtor, property manager and contractor. Those are all helpful for you to succeed. And, like I said, it's it's not a big puzzle, it's a small puzzle. Everybody plays their part to make that picture, make you know that picture come about.
Speaker 2:Right right.
Speaker 1:Exactly, and this is uh about the costly, a costly mistake, how to avoid it. It says um, how to share. I'm trying to think how to have an example, as if all I know is I've come across some people where they they just bought uh stuff just because of, um, off of emotions, yeah, yeah, and I was, I had to, you know, had to pump the brakes on them on that, like no, no, no, you can't. Let's, let's, uh, let's, do some research, let's see, right, let's see what you're working with and like. And I I talked to say who's your, you know your lender, you know your lender, you know cause, your mortgage, your mortgage, uh, broker, that they, they play a huge part of what you can be accepted for, yeah, or it's a situation where I have a friend named such and such and they did it.
Speaker 2:So I want to do it there. You know they it's it's. You know they won't be like that Exactly.
Speaker 1:They're, you know they, it's, it's, you know they don't want to be like that Exactly, and every story is that's every. Every story can't have that same story.
Speaker 2:Right, exactly, exactly. You can't want to just all the way copy what your friend or what your this, this other couple has done, or whatever the case you want to be able to. Every deal is different, every, every, every. Uh, what do you call it? Every deal is different. Every, every, what do you call it? Every, every house is different, every situation is different all the way from the loan to the numbers, to how much it costs for the property certain repairs. So your situation can't be exactly like your friends.
Speaker 2:Yes, exactly yeah, don't go by don't go by that, that that situation is different. I saw them do that. Why can I have that? Well, I mean, it's a different situation, so exactly, yeah, yeah.
Speaker 1:so these are how to avoid making uh costly mistakes and errors when buying a uh buying a piece of property as a new investor, because, yeah, it's a team effort. A lot of people get in it for different reasons in investing, but the longevity of it is always long when it comes to real estate investing yeah, for the most part. Yes, this is not a short game. This is a long game when it comes to it.
Speaker 2:Yeah.
Speaker 1:So just to let you know the world out there know it says you know, start with education, educate yourself. Books, podcasts like this, networking yes uh, there's many networks that you can go to when it comes to real estate investing. Uh, analyze multiple deals before buying your first property. If you don't know how to go about doing it, talk to an experienced investor, or talk to a realtor, or even to a mortgage broker. You want to make sure those numbers are good for you.
Speaker 2:Yeah, Look at plenty of deals before you just commit to something you know. Just look at plenty of options, because there's so many options.
Speaker 1:Yes, and then get multiple quotes and repairs and financing. That is huge. Don't go by the first one. Yeah, I would say go by three or four.
Speaker 2:Yeah, I say minimum three quotes for, for, for repairs and then for financing. The same, if you if at least a minimum of three. If you want to do five, just to pick one out of the five, that'd be cool too. But at least get three, a minimum of three quotes. That way you can choose which one you want to go with, and it don't have to necessarily be the cheapest one, it's just, you know, the one you feel confident about.
Speaker 1:So yes, and he says have an exit strategy before investing, because it's a long game. But then eventually, you know, eventually you're gonna, you're gonna let that property go. You might, you might, uh, you might invest it somewhere else or you might go into a syndication deal. He's like you know what I'm tired of? I'm tired of the single family home. I'm going to multi-family, right see, I want, I want, I want more doors under one roof, right yeah?
Speaker 2:exactly you. Just because the, the, the name of the game in real estate is, eventually you're going to, you're going to want to scale to a certain level. You know, whatever your vision is, if it's starting out with one to four and then you've been there for a few years and you want to scale up to multifamily, you know that's, that's just how it goes, you know. And then some people go further and want to go commercial.
Speaker 2:You know yeah uh, multi-family commercial, or even uh uh um industrial commercial, or, or or skyscrapers, you know stuff like that big buildings exactly.
Speaker 1:I view it like you. Just you're just graduating up higher on the ladder?
