Darel and Steven reveal the top real estate investor mistakes and the lessons learned throughout their own investment careers. Everything from buying on cash flow, not knowing definitions to making an emotional purchase, they explore what not to do as a real estate investor.
INTRO TO STEVEN AND DAREL
-Steven Rozenberg has been in the real estate business since 2002. Darel Daik has been in real estate for 23 years
-He was a pilot, so after 9/11, he had to re-evaluate. He just started buying real estate without any plan or long-term goal.
-Start with a goal and work towards it. Know what you are going to do before you buy the property. Buying the property because they seem like good deals may not align with your long-term goals.
MOST PEOPLE GET INTO REAL ESTATE FOR PASSIVE INCOME, BUT BUY ON CASH FLOW
-For long-term passive income, you should buy on appreciation, not cash flow. Have a strategy that fits your overall goals. A “Good Deal” is subjective.
-Went to school for finance. He was good at doing loans. Real estate has very low barriers to entry.
YOU FIND OUT YOU DID SOMETHING WRONG WHEN IT IS TOO LATE
-When you are an investor, all entities see you differently. For example, they believe you are making tons of money, so they try to fleece you. There is no real playbook for real estate investing. You learn the lessons after the mistakes. When you are going through it, no one is there to tell you what is right or wrong. Have the abundance mindset. You learn through helping others. It is important to give back and it improves the industry.
NEW INVESTOR MISTAKES
-They get into it without knowing what they want. Are you buying to flip, to rent, for cash flow, appreciation? If you are in real estate, you will have to borrow money. You need your own personal finances in order to borrow money.
NEW INVESTORS DON’T KNOW DEFINITIONS
-When you own a rental property, it is a business. Income, expenses, profit, loss. With a business, you need a business plan.
DEFINITION OF A BUSINESS
-Commercial profitable enterprise that runs without you. If you cannot walk away from your rental property and it run itself, then you have a job not a business. Treating it as a business, you need to use leverage, systems, tools, then you have a job, not a business. You will have to work hard initially but have a strategic plan with the goal of being able to walk away and it run itself.
STICK TO YOUR PLAN
-Investors who survive are disciplined and conservative. Again, a “Good Deal” is subject.
HOW DOES CREDIT SCORE APPLY
-There may be no minimum credit score for hard money, but the exit strategy matters. If you have a low credit score, you won’t be able to refinance. Probably 640 minimum if you are doing a buy and hold.
WHAT IS THE TREND WITH WHY NEW INVESTORS ENTER THIS INDUSTRY?
-New investors get into it to wholesale but learn other strategies to employ.
ALWAYS CONSULT WITH PROFESSIONALS
-Use professional attorneys, CPAs, Title companies. Be aware of the legalities involved.
LEARN THE REAL ESTATE CONTRACT
-Read and understand the real estate contract as it will be used.
KNOW THE 7 PROTECTED CLASSES
-Race, Color, Religion, Sex, Handicap, Familial Status, National Origin.
BUY HOUSES LIKE YOU BUY STOCK
-You are not emotionally attached to a stock. You buy a stock as a vehicle to reach a financial goal. View a property like a stock, a vehicle to reach a financial goal. You can always sell the house. If it is a dud property, sell it, cut your losses.
DON’T BUY A PROPERTY UNLESS SOMEONE ON YOUR TEAM HAS WALKED THE PROPERTY
-There are issues that you cannot see unless you are in the property. Someone on your team could be an inspector, you just need someone to physically go to the property.
KNOW HOW TO DETERMINE ARV AND REHAB COSTS
-Be conservative with your estimates. Learn how to run accurate comps. Look at
DO NOT GET EMOTIONAL ABOUT PURCHASING INVESTMENT PROPERTY
-Make decisions as if they must be justified in court.
TAKE ACTION WITH A PURPOSE
-Analyze the deal in your head so you can really understand it.
1.What is one big mistake investors make when purchasing property?
2.What is the definition of a business?
3.What must you have to be a successful real estate investor?
4.What are the 7 Protected Classes Under the Fair Housing Act?
5.How should you assess the properties you buy?
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