You’re pretty close to being right. In fact, only about 20% of the people who start any business (including REI) will still be in business at the end of 5 years. I read in a recent article that 90% of these failures were due to poor management (i.e. bad decision making). Knowing that such a high percentage of businesses will fail, can we easily see which posters on this board will fail - yes we can! How many posts do we read where someone is buying at retail; with an interest only loan; without a plan; and hoping to profit (hope rhymes with dope). How many people are taken in by these schemes (or scams) to invest in RE by letting someone else use their credit or money? How many people start investing without being willing to study until they have a thorough understanding of the subject? How many people aren’t even willing to look at enough houses in their area to understand their mairket? How many people believe the late night TV gurus and start their REI business with no credit and no money? How many people are chasing the end of the rainbow with out-of-state big bubble speculation? ALMOST ALL OF THESE PEOPLE WILL FAIL!
Being successful isn’t difficult, but it does require hard work. Start out by studying REI. Then study your market. Join you local REIA and learn everything you can from other successful investors. Write a business plan. Have excellent credit and some money. Be willing to work HARD - VERY HARD!!! Don’t gamble on appreciation. Buy EVERY property at a BIG discount! Learn the landlording business BEFORE you rent out your first property. If and only if you do all these things - you will be one of the successful 20%.
True True True. Though you rarely hear it mentioned by well-known personalities.
How do you learn to make good decisions? By making a lot of bad decisions…
I have been a full-time inter-state investor, ‘rehabber’, landlord, HM lender, construction remodeler, and trainer for several years now and I have lost money because of what I DIDN’T know.
Unfortunately, most popular books and tapes (while they do contain some useful information), are designed primarily to motivate than educate. Things that you MUST know (notice the capitalized MUST) and understand in detail (not just the conversational phrases and terms) are title insurance and title ‘seasoning’, FHA/VA/HUD financing (for your buyers), state tenant laws, mortgage financing, the time value of money, construction management and the mechanics of residential construction, property insurance, market research and so on.
Thanks KRT…for telling it like it T- I- is!!
Some of the ‘big name’ products out there do provide good information but are definitely designed to motivate not educate just as you said. Good information is always welcome, but what good is a car if you don’t know how to drive…hmm
Education of the subject is absolutely the key. And I speak from first hand experience. ( At least on the purchasing side ) This home was to be our home, not an investment purchase. I used an on-line company to get my financing and the end result was tanking of my credit. (Stay AWAY from the on-line financers that state multiple banks will try to respopnd to you ). It wasn’t just 4 banks…try 29 banks. And at 3 points a pull of my credit history ( you do the math ).
Anyway, what wound up starting off as a 5-1 ARM at 4.25% ( locked for 5 years ) became a 30 year fixed at 8.15%. OUCH!!!
Good advice so far, everyone!
Do you want war stories, Swirlaze? If so, here’s one.
In the early days, when I was still young and naive, I started acquiring properties for rental.
It was going good. However, at one point I had four vacant houses, so I was a motivated landlord.
While I was at one house doing some work, a very nice Mercedes pulls up and out steps this woman who looks like a million bucks, literally. She’s got the clothes, the jewelry, the hair, etc. to suggest that she was well pampered.
Well, she wanted to rent the house - now! She told me that her husband had been transferred down to our city a couple of months ago, and she was still at their old home about five hours drive from here. She was worried that he was starting to have an affair with someone he worked with because of her absence, so she wanted to move here immediately to save her marriage. She had the moving truck on the way, and she had to have the place now. Then she started crying.
Now I knew that you never take a personal check for the security deposit and the first month’s rent (get certified or guaranteed funds), and you don’t let someone in without filling in a rental application and doing a credit check, but this looked like an exception to a motivated landlord. Surely, if anyone was good for the money, this lady was! She gave me the check (drawn on the out of town bank), and I gave her the keys.
It used to take a little while for checks to clear, so I didn’t know that the check she gave me was bad for about ten days. Surely there was some mistake. The shorten the story, I’ll skip some of the details, but I ended up wasting four more days trying to clear up the matter by telephone before I went by the property. There, to my surprise, was a for sale sign in my yard.
There were also two couples in the yard shouting at each other. Again, to shorten the story, I’ll just tell you what we later determined had happened. This fine lady had “sold” my house fourteen times to different people in nine days, collecting an earnest money deposit of at least $1000 from each sale. Then she disappeared forever. Her check to me was no good, but she collected only certified funds or cash from the would-be buyers.
Her story to them was the opposite of the story to me. She had to get out of town quickly to save her marriage. She didn’t care what she got for the house, so she was selling it at far below market just to get it done. The buyers’ greed glands overcame their common sense, so they gave her the money and signed the purchase agreement, waiting for her to open escrow with them.
I guess she went to the next town to find the next amateur landlord to repeat the process.
Now I know how she got that Mercedes.
She made a lot more money on my house than I did that year!
WOW! That was a real eye opener for sure. Thanks. I’ll be sure to keep that in mind.