[Music]
Hello everyone and Welcome to another
episode of Selling Greenville your
favorite real estate podcast here in the
Greenville area of South Carolina I'm
your host as always Stan McCune realtor
right here in the greater Greenville
area and as always you can find all of
my contact information in the show notes
if you need to reach out to me for any
reason particularly if you have any real
estate needs go to the show notes there
you will find my contact information
reach out to me at any time and I
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things today we're going to be talking
about a little bit of a broader topic
than strictly Greenville related
topics but I always warn you guys in
these instances when I'm talking about
something that's a little bit broader it
is always from a Greenville lens because
the real estate market really does vary
dramatically within the us from one area
of the country to another so even when I
cover a broader topic it's not
necessarily going to apply in San
Francisco or in New York or in Chicago
so I always give that warning or I try
to always give that warning when we're
doing a broader topic like this but the
topic that I want to cover because I
work with a lot of investor clients and
this is how I got into real estate if
you know my background it's frequent
investor mistakes and I've got five of
them here and I I've talked about you
know specifics of what investors do and
what they shouldn't do over the years
but I haven't really talked about just
had an episode at least I can't remember
I've now done two years worth of over
two years worth of episodes so it's hard
to keep up with everything but I
don't think I've ever done one that
specifically hones in on investor
mistakes common real estate investor
mistakes and so that was something that
was on my mind recently and I was
like you know what that would be a good
topic for the Pod so here we go I've got
basically five frequent investor
mistakes with number one being not
adjusting to the market or not adjusting
with the market here's the thing there
are always real estate investing deals
out there always I I am a True Believer
of that no matter where you are in what
part of the country but specifically
here in the Greenville area I have seen
I have been through the market since the
Great Recession so I've seen that part
where it was an insane buyer Market all
the way through the past few years which
has been an insane sers market and guess
what there are deals in all of those
markets you need to be able to adjust
with the market and to understand what
the market is offering you and here's
the thing in a in a buyer Market
there are different challenges than
there are in a sell Market but there are
always going to be good deals out there
what however you might have to keep in
mind is that different markets demand
different amounts of capital for
instance in a buyer's market you can get
things cheaper you don't need to have
as much capital in order to make a play
in a buyer's market but are your margins
going going to be as high maybe not are
you going to have higher vacancy rates
most likely so you have to be aware
of that and you have to adjust for that
your margins and your vacancy rates all
of these different things are going to
be different based on the market that
you're in some markets are better for
buy and holds some markets are better
for flipping houses Etc a lot of people
will will base what they think is a good
deal or not off of formulas and rules of
thumb and I'm fine with that to a
certain extent formulas help us to be
able to compare different deals but
your formula has to be fluid and your
your rules of thumb have to be fluid
because what was a really good deal
three years ago would be an unbelievable
deal today right and so you have to
understand if you're comparing today's
deals to three years ago you're not
going to actually find any deals you're
just going to be tossing up your
hands and just saying where are all the
deals well they're not the same as
they were back then you have to be able
to adjust your expectations and to to
think on the
Fly and so frequently I see investors
that are that are doing this they they
have a 2017 2018 2019 mindset and
they're bringing that into the market
today
and that's fine that's going to
that's going to cause you as an investor
if that's what you're doing that's going
to cause you to be incredibly cautious
but it's also going to cause you to
probably miss out on a lot of
opportunities and and that's the thing
is that people look
back on years and years
ago and say man if only I had bought
that you know nobody thought that that
was a good investment at the time but
man that was a great investment at the
time how do we miss out on that I
constantly see this I constantly see
deals from or see real estate
transactions that happened you know
seven eight nine years ago that in
hindsight it's like man if we could go
back in time it's just like you know if
you went back in time and bought Tesla
stock when it was like hardly worth
anything you would do that right
everyone everyone would do that well
real estate is the same way the people
that make the most money in real estate
are the ones that are able to adjust for
the market and are able to identify the
deals in the market if you don't think
that there are any deals in the market
if you're not identifying any then
you're doing it wrong that is the
reality if if you're saying oh because
nothing here matches nothing here is as
good as what it was in 2018 then you're
assessing the market the wrong way there
are deals and 5 years from now we'll
look back and say yep there were a ton
of deals during that during in the year
2022 there were a ton of deals in that
year that that people overlooked because
they were so focused on hitting this
formula or hitting this rule of thumb
etc
etc now number two on my list is kind
of in a different direction it's
focusing and I see this from a lot of
investors it's well I'll just describe
it in two words cuz some of you guys
will be familiar with this phrase
scarcity mindset okay now Real Estate
Investors are not your stereotypical
