Real Estate, It’s a Love Hate Relationship

There are a few things in real estate that may not be quite what you signed up for. MAREI Member Brendon Pishny shares his words of wisdom on his love hate relationship with Real Estate. By the way, he will be discussing this on December 10th at the HRN meeting.

What I Hate About Real Estate

A while back I was listening to a BiggerPockets podcast. The episode was labeled “10 things we hate about real estate.”

I decided this would be a fun idea to take further. So I’ve worked on my own list.

I absolutely love real estate. I invest primarily in long-term rental properties in the specific Kansas county I live in. You’ll see this strategy mentioned throughout because I believe it’s the best way to build wealth. Real estate has changed my life and provided many blessings for myself and my family.

However, it does not come without its struggles and nagging annoyances. So grab a cup of coffee and let’s dig into the 10 things I hate about real estate investing. 

What Is Success

Number one is there’s no clear-cut way to define success. I go to a lot of real estate meetups. I run into other investors all the time. We’re both always looking for a way to get the conversation started. “So what do you do in real estate?” is the typical icebreaker. Once that’s over, and I’ve given my spiel about how I buy and manage my own rental properties the follow up question is very predictable. “How many do you own?” At the writing of this, I own 16 properties. To someone just getting started this may sound like a ton. To someone who’s been investing for decades, they may think “how cute. He’s just getting started”. I bought my first rental property just over 10 years ago. I worked in real estate part-time while I was a stay-at-home Dad. I feel very successful with what I’ve done, but there’s no standard to show me that’s actually true. Success has to be decided by the individual, and one person’s success may not even compare to someone else’s. The reason this made my list is because you can achieve what you set out to do, and when you get there, you feel like there’s more to do.

Who to Trust

Number two is all the gurus. The term guru refers to anyone who is seen as an expert or highly knowledgeable person in a specific field. The problem I have in real estate is that a lot of times these people are selling you something. They say they’re going to sell you their secrets, but then never actually share what that secret is. They promise they will teach you how to be successful and the entire time their success is based on selling you their “success program”. Does this mean that everyone who offers some education is bad? Absolutely not. I love when others are offering their expertise in an authentic, honest, and real way. So if you find someone who can help you then go for it. Just watch out for those trying to take advantage.

Enough with the Charts

When you get started, you have to decide what property you want to buy. There are many ways to do this, but most of them are too complex. So number three on my list is spreadsheets. If you want to invest in any kind of real estate there’s a spreadsheet, calculator or formula out there to use. The problem I have with these is not a lot of properties fit into these perfect scenarios. In my experience when I plug in numbers to a spreadsheet to find a good deal the spreadsheet will tell me not to buy it. Rental properties are very forgiving and hard to fail at. Don’t over complicate it. Here’s my super sophisticated way to analyze a deal. (Insert drum roll here) I determine what the rent is going to be. I subtract all my estimated expenses. The amount that’s left is my cash flow. If that’s a number I can live with I buy it. If not then I don’t. I’ve bought a lot of properties and this hasn’t failed me yet. So many people get trapped in the analyzing phase. It’s called analysis paralysis. They get stuck at Ready, Aim, Aim, Aim…. Don’t forget to Fire.  

Too Many Ways to Do It

I mentioned that my main focus is long-term rentals. My portfolio consists of houses, duplexes, condos, and town homes. I believe these types of Properties held for a long time creates the most wealth and opportunities. My real estate journey started with one rental property and this has been my primary focus over the last several years. I have also completed several flip projects, lent money to others and I even accidentally wholesaled a property once. (But that’s a story for another time). While all these different projects helped me get to where I am, my business exploded once I narrowed down what I really wanted to do. That’s why number four on my list is that there are too many options in real estate. I see people all the time that chase squirrels. Like a dog that’s doing great walking beside you and then they see a squirrel run up a tree. All of a sudden that’s all they can focus on until they see another squirrel on a different tree. So whatever you decide to do – flips, wholesale, storage units, commercial, money lending, lease options, residential, assisted living, short term rentals, the list goes on – pick something and stick with it. Become the best you can at that thing. Don’t let the next shiny object distract you. 

No One Really Gets Me

This one is personal for me. Number five is how people don’t understand what I do. I’m going to try to describe a typical person in America today. They go to school through high school. Then they attend a college, or trade school and jump into the workforce. Maybe they marry their bestie, have some rugrats, and do their best to enjoy all the blessings of life. They get up every day, drive to their job, and then watch the clock until it’s time to go home. Usually, there’s some job benefits paid for like health care and social security. They get a W-2 at the end of the year that spells out their tax liability perfectly. Every year is very similar to the year before. My world is totally different and a lot of my friends don’t understand. If I introduce myself as a real estate investor their eyes glaze over while they nod their head acting like they know what I’m talking about. I have to work to get paid. If I don’t manage my properties well then my tenants won’t stay and they definitely won’t pay rent. I don’t always get to wait until 8:00 to start my day, it doesn’t always end at 5:00, and sometimes I have to work weekends. My tax returns are long and complicated. At least for me they are. And while I get all the benefits of real estate (and there are a lot) I don’t get employee benefits like health care and vacation days. Everyday is different. One day I get up, go to a meeting, call a potential seller, work on some bookkeeping tasks and end up at a property that evening showing it to potential tenants. The next day I’m elbow deep in a can of paint sprucing up some walls or stuck under a bathroom vanity replacing a faucet. So when I meet someone and they ask “what do you do?” I’m not really sure what to say. 

