The 5 Deadly Sins of Real Estate Investing
- Over-rehabing. Don’t do it…you will never get your money back…keep it simple and clean. Rehab the home but your rental property does not need to be a mirror of your own home.
- In-action. This is the one I hate the most. My house is not sold…rent it…my house is not rented…put and ad in the paper and a sign in the yard…people don’t want to pay $1,350 for my rental property…LOWER THE RENT!! These things came very simple to me, but most people don’t catch these easy solutions. If your payment is $1,000…and you can only get $950 in rent…RENT IT ANYWAY!! WOW that is so easy but people don’t realize, the $600 you lose in cash flow can be made up in appreciation and tax benefits!!
- I want to buy and sell. Great you can do that…I have done that…it works…just not as well as buy and rent. Check out the scenario below. Have a plan A but be willing to jump to a great plan B when the investment requires the move. Don't sit and wait.
Buy and Rent Vs. Buy and Sell
| Purchase Price | 100,000 | 100,000 | Purchase Price |
| Rehab Cost | 6,500 | 6,500 | Rehab Cost |
| Down Payment | 10,000 | 10,000 | Down Payment |
| New Estimated Value | 140,000 | 140,000 | |
| Equity Line at 80% of new value | 112,000 | 135,800 | Negotiated Sale Price |
| Existing First Mortgage | 90,000 | -4,074 | Commision to Agent |
| Cash out to You!! | 22,000 | -2,500 | Closing Costs |
| Less Dn Pmt/Rehab | -16,500 | -5,000 | Carrying Costs |
| Cash out less the Dn Pmt./ Rehab | 5,500 | -100,000 | Purchase Price |
| Equity in the Property | 28,000 | -6,500 | Rehab |
| Awesome!! | 33,500 | 17,726 | Not Bad… |
Hypothetical Situation**
- I want to quit my job and rehab. I have heard this 1 million times…and as much real estate as my partner and I own, we are still gainfully employed. After a number of years, with this system, you will have a nest egg built up…but don’t for a second think this is easy or that you can get rich quick buying real estate. However, you can put together a ton of equity and cash over the years through investing and rehabbing, enough so that there will come a day that you retire and simply speculate…but that day won’t come after a few years, in fact it is still not here for a lot of investors who have been doing this a long time…but you can equip yourself to the point where, if you never bought another piece of real estate in your life, 15 years from now everything you bought this year would have doubled assuming your properties appreciate at 5% a year.
- Never starting!! This is where 99% of people make a mistake…you have to have the courage and foresight to take charge of your personal and financial future. I had no one to guide me in this business when I started…I had help for sure, but no one told me that I could do as much as I have done…in fact most of my friends and colleagues told me I couldn’t do it. Well I have done it and so can you.