I bought my first rental property at the age of 22. Luckily it turned out a great investment.
But since then I've learnt a lot.
Truth be told, there's a heap of things I wish someone had told me about when I first got started in property back then.
The time, the money it could've saved me... I sure as heck would have gone a lot further a lot faster if I'd had a clue about some things.
So, if you're new to all of this, let me do you a favour I wish I'd have known.
I can think of a bunch more, but I'll start with four things for now…
Whatever you do, avoid ‘first deal desperation’
You’ve decided to invest in rental property. You can already see the monthly cheques come flying in. The only thing on your mind now is doing a deal.
I often hear new investors say this, I felt the same: “I just want to do a deal! Even if it’s only for the experience and to show myself I can get one done. I’d even be OK just breaking even on it – it would be worth it to have the experience of doing a deal!”
I remember all too well the being a green, wet behind the ears investor. So eager, excited to get out there and conquer the world.
That hunger is awesome. Embrace it. Be motivated by it. Let it drive you to act.
But watch out, because it’ll also totally mess with your head and cloud your judgment if you let it.
Let’s be crystal clear about something: You’re not in this business to do deals, you’re in this to make money.
So, make sure you know exactly what kind of property you’re looking for. Continue looking until you find it. Don’t settle for a break-even deal just to get one done.
Don’t settle for second best because you are over-excited. Control your emotions, and continue looking for the best possible deal. That way you will get a jump start in life!
A good property manager is worth his or her weight in gold.
When you’re looking at building your rental property portfolio make sure that you have found 2-3 decent property managers in the area.
Property managers (or letting agents) aren’t necessarily hard to find, but you need to make sure you can find them, and judge the good ones from the bad.
When looking for one, you can simply find them online, but make sure to ask for references. AND CALL THEM! When you have the references on the phone, make sure to ask how the manager has handled tough situations, such as a tenant that stops paying, repairs needed, or filling an empty unit. This will tell a whole lot about the property manager. And you must know these answers.
The fact is, you still have a day job and won’t have the time and energy to deal with tenant problems, maintenance issues and sending rental invoices when you get busy. Get someone to do this for you.
Understand if you never ask, you'll never get
When I got started investing in property
I was scared to death to make offers to sellers. What if they rejected my offer?
Over time I came to realize that this one mistake kept me from making offers that, in retrospect, I feel the sellers would have accepted. This cost me thousands in profits.
Today I see other investors falling for this same trap. Sometimes it is the disbelief that a seller would ever accept a lower offer, or one with specific conditions.
The most important lesson I learned is that NOT asking is an automatic no, and asking isn't as painful as I'd imagined. Over the years I've asked for and gotten everything from extensions on the terms of a deal to a discount on the asking price of 20%. Asking, and not being afraid of making an offer is key!
Partners are great (sometimes)
After a couple of property deals I quickly realised if I wanted to scale up the pace of growth I’d need access to more capital than the banks were willing to lend me.
So, I went into partnership with a group of friends and family as co-investors.
Partnering sounds like a great idea, and with the right people it can help your business grow MUCH faster than without. But it can also destroy businesses, and friendships.
I don’t have a fool proof solution for finding the right partner for you.
But what I can highly recommend is fixing the rules and the way in which you want to do business UP FRONT and ON PAPER.
Just because you trust someone doesn’t mean it’s rude to ask to jot down rules or a contract. It’s purely good business.
So, when you set up a partnership, determine the roles and responsibilities of everyone up front. Write down how a partner gets to exit, how you decide on picking new investments etc. That way your partnership won’t land on hard times – and you’ll get to grow your empire much faster!
Owning rental properties can be the key to a great deal of profit and financial freedom if you do things the right way from the start – or at least learn from your mistakes along the way. I hope you find these things that I wish I knew useful – and that you don’t need to learn the hard way!
Here’s to unleashing real value