Borrowing Money for Your First Real Estate Deal & How to Raise Rents

This podcast addresses several common real estate investment questions from the BiggerPockets forum, including whether using private money for a first deal is advisable, when to accept tenants with red flags, how to raise rents for existing tenants, and if the 70% rule is still relevant for flipping houses. The hosts provide insights and advice for beginners and experienced investors, emphasizing the importance of understanding market conditions, tenant quality, and risk assessment when making real estate decisions.

Borrowing Private Money

• 00:01:31 Borrowing private money for a first real estate deal carries significant responsibility. It's recommended to avoid it if one has poor spending habits and lacks experience, as mistakes are likely to be made. Partnering with family or friends, who understand the deal and are willing to take on some risk, offers a better alternative.

Accepting Tenants with Red Flags

• 00:07:09 Deciding whether to accept tenants with red flags like late payments or bankruptcy requires careful consideration of each case. While a bankruptcy due to medical debt or divorce might not be concerning, repeated recent late payments should raise serious concerns. The hosts recommend prioritizing a vacancy over accepting a tenant who might cause problems later.

Raising Rent for Inherited Tenants

• 00:14:22 Raising rent for long-term tenants requires a delicate balance between business needs and tenant relations. If the tenant has a strong payment history and takes good care of the property, it's advisable to have an open conversation and potentially gradually increase rent over time. This approach prioritizes keeping a good tenant over maximizing immediate profits.

The 70% Rule for Flipping

• 00:20:36 The 70% rule, which suggests buying a property at 70% of its after-repair value, is a rule of thumb and not a market-specific indicator. The hosts advocate for a more tailored approach, where the investor determines their desired profit based on market conditions, property condition, and risk. They recommend calculating a maximum allowable offer based on after repair value, expenses, and desired profit.