Glen Gallucci discusses three lethal mistakes that a lot of investors make.
Hi, Glen Gallucci from Peak Private Lending and today’s tip of the week is going to be on the three lethal mistakes that a lot of investors make. And today, we’re going to actually write it on the board for you. The three mistakes that hopefully you’ll avoid when you go to invest in your real estate deals.
- Lethal Mistake #1: Not Planning Ahead
The number one mistake investors make is not planning ahead. They just don’t have a plan before they go and buy the property. They kind of wing it as they go. You can’t wing it as you go when you’re investing in real estate. You need to be sure of the after repair value which you would be selling the house for, that’s critical. You need to be sure of what your estimate is going to be in the rehab work. You can’t just buy a house and then start saying let’s get some contractors in to give us some prices because we think it’s $80,000. You will be unhappily surprised when you find out that $80,000 might be $110,000. So you need to have those two things lined up. And the solution to this is you pick your investment model first. Whether you want to buy and hold or buy and flip. Then you go out and find that particular property. If you’re going to buy and flip, you’re going to be looking at a low LTV, loan to value, of 65% to 70%. So that means if your ARV is $300,000 which you sell the property for and take 70% of that. You want to be into that project for any more than $210,000. That’s where you get your holding cost, your profit. Now if you’re buying to hold, you can go up on that loan to value which you’ll be holding your property for a long time. You get appreciation out of it and you’ll still have probably some good cash flow. So those are the two to three things that you want to do when are you planning ahead.
- Lethal Mistake #2: Being a Lone Ranger
Number two is not to be the Lone Ranger. What does that mean, you don’t want to be the Lone Ranger? Well, you don’t do everything yourself. That’s really not your job. You don’t want to be going out and getting the ARV all by yourself. You don’t want to be doing the construction estimate coming up with that all by yourself. You don’t want to figure out how you doing your financing all by yourself. The quick solutions to these are you’re gonna hire professionals. Who are the professionals? You have real estate investors, real estate agents, you have contractors. These are professionals. You have professional lenders. All these people will help you make an informed decision on the property that you’re looking to buy. So don’t be a lone ranger, get some help from this business.
- Lethal Mistake #3: Thinking Get Rich Quick
And the third is thinking that you can get rich quick, okay? We see this on TV late night, how you can get rich quickly in this real estate investing. While real estate investing does provide a lot of profits and it can come quickly especially if you’re wholesaling. Rehabbing will take you four, five, six, seven, eight months. So it’s not really quick-quick but if you’re wholesaling, you can get profits in 30 days or less.
So one of the things is you need to work hard just like any other business. You can make good profits but you need to work hard. Some of the gurus on TV make it seem like they don’t have to do any work. That’s just not the case. You want to make sure you’re calculating your risks, know what your risks are before you purchase the property. Get educated in the flipping business. We have many meet-ups through our New Jersey meetup groups that we provide a lot of training. Peak Private Lending also provides workshops that we have many successful borrowers. They attend our one-day workshops. They go out, they find the right properties they know exactly what to do. We train them how to do it and then they come to us for financing. We give more financing that they need and we also help them along with the project. So remember, you’re not gonna get rich quick but you can make substantial profits in this business if you do your homework. And you know you’re associated with reputable people in this business. And you have the financing lined up behind you and that’s what we do here in Peak Private Lending. So hopefully we’ll see you at the meetup group that meets New Jersey Real Estate Investment Group. You can see us on meet up and we have the first Tuesday of every month. Hope to see you there.