I bought my first rental property about 5 years ago. I didn’t know what I knew now of course. I also made a lot of mistakes. Personally, I don’t call them mistakes. For me they are learning experiences. Experience is something that we can’t study and nobody can take it away from you. The following points are some mistakes I made with my first rental income:
1. I bought the property cash- I always saved a lot of money and I am always on the frugal side. I had a large amount of money to buy my first rental property cash after buying my primary residence 6 months prior. Buying cash is never recommended for real estate investor. The idea behind a successful real estate investor is leveraging the money and using other people’s money. Next time I will find the money from other source than my own cash.
2. I didn’t raise the rent for 4 years- When I first bought the house the tenant told me that I was not supposed to raise the rent (the house is under section 8 housing). I didn’t know the rules and I was not confident at the beginning. After acquiring more houses and dealing with housing a few more times. I raised the rent and will continue raising the rent gradually.
3. I paid for the water bill- If acquiring single family homes to rent, make tenant pay their water bill. When I make the tenant pay the water bill the bill reduced by $85.00. When people don’t pay for things they don’t care. Now she does care.
4. I didn’t research for the cost of repairs — When I was doing the inspection, the tenant disclosed that there was a problem with the sewage system. I thought that it was going to be cheap to fix. Well, I was wrong. The quote came back at $8,000. Up to this date I haven’t fix it, instead the handyman did something to fix the problem and I haven’t had any problems so far.
5. Didn’t make the numbers before buying– When you are a real estate investor you will need to make some number to find out if the deal is good and will yield a profit that you are looking for. I didn’t make any numbers when buying the house. Now I understand what is Cap rate, cash on cash return and ROI. Those are terms that when buying any rental property, you should know.
Since I bought my first property, I have learned so much. I am not afraid of tenants or having vacancies. In the beginning, I was terrified of having an empty house or getting the tenants upset. Don’t get me wrong, I am a good landlord and tenants don’t intimidate me at all. After vacancies, one eviction, 2 complete renovations and several learning experiences with tenants. I can call myself a real estate investor. My next step is going to be to take more risks and continue growing. This is my way of creating passive income and to be able to retire early.