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Today I'm going to show you the professional versus novice style of the eight biggest mistakes people usually make when buying real estate. Let's get straight to the point, because after all, these are videos that make them money. Number one, the novice usually begins their real estate search by looking for the cheapest properties possible.
They go to Zillow and simply order by the lowest price . The professional, on the other hand, begins by educating himself about which areas are known as high- demand zones. Those that sell quickly, those that rent quickly, and those that are easy to remodel. The professional focuses on those areas and waits for good opportunities to arise.
But the professional realizes that nine out of ten houses that come onto the market and seem cheap usually have something wrong with them. On the other hand, the novice orders first by the lowest price. They often end up with that $190,000 property in a neighborhood of $ 400,000 homes near the oil platforms and then wonder, "Wow, this is a pretty good deal." However, they still don't realize that the reason it costs 190 is because tenants are suing the landlord for exposure to fracking chemicals.
So pro tip number one: start with high- demand, high-quality, proven neighborhoods that rent and sell quickly. If it 's on the outskirts, if it has abnormalities, don't even bother. Number two, never buy "yabots". And the easiest way to explain a " yabot" is by taking as an example a new member of the course from four weeks ago, whose name I won't mention, but someone came along and said, "Hey, here's a deal for three units." "Uh, Kevin, I'd love for you to analyze it ." "Uh, it's, you know, great." "It's fully rented." "I can kick out one of the tenants who has a month-to-month contract, and I can move in and take control of this three- apartment building." "It's going to be great." "It's incredible, but it's in an area that isn't very desirable and it's on a very busy street." And my answer is: you literally need to go and watch the lesson on "yabots" because you obviously haven't reached that part of the course yet, since you literally just described what a "yabot " is.
Something that seems like a good offer, but...and here are some examples of common "yabots". Properties with additions where you have to go through one room to get to another. Properties with high- voltage power lines right in the backyard so you glow in the dark when you go to sleep. Properties next to airports.
Properties adjacent to busy roads, intersections, or stop signs on busy avenues. Or, as a recent example that hits close to home, great properties, except that they have a crazy neighbor next door, who you find out from your mother-in-law is also violent and capable of harming anyone who works in the neighborhood .
He is also accused of vandalizing cars by gluing the doors shut with super glue. Yes. Yes. But they just happen. This is what I see in this business every day. It's crazy. Well, maybe not every day, but yes, it happens. Professionals, on the other hand, see these properties on the market and the first thing they do is look for the location and any anomalies.
And as soon as they find a " but", they say: "Don't buy it". And that's exactly what I told that student in the course. Don't buy it. You don't want to have to collect the rent armed. Number three, we all know that the best type of property to buy is the one in the gap. There are three types of gaps.
We've talked about them before, but the concept is to buy single-family or multi-family homes below market value by taking advantage of one of the three ways to buy gaps or below-market deals in real estate. We know how to do it. But the worst type of property to buy is one where the owner or a DIY enthusiast has remodeled everything.
And at first glance it looks great, so it sells quickly. And at a high price. But then, when you start checking and you realize that the same owner did the extension, the windows, the flooring and the electrical work in the bathrooms, and the inspector tells you that the recessed kitchen lights were installed terribly, with code violations and uneven floors.
Don't expect the materials inside the walls or the installation of those windows to be of better quality. I tell my clients, if I see an amateurish remodel and start noticing weird shortcuts or code violations, you can bet the same thing is happening throughout the rest of the property. At that point, I'd rather buy a property in bad condition, because it's stupid to pay the full price or overpay for a remodeled property and then have to live with someone else's mess or redo it.
Number four, this is actually a blow to myself, to my own heart. But the professional does not represent himself. As Abraham Lincoln said, he who represents himself has a fool for a client. Real estate agents who often represent themselves, or buyers and investors trying to find deals on their own, are often blinded by the business and fail to see other anomalies or factors that could actually affect their profits.
Some of my clients who have gotten the best deals used to be real estate agents and brokers , but they use people like me to point out things they do n't see, to look for opportunities, and generally to be another advocate for them in their future as investors. It's much harder to do that yourself .
And I'll tell you, when I negotiate on my own, I feel like I give in easily. When I negotiate for a client, I'll go to the ends of the earth to get them a good deal. Number five, many people want to start buying properties and the first thing they do is go to open houses, but they are afraid to get their pre-approval letter because they are worried that their credit will be affected.
Stop doing things halfway. Get your pre-approval letter and take it a step further. This is what professionals do. Professionals know their loan portfolio so well that, when making an offer, they know they can waive the loan contingency because their credit is as good as gold. If you also want to be in that position, ask your lender to do what is known as a pre-underwriting of your loan.
Not only will this give you much more power when negotiating with sellers, but, surprise, you'll know if you have any financial skeletons in the closet that are better resolved now, rather than when your deposit is at risk during a deal. So, get your credit checked right away and get the pre-subscription.
Number six, be prepared to invest time and money in your education. And yes, this is an ad to get you to for $264 using the code "short red," because honestly, everyone who has joined has realized that this is life-changing. You get 10 years of knowledge at a very low price and you have access to me in private live streams.
But look, seriously, whether it's inviting an agent for coffee and paying for it yourself, or paying for online education, books, or whatever, if you're interested in making real money in real estate, don't skimp on your education. That would be as bad as number seven. Number seven is skimping on your inspections.
Look, obviously everyone says to do a house inspection, but the inspection should be your first line of defense; although the most important one is actually the second. In other words, it's not the moat around the property or your castle that really matters as a first line of defense. It's about how high your walls are.
And in real estate investing, how high your walls are depends on how much it will cost you to fix things. And I'll tell you, a lot of people go to the inspections very emotional because there's a long list of problems. A professional puts that long list on a spreadsheet and says that's just a $2,000 problem.
As if every problem that appears there costs 50 dollars. The professional will do the same with other houses and will realize: "Wow, this house is perfect except for the foundation problem." We called my foundation expert and paid $300 for the foundation inspection. And that person not only told me not to buy the house, but added, " You're going to need an excavator for this, aren't you?" "And if you really want to pour a new foundation, it will cost you $180,000 to demolish and rebuild it ." That was $300 well spent.
But many people simply don't want to spend the money. You have to believe that there are people out there who have more experience than you. And I'll tell you that the experience of many people and professionals comes from having made mistakes themselves. And you can often get all those answers for a very low price.
And the professionals know it. Number eight, newbies are looking for something that's move-in ready and beautiful. That it has wood paneling. That it has decorative moldings. It should have beautiful floors, quartz countertops, an amazing kitchen, and contrasting door hardware. Professionals, on the other hand, see every real estate purchase as an opportunity to make money when they know they can buy below market value and not pay what everyone else is paying.
Why wouldn't you take advantage of that to instantly increase your net worth? Instantly increasing your wealth is a wonderful thing that professionals take advantage of, and I encourage you to do so too. One extra note: I did a live stream a few days ago about whether real estate investing will be dead if Redfin does this.
And some people have sent me direct messages worried that real estate investment may already be dead. However, I honestly don't think those people will watch the video, because I said in that video that it will be at least five years before algorithms arrive and take control. Which, whether you're 16 or 50 right now, gives you plenty of time to snag some great real estate deals.
So go out, go shopping, watch the whole video before sending me a DM wondering if the world ended because you read a title, and I'll see you next time.
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