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Couple Goals: Navigating Real Estate Investment Decisions With Your Significant Other

Couple Goals: Navigating Real Estate Investment Decisions With Your Significant Other

by | May 10, 2024 | Investing, News Feed

While you may want to dive headfirst into real estate investing, there’s no guarantee your partner wants to do the same. Getting your significant other—the most important person on your real estate investing team—on board with your investment dreams can feel like an uphill battle. 

Your partner may want to stick to traditional income streams, while you may have big plans for generating passive income. This is a common dilemma for many aspiring property investors who had their investment epiphany after entering a committed relationship.

It can be easy to feel held back as an investor when your partner hasn’t bought into the idea. Here, we’ll discuss seven steps to take if you want to earn your significant other’s support in becoming a real estate investor.

1. Understand Your Partner’s Financial Perspective

Before trying to convince your significant other to invest with you or support you in investing in real estate, you must understand their financial perspective.

We all come into relationships with certain money beliefs and risk tolerance levels. How you manage your income and risk tolerance is partially influenced by your early life experiences. These behaviors around money can be difficult to change, especially if there’s no reason to.

In many cases, one person in the relationship is more risk averse than the other. Differing risk profiles can lead to disagreements on investing shared savings. As you prepare to craft your message to your partner, you must understand this.

2.  Do the Work Upfront

Before bringing up the topic of investing to your partner, make sure you know your stuff. Dig deep into real estate by networking, reading books, and studying your chosen market. Hone in on an investment strategy, and develop a muscle for analyzing deals. 

Establishing expertise in a certain area naturally allows you to speak about it with confidence. If you know exactly what you need to do to be a successful real estate investor, you’ll have a better chance of convincing your partner to come on board. 

It’s normal to want to venture into this journey side by side with your significant other. But it’s OK if they aren’t ready or as enthusiastic as you are about investing. Focus on doing your part first, and embrace the idea that it may take some time before your partner buys in.

3. Have a Proven Track Record of Following Through

If your partner is on the fence about investing with you, it may be because you’ve mentioned goals in the past and haven’t followed through. 

Every year, we set goals around lifestyle changes we’d like to make, financial milestones we’d like to reach, and new journeys we’d like to embark on. However, few of us actually make good on what we say we are going to do.

While there is no way to guarantee every investment will be a success, you can show your partner that you’re committed to the journey by keeping your word at home. Make it a habit to follow through on everything you say you’re going to do. 

If you say you’re going to cook dinner, do it. Want to wake up early? Get up when your alarm goes off. Over time, this subconsciously shows your significant other that you are worth trusting, so when it comes time to invest together, it’ll be a no-brainer.

4. Share What You’re Learning

Once you’ve acquired some knowledge on your own, invite your partner to start learning with you. Ask them to tag along the next time you attend a networking event or seminar. Share blog posts, podcasts, and other sources of information you find interesting. 

Encouraging your partner to learn about real estate investing from other experts can pique their interest if they previously had none and help them develop their own ideas around the subject. If your significant other is more risk averse than you are, be sure to give them plenty of time to do their own research. Also, come ready to handle objections with your own research and supporting evidence.

Real estate investing can be intimidating for someone who’s never done it before, so it may take some time for your partner to get comfortable with the idea. Be patient with them when they express doubts, and look for opportunities to discuss new insights together. 

Remember: Not everyone wants to be a real estate investor

There are some people out there who just don’t want to invest in real estate. You can try persuading them all you want, but they just might not have the same passions as you.

That’s perfectly fine. Date night doesn’t need to turn into binging podcasts or cranking out analyses on your new rental property spreadsheet (although that would be pretty cool). The goal is to get your partner to support you in your endeavors—anything else is an added bonus.

Rest assured that your significant other will take notice as your enthusiasm for real estate grows. Even if they aren’t interested in physically investing with you, seeing how passionate you are might just be enough to pull on their heartstrings.

5. Know How It Will Help You Achieve Your Long-Term Financial Goals

This can be a game changer for you and your partner. By connecting the goals you’ve set as a couple to the goals you have in mind as an investor, you can secure your partner’s support for the long term. 

Consider the financial goals you’ve established as a couple or as a family, and create a narrative around how you can reach them faster through real estate investing. Focus on articulating how real estate deals can support your overall financial goals, whether they are to build wealth, generate passive income for retirement, or fund your children’s education.

6. Create a Detailed Plan of Action

Once you’ve warmed your partner up to the idea of investing in real estate together, create a plan of action they feel comfortable with. Developing a step-by-step investment plan will help your partner understand your thought process and reassure them you’re ready for any bumps along the way. 

Be sure to include your logic behind analyzing deals, the investment strategy you plan to follow, and why it’s a good idea to invest in your chosen market. The more you explain the reasoning behind your decisions, the fewer doubts your partner will have. 

You want to be especially detailed in the financial section of your investment plan. Real estate finances can be confusing for someone who isn’t familiar with the industry. Consider how current income, existing assets, credit scores, and past financial challenges may affect your borrowing ability as a couple. 

7. Don’t Get Stuck in Analysis Paralysis: Take Action

Once you and your partner are on the same page about investing together and have agreed on an investment plan, it’s time to take action. Many real estate investors experience analysis paralysis, which limits their success in the long run. 

While real estate investments should be carefully considered, they often require you to make quick decisions. Good deals go fast, and market conditions are constantly changing. If you indulge in overthinking and indecision, you may miss out on great investment opportunities.

