Epic Real Estate Investing - Six Reasons You Shouldn't Buy THAT Property | 852

Episode Date: November 30, 2019

This Saturday, Matt shares what to look for when buying an investment property. Tune in and find out what are the 6 reasons why you shouldn’t buy one! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit RR.

EI-Aase.com. Here's Matt. Hello, and welcome to the Epic Real Estate Investing Show, and today we're going to talk about what to look for when buying an investment property, and we're going to dive in specifically as to why you might not want to buy that property based on what you find, and causing you to go look for another property elsewhere. There's plenty out there. You don't have to buy every property you see.

We're going to talk about what you're going to look for that would suggest you don't buy that one, all right? So before I get started, if you want to flip properties in your spare time or double the deal that you're doing if you're already flipping and make enough money that would easily replace the average salary in America, I'm hosting a brand new live training with my friend Ross Hamilton. It's live all week on demand. And it's going to show you how to access a revolutionary but very simple house flipping strategy that allows anyone to quickly find and flip properties that aren't available to the general public. And if you like the way that that sounds, head on over to drone flipping.com. Dronflipping.com. Like the little things that go up in the air and they're unmanned and they take pictures of stuff. That's pretty cool what they're doing with real estate investing and drones. So go to droneflipping.com.

All righty? So here at Epic, we all know that most people are living a life of financial sacrifice and financial betrayal. And what I mean by that is that the time honored practice of saving for retirement is a broken strategy that's failing the majority of the population. And when I say the majority, I'm not talking about 51% majority. I'm talking about 95% per the statistics of the Department of Health and Human Services. 95% are completely unprepared to retire at the age of 65. 4% do squeak by and are just barely making it, but only 1% actually makes it to what the

government would consider a wealthy status. And what that really means to me is just most people just don't make enough money to save enough money to live a life in retirement that's comparable to the life that they lived during their working days. And even if they do manage to pull it off, even if they do manage to make it and they operate with an unreasonable amount of discipline and start early enough, still, more than two thirds of their lives are going to be behind them. So what we've done is we've built a system that creates an opportunity for one. money to work harder for them than they did for it, saving them and their families from a lifetime of financial worry and doing it all in a fraction of the time of how most pursue their financial freedom. The bottom line is real estate. It works and everyone deserves a chance to get theirs. That's why we're here. So with that said, though, does all real estate work? Are there some

types of real estate you should steer clear of? What are the signs a property may display? when you'd likely be better off passing and looking for that next property. And you've heard me say real estate is safe, right? It's the people that are risky. So let's start right there. Let's start there with reason number one that you should not buy that property. If you let confidence in or experience with the team of people that are going to be involved in getting a property up to snuffin and causing it to perform for you.

In other words, be very close. cautious on the risks you take if a lot of people are going to need to be involved to get your investment to function. And so that's number one. You should not buy that property. If you don't have a team, right? If you don't have confidence in that team or experience with that team to do what's necessary to get up running, might be a reason you pass on that property. And that would bring me naturally to reason number two that you should not buy that property. If there are big ticket repairs required. You know, unless you've got a hell of a discount and you've got confidence in your contractor, then maybe. But major repairs, they've got a tendency to cost a lot more than what's accounted for

up front, not to mention major repairs. They can somewhat be like peeling an onion, right, peeling those layers of an onion. There can be a lot of stuff that gets discovered when you're making the major repairs. And lots of underlying minor things and mediocre things or middle of the road type repairs, but they all cost. They all have an expense attached to them. And what I'm talking about with regard to big repairs, not necessarily financial-wise, but more like the major components of a property. Like if there are significant cracks in the foundation, or if the electrical is in bad shape, or the plumbing is in bad shape, or maybe the roof is in really bad shape, you might want to consider looking at something else. It needs paint and it needs carpet, or maybe the lights

switch doesn't work or the faceplate on the wall socket is broken or the doorbell doesn't ring or, you know, maybe it needs a new screen door or something like that. That's all minor. I'm talking about the big stuff, the foundations. I'm talking about the electrical systems, the plumbing systems, and the roofs. All righty. Also, things like serious flood damage or fire damage or septic tank spills. Gross. All of which can become very expensive. They can be overcome, but they're expensive. and there's a lot of moving parts and variables at play too. So if you decide to take on a big project that's got major repairs like that, doesn't make sure that you're buying the property cheap enough to account for,

