Top 3 Reasons Landlords Will Fail Investing In Elk Grove
Last Modified 9/10/2020
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Investing in real estate can prove to be lucrative, particularly in a market like Sacramento or Elk Grove.
But, failure is always a potential.
Our guest today is Dan Hines. Dan is Regional Manager with Mynd Property Management in Elk Grove and, today, he will be giving us his top three reasons why investors and property owners have failed while investing in Elk Grove.
Alex Osenenko: Boys and girls, Alex here with Mynd Property Management. All about Elk Grove, today. Elk Grove, California. Investing in real estate.
- How do you do it?
- How do you not lose your butt?
- How do you make money?
- How do you become successful with no issues?
Well, there are always issues in real estate, but I have a guest today who can help me unpack one of the more often asked questions. And that is, what are the top three reasons rental property owners would fail specifically in Elk Grove.
What are the specific things people miss and end up losing money? Dan Hines is my guest today.
Dan, how are you?
Dan Hines: Great, thanks. How are you doing, Alex?
Alex Osenenko: I'm awesome. So Dan's got a lot of experience, right? Let me just set him up really quick before we get right into the topic.
He has over a decade of experience in managing property in Sacramento and Elk Grove.
He is a co-founder of a company called Raymond Property Management. They had 1400 units under management.
And now, Dan is Regional Director here at Mynd. So, I'm excited to have him on.
But Dan, let's unpack the three reasons you see people fail.
1. Being too Slow to Act
Dan Hines: The first is, people are slow to act, usually.
Alex Osenenko: That's a good one. Interesting. Let's unpack that.
Dan Hines: People are slow to act. You know, owning investment real estate is a business. Think of the old saying: be slow to hire, quick to fire. A lot of people don't know when to pull the plug. They try to try to wait things out.
Patience is a virtue until a certain point and then you can cause a lot of problems and cost you a lot of money to unwind it.
Alex Osenenko: Do you have an example of that? I mean, I'm just curious, what would it look like in real life?
Dan Hines: I cannot tell you how many times I'll speak with a prospective client, a new property owner, and they say that for the last six months or eight months—however long—their resident has been telling them the same story:
“I'll catch up on the rent here. I'll do this. I'll do this.”
And, I think a lot of property owners want to do the right thing. They want to be a good guy or a good person. You have a lot of faith that people also want to reciprocate that. And we find ourselves dealing with a lot of situations where we are playing cleanup crew, unwinding several months of people's patience and goodwill.
So, it's hard to strike that balance between making sure that you're being a responsible landlord, but also managing the asset and conducting business in a way that's going to set you up for success. It's not always easy to do both.
Alex Osenenko: This is something like the saying, fool me once, fool me twice, the third time I probably should act.
But alright, so that's one reason: people are slow to act.
So not correcting the situations and this wishful thinking—hoping for the best ends up typically costing tons of money, and that's where the failure comes in.
What's number two, Dan?
2. Emotional Purchasing
Dan Hines: Emotional purchasing. And this is sort of a spin-off of the last point, but there's a lot of silly investing decisions that are made around how a property feels.
Alex Osenenko: In which way? How does that manifest?
Dan Hines: They'll buy something and find out that they're not going to collect nearly as much rent as they thought. Or they buy something because it feels nice being close to a certain thing—a certain location, a certain park, maybe a particular school. But, because of the lack of diligence, the lack of attention to detail on certain things, they find themselves in a situation where, well, I now own this property and I thought it was a good idea, for whatever my reasons were. But they leaned too much on the emotional side.And that's also where a lot of property owners get in trouble.
And that ties back to the first point: knowing when you need to pull the plug on stuff. If something isn't working, oftentimes the best thing you can do is get out while you're still in control.
Stop the bleeding.
Regain control and don't wait six months and find yourself in more hot water.
Alex Osenenko: All right. So, second is emotions. Hey, I like school. Buying a house near the school is the way. But they end up finding out 90% of the prospective residents don't really care, for one reason or another, because there's a bunch of good schools in the area.
Whatever the case is, right? What's the third reason?
3. Lack of Investment Education
Dan Hines: Lack of education. From the purchasing process to how you're going to effectively manage maintenance issues, to what level of withholdings you might need if you're an out of state owner, if you own property in California. You have to structure your entities in the right way. Are you socking away enough money? Now, there's a lot of times when, unfortunately, people are building that airplane as it is in the air, so to speak.
Alex Osenenko: And I'll give reason 3.5: not watching Dan Hines interviews where all of that is discussed and out in the open. So, speaking of that, go to Mynd.co, M-Y-N-D dot CO. Type in Elk Grove and learn yourself - become more educated when it comes to investing in Elk Grove because we are doing a whole series with Dan on investing in Elk Grove.
Thank you very much for watching. Hopefully, we helped you out. Dan, thank you for your time.
Dan Hines: Thanks for having me.
Alex Osenenko: See you next time.
There are many reasons why investors lose money in real estate, but having just a little bit of knowledge can buoy an investment in any market. Investors save the most by having a sober understanding of the financial viability of a property and knowing what returns such a property can generate.
This means being a responsible landlord, as well. Those who successfully self-manage, maintain their investment by remaining diligent and firm when dealing with tenants and consistent with maintenance; for the most important aspect of investing in any market is having the knowledge of how to make the right decision and when.
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