How to Avoid Rookie Mistakes as a New Real Estate Investor (Video)

It’s easy to make mistakes when you’re buying your first income property. But there are plenty of things you can do to avoid those rookie moves that new investors often make. Educating yourself is a good place to start, which is what this podcast is all about. And listening to stories about other challenges that other investors have had to deal with.

In this episode, you’ll hear from Brandon Pritzl who works a full-time job in the aerospace industry, and just bought his first rental income property. He had his first big challenge right away, but he saw his way through that rough patch. He’s now planning on growing his portfolio to provide financial flexibility for his growing family, and he will share what he’s learned, so far, in this interview.

If you’d like to become job optional with rental property income, join RealWealth for free. As a member, you'll have access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. Go to realwealthshow.com to join.

Transcript

[00:00:00]

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Voiceover: You're listening to The Real Wealth Show with Kathy Fettke, the real estate investors' resource.

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Kathy Fettke: What are some rookie moves that new investors make that you could avoid by listening to The Real Wealth Show? I am Kathy Fettke, and thanks so much for joining me here. Our guest today, Brandon, just bought his first property and learned a lot of things along the way that I thought were really, really valuable to share with you here on today's show. Brandon, welcome to The Real Wealth Show.

Brandon Pritzl: Well, thanks for having me on the show. I'm happy to be here.

Kathy: Let me start by saying, what inspired you to choose real estate over the stock market? You may be also invested there, but what inspired you to choose real estate?

Brandon: I think a few people, I started reading that purple book, Rich Dad Poor Dad, a few years ago. My dad had been trying to get me to read that for a couple of years, and I finally got around to it and wish I would have done it a few years ago. That started my journey into self-education. I started listening to podcasts, including your show. I even read your book as well and a bunch of other books as well, as I was trying to start to build up the funds for an initial downpayment on my first property.

Kathy: Tell me the things that really stood out in that process of learning, with real estate versus investments.

Brandon: I think just the five ways that you can grow your wealth. It's not just dependent on people buying or selling or any whimsical changes in the stock market, you can actually be very planful and methodical, and real estate moves very slowly, comparatively. I liked the fact that [00:02:00] you could educate yourself, really hone in on what your strategy would be, which markets you want to target.

Me being on the younger side, I wanted a healthy mix of a cash-flowing market with appreciation potential, knowing that I want to buy and hold for the long-term. I think real estate provided that monthly cash flow. You've got your appreciation potential, you've got your inflation hedging, you've got your tax benefits. You can do cash-out refinances down the road, you can do 1031 exchanges to defer any tax. I just thought there's a lot more advantages, going this route than maybe some other investment vehicles.

Kathy: I agree. It is amazing that you can lock in these low interest rates for 30 years, while we're seeing rents go up and home prices go up. You got someone paying down your mortgage for you, you got tax benefits. That saves you even more money and then somebody else paying off your debt and creating that growth, the equity there. If you just look at fundamentals, you don't have to worry so much about markets going up or down.

You just pay down the loan, or I should let someone else pay down for you and pay less in April to the IRS. Okay, good. I know when I bought my first property, there felt like so many unknowns. It just felt like this overwhelming thing, how do you even get a loan and read all those documents and look at an inspection report and so forth? I know you said Leah, our Investment Counselor at Real Wealth Network, is really helpful. What did you learn from-- Let's just start with the loan application process.

Brandon: [00:04:00] I think throughout the whole process, I learned the incredible value about building a team around you. Leah being one part of that team, I found a lender that I really liked after speaking. I went and did my rounds and interviewed different vendors that I'd like to work with, and I know that you guys have your preferred list of vendors, I'm working with one of those.

On the tax side, working with CPA, making sure that your property management is solid since they're the boots on the ground in that area. I think just initially coming into it, it can be a little bit overwhelming, but I think you just got to get out there and start talking to people. I think the more property management companies you talked to, the more lenders you talk to, the more well-informed you become.

You can pick their brain about different questions to be asked, to be asking them. Then you start to develop different criteria that you'd be looking for as you become more exposed to it. My advice to any new person starting out would just be just to jump in and do it. Obviously, do your groundwork and some homework and a little bit of research.

Kathy: You did watch a lot of webinars and listened to podcasts. There was learning that happened before you started making those phone calls. [00:05:32] Were you surprised at all at what the mortgage broker came back with, as far as what you could qualify for and how many?

Brandon: Yes. I was surprised by the quantity and the rate I ended up getting. In all of my cash flow projections, I'd budgeted for a certain amount, and it came in well below, and I think that's the icing on the cake [00:06:00] for that particular deal. I think I definitely want to utilize-- I'm married as well, so utilize the 10 loans in my name and then in my wife's name so we get those 20 and then get and plan next steps after there, after that point.

Kathy: I was going to ask you. Was that your ultimate goals, to get 10 each?

Brandon: I think so. I'm relying on this property to be my proof of concept for my wife to get her to buy in. I think she's trusted me thus far, knowing that I've done my due diligence and research along the way. I think showing her the monthly mailbox money in the account, I've been including her on any updates from property management or any repairs that might be needed, talking through different things. She has some good gut instincts on different questions to be asking folks that I didn't even think of, so she's definitely been a great partner, in that regard.

Kathy: Wonderful. It sounded like maybe now that you're having a family and starting a family of one child, do you intend to have one of you stop working at some point with the help of the cash flow?

Brandon: Yes. I think that's the ultimate goal there to use real estate as a vehicle for one of us first to be job-optional and then hopefully down the road, we can both be job-optional and maybe do some passion project work. The main thing is just to be able to have flexibility to be able to set up a comfortable life for my little baby girl and any more that might follow. I think [00:08:00] that's the goal for now as I see it, that might grow and evolve and change, but right now, definitely, just to give us a little bit of flexibility.

Kathy: When you look at the tax benefits you'd get from owning these 20 properties, you would just save, right off the bat, enough money that the second person wouldn't even have to work because the tax savings would cover it. The question is who quits their job first, right?

Brandon: Exactly.

Kathy: What did you learn? What surprised you about the kind of tax benefits you can get?

Brandon: I think the more I learned about both the cash-out refinance options, being able to basically use your home as an ATM to pull cash out and redistribute that equity for other properties that will be income-producing, that and also learning about different tax exchange, two different vehicles to grow your