People have asked me what it takes to succeed in real estate. Honestly, I really think it only takes one thing, persistence. Many people eliminate themselves right away by never starting or quitting after one bad experience. This business certainly has its ups and downs, but the people that keep trying eventually succeed.
Here are a few examples where persistence pays off. First, let’s look at the tenant from hell. No matter how great your screening process is, eventually the dice come up snake eyes. When a tenant refuses to pay rent or destroys the property you put in a lot of sweat and equity into, it can really push you to the edge. When you realize you just can’t throw them out on the streets, change the locks, and tell them to go to a hot place (and I don’t mean Florida), what do you do? How you deal with this situation defines how successful you will be in the business.
So how do deal with them you ask? First, begin the eviction process early. If a tenant is commonly late with the rent become familiar with the eviction process because you will probably need it. Additionally, never get antagonistic with the tenants. You can never win this battle because an angry tenant is a destructive tenant. Many new comers in the business feel like they can sue tenants. Think again. While you certainly can sue tenants, if they are being evicted they will probably not have any money for you to get from them. After the eviction process has started, the best situation is to convince the tenant to leave amicably. I have known some landlords to actually pay tenants to move out. On the surface this seems crazy, but paying a tenant say $100-$200 vs. spending $1000 (or more) for eviction plus repairs makes financial sense.
Another common situation that requires persistence is dealing with contractors. I have never personally had a project come in on or under budget. The bigger the project the more financial padding you should put in your budget estimates. Always have more money than you need. While the tenant situation can be frustrating, poor budgeting can be lifestyle threatening. The worst thing that can happen to a new investor is to lose their personal property (or credit) because of poor budgeting.
The best way to avoid this issue is to hire reputable contractors. Furthermore, make sure that you walk through the property with the contractors and tell them exactly what you want done. Get multiple estimates. Don’t just take the lowest estimate. Take the estimate of the person who you feel most comfortable with and who presents the most comprehensive plan. If you can get them to agree to a maximum charge for a job, great, if not ensure that they communicate any changes in the original budget. This gives you options to call in another contractor if you do not like the work or if things seem suspicious. Make it clear how they can be terminated. Be fair and honest with them and expect the same.
No matter what you hear, real estate is not guaranteed money. In the end you will certainly make mistakes, but how you rebound from those mistakes is what makes you a great investor.5 comments