[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 always ask you guys please in whatever podcast app you're using please hit the five star button and leave a short little review we had a few of you that that responded to that this past week and I appreciate that let's get as many of those as possible to get as many good ratings good reviews and and more people to be able to listen to this podcast as they see it as it gets pushed up in the rankings for the different podcast apps please hit the Subscribe button leave a festar rating and leave a short little review that's all I ask it only takes you a few seconds to do those 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 [Music]