Speaker 2:yep, you just graduate and that's all you're doing. Each level, you're graduating and and, and you know trying to figure it out, you know, but some people stay with the strategy that works best for them as well. You know. Some people aren't going to go for whatever's the most money, they're just going to like. You know what? I'm making a little bit of money. This is kind of like it's not stressing me out, so I'm good with it, you know know.
Speaker 1:Yeah, so, but everybody's different. You know it is, it is, and then anything else you want to say.
Speaker 2:So, the only thing I have to really say about this topic, um to avoid costly mistakes as a real estate investor, um to to recap, and um some key takeaways I want to say is make sure you're running your numbers. Make sure the cash flow is going to be there, um, depending on your strategy, um make sure, um you take care of your tenants.
Speaker 1:Oh, yes, to make sure they're happy.
Speaker 2:Um, and to avoid costly mistakes, um, make sure you're doing the right financing for the for for the property um in question. Make sure you're following procedure and following the process of it all. Don't jump around, you know. Follow the process of taking your time doing due diligence, doing your homework, to figure out if the property is right for you. Look at, analyze and look at plenty of properties.
Speaker 1:Yes, that's my take, that's. You heard it from Marcus Harvey, mr Property Relief himself, sir you know we're going to do another one for you guys.
Speaker 2:Um, here coming, um, here coming soon. Um, we've talked about another topic, um, um, and other topics we're going to touch on, but, um, yeah, that's pretty much what I have to say about this topic is just make sure you do your homework, as always. Make sure numbers are right. Yes, make sure you got a cash flow, because it's a business and you don't want to lose money.
Speaker 1:Amen, amen. And then my part is I just want to thank everybody that listens to the Professors Real Estate Investing Podcast on Spotify, on Apple, on all the other platforms. All the shorts, what I'm going to start doing. I started to do it at first, but now I'm going to start back doing it. I'm actually going to have all these on YouTube so you can have the visual for the whole time of the podcast also. Yes, because that needs the podcast also. Yes, because that needs to be done. I'll also have I already have a slew of interviews coming up and I have some previous ones that I've done that I need to bring out and so you can have the visual effect of it. Also, because the interviews are very informative, information that you would need into you, into your, uh, real estate investing portfolio, your platform that's needed.
Speaker 1:Yeah and yeah. I just want to thank everybody and I appreciate.
Speaker 2:You say appreciate. You guys just keep tuning in to us. Just a couple quick little shout outs to some mentors pace morby, we got grand cardone. Um, we got the the what I forgot dude's name, the wealthy podcast dude, you know. Oh, yes, with the beard and the body, I forgot his name. But shout out to you, bro um. And just shout out to everybody who's uh, doing real estate. Oh, shout out to my, my god, new development, eric crutchfield, dallas, texas. He's killing it out there, he's just doing his thing. So shout out to him. And just everybody in real estate that's trying to grind and get this thing going, just shout out to you Keep going, keep building, keep trying to. You know, stay in the game and get this real estate money.
Speaker 1:Amen, amen. And, like I said, apple, spotify, all platforms, youtube go to the Professional Real Estate Investing Podcast channel. And yes, I just want to dedicate this to my late cousin, this episode to my late cousin, Didi, who I love so much she passed away from cancer I hate cancer and I'm actually going to structure um um this year that when I, when I sell property that I'm going to go through proceeds to help out with with cancer, because that's awesome because I can't stand.
Speaker 1:I lost two women in the past three years to cancer my, my granny and my cousin. My cousin taught me everything I know about dressing from head to toe. Make sure everything matches that's right make sure, make sure I talk to everybody presentable and oh yeah in the way that everybody can understand and accept and uh, yeah, that's it basically for sure, for sure.
Speaker 2:yeah, like, like condolences to your family, man, and I just want to everybody to just stay strong, keep working out there, don't give up. Um, you know you can in this life, man, anything's possible.
Speaker 1:So yes, and in that world, everybody have a blessed day, blessed week blessed month and blessed rest of the year we out.