A few weeks ago one of our buyers called me in a frantic. He is a new investor and recently purchased 2 properties and one property wasn't rented yet and the other just went vacant. He expressed to me his doubts about investing in rental property.
As I listened to his concern, I reflected on how I got started investing in real estate. As I thought about that experience and what I've learned since, I was reminded that to be successful investing in real estate (among other things) there are 3 essential things to learn. I'd like to discuss those 3 things in this article:
It was 1997 and the year was coming to an end. My wife and I were flat broke and in debt. I remember it like yesterday. It was New Year's Eve and I turned and looked at my wife as the ball fell and told her this is going to be my year. I decided I wanted to get into real estate investing. I bought RE investing course off the TV. I started getting up at 5:00 am and reading every book I could get my hands on. I also began reading the classified ads in the newspapers and started calling on everything that looked interesting (whether I could afford it or not). I found a realtor that specialized in apartment buildings and he helped me secure creative financing.
By May of 1998, I had acquired three apartment buildings (4-unit, 6-unit and an 8-unit). Two of them were about 30 minutes from my house and the other about an hour away. I choose to manage them myself. At first, I was excited about owning them and looked forward to handling repairs and managing tenants. That is until the upstairs shower had a leak and eventually the floor fell through to the lower unit. My excitement turned to frustration.
To make matters worse, I had a tenant from hell! She was an elderly lady that had lived in her unit for almost 20 years and she absolutely drove me nuts. Being the new investor that I was and trying to manage my own properties, I made the biggest mistake ever...I gave her my home phone number! She called every single night at 1 or 2 in the morning to complain about the partying tenants above her. She could have just called the police but I think her mission is life was to drive me crazy. It wasn't long until she succeeded and I wanted out! I called the realtor who I had purchased the properties from and sold them all after having owned them for less than a year.
I walked away from real estate until 2004 when I learned that those same properties were worth well over a million dollars each! (I had only purchased them for an average price of $240,000 each). Looking back at this experience, I've learned 3 lessons the hard way that have made all the difference in my RE career and life:
1). HOLD FOR THE LONG-TERM!
2). USE A PROPERTY MANAGER!
3). DON'T GET DISCOURAGED!
Today, I can't stress enough to our buyers the importance of holding for the long-term. We're selling properties that were worth twice the sales price a few years ago and will be worth 10 times that in the future! I'm convinced that you have to use a good property manager. I think it is better that most of our investors live out-of-state (or out of the country) because it forces them to not try and do it themselves. Lastly, as I told my buyer who called me concerned about his vacancies; no matter what happens - keep your head up and keep going! Anyone who is experienced will tell you that owning investment property in not a walk in the park. There will be some ups and downs and headaches but you have to weather the storm to get to the pot of gold at the end. I was excited at first and didn't think long-term enough. Now when I have struggles, I remember this lesson and find a solution and move on.
Oh, and by the way, in regards to the concerned buyer who called me...one property was rented with 2 weeks of being vacant and the other has a tenant moving in the first of the month.
About the Author:
Jerry Norton is a full-time real estate investor and mentor. His company, Equity Services, LLC specializes in providing investors with fully renovated, cash flowing investment properties for under $50k. http://www.equityservicesllc.com
