Lessons from an Amateur Real Estate Investor
Buy a good property
Insanely simple. Hard to do in practice. This is where all the magic happens. When I was getting started in RE, I didn’t have a “strike zone” for what I was looking for at all. I was swinging at any and every deal that entered my batter’s box. Got some lemons along the way.
I was very lucky that my very first property ended up being a solid condo in downtown Orlando with an amazing tenant already in place. Didn’t have to lift a finger and it appraised much higher 6 months later. Little did I know this is rarely how it goes but that’s another story for another time.
Following that I had a succession of properties that were not home runs. I wouldn’t even call ‘em base hits. I learned some very hard but very valuable lessons during this time period. I’m still working on these properties at the time of writing.
The lesson is this: define what kind of property works best for you based on your risk tolerance, available capital, and the business plan that fits your situation best.
2. You’re left holding the bag [good or bad]
Owning real estate is a long-term relationship. It can either be beautiful or turn nasty really quickly. It requires constant attention. RE isn’t liquid like a stock on Robinhood. You can’t tap your IPhone and get rid of it when things start getting hairy. And they will get hairy.
Once you purchase your property you’re the sole owner/operator. Nobody is coming to save you. Everything that happens to your property is on you. By investing in real estate, I’ve come to learn that one of the joys of renting is being able to hit up your landlord and have them come fix things right away [free of charge to you btw].
Bought a bad property? Tough luck bub you’re stuck with that bad boy for a while. More than likely you’ll have to invest even more capital to get it to a standard where you can refinance or sell it on.
If we’re talking actually living in the property you’re purchasing, the calculation changes dramatically. The NYT has an excellent calculator to suss out whether you should purchase or rent. Personally, I choose to rent my primary residence and invest in RE. There are almost an unlimited amount of costs that can arise while owning a house. In most cases your house isn’t really an asset but a liability unless you plan to stay 5+ years.
3. Be comfortable with debt. A lot of it
I have 7 figures worth of mortgages that auto deduct from my bank account on the same date every month. No and’s if’s or buts. The banks don’t care if I’m having a rough time at work or if my tenants aren’t paying rent.
I’m paying off 2 roofs right now. Roofs are expensive. That’s a lot of Carbone dinners right there.
If you don’t have the stomach for debt then real estate is probably not a great choice for you unless you have a significant amount of cash to purchase properties outright. I never thought I’d be putting 5 figures on a 0% interest business credit card while waiting for rates to [hopefully] drop so I can sell and consolidate some debt.
However-leverage is one of the best parts about RE if used wisely. There’s nothing else like it.
4. Build an amazing team
Real estate is a team sport. It’s a requirement to have a great team around you to tackle everything that’ll be thrown your way. Insurance brokers, contractors, handymen, property managers, inspectors, lawyers, real estate agents…sometimes I talk to all of these people in a single week.
There are so many specialized aspects to the business that require specialized knowledge. Laws are constantly changing in this heavily regulated industry.
In short, it’s essential to build a trusted network around you as you grow and scale in RE. That means having backups to your primary person in each role. 2 contractors, multiple insurance brokers, etc…
You simply cannot do anything worthwhile in RE if you’re slogging it on on your own.
5. Build with partners
I embarked on my RE voyage without a slightest clue about the whole new world I just stepped foot inside. It was like learning an entirely new language. Luckily I had some buddies with good advice while I was ramping up but I did a ton of learning on my own.
I’ve gotten this far largely by myself & with a small team… it’s been a long & lonely journey at times.
If I was starting over I most definitely would lean on some partners in the beginning. I know several buddies that have done it with trusted friends and that’s usually the best route to minimize costs, spread the risk around, and have a group that’s all in together. Plus, what better stories to share over a beer than a tenant pouring concrete down your drain or some other shenanigans that you can all commiserate over.
All this being said- I’ve enjoyed my own personal journey with RE immensely. In my own mind I’m still at the starting line, and learning so much every day. Hope these tips help out if you’re up for the challenge of embarking on your own adventures in RE!
