The Huge MISTAKE Real Estate Investors Make

The huge mistake real estate investors are making with rental properties. Many new investors think real estate provides consistent cash flow every month, but that isn't the reality. Sometimes, residents can't pay their bills for many reasons, but real estate investors must be prepared for this and plan.

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[Evernest]

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[rdkrussel]

I had a rental for 4 years. 2 different tenants, they both lost their jobs, fell behind on rent and destroyed/trashed the place. I sold it and will never do that again

[Greg_Chase]

I've owned/operated a portfolio of rentals since the 1990s. We have 100% collection on or before the 1st of each month. If you let tenants know how serious you are about them paying rent, they will pay rent. Get trained on new tenant intake to solve lots of problems. If you 'wing it' like we did the first 2 years, you are really blowing it, and could easily end up quitting.

[SeanEustace-zkmc]

He has a point, and it is a very good point. You need to have money to back up your endeavors when they don’t go the way you plan. On the other hand, the tenants clearly paid the rent and they pay the mortgages. That’s how he ended up owning that many properties.

[kev]

So true, it’s such a hassle managing several investment properties, especially residential ones, low yield and the most problematic.

[annm.]

If you borrow money to buy rental property it doesn't pay off for years

[mrsparex]

Dave's richer & smarter than me...
However we bought a rental property and we've only
had one Tennant. He always pays on time and that
has covered the payment plus more. He's already paid
us more than half the purchase price and the property
is worth twice what we paid. I realize that isn't the
norm but that's been my experience...

[christinadoxstader]

I've told many people this, if you can't afford to make the payment for the rental property all on your own, you have no business owning the rental property. There are going to be times when a rental is empty and you aren't receiving money from it. It is going to happen.

[---crnw]

Yes and no. Will 100% of your tenants make 100% of their payments on time? No. Will they pay most of the mortgage? Yes, if you're screening them properly. And the more you have, the more reliably you can track what is likely to happen. If you have one renter, you never know if and when he'll miss a payment. If you have 5 renters, you never know which one(s) will miss a payment and when. But you can expect that someone will. And you can reasonably expect at least 4 out of 5 of them to make their payments on time all the time. So, while it might be exceptionally risky to have one rental house where you're counting on the tenant to pay the mortgage, it's not nearly as risky to have 5 tenants in 5 rental houses with only 3 mortgages among them.

[allsidespressurewashing]

I love listening to your podcast! It helped me make a decision on where to buy my first house in Birmingham. Keep up the great work!

[GenzFinanceJacob]

Expect the worst and if anything better than that happens you will be okay👏

[christinawest]

I think rather than collections, Ramsey was also saying the income may not exceed the expenses. When you factor in down payment, mortgage, expenses, taxes, insurance, repaid, etc the costs very often exceed the income on a rental.

[yankee]

Hes absolutely correct. I’ve owned commercial and residential real estate for 30 years even commercial businesses go under people leave overnight tax problems problems with licenses. Divorce death job loss I can’t tell you how many evictions I had to do in my 30 years. thankfully, every piece of real estate I own has no mortgages makes it a little easier the apartment buildings are the absolute worst I own a 69 unit and the 19 unit Apartment building I’ve had countless problems with tenants. It’s hard to find a really good stable tenant.

[nunyabiznez]

It's like with stocks. You make money from stocks through the dividends and through the increase of stock value. With real estate it's the same way. You get revenue from rent but you get equity through the increase in the value of the property. Yes sometimes one or the other does not happen. But usually both do and over time you can make money at it. But don't expect to become a millionaire over night from rent.

