Some other common mistakes first time investors should watch out for.
Not having enough cash reserves should be considered a big one. Being in this position can set you up for all kinds of problems. Performing sub-standard repairs comes to mind first, which eventually leads to sub-standard tenants and there goes your positive cash flow.
Relying on your property to appreciate. Over the last couple of years there were many 
who bought apartment buildings in the Chicago area expecting high immediate return and are definitely paying the price today. You should focus on ways to increase your cash flow, appreciation should be considered the ‘cherry’ on top.
I have known several investors over the years who subscribed to this philosophy. They built their portfolio over the course of years, adding one to two properties each year until they had reached the number of properties they needed to achieve their over all financial goal. Several of them have long since sold their properties are now retired millionaires.
Executive Realty Group - Skokie, IL
Evelyn~ We see a lot of that here in Chicago too. The only problem with SGF if you lose a tenant you could end up in trouble.
Bruce~ Hey Bud!! Thanks for the heads-up I had no idea...... I guess holding your breath does still pay off LOL!!
Cory~ Absolutely.... everytime!!
Jun 03, 2011 09:43 AM
Sotheby's International Realty - Los Angeles, CA
Kim - I'll buy you and Jane a beer even if I don't sell that property! (Bruce, you have to pay for your own :) I LOVE Chicago - worked there for many years in the Hancock Building. I'm due for a trip back just to eat Chicago style.
As always, your advice is so sound, Kim. I have seen too many investors go under because of a lack of reserves. Cash really is King when the economy takes a dip and renters stop paying. Of course, that's when a gun with a silencer is also advisable. Oh my, is my New Jersey hemline showing? :)
Jun 03, 2011 02:41 PM
Golden Gate Sotheby's International Realty - Redwood City, CA
Redwood City Real Estate
Good comments and perception of investors and their properties. I have found that investment in real estate investment properties also take an element of time to fulfill its' full potintental. If the equity is left in tact over time income will far out perform your expectations. This is good.
Jun 03, 2011 06:43 PM
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA
Kim, real estate is and has always been a long term investment. Investors who think it is a get rich quick scheme usually lose out.
Jun 04, 2011 02:44 AM
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert
Thanks for your well written and important post.
This downturn is has sent many investors through the meat grinder.
Investors must assume stagnant or negative appreciation. Buy it for the solid cash flow. If it's not there, just move on. The banks are brutal to investors when it's time to do a short sale or if it goes to foreclosure.
Jun 04, 2011 03:24 AM
Contour Investment Properties - Jackson Hole, WY
Commercial Real Estate Expert in Jackson Hole, WY
I've appraised over a hundred apartment complexes over my career, and it's so easy to tell which investors will make it and which will struggle. Proper maintenance and cash reserves will tell the story every time!
Jun 04, 2011 03:37 AM
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions
New commercial RE investors who fail to seek professional advice from an experienced Realtor, I believe have the same failure rate as a new business owner. Your illustration works, however, leveraging financial resources to the max without a safeguard for vacancy and other issues will often lead to disaster.
Most investors don't have an exit plan and that is a key element that is never discussed except by a professional. Amazing how many investors leap into opportunities without professional consultation.
Sometimes, a new commercial investor should be advised to begin at a lower level and build a strong financial foundation before moving up. Would an investor get that advice from a business broker, I doubt it.
Jun 04, 2011 04:25 AM
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN
Marte Cliff Copywriting - Priest River, ID
Your real estate writer
It's really all about doing the math - and relying on numbers instead of hopes.
Jun 04, 2011 07:09 AM
RE/MAX Suburban - Schaumburg, IL
Schaumburg Real Estate
Good post, you have to have that strategy & don't flinch during it's execution.
Jun 04, 2011 08:18 AM
Finance of America - Atlanta, GA
NMLS #6621 - Specializing in Jumbo FHA & VA
Kim, great advise and well said. If done properly, now is the time to buy and hold.
Jun 04, 2011 10:56 AM
Your complete source for buying HUD homes - Littleton, CO
HUD Home Hub - 303-949-5848
Yes manage your operating cash flow, grow it, and your building is worth more. Very simple. The appreciation from the building is just the icing on the cake.
Jun 04, 2011 05:41 PM
Keller Williams Indianapolis Metro NE - Carmel, IN
Carmel, Fishers, Westfield IN Real Estate Expert
Kim--So I have not been the only one missing your smiling face! Pretty good job to get a month old post featured!! Life gets busy. I certainly understand being pulled in different directions. Hope all is well!!
Jun 05, 2011 10:05 AM
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes
Good post. I would like to hear more about Investing in Apartment buildings. Thanks for the information.
Jun 05, 2011 11:11 AM
RE/MAX Allegiance - Burke, VA
Northern Virginia
Your feedback is helpful to any first time real estate investors.
Thank you for the reminder !
Jun 05, 2011 05:32 PM
Executive Realty Group - Skokie, IL
Gwen~ Love that Jersey advice LOL! But, like you said the cash is what it really takes. Hey, maybe if we keep working Bruce we can get him to buy us the beer and that 'Chicago Style'. Good luck with the manision!
Cliff~ Absolutely, and with a little 'forced appreciation' there are always ways to increase the equity position.
Michael~ Oh so true, unfortunately there are still those out there selling the 'get rich quick' philosophy.
Dave~ your right. I've met with some of those 'meat grinder' investors.. it's not a pretty sight!
Time~ That's so true!
Kimo~ Your are so right. The exit strategy should be where you begin. Investing is a process that requires a team to get there.
Jan~ Thanks for stopping by and the kind words.
Marte~ Amen to that!!
Lyn~ So true... and too many don't have a plan and flinch way too soon!
Ray~ Absolutely! This is the kind of market that makes millionaires... with the right plan, of course!
Mike~ You bet!! that's how you retire a millionaire.
Andrea~ So True.. in most cases the actual purchase price is the least of it.
Pat~ I know can you believe it!! I was shocked. All is well, just really busy, but I've been keeping an eye on you my friend!!
Gene~ Thanks, I'll try to keep 'em coming!!
Marguerite~ Thanks for stopping by.
Jun 08, 2011 05:29 AM
RE/MAX Properties - Rockwall, TX
Homes for Sale in Rockwall County, Texas
Kim - congratulations on this well deserved feature! This was a good read and timely for the market.
Jun 08, 2011 05:51 AM
Executive Realty Group - Skokie, IL
Academy Mortgage.......We are a Equal Housing Lender - Eugene, OR
LoansByEllen- Licensed in Oregon
Kim: This is a great post/discussion. Excellent points for today's market..
Jun 10, 2011 12:29 PM
Executive Realty Group - Skokie, IL
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