people to have a scarcity mindset so you
might be surprised that I'm saying that
because most Real Estate Investors do
have an abundance mindset they're
willing to to you know take multiple
leans against their home in order to be
able to finance their next flip
that is a really
risky venture
and in hopes of making a few making a
few dollars on the flip right there Real
Estate Investors by definition tend to
be risk-takers tend to have more of an
abundance mindset but I've noticed that
there is a scarcity mindset when it
comes specifically to shaving a few
dollars off of off of your loss on
the p&l or off of your expenses on the
flip just trying to shave a few dollars
and doing that at the expense of
building relationships and building a
good team now I'm not saying that
necessarily that you can only have a
good team if they're
expensive but what I see so often from
investors is that they try to go the
cheapest route for different things and
then particularly when it comes to labor
or for people on their team and then in
the end they sacrifice the relationships
that would pay off for them down down
the road because they're just trying
to save a buck and that is a scarcity
mindset this is especially true for
contractors right we hear this all
the time people that are kind of getting
into the market who are your
investor-friendly
contractors and that phrase investor
friendly by definition the best
majority of people mean cheap right
Penny who's going to be the Pennies on
the
contractor that I can use to get this
done cheaper than than everyone
else listen going with the cheapest
contractor is a bad idea on so many
different levels and you're hearing
from someone that knows us from
firsthand experience what's better find
a contractor that you can have a
relation a good relationship with who's
not the cheapest but who is really good
it is a great
communicator and gets things done
quickly and stands by his or her word
that is the way to go about it and and
once you build those types of
relationships it starts to it pays off
in so many ways it pays off in you know
I I've seen contractors that have
brought deals to me that I've had a good
relationship with contractors that
are because they they know that that
they're going to keep getting business
from you they will ultimately throw in
some some extras in there that perhaps
you know if you were going with the
bottom of the barrel guy in terms of
pricing he he's not going to throw in
any sort of extras in there because he's
already giving you such a such a cheap
deal
again I I think I'm I think I'm
preaching to the choir to some extent
because Real Estate Investors they all
say that they know this but then
practically when it comes down to it is
always like okay who's my cheapest guy
particularly for the novice guys I think
the experienced investors out there
they they get this they get what I'm
saying but if you're kind of a newer
investor don't fall for the Trap of just
going for the cheapest I'll say this is
also true for us as Realtors as well
right because there are you can find
Realtors at all sorts of different
pricing levels you can find listing
agents that will basically just throw a
on the market for a few hundred bucks
and then just have you do all the leg
work on the back
end there are others that I know some
agents that you know are investors
themselves but they also have a
brokerage and so they will you know put
something on the market and then all
kind of manage it but not really manage
it right let me tell you why that I I
don't want to toot my own horn right but
I am a realtor and this podcast I don't
get compensated from this podcast this
podcast ultimately is it only
supports me in so far as it supports my
Direct business so I am going to toot my
horn here for a second over the weekend
and I'm recording this right after
Mother's Day weekend it's going to
probably come out in a week or two
but over Mother's Day weekend at 11:00
a.m. on Sunday on Mother's Day I
received a phone call from an appraiser
now let me just start for a
second not many Realtors are going to
answer their phone at 11:00 a.m. on a
Sunday particularly on Mother's Day
if you go with a cheap
realtor I can almost assure you they are
not going to be answering their phone in
that instance a number pops up that they
don't recognize not going to not going
to answer it me I was available
I wasn't in a worship service at that
time I answered the phone it was an
appraiser the appraiser was calling me
to ask about how much I knew about a
house that he was appraising for a
former client of mine however this is a
this is a a client of mine that has done
several transactions with me and the
reason why he was calling me and and I
knew this in advance was that this
client of mine who had bought this
house and had bought and sold through me
a house close to it he had done an
off-market type of transaction with a
friend of his to basically sell the
house that he had flip off Market to the
front so now the appraiser is calling me
because he wants some additional
information I had been inside that house
and also I had been inside the house
that was nearby that my client had also
flipped the
appraiser couldn't couldn't come up to
the to the purchase price that they had
this house under contract for and he
wanted to to try to get more information
and and I appreciated that I appreciated
that he he was trying to find a way to
make it work now here's the thing I'm
not getting any Commission on that house
I'm not benefiting in any tangible way
and
my client if if I had just blown off
that phone call my client would have
never my former client would have never
found out but you know what because he
and I have an established relationship I
spent 15 minutes on Mother's Day on the
phone without appraiser then I gave my
client heads up got more information
from my client passed that along to the
appraiser and I'm I'm pretty confident
that I saved my client several thousand
at the appraiser
the appraisal would have come in several
thousand do lower than it did if it were
not for my conversation I had with him
at 11:00 a.m. on Mother's
