Have you ever met any landlords who are overly excited to be a landlord? That is, someone who would wake up in the morning and tell themselves, “I’m SO excited to be a landlord today!” Well, if your answer is no, then that’s normal. I always tell my clients that I don’t know anyone of that nature either.
The End Goal – Trust me, being a landlord is not the easiest thing to do whether it be a side hustle, hobby or your primary source of income. What I can tell you for certain is that the random days of frustration that you may have to deal with (relating to your tenant or your property in general) is 100%, without a doubt, worth it in the end.
Of course, those random days of frustration always seem to come at the worst or most inconvenient of times where it’ll make you want to sell your property. But if you end up making $50,000 from cash flow, mortgage paydown, and appreciation for having to deal with maybe 2 of those bad news calls every year, then wouldn’t those calls be worthwhile?
Putting it into Perspective – Let’s say it’s a problem that requires 4 hours of your undivided attention to resolve twice a year. So that’s 8 hours per year of property management to make $50,000 or $6,250 per hour for your time? You let me know if that sounds like it’s worth it!
So in this week’s Insight Article, I wanted to take you through the emotional roller coaster of buying your first investment property.
Phase 1: Don’t Know where to Start (Confused, Curious, Excited)
You hear all of the horror stories of real estate investing, landlords and tenants and all of the other things the media depicts on the evils that come from being a “landlord”. On the other hand, you realize that most wealthy individuals own real estate in their portfolio. During this phase, you want to be wealthy or even at the very least, your hope is to not be tied to only one stream of income.
My Advice: Read Rich Dad, Poor Dad by Robert Kiyosaki. It’s a very insightful book and will help you understand the fundamentals of why people invest in real estate.
Phase 2: Learning (Excited with the Endless Possibilities)
This is the best part as you are super excited, and you start to understand the principles of investing. You learn about the strategies that could be executed to grow your portfolio faster. Needless to say, everything is rainbows and unicorns at this stage.
My Advice: Make a commitment to buy your first property within 3 months, otherwise your excitement will subdue as the process drags on.
Phase 3: Always Looking for the Best Property (Frustration)
The honest truth is that there is no perfect investment property. There are properties with more upside and options than others. I’ve seen many people look for the so called “perfect property” and try to time the market so that you’re buying at the absolute bottom. With these things in mind, you’ll quickly get tired, frustrated, eventually, give up and never end up buying anything.
My Advice: If a property answers YES to the following 2 questions, then it’s probably worth it to buy. Remember, it’s about TIME IN the market, not TIMING the market.
Criteria 1: Is it cash flow positive?
Criteria 2: Can I sell it easily if I need to exit?
Phase 4: Closing Time (Stressed)
There will be stress when it comes down to closing time, especially with how stringent mortgage qualification rules have become. Gone are the days where you can get a mortgage with just a driver’s license and get cash back from the bank.
My Advice: Get a good mortgage broker and lawyer. A good Realtor will line you up with the appropriate professionals to help carry out the transaction. We have great contacts that we would be more than happy to put you in touch with.
Phase 5: Getting a Tenant (Freaking Out)
This is where it becomes the most stressful. You just bought a property, and you’re anticipating to collect rent from a tenant. You don’t know where the tenant is coming from yet and you’re now carrying a mortgage.
My Advice: Follow the steps that I’ve outlined for getting the best tenant in this Insight Video on Youtube and you’ll be just fine!
Youtube: How to Find the Perfect Tenant
Insight: How to Find the Perfect Tenant
Remember, if you have followed our advice on where to buy, your vacancy rate should be very low in the areas which we recommend. Take a deep breath, it’ll be okay. We got you!
Phase 6: Money Starts Following In (Jumping for Joy)
You got your first tenant, received the first and last month’s rent, and your property is paying for itself, woohoo! At this point, you’ll probably feel like that wasn’t so bad.
My Advice: Keep some of your cash flow in a separate account for emergency repairs to the property. I recommend keeping funds equivalent to around 3 months worth of carrying expenses.
Phase 7: First Tenant Call (Misery)
Getting the very first call is always nerve-wracking, frustrating, and is bound to throw you off your game. Depending on the severity of the call and the issue at hand, you may start second guessing yourself, questioning why you chose to become a landlord. This tenant and this property is starting to drive you up the wall.
My Advice: Calm down, take a deep breath, call our team and we’ll guide you through a resolution. Just remember that the reward you get for dealing with these inconvenient calls is worth it, just as we had discussed at the start of this article. We have contacts for most situations as we’ve seen it all (well almost all, anyways – nobody can really claim that they’ve seen absolutely every situation).
Phase 8: I Want to Buy More (Eagerness and Excitement)
Now that you’ve gone through the entire emotional roller coaster, you’re ready for the next one and addicted to building your portfolio.
My Advice: Let’s chat and determine how to line up your portfolio with a good broker and start this whole adventure again.
The Wrap – I hope this week’s Insight Article prepares you for your first investment property. It’s really not that bad if you understand the journey. If you are looking for your first investment property, reach out to our team at PPTO, and we can chat about how to navigate through this market.