Automated Calls and Texts

Number six on my list is a big one. Let’s call them Robocalls. These are people calling and texting about properties I own asking “Do you want to sell?” It gets annoying and tiresome. If I wanted to sell something then I would. Except I have news for you. I wouldn’t sell to a wholesaler. I would list on the retail market and get the most money I could. Robocalls go beyond texts and phone calls. I get tons of junk mail that all look pretty much the same. It’s always a redundant letter or postcard that is obviously pulled from some list and then sent out to thousands of people. I totally understand how this world works. Wholesalers work in volume. Something like this. If they send 1000 mailers they hope to get 10 leads with the hope to close one deal. Most of the time I just delete the text, hang up on the caller or throw away the letter. What is really upsetting is when my wife or kids (yes my kids) get contacted asking if they want to sell a property. My kids don’t even know what they’re talking about. So this is a true pet peeve of mine. I know that this is part of the business, but it can still make my list of things I hate.

All the Fake TV Shows

Who has ever watched Flip or Flop on HGTV? It’s ok. You can admit it. I used to watch this show all the time. The drama of taking a ugly house and turning it into a Southern California gem is so entertaining. And it’s all done in 30 minutes. Amazing! The problem is they show you how easy it is and leave out all the failed projects. It’s unrealistic. That’s why #7 on my list is overdone rehabs. Just because you see something on TV doesn’t mean it needs to, or should, be done. Most buyers or renters in the midwest don’t need their home to look like it belongs on the west coast. If you are doing a flip or rehab project in a C class neighborhood then it needs Home Depot finishes. Stop wasting money fixing up properties too much for the average homeowner or renter who needs a nice place to live. Does that mean you can’t have a little fun? No. Feel free to try an accent wall, install interesting light fixtures or high end carpet on the stairs. Just keep it in check. Only Patrick Mahomes needs a wine fridge next to their bed. And even he doesn’t need one; he just has the money to afford it. You only need to make your rentals neat and clean. You will definitely get more return on your money. I truly believe that gray paint, brushed nickel hardware and stainless steel appliances never go out of style in a rental. 

Interest Rates

Do you want to know what is the most talked about topic in real estate? Interest rates. What is it with this fascination with interest rates? This is #8 on my list. Before you get so angry at me you stop reading I’ll admit to you that yes I know that interest rates do matter. I understand that what rate you get can make a huge difference in an investment. My hate with interest rates is on a more specific level. Let me share an example. Let’s say we buy a property for $200,000. We put 25% down on the property. So our loan balance is $150,000. At a 7% interest rate the principle and interest payment is $998 a month. You could wait for the rate to drop to 6.5%. The new payment is $948 which is a $50 savings per month. That’s great, but how long will it take for the rates to drop? You don’t know. It could take 12 months, or longer, or never. In the meantime, the price of the house increases to $220,000. Now you need more money for the down payment and the loan balance is $165,000. Even if you get the rate you were waiting for your payment is now $1043 which is $45 higher than if you would have bought it the first time. While you waited for the interest rate to drop the value increased. You missed out on the appreciation and the cash flow the asset generated over the last 12 months. The point with this example is when people worry so much about what the interest rate is they forget to do the important thing. Just buy the deal. In the grand scheme a small decrease in rate doesn’t really matter. Just take the leap.

Not Really Passive

If you get on Fakebook (Facebook) or Tic Tac (Tik Tok) you will find someone trying to convince you that real estate investing is passive. I’m sorry to burst your bubble, but it’s not. So #9 on my list is people telling others that real estate is a passive investment. Yes, you can hire a real estate agent, handyman, property manager and many more to help you build your portfolio. But who manages them? There are many property managers out there that I think do a great job. I may even hire them one day to manage my properties, but I don’t think they will ever care about my future as much as me. So I will constantly keep watch over them. The beauty of real estate is the work versus reward. I do agree that the effort you give to real estate will be returned to you in the benefits of owning that real estate. If you want more passive investments you can find those. They will not provide you the return and the benefits that a rental property can provide. As long as you know going into the deal that it isn’t passive you’ll be fine. Those that have a rude awakening are those who think they will sit on their couch all day and collect rent checks. Sorry, no couch potatoes in this world will ever achieve all that they hope to achieve. 

Let’s Do it Tomorrow

Finally, the last one. It’s a little ironic because the #10 thing I hate about real estate is the thing I love the most. Flexibility. When I started this journey I was home most of the day with my then three-year-old daughter. My oldest was in grade school and needed to be picked up everyday at 3:30 and my son was in preschool part time. To say my wife and I were stretched thin is an understatement. I was looking for something I could do to help contribute to the family all while staying flexible to be the stay at home Dad I had committed to being. The answer was real estate. Now here’s my problem with flexibility. It means you have to be self-motivated. For me this is easy, but for the casual investor this can be very tough. There’s always tomorrow. That task can always be done later. Until tomorrow or later never comes. If you get hired at a company your boss is your accountability partner whether you like it or not. If you don’t show up and produce you get fired. When you are your own boss you can’t be fired. The great thing about real estate investing is it all depends on you. The bad thing about real estate investing is it all depends on you. The key is to set achievable goals and find a big WHY. If the motivation to succeed outweighs your procrastination all things are possible. You can then enjoy the freedom of time, but continue to strive towards everything you want to accomplish in life.

Love It & Hate It, but Do It

Hate is a strong word. It’s not a word we use a lot in our household. So when I say I hate these things I’m obviously not serious. Real estate can be tough at times. There is stuff you have to do that is not always fun, but is necessary to succeed. When people say it’s easy they aren’t telling you the full truth. Here’s the truth. Real estate investing has positives and negatives. What I have found is that the beneficial aspects leave all the unpleasant aspects in the dust. I hope you found this helpful. Maybe your list would look completely different than mine. Or maybe you’ve been nodding your head the whole time because you can relate. My wish for you is you find the same joy and satisfaction that I have and go make your dreams come true. 

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