Real estate investing is a straightforward process. However, I can easily say that now only because I’ve been through the process multiple times.
When I did my very first deal, I had a roller coaster of emotions. I had a lot of hesitation and self-doubt. And, I’m here to say, “That’s Normal.”
I’ve written a beginner’s guide to real estate investing, a very comprehensive and technical guide. However, it doesn’t include any of my pitfalls and mistakes.
This article aims to complement my technical guide with the “other side” of real estate investing. The following are my real estate investor confessions!
Once I decided to pursue real estate, I became committed. I read every recommended book and would listen to the Bigger Pockets Podcast during my drive to work.
Truthfully, I didn’t understand half of what I read. But now it makes complete sense. Many times I look back on my first and say, “Oh, that’s what they meant.”
What I’ve learned is that knowledge gained through reading can only get you halfway there. If knowledge was enough to succeed in anything, then we would all be rich and have six-pack abs!
It was only through action and experience that I fully understood what I’ve read.
Not About What You Know, But Who You Know
During my annual meeting with my financial advisor, I shared that I wanted to get into real estate. Fortunately, he knew a seasoned investor and said he would reach out to him.
I was hungry, though. Knowing this investor’s first name and that he is a real estate agent, I skip traced him and found his business email online.
From the books I read, real estate investing is a hustle. So, I didn’t wait for my financial advisor to set up a meeting. Instead, I impatiently sent this investor an email.
What I’ve learned is that networking is essential in real estate. Yes, anyone can attain success with real estate. However, you can achieve success faster with the right people on your team.
Also, I felt like real estate was a secret society that you can’t enter unless invited. I never got an email response from that investor, and not even sure he even received it. I never asked.
My financial advisor set up a meeting with the seasoned investor and, only then, gave a formal introduction to my wife and me. However, I could tell he was skeptical about us and probably thought we were just “wannabes.”
Managing My Expectations
I admit I tried to flex my muscles and show initiative in front of Shawn, the pro-investor. I told him that I wanted to acquire 25 properties that each cash flowed $300.
After I completed my first deal, I thought how ridiculous I sounded. However, after doing a couple more deals, I realized that it wasn’t too crazy.
Every time I buy a new property, I’m always updating how many houses I want. One day it’s eight houses, and another day it’s five houses.
Before, I couldn’t believe anyone would want to rent a property for more than $700 or $800 a month because that’s a price that I’m not willing to spend for myself. I practiced calculating the cash on cash return and couldn’t see how I would accomplish $300 in cash flow and scale that fast.
Shawn blew my mind when he told me his properties rent between $1,800 to $2,400 a month! What was his secret? Location. His properties were next to universities and hospitals, which were perfect for medical students.
After that meeting, Shawn took my wife and me under his wing and became our mentor. He introduced us to more people in the real estate world, such as our banker, attorney, and insurance broker.
To this day, he checks on me from time to time and sends me deals!
I call this my “Flip or Flop” moment. I felt like one of the TV personalities disagreeing with their partner about cost and rehab expenses.
For example, I wanted to repaint the cabinets. On the other hand, my wife wanted to relocate the stove, add more cabinets, and replace all the old ones.
I tried to pinch pennies and sacrifice style for the sake of staying on budget. There were items on the list that I was willing to do myself to save money.
In the end, I conceded and agreed to redo the entire kitchen. It cost us about $2,000 to remodel the kitchen. However, the reappraisal valuation increased by over $25,000!
From that moment on, I never questioned my wife’s design. When we walk through a potential property, she gets free reign to do whatever she likes.
Becoming a Boss
I hired contractors to help renovate my first rental property since I still had a full-time job. However, the quality of service of the contractor is directly proportional to the price you’re willing to pay.
It’s not in my nature to be pushy, but I didn’t want anyone to take advantage of me. So, I was always on the contractor’s case and monitoring their progress.
I wanted them to complete the property before the end of summer, which is perfect timing for college students. Unfortunately, they didn’t finish the project by my desired deadline, and we missed the enrollment season.
In reality, I pushed them too hard. The timeline that I was expecting was an ideal scenario. I’ve learned that projects, the majority of the time, will go past their deadline. Also, the rehab expenses can quickly go over budget!
Now, I use conservative numbers when determining the estimated rehab expense. I also add a buffer to the budget and the schedule to control my nerves.
For the record, I did buy the contractors’ lunch one weekend, hoping it would motivate them to continue working.
Dealing with Mental Stress
I scheduled an appointment with an appraiser to evaluate the after repair value of the property’s improvements.
Sadly, the day I met the appraiser at the property, I noticed the front door open. Initially, I thought I forgot to close the door because I was there the day before watering the grass.
Instead, what I discovered was that someone broke one of the back windows. Someone ripped open the drywall of the downstairs bathroom and stole the copper.
They also remove the copper from the water heater and furnace, which somehow also damaged the air conditioner outside. The police estimated they stole $50 worth of copper. However, I spent $8,000 on repairs.
My insurance was able to cover the majority of the expenses. However, they did not renew my contract when it expired.
This break-in was the first of its kind in the neighborhood. I informed the neighbors across the stress, especially since they run an in-home daycare.
I have a few theories about why someone attacked my property, which I blame myself for.
The property has a large window in the front that I failed to cover with curtains. This window quickly allowed anyone to see that it was vacant. Curtains are now one of the first things I install after taking possession of a new property.
I sent a lawn maintenance company to mow the yard. It wasn’t until I didn’t receive a billing statement that I learned someone else cut the grass.
At the time, I worked with a property management company, and they said they sent someone to mow the grass. Did that person notice the house was empty while they were pushing the mower around?
My next suspect was the painter. I reached out to two different painters to give me a quote on painting the exterior. One company was local, while the other painter I met while doing touch-ups on a project at my home.
I never met any of the painters at the property and just requested they send me their bid, which was my mistake. It could have been one of the painters. But, it was my fault for giving anyone an opportunity.
It took me months to mentally get over the break-in. I felt like someone robbed me emotionally, mainly due to all the time I spent there. I use to work on that property by myself as late as 11:00 pm!
On the following rental property, I never felt comfortable going there alone or would only stop by during the day. It took a long time for me to get over it, which also delayed the timeline.
Rinse and Repeat
My first property tested me! I had the option to stop there or keep moving forward.
I had a “heart to heart” talk with my mentor, and he shared with me that real estate is mental. He likened real estate to getting kicked for 15 to 20 years. After the tenants pay off the loan, your return on investment increasing exponentially!
With any kind of entrepreneurship, you feel the heartaches ten times more than an employee of a big corporation because your business becomes a part of you. On the other side, you also relish in the victories TWENTY TIMES MORE because your business is your baby.
We refinanced the mortgage loan on our first property, which allowed us to recoup our initial investment. This method was how we were able to scale quickly and purchase a house every six months.
I shared a couple of experiences that I went through with my first deal. However, there are so many more “lessons” I’ve learned along the way. Some I wouldn’t mind sharing over a cup of coffee. Other “lessons” I will take to my grave!
Will you overpay for a house? Sure. Will contractors give you excuses why they are behind schedule? Definitely! Are these reasons you should give up? No.
If you still have any reservations about real estate investing, take it one house at a time. The road to success may not be a smooth one, but at least you’ll be the one at the wheel!