Before Investing in Real Estate

I was a rookie when I lost money investing in real estate. So with that said, I will tell my story. I have been one of those guys who jumps into things thinking I can figure it out. Well in hindsight I can tell you that if you make a few mistakes as an investor it can cost you.

I’m not saying don’t do it, I’m saying do your homework. Learn from other people’s mistakes. It may seem like a rip-off to pay for a real estate course and there are a lot of hustlers who promise a guide to success. After they get you to make a small commitment they hit you with additional fees for more courses to gain the knowledge you seek.

Real estate agents only care about their commissions. This leaves you or at least it left me, feeling alone and frustrated. I knew the type of property I wanted, a fixer-upper. I had a budget and strict guidelines as to the criteria the property had to meet. The problem was, that I used a real estate agent and was shopping the MLS. Big mistake! Every time I found something of interest, there were mobs of people just like me. One property had 64 bids on it. I did ultimately find and buy a fixer-upper and yes I overpaid. So, lesson one is don’t look at MLS listings. Here is an affiliate link for an alternative called Birddogbot I found it after the fact but will try it on my next flip.

Fix and flip or be a Landlord?

In hindsight, I would have been better off as a landlord. If I had been patient and willing to be a landlord. The property I flipped would be worth another 125k today, only 2 years later. However, I had no idea at the time that interest rates would go so low. I had no idea that there would be a Pandemic causing the market to go completely nuts.

The idea of getting in and out and getting paid is appealing. The downside to that is capital gains. You can defer capital gains by using a 1031 exchange, but the properties must be of like the kind in the eyes of the IRS. Unfortunately, there is a time limit on which to complete the exchange. it’s 45 days to identify the property after closing on the first one, and then 180 days to complete the exchange.

Becoming a landlord and renting properties has its tax advantages. But it comes with a certain amount of headaches. If I were to go this route, I would rent it out by night using VRBO. Sure it might be more work, but at least there be the problem of evicting a tenant. The potential for making more than double a 1 or 2-year lease is very attractive. So, I would look for a property in an area with year-round appeal. Possibly near an attraction. You can go to the link below and register a property for rent or book a vacation.