From the Forums: One Thing That Most Beginner Investors Should NOT Do

BiggerPockets Real Estate Podcast

BiggerPockets

Education, Investing, Business

4.8 • 16.6K Ratings

🗓️ 4 December 2024

⏱️ 36 minutes

🔗️ Recording | iTunes | RSS

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Summary

Should you borrow money for your first real estate deal? We’re not talking about taking an interest-free loan from your mom; we mean using “private money” to finance your investment. This type of investment property financing is usually reserved for the more experienced investors, but is it a bad idea for someone with such little experience? Is there another way to finance your first deal that gives you more wiggle room if you make a mistake? This is just one of the BiggerPockets Forum questions we’re answering today from investors like you. One investor on her second rental wants to know whether bankruptcy or late payments is an immediate red flag in a tenant application. She’s struggling to fill up her property, so should she take on a tenant with sub-optimal finances? What do you do when you inherit a tenant paying substantially under-market rent? How do you raise rents the right way? Finally, Henry the house flipper shares his thoughts on the 70% rule and gives his own house-flipping formula you can perform on the spot to see if your deal is a steal! Looking to invest? Need answers? Ask your question on the BiggerPockets Forums! In This Episode We Cover: Whether you should or shouldn’t borrow private money for your first real estate deal Tenant red flags and what to do when you’re struggling to fill a vacancy Raising rents on inherited tenants and why we DON’T ask for market rates How to attract better tenants to your rental property (and whether to lower the price) Henry’s house-flipping formula that beats the 70% rule calculation And So Much More! Links from the Show Join BiggerPockets for FREE Let Us Know What You Thought of the Show! Ask Your Question on the BiggerPockets Forums Grab Henry’s New Book, “Real Estate Deal Maker” Find Investor-Friendly Lenders The Comprehensive Guide for Financing Your Very First Real Estate Deal Connect with Henry Connect with Dave (00:51) Use Private Money for FIRST Deal? (06:21) Tenant Red Flags (11:24) How to Attract Tenants (13:47) Raising Rents on Inherited Tenants (19:55) Ditch the 70% Rule? (27:54) Ask Your Question! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1052 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email advertise@biggerpockets.com. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	You posted your juiciest real estate questions to the Bigger Pockets forums.
0:04.5	Today, we're answering.
0:10.8	Hey, everyone, it's Dave Meyer here with Henry Washington.
0:14.1	And for today's show, we picked four hotly debated recent topics from the Bigger Pockets forums.
0:21.6	And we're going to weigh in with our opinions on what the posters should do.
0:26.1	We're going to cover in this episode whether it's a good idea to use private money for your first deal,
0:31.9	when to accept a tenant with red flags, how to raise rent for inherited tenants,
0:36.6	and whether the 70% rule still works for flips
0:40.0	in today's market. Henry, you're ready to dive into these community questions? Yeah, man,
0:46.1	this is good stuff. Let's do it. Awesome. Well, I'm glad to have your help. Let's dive into our
0:50.4	first question. All right, Henry, this question comes from Chris on the Bigger Pockets
0:55.5	Forums. He's wondering about raising private capital and specifically what happens if you do that
1:02.3	and then a deal goes bad. He wrote, I'm a beginner investor who still hasn't gotten their first
1:07.4	deal. I've spoken with some real estate friends and they've told me about
1:10.9	how private money has helped their business grow massively. It's something I believe will
1:16.1	help me finally get that coveted first deal and first paycheck. So before we get into the second
1:22.0	part about a potential deal going bad, curious your thoughts here, Henry, on whether raising
1:26.7	private capital is a good idea in the
1:28.8	first place for someone who's trying to land that first deal. I think raising private capital is a big
1:34.3	responsibility. I mean, you are borrowing other people's money. And I think too often people want to borrow
1:41.8	money because they've been bad with their money.
1:46.5	And so they've got bad spending habits and want to borrow money because it feels less
	...

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