What Your Rich Dad Didn't Tell You About Real Estate

My wife and I retired in 2006. Our real estate business was to supplement our pension with minimal time and effort from us. Several years prior to retirement we attended various investment seminars, learned a lot, and felt "we got this"! To say we were naïve is an understatement.

The "Rich Dad" philosophy of real estate investment was invaluable and gets you started, but your success still comes from hard work, continued education and paying constant attention to income as well as expenses. We believe in the motto "don't believe everything you read and half of what you hear". Don't misunderstand. We've learned a lot from the seminars. Income is usually the focus of investment seminars, but how about expenses? Our experiences show that you need to:

1. Create a budget. It always costs more than expected. We now increase estimates as much 50%. Contractors always take more time than expected. Recently, we had a roofer bid on one of our properties to replace wooden box gutters with aluminum ones. His estimated four day job took over a month to get done. Remember, cheap does not always mean quality, and you get what you pay for.

Constantly be on the lookout for deals on supplies. Recently, my wife and I found warehouse in Pittsburgh that sells remnants and donated building materials at a huge discount.

Don't forget about other costs, the hidden costs of having rental property such as: school, city and state property taxes, building permits, occupancy permits, new code enforcements, sewage improvements, the list goes on.

2. Pick the right tenant from the start. Tenants are the variable which very few courses cover because it's unpredictable. A great resource for landlords is www.landlord411.com . On this site you can run credit checks, backgrounds and get expert information. Take immediate action when you see the signs of problem tenants. We rid our rental units of non-paying, deadbeat tenants. The longer a tenant remains in your property without paying rent the more revenue you lose and at your expense.

3. To use a Property Management company or not. Although we manage our own right now, we recommend finding a qualified property management person or company to oversee your properties. An incompetent manager can be very costly.

Pay attention to where the money goes. No one is as concerned about spending your money as you. Property Managers are motivated usually by taking the first month's rent and about 10 percent of your total monthly rental income. Maintenance costs are usually marked up. They get their money regardless of your profits or lack thereof. If they choose the wrong tenants, you absorb all costs (attorney, court, lost rents, other expenses).

Personally inspect your properties several times per year. This keeps your property manager as well as tenants on their toes, and gives you insight on projected improvements needed to help in your budgeting activity.

You're bound to make some mistakes but apply the lessons learned to success.