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!
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Welcome to the Professionist Real Estate Investing Podcast .
Speaker 2I'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 1Yes episode Avoiding Costly Mistakes as a New Real Estate Investor .
Speaker 2Let's do it .
Speaker 1Yes , 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 2I'm gonna buy that property
Welcome to The Professionist Podcast
Speaker 2right . Shoot me a number , I got this exactly right .
Speaker 1I'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 2Right , right .
Speaker 1That'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 2Yeah , yeah .
Speaker 1Yeah , 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 2Yeah , yeah , you got to do the numbers , you got to run numbers . It has to make sense .
Speaker 1It 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 2Right . 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 1And 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 2Right .
Speaker 1Right , so make sure you're not . Your money works for you .
Speaker 2Yeah , 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 1Depending on no , no , matter what strategy you're trying to do . And then the next one says understanding , repair and hidden costs .
Speaker 2Yeah .
Speaker 1I 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 2Yeah , it's not even . It's not even transparent to them . So they're just like oh , you know .
Speaker 1I , 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
Common Rookie Investor Mistakes
Speaker 1one part . I see . I'm just like what you and like , how's the plumbing here ?
Speaker 2do you have septic , do you I ?
Speaker 1know 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 1Um , 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 2Yeah , 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 1It 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 2What'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 1Yeah , 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 2Have enough resources for unexpected we talked about this before unexpected expenses .
Speaker 1Yeah , 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 2All is the roof .
Speaker 1Yeah , 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 2those 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 1Like 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 1So 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 2Exactly . 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 1You 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 2And they just brought a brand new newborn baby home or something .
Speaker 2So 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 1So 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 1Yeah , trying to do everything by yourself yes , it's failing to build a team agents , contractors , lenders , mentors not learning from experienced investors .
Speaker 2Yeah .
Speaker 1Yeah , 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 2And 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 1you're not necessarily a big puzzle
Understanding Hidden Costs & Expenses
Speaker 1, but it's a small puzzle that each piece play their part and then , the picture comes all together as one .
Speaker 2Yeah , exactly .
Speaker 1And 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 2Yeah , the public . The public one um realtors use , but it's the other one yeah , the public , the public one .
Speaker 1Yeah , 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 2Right .
Speaker 1Right , that's just a guesstimate of what they think it is , but it's not the best credible .
Speaker 2Yeah , I think Zillow calls it a zestimate .
Speaker 1Yeah , the zestimate Using the Z .
Speaker 2Yeah , 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 1So 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 2Hey , what are you using , like , what are you using to comp properties or to even estimate what properties are ?
Speaker 1Yes , 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 1That 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 1So 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 1you 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 2Also , 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 1Because , 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 2Yeah , he got that creative Shut up , Pace .
Speaker 1Morby , he has that creative financing down to a T .
Speaker 2Oh yeah .
Speaker 1And 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 2It 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 1We 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 2Right right .
Speaker 1Exactly , 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 2So I want to do it there . You know they it's it's . You know they won't be like that Exactly .
Speaker 1They'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 2Right , exactly , exactly .
Building Your Investment Team
Speaker 2You 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 .
Strategies to Avoid Costly Mistakes
Speaker 2Yes , 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 1so 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 2Yeah .
Speaker 1So 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 2Yeah , 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 1Yes , 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 2Yeah , 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 1So 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 2exactly 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 2You 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 1I view it like you . Just you're just graduating up higher on the ladder ?
Speaker 2yep , 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 1Yeah , so , but everybody's different . You know it is , it is , and then anything else you want to say .
Speaker 2So , 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 1Oh , yes , to make sure they're happy .
Speaker 2Um , 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 1Yes , 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 2Um , here coming , um , here coming soon . Um , we've talked about another topic ,
Scaling Your Real Estate Portfolio
Speaker 2um , 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 1Amen , 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 1Yeah and yeah . I just want to thank everybody and I appreciate .
Speaker 2You 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 1Amen , 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 1I lost two women in the past three
Episode Wrap-Up & Shoutouts
Speaker 1years 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 2yeah , 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 1So yes , and in that world , everybody have a blessed day , blessed week blessed month and blessed rest of the year we out .