I would say, double the repair expense that you estimate up front. You've got to get deep discounts on that stuff because there's a lot of risk that you're taking on. Okay, reason number three that you should not buy that property is if you discover during your due diligence a really high vacancy rate in the area. An excessive number of vacancies. What it does is it really translates to a lot of competition, right? The law of supply and demand is going to work against you in this scenario, in this market. And when landlords compete for tenants, what happens is they typically compete with the rent,

the price of rent. So rents fall. And so during your due diligence, just go to Google and search all of the property managers in your area and visit their websites and take a look at what they have for rent. Take a look at their rental inventory and just get an understanding of how much is out there and an understanding of what it's going to take for you to compete in the marketplace against what's available. So if you see high inventory with a lot of stuff to rent on someone's property management website and it's all really nicely done and it's really pretty

properties, that might be a sign that no one wants to live there, right? And that might be a predictor of what's in store for you when you take over that property in that area. All right? So that's reason number three. Reason number four, you should not buy that property. When the local economics don't work in your favor when they aren't supporting the community. And what I'm referring to specifically, you know, there's all different types of things that you can look at. But really, Just one thing that you can look at, that of which it really passes the test that'll kind of, it'll give you a good likelihood that all of the other economic factors are going to pass the test. And everything else will be least satisfactory if you look at this one thing.

And that is jobs, and specifically the diversity in jobs and the diversity in the jobs available. And so what I do, just kind of a quick and dirty math, poor man's way of doing it, is I like to look for a few Fortune 500 companies within an hour or so for my property. I want to look for major corporations and companies in the area. And I get nervous if there is an overwhelming presence of jobs in any single industry also. So, you know, like a town that's heavily dependent on the oil industry or a town that's heavily dependent on, say, aerospace. I remember back in the, I think it was the 80s when I lived in Southern California. and all of Long Beach and Lakewood in those areas,

the prices just plummeted when a lot of those government contracts got cut. And I know that happened in, I think it's Houston last year, two years ago, when there was a big upheaval. It's wrong word, big disturbance in the oil industry. I don't know the details, but I know prices got affected there. And just any single industry. So those are two examples. All right.

So if people don't have jobs, they can't pay your rent. so check out the job economy in the market that you are going to purchase your property. So reason number five that you should not buy a property. If it feels too good to be true. Now, I'm not saying that I'm always looking for something that it feels too bad to be false and that's going to be a good indicator that this is the way to go. I'm certainly an optimist. I'm always looking for the good and what I'm looking for.

and I just always look for reasons or ways that something will work. But if something just looks too good, I make sure to double down on my due diligence. Like if the price is too low or the rent is too high or the property is just in such a great area, it just looks good on paper, it looks good on the Internet. It might be an indicator that you're going to want to do some little extra due diligence. Certainly, there are good prizes out there that you can win the rental property lottery every once in a while for sure. But just make sure that you're checking it out.

If it all checks out, then go ahead and buy it. But just make sure that you're able to satisfy all of your curiosities and all of your concerns before you do finalize that purchase. All right. Reason number six, that you should not buy that property. If it's borderline hitting your minimum deal standards, and for you to hit your deal standards, you need a number of things to go right in order for you to hit your numbers.

So if you're in that situation, you might want to reconsider. And here's what I mean specifically. For example, if you're thinking something like this, gosh, if I can just get the repairs done at 80% of the estimate, if I can get my contractor to come down a little bit, this is going to work. Or if I can get a tenant, if I can just get them a tenant in there to pay 10%, just 10% above market rent, this is going to be a great property. Or if you're thinking something like, you know, if the area gentrifies the way that

everybody's talking about, the way they talked about in the newspaper, this is going to be a great property. If you're ifhing your deals before you own it, like if this, if that, if you're ifhing your deals before you own it, probably not going to be a good choice because you're gambling and you're counting on certain things to go right and be better than what they are at the moment that you're looking at the property for it to work out. There are plenty of properties available that will work for you without taking unnecessary risk. All righty. So those are six reasons that you should not buy a property, or at the very least, you should just give serious reconsideration before signing on the dotted line.

All righty, so before I go, if you want to flip properties in your spare time, you want to double the deals that you're already doing if you're already flipping, and you want to make enough money that could easily replace the average salary in America. I am hosting a brand new live training this week with my friend Ross Hamilton. It's going to show you how to access a revolutionary but very simple house flipping strategy that allows anyone to quickly find and flip properties that aren't available to the general public. If you like the way that sounds, head on over to drone flipping.com. D-R-O-N-E flipping.com. All right, so that's it for today. Enjoy the rest of your holiday weekend. God bless and to your success. I'm Matt Terryo,

Living the Dream. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know home for us. We got the cash flow. This podcast is a part of the C-suite radio network. For more top business podcasts, visit c-sweetradio.com.