Common Newbie Mistakes

Hi Folks,

Bill and I are in Clinton, Iowa getting our space ready for our first training class. We are so excited to hold training classes here. Doing training in Iowa allows us to add a bus trip to our class! We are so excited about that. I love going on bus trips!

We try to buy one new rental each time we come here. We have a really cute place we just took over last month and are in the process of painting it for our new tenant. We had over 70 responses to our rental ad...it's crazy here.


We just returned from a 4-day class in Hawaii. Pete Youngs was gracious enough to take our class on a bus trip there. It is so much fun to meet new students who are looking to begin rehabbing. Whenever I meet new rehabbers or new investors of any kind - I always want to give some advice - so here goes...

I remember the excitement of being a new investor. I was so excited that I wanted to buy every deal that came my way. The excitement of “the deal” can get you into trouble. Because of that excitement many new investors don’t always look at the deal from an objective viewpoint.

I think one of the biggest mistakes new investors make is that they want to rehab the property themselves to save on the rehab costs. This is fine if you have the skill, the tools, and the time. Unfortunately, what I often see happen is that new investors try to work on the property on weekends and in their free time. BIG mistake!

Picture this, you worked hard all week and now the weekend is here and it’s time to work on your new rehab project. The first weekend is so exciting. You see such great results after the end of the weekend that you can’t wait until next weekend to do it again. The next weekend comes and you’re really tired, but it’s time to work on the house. You sleep in late on Saturday and end up putting in a half-day on Saturday and full day on Sunday. You still see results, but you are really tired and have to go back to work in the morning.

The third weekend comes and now you’re really beat from no time off for three weeks. You sleep in Saturday and work on Sunday. As each weekend passes, less work is getting done. Soon you are either exhausted or going every other weekend. Now several months have passed and you are making extra hard money payments, your property is still not finished, and you are beat.

What did you save? Nothing! It would have been cheaper to hire a crew and pay them as opposed to making extra hard money payments and burning yourself out. The worst part is, your property is still not sold!

Another mistake I often see is investors partnering with people they don’t really know because they don’t have the money to do the deal themselves. Just because you meet someone at one of the investment clubs, does not mean that person needs to be your partner. Take the time to investigate anyone you may be thinking of partnering with. Call a group leader and ask for a reference, ask the person for bank statements, go to the courthouse and see if they truly are buying and selling properties. Do your due diligence now, draw up a detailed partnership agreement (be sure to discuss loses), and pray for the best.

How about overextending yourself? I see many new investors, who have a few dollars saved, buy more than one property. Unless you have a lot of carrying money and free time, this can turn into a bad situation...fast. Do you have the time to oversee several crews, do you have the time to take all the ad calls, can you show the house everyday and then do open house on the weekends? Be care not to get so excited that you buy everything you see.

Until you have some first-hand experience, stick to one deal at a time, hire someone to do the rehab, and when the property sells, buy another. Being an investor is a great way to earn a living, just be cautious.

Folks....please take my advice. I can't tell you how may people I have seen go bankrupt trying to make it big as a real estate investor. Follow my advice and you'll do great!!!

Have a Blessed Day,

Dwan

BTW - Pray for all the people here in the Midwest. There is so much flooding. It's really sad. We are one block off the river and the water is high!!! Kinda un-nerving:-).