Day so does it all come back if you know
my client had been using other realtors
that you know were kind of more that
basic bottom of the barrel service but
are cheaper would it all have come
around in the end I I believe that ended
up getting more money by means of me
being able to help him in a situation
where I wasn't getting money but I did
that because we had that past
relationship and I was happy to do that
for him and to help him out took time
out of my schedule for something I
wasn't going to be compensated for in
order to help him out
and so you have to remember when you're
just saving a buck just to try to
increase your bottom line by by just a
little bit you may not be benefiting
yourself in the long run that's
something to keep in mind number
three specifically for buy and holds
so not so much for flips but
specifically for buy and holds the
third investor mistake that I see
frequently is focusing too much on the
current situation and what I mean by the
current situation current rents current
neighborhood current condition of the
house rather than projecting those
things and it it's interesting to me how
frequently I see this with people that
have past real estate investing
experience they get so caught up well
the current rents are 500 a month per
door like that doesn't fit the the 1%
rule or that doesn't fit this rule or or
that's just too low and it's like yeah
we we know it's too low that's why it's
on the market that's why it's an
opportunity because you can come in here
and do some light improvements to and
then get rents per door up to 800 per
month for instance I see this all the
time people when when when people are
looking at properties particularly
rental properties you have to look past
the current situation factor in the
current situation because it does impact
the future the current condition for
instance does impact what it will
take to get it into better condition the
current neighborhood will impact your
rents so you don't completely ignore the
current condition but you have to focus
more on your projections and I've talked
about this in the past you have to be
able to project what the rents will be
project what the neighborhood will be
project what the condition will be and
this ties into my first point about
not adjusting with the market is that a
lot of when we look back a lot of the
great deals from the past 10 years that
that we look back and are just like wow
how did how did people miss out on that
it is very simple it's because they just
weren't able to project they were so
focused on okay yeah this is a slI
don't want to buy here rather than if
they had just seen okay this is in the
path of progress things are going to get
better here at some point or at some
time it would have been very easy this
is a great deal and I have won and
lost on this I I have bought some
things that I was was able to purchase
and spend more money than anyone else
because I saw this is an awesome
property it's not awesome now but it
will be awesome everyone else passed on
it or wasn't willing to go up as high as
I was willing to go up to and I won I
won out on that on in multiple
different real estate Investments that
I've made there's been several others
where I passed up on something and now I
look back and I'm like wow that was
idiotic of me I should I should have
bought that all day every day and as
I keep doing this and as I keep
educating myself on these different
markets I start to understand better how
to project but that is the number one
in my opinion the number one most
important thing to be able to do as an
investor is to be able to project and
particularly with buy and holds you need
to be focused more on your projection
than on the current
situation number four not
understanding how much due diligence is
acceptable and or necessary due
diligence is is important right when
you're looking at a house you don't want
to get something that you have to
completely rebuild if you're hoping for
it to be a quick TurnKey property right
the problem is is a a lot of investors
don't understand the healthy balance
between too much due diligence and not
enough and here's what I mean by that
not enough due diligence is when you buy
the property and then realize you're in
way over your head in terms of what
needs to be done to it that's not enough
due diligence too much due diligence is
you need to have so many inspections
done that you don't get the deal or that
you talk yourself out of the deal
because you've done so much due
diligence and now you know every single
thing wrong with the house and it's just
more than you were expecting and now you
want to back out that probably right
there neck and neck with that ability
to project is the ability to know how
much due diligence you need to to do on
a property for me in most Parts in
most situations I don't need to do a lot
of due diligence to know if a property
is the right fit or not
I can generally speaking walk into a
property walk around it and say and look
in the crw space look at the roof look
at the AC unit if I can find the
water heater look at that and say yes
or no I don't need to have a bunch of
inspectors in I don't need to do radon I
don't you know I don't need to do mold
tests I can generally speaking do that
for myself and I have some clients that
that trust me with that level of due
diligence as
well but there are some times when
you need to when when I need to do
more due diligence than that as well so
it doesn't always work out that way but
I have gotten to the point now where I'm
comfortable with myself with my
knowledge of property with my knowledge
of real estate that that's that's how
much due diligence I need to do in order
to identify whether something is a good
deal or not
but a lot of people don't completely
they they haven't gotten to that level
of comfort yet with me or with
themselves or whatever the case may be
and so they will ER on the side of too
much due diligence well earing on the
side of too much due diligence is going
to make it very difficult for you to be
able to actually snag a good real
estate deal but you need to if if
you're not comfortable able yet if you