My landlady made a huge mistake. She got scammed into having solar installed. Now solar can be a good thing if done correctly. But she let a scam artist talk her into a roof top solar power plant without battery back up. The told her she would get it for free by signing the paperwork. They told her it was a government program where the government not only pays for the solar but pays you checks every year to do it. Here is the truth. First, there was no government money because she doesn't live on the property. Second the papers she sighed was an agreement and a loan. The company loaned her money on 25% annual interest rate, basically loan shark rates. So she is on a ten year payment plan where she pays them $20, 000 in interest every year along with another $8, 000 in principal. Then the next part is that she sells the extra electricity to the electric company only in my state, Florida, the electric company decides what to pay the home owner for wholesale electricity. So they pay 1/10 what they usually pay in wholesale prices. Next they got a law passed years ago that makes every person who sells electricity to the electric company a commercial business and as such they have to pay the commercial rates for electricity. So you sell your extra electricity during the day to the electric company for about 2% of the going residential rate then at night you pay 3-5 times the residential rate which means you now pay 1.5 -2.5 what your old electric bill was AND you must pay about $280, 000 for the privilege and if my landlady falls behind they can put a lien on the house and force it's sale and recoup their money that way becoming my new landlords. That is one example of something bad that can happen to a landlord. Then there was the pandemic. My landlady has 23 properties in this city. for over a year I was one of only four tenants that paid on time every month never falling behind. All the rest either fell behind or never paid at all. My neighbor stopped paying altogether the moment the moratorium on evictions was announced. He paid next when the moratorium was lifted. I am not sure of the dates because they don't apply to me since I paid. But he was perpetually behind after that. He paid nothing for a year and in the years since he paid his rent occasionally and she just got fed up and evicted him in August. I think she should have evicted him a year before that. Since 2020 I believe he paid a total of about 10 months worth of rent. I honestly consider this unfair since I always paid on time. But then she was charging him twice for his unit as she charges me for mine and mine is twice as big. She called it a late fee. He also trashed the place. She had to replace all the plumbing, all the appliances, most of the windows, the deck, the doors, half the flooring, half the drywall, all the light fixtures and the air conditioner. Probably other things that I don't know about. Another property she has was destroyed by an act of god so the insurance didn't cover it and not only did she lose over a million dollars in structural damage, but half her tenants sued her to get their rent money back and they all won. The incident happened on the fourth of the month. She had to give back all that rent AND the deposits and still has no building to rent out. That is when I sat down with her and taught her how to read a topographical map so now she knows how to buy property without fear of flood damage. I knew my time in the boy scouts would do some good.

[beccasueflynn]

A teenager whose Dad was transferred to the Naval Air Station on Whidbey Island. The Dad researched and was advised to make sure that if purchasing a home that has a Freeland address. He did. What he didn't know was that the house he purchased was only half inside Freeland. The other half of the house was Greenbank. So, Coupeville school district authorities showed up and said since the bedrooms were in Greenbank, the kids had to attend Coupeville school district instead of the then more highly rated South Whidbey school district. He decided to rent out his newly purchased house and rent another within the South Whidbey school district. After calculating the costs, his rent, utilities on both properties, property taxes, morgage x2, etcetera... he had that be the rental cost he charged. His paycheck then went into savings. The teenager said that for the first time ever, they could afford a vacation. 🤗💖

[rafaelmanolaros]

ok he has a point but let me explain why thats not the case because i see many people here stuggle understand acording to the comments i read.
1) you dont go in to renting real estate hard asset buissnes if you havent scaled a buissnes already to leverage it and get a very good intrest rate because you need the property to cashflow not to lose money plus you need safty if the tanant falls short and payment must be due.
2) understand what type of property you aquire A, B, C, D.
3)please dont start that without a property manager. if you do that your doomed
4) learn how ARV works and how to add value in to property operating in the B, C maket so the tenants you aquire are very carfully and suitably chosen. I hope god bless you all and your families 🤲

[love-life]

Best rental properties are if u can rent the house out to the government for house assistant

[SeanEustace-zkmc]

Cash flow is very important to stay in business no matter what that business is. Cash flow is the velocity of money in the economy to pay debts and day-to-day operational expenses. This is why when your government wants to get rid of inflation they try to move cash out of the economy, so businesses will fail, so people will not have any money and that there will not be spending, which will cause deflationary situations that fight against inflation. They’re fucking you in order to keep their system float. They make money by the system because they can inflate the shit out of the currency and buy a bunch of assets and then shut down the economy when things get overheated, and then externalize the cost of this debt onto everyone else. Two different subjects but they meet.

[forthelulz]

If they didn't pay nobody would own them... smh... ain't nobody buying rental properties fir millions od dollars in order to give out free housing

[zohramartini]

In Korea its different. The deposit is so high so that people have to pay their rent or you keep the high deposit. So the owner is always winning