What do you suppose is the #1 newbie mistake is?I’ll bet if you ask a room full of real estate investors, you will get at least a couple of different answers. But by and large, you will hear the same thing over and over.
“They paid too much for their first few houses”. Just about everyone I know did this in the beginning, myself included. It’s a common mistake new real estate investor’s make. So how can you keep from making this same mistake?
First and foremost, you have to learn what a good deal is and this comes with experience. However, there are things you can do to speed this process up.
Don’t try to be an expert on every neighborhood.
Pick one area and become an expert on that area before moving on to another one. Visit open houses on the weekends and find out what houses are selling for.
Talk to other investors in the area. If you are driving around the neighborhood and you see a house that’s in the process of being rehabbed, stop by and talk to the owners of the house. Find out what they expect the house to sell for.
Call for rent signs in the neighborhood and get some input from the folks that have been around a while. Landlords know what their houses are worth.
If you have access to the MLS you can quickly find out what property values are for any area.
Learn from those that came before you.
When you are just starting out you should belong to your REIA group. Be there at the next meeting! There is one in every major city. You can find the one nearest to you by visiting http://REIA.org or http://nationalREIA.com.
Get there early and hang out with those folks. You’ll be surprised at just how willing they are to help you succeed. If you’re having trouble putting together an offer; if you’re just not sure it’s a good deal, ask someone that’s experienced.
Be sure to give back to the people that so generously share their knowledge with you. Volunteer to do one of the less glamorous jobs at the meeting no one else wants to do like manning the sign in sheet.
Hang out online where the experienced investors are.
There are so many places online that you can ask questions, get information, and get advice that will keep you from making mistakes. There is a wealth of information on real estate blogs and online forums.
One of my favorites is http://BiggerPockets.com. It’s free and you’ll find investors at every level of experience from all parts of the country.
Invest in your education.
All successful real estate investors are life long learners. Commit to becoming the best you can be. Make it a part of your life to spend some time each day learning how to be a better investor. There are so many books, tapes and seminars that don’t cost anything, but be prepared to invest some money along the way in your success. You’re worth it!
Believe in yourself.
Develop a strong belief that you will succeed and then take action each and every day. Small consistent steps lead to big accomplishments.
Thanks for the great post. It’s very difficult to do well if you pay too much up front for a property!
Adrian – You definitely make your money the day you buy the house, so you have to buy it right.
We’ll I am packing up and getting ready to move across country. From Oregon to Florida, big move and big change. I have my GPS set for local Tampa bay REIA group as soon as I get their. Have an investor friend who is flipping some deals through a couple of local real estate agents. Once I pick farm area, will look at 100 homes and start learning values. Next comes marketing, will have a lot questions. Sure am glad I have your blog and Bigger Pockets.
Good for you Chuck. That’s brave! I just published a podcast yesterday that I did with Chris Bruce. He is in the Tampa area. I’m sure you will run across him. Good luck and keep in touch.
I don’t Russell, but I have a friend Bill Walston that is a lease option expert. You can find him here at: http://BillOnBusiness.net or BillWalston.com.
He will be happy to answer questions. He also offers some coaching. Just tell him I sent you.
Yes, very difficult to estimate repairs. I hv a GC buddy that will go through a house for me thank goodness. Sharon, I’ve been hearing about this strategy of assigning LO’s. Do you ever do any of these? On the surface it seems nice to have a strategy for low equity leads.
Thanks for your contributions, as always they are very helpful
Hi Sharon, I am in the Las Vegas, area and at present there are no REI clubs here. Perhaps it is due our are having been hit so badly? I believe with people like you and the BiggerPocket family we can still be successful. We am told to follow the 70% rule and pretty much you never go wrong. I believe that is after the rehab cost are included, along with other expenses. Several of the BiggerPocket contributors give good info as well. My son and myself are really trying to build relationships with a number of BiggerPocket members such as yourself. We have one realtor that we stay in touch with and we are going to get to know at least 2 or 3 others. Thanks so much for your article above.
Thanks for your comments Rea. All markets turn around and yours will too. Why don’t you try to locate some other investors in your area and start a small monthly group? Just meet at a coffee shop or restaurant. All big REIA groups started small.
The 70% rule is the one to follow. From that 70% subtract repairs and your fee if you are a wholesaler. Always allow for a “fudge fund”; add at least 10% more over and above the repair amount for “things unknown”. It will always cost more and take longer than you think.
There is a great conference in Ohio around the first week in November every year called “OREIA”. You can find the info online. It’s about $100 or so to attend and get 3-4 days of training from experts that talk about real estate. I have gone myself. You should try to go to that or find one closer to you.
I love the informaion you are providing and “CAN NOT WAIT” for the course you intend to offer. Please keep up the wonderful work and continue as a wonderful educator.
William – I appreciate your comments so much. Thanks for reading.
Alison – The Diva Money Club sadly is no longer available. I will take it out of that post.
Thanks for the reminder.
Hi Sharon, Good post as always. I tried getting to the Diva Money Group. Most content is blocked but I couldn’t find a spot to register or sign up for membership. Can you help?
Thank you Sharon…..I’ll be sharing this with our local group…as always, valuable information and applicable to not only newbies but anyone who’s currently stalled in their progression. Always go back to the basics if you find yourself spinning your wheels.
Thanks for taking the time to comment Mike. I appreciate it, and I’m glad you find the information valuable.
Hey Sharon, I don’t know if it changed recently or what, but the web address for REIA is: http://reia.org/
It was quite easy to find on google, but just a copy/paste did not work.
Michael – I will fix that. There is also http://nationalreia.com. Thanks for letting me know.
I am really enjoying your blog and I was just reading your post on this topic. It is really tough trying to find a good mentor in this business. I have had my share of bad mentors, they just want to charge you a lot of money and run. They never give you the time to mentor you. Where can you find a good mentor who would really like to help you and not try to steal your money?
Juanita – I would start with your local REIA group. You should be able to find your group at http://REIA.com. You will find a lot of experienced investors that will be willing to mentor you. I still visit other real estate blogs, sites and read a lot of books. You can never quit learning.
Thank you for the post.
I agree. Understanding house values, and estimating repairs, is quite challenging when starting out, especially if you don’t have solid resources at you finger tips. That being being true, it is essential to develop the skill of accurately quoting comps, and understanding what to look for, such as similar sq. footage, number of rooms, year built, etc.
The best place to find those comps are the MLS, and after that, there are places like RealQuest.com, Melissa’s Data, and the like.
Aside from that, you’ve got the task of figuring out roughly what it will cost to make repairs to the property, so that you can present that to your end buyer.
It’s not easy being a new wholesaler, or rehabber for that matter. Having the right tools in your wholesaling toolbox, and aligning yourself with the right mover and shakers in your market, can definitely shorten the learning curve.
I couldn’t agree more. It’s a process that just takes time and effort. I do believe that finding a mentor is one of the things that helps with that very steep learning curve.