Think Realty members, educators, and supporters bring unique perspectives to real estate investing. Think Realty members can always submit their responses to the monthly “Street Smart” question online, but whenever a Think Realty event brings all that expertise into one room, we capitalize on it!
Think Realty Magazine asked experts in all sectors of real estate investing two questions at a recent Think Realty national event in Dallas and recorded their responses.
Dallas: What is the worst mistake you’ve ever seen an investor make?
“People that weren’t disciplined with their numbers or people who didn’t do their due diligence prior to purchasing properties which ends up bankrupting them. I see them every month when I go to the auction.” – Michael Owen, Flip U
“Unfortunately, the answer to this question is not limited to a single investor. Too many times investors make the decision to get into a losing proposition. At Patch of Land, we like to say to potential borrowers that if we don’t like your deal well enough to finance you, you probably should not be doing the deal! Obviously, we must underwrite our loans and effectively manage risk, but our goal is to help investors make successful flips.” – Robert Greenberg, CMO, Patch of Land
“The worst mistake I have seen real estate investors make is misjudging, misassessing the amount of repairs a place is going to take…to get up to the standards of the appraisal and then hiring contractors who don’t know what they are doing and end up taking advantage of them. But misassessing is the biggest mistake I’ve seen.” – Heather Goodstein, Owner/Broker, My Rehab Lender
“One of the biggest mistakes I’ve seen investors make is self-insuring on the liability side. Let’s say you have someone slip and fall on your property and file a $1 MM law suit against you, this can put your business and personal assets in jeopardy.” – Juliana Shipp, Marketing Director, National Real Estate Insurance Group (NREIG)
“I can’t speak for another investor, I can only tell you from my own experience: I thought that I could ‘beat the market’ while investing in class C rentals – i.e. that the rules of class C properties didn’t apply to me. It turned out to be a cautionary tale which lead me to Greystone’s Class A rental model.” – Ash Hebdige, Director of Business Development, Greystone Residential
“Painting over smoke and urine to get rid of odors is the worst! Both stinky substances produce a gas – not a solid – (a little chemistry lesson here) and you can’t paint over those substances and expect the odor to be gone forever. Painting also puts a barrier between the odor causing contaminate and any product that could neutralize the odor source. This makes it nearly it impossible for a product to eliminate a urine odor to get to the source and totally eliminate the smell.” – Deb Meyer, CEO, OdorXit
“We’ve seen all the losses reported and claims filed through the insurance program, so we’ve seen many mistakes made that resulted in an injury or death to a tenant and the loss of an asset. To keep the response short and not resort to a huge list, we’ll boil it down to: 1) know what your insurance covers and doesn’t cover and 2) take proactive steps to protect yourself and your investments. Don’t assume anything.” – Rick Abell, President, Affinity Loss Prevention Services (ALPS)
Baltimore: What do you wish every investor knew before they got started in real estate?
“Statistically 80 percent of all people who have had an entity set up for them, if they were sued or faced an audit, would find that their entity will not do what it was intended to do because it was improperly used, created or the individual comingled personal and business funds.” – Nick Fortune, CEO, Fortune DNA Group
“Don’t miss out on a great deal because you don’t have a consistent and reliable source of funding for your deals. Get to know your lender and allow your lender to get to know you so that you will be able to move quickly when you’re ready to pull the trigger on your next deal.”– Robert Greenberg, CMO, Patch of Land
“Utilize your team of advisors and keep them in the loop on any changes to your real estate investment business. As an example, let’s say you get your first property and insure it in your personal name. A few months go by and you decide to create an LLC and don’t let your insurance agent know of the change. If a loss were to occur to that property, your claim will be denied.”– Juliana Shipp, Marketing Director, National Real Estate Insurance Group (NREIG)
“Don’t be seduced by the headline cap rate and low cost of a rental, look at the entire picture, and ensure that as long as your asset cash-flows positively from the start, pay more for a better-quality asset in a better location and you will cash flow better, on the whole.” – Ash Hebdige, Director of Business Services, Greystone Residential
“You aren’t in this industry on your own. There’s a ton of help out there, but you have to ask and search for it. Find a good mentor and service providers and go to them when you aren’t sure. Just because you have a home and know how the laws, regulations and services (like insurance) work for your personal residence, don’t assume they work the same way for your business and investment properties.”– Rick Abell, President, Affinity Loss Prevention Services (ALPS)