haven't yet figured out your own
due diligence models as it were in in
your mind what needs to be accomplished
for you to be comfortable with the house
then you you need to to determine
okay what is the minimamount that I
need to be comfortable and to know that
I'm getting something that I want and
once you get to that point then you
have to consider okay okay this is what
I'm comfortable with is this
realistic if if your comfort level is
doing a gazillion
inspections and expecting that they're
all going to come back clean then you're
probably not supposed to be a real
estate investor you go go do something
else there's lots of other things you
can do other ways to to make a book
than than real estate but if you're
really meant to be a real estate
investor then you will be able to find
that balance between two and not enough
due
diligence number five
and and this is something again I see
this this is something that nobody has
ever perfected okay let me say it this
way every real estate investor
struggles with this and still and
continually makes mistakes with this no
matter how long they do it and that is
either over improving a property or
cutting too many or the wrong corners
and this is this is one of the hardest
things with real estate at the end of
the day because the world is your
oyster you can you can make turn a shack
into the Taj Mahal if you want to but is
that the right decision to make you
can cut Corners everywhere but is that
the right decision to make there there
are all sorts of
considerations when it comes to what
type of improvements you should make and
where you should cut Corners and this
is
where it's it's really valuable to have
the contractor that understands this and
this is why building a good relationship
with a contractor and maintaining that
relationship is so important because a
good contractor can help to identify and
and and kind of speak the same language
as you when it comes to improvements
they shouldn't and and it takes some
time it takes some time for you guys to
kind of get on the same page but if
you've got more affordable housing that
is just very basic Bare Bones you
know it it's never going to rent for
tons and tons of money you don't need to
go in there and you know for instance
scrape off the popcorn ceilings or do
something with the textured ceilings
it's completely unnecessary in a
situation like that do something else
but it if you're flipping a house those
popcorn ceilings it it's a possibility
that they could be a problem I would say
right now in this market more often
than not you can get away with with
popcorn ceilings but nobody likes it
nobody wants popcorn ceilings and so
that could be something that is worth
getting rid of and and that's the
thing is that's the tricky thing is
determining where what improvements
are too much and what improvements are
not enough and at what point are you
cutting too many corners or maybe even
not enough because let's be honest we
all cut Corners every house everywhere
that is sold has had Corner cutting
somewhere that that's just
undeniable but there are some Corner
cutting that is not really important you
know I I showed a house recently that
clearly had new newer flooring but there
was no quarter round that had
installed okay so they they cut costs
they save themselves a few hundred bucks
by not having quarter round put in there
big deal that's not an important Corner
that was cut but someone that
completely jacked up the plumbing on on
something risking it leaking and
causing damage throughout the house
that's you don't want to cut Corners
there and so these are the types of
things that EV I'm telling you every
investor makes mistakes when it comes
when it comes to that and that is a key
skill that you have to hone over the
years and this is where again going back
to the team it's really helpful to have
a team that can help you to
understand this and with my clients that
flip houses and that that buy rental
properties and and whatnot I
gladly assist and give advice when it
comes to this type of thing because I
understand the market I know what is
required I will walk through a house and
tell someone okay this house this is a
$300,000 house here's what I think needs
to be done in order for you to fetch the
top price on this and usually I approach
it from the standpoint of the least
the the least viable option what's the
least that we can do to get the most
money following you know basically the
2080 rule what's the 20% that we can do
that's going to have an 80% impact on
the home value
same thing with renting what is the
the least that we can do to a rental
property in order to be able to get
rents to where they need to be maybe
maybe we could possibly do some
additional updates that would be
expensive that would get rents from 900
to 1,000 a month but if we can save a
lot of money to just get them to $900 a
month when they have been at $500 a
month that might be what what's worth it
in the
end and so those are things that I
can assist with that I currently assist
with a lot of my clients and contractors
to a certain extent can as well
obviously most contractors don't fully
understand the real estate market side
of things but they can use some some
common sense and and bring some
common sense to Bear when it comes to a
rehab and to repair work and so
that's those that's it those are the the
the five frequent investor mistakes that
I came up with I'm sure there are a
bunch more in fact I'd be happy for you
guys to to give me a shout out and
let me know of any others that you think
I could have covered that I didn't you
can do that by texting me at my phone
number that's in the show notes or send
me an email that's also in the show
notes reach out to me for any reason
for any time preferably not 11:00
a.m. on Mother's day but just know if
I'm able to answer I will even at that
time all of my information is in the
show notes and please as I keep asking
please subscribe rate review the show so
that we can get it out to as many people
as possible and I hope you guys have a
great rest of the week stay safe we'll
talk again next time
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