If you’re having difficulty taking the first step in your investment journey as a couple, consider these tips:

Take calculated risks

As a first-time investor, you may want to plan out all your deals from start to finish. However, you’ll quickly realize that’s not always possible. No investment is entirely risk-free, so there will always be some level of ambiguity. 

The key is to develop a tolerance for uncertainty in potential deals without throwing your financial goals out the window. This allows you to take calculated risks that are in alignment with your overall investment plan.

Start small

After putting in hours of work studying real estate investment strategy, convincing your significant other to come on board, and developing a detailed investment plan, you may think you need to go big or go home. But that’s not necessarily true. 

Start with manageable investments that allow you to gain experience and build confidence. It’s best to start with a small, low-risk deal so you can see a return on investment and validate your decision-making skills with your partner.

Do something

Once you’ve conducted your due diligence and identified a viable opportunity, act decisively. Don’t let fear of failure or uncertainty paralyze you from taking the next step. 

If taking the first step seems overwhelming, break it down into smaller, more doable tasks. 

For example, if your overall goal is to buy a distressed property within three months, set a smaller goal of driving around the neighborhood every Saturday to identify abandoned or foreclosed homes. By creating smaller goals, you hold yourself accountable for making at least some progress in the right direction. 

Final Thoughts

Investing in real estate with your partner can be a lifelong, rewarding journey that not only improves your financial future, but also strengthens your relationship. While it may seem difficult at first, bringing your spouse on as an investment partner is possible even when you have different opinions on how you should spend your money. In fact, different money management skills can help strengthen your investment decisions.

Try your best to understand your partner’s financial perspective and view their opposition as insight. If your partner is particularly risk averse, it may take a little bit longer for them to buy into the idea. Remain patient throughout the process so both you and your partner can reap the benefits in the future.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Couple Goals: Navigating Real Estate Investment Decisions With Your Significant Other

Contractor Nightmares: 5 Red Flags to Watch For and How to Escape a Bad Hire

by | May 1, 2024 | Investing, News Feed

What’s easier to find, a unicorn or a rock star contractor?

If you asked most value-add real estate investors, the answer would be obvious: “Unicorns, of course.”

We all know the inherent value contractors bring to any real estate investment. A great contractor can help you reduce costs on renovations, save money on holding costs with quick turnarounds, and manage the project with limited guidance. The end result, of course, is a beautifully renovated property that gets finished on time and brings in a big payday.

Reality often paints a very different picture. Headaches, delays, and disappearing acts are commonplace. Investors are always looking for contractors because they either assume that all contractors are created equal or simply don’t know what to look for.

In either case, the quality of your contractor can make or break the deal. 

Whether you fix and flip or buy and hold, properly vetting and hiring reputable contractors is a muscle you want to (pardon the pun) build. Here’s what you need to know about bad contractors and how to find good ones.

How to Spot a Bad Contractor

Sleepless nights. Endless delays. Excuses. Theft. The list goes on and on. 

This more or less summarizes my experience with the first contractor I hired as an out-of-state investor. Everything that could go wrong went wrong. 

Here’s the gist of the story: The contractor promised a one-month turnaround time on a gut job at a bargain price, so I decided to give him a shot. Week after week, he would mention all the progress that was being made—yet all he sent pictures of was the framing, plumbing, and electrical. 

All were done incorrectly and without permitting, so the town shut down the project. We had to start from scratch and redo everything. 

The kicker? He stole $15,000 and stopped responding to calls and texts.

After applying for permits and getting a new contractor, we ended up behind on the project by two months. If I had paid attention to the red flags from the beginning, this project would have finished two months earlier, with less stress. 

Pay close attention to these five warning signs.

1. Lack of licensing

Some contractors subcontract work to unlicensed professionals to save on costs or pocket more for themselves. While it may be tempting to hire an unlicensed contractor for a lower price, the risk is usually not worth the savings. 

Depending on the jurisdiction, there are many components of a renovation that may require permitting. You’ll need to have a specialist in that field willing to put their name on the line and stand behind the work completed. If done incorrectly or if permits weren’t pulled, the jurisdiction can tell you to start over—there goes all that time and money out the window if you don’t follow the right steps.

Make sure that the contractor and team members used on the project (such as electricians and plumbers) are licensed.

2. Unrealistically low bids

Another red flag to look for in a contractor is an abnormally low bid. We all want to save money, but that’s how they reel you in.

Don’t let cheap prices fool you. They usually come at a hidden cost. Unethical contractors know property owners are looking to cut costs, so they’ll provide cheap labor and cut corners to land the job.

Be sure to review bids against your required scope of work to make sure you’re being charged for everything you need. 

As mentioned, a contractor I worked with bid significantly less than the next. Naturally, I gave him a shot. All the work was done incorrectly, and I had to hire a more expensive contractor to fix their mess. In the end, it cost me significantly more to complete the project because I thought I was saving money.

3. Poor communication 

No investor wants to deal with a contractor who randomly disappears throughout their renovation. Contractors who go MIA put your project at risk and delay return on investment. 

You can usually tell whether a contractor is a good communicator in your first interaction. If they don’t follow up after your initial call, respond slowly, or lack attention to detail, expect them to treat your renovation the same way.

It’s also important to pay attention to a contractor’s written communication, or lack thereof. If a contractor is hesitant to put terms in writing, either through a contract or email, be careful. This may indicate they don’t want to leave behind a paper trail, which could be useful in future disputes.

4. High upfront deposits

Contractors usually ask for a certain amount of cash upfront before getting started on renovations. That’s normal.

However, you should not have to come out of pocket for more than a week or two of material and labor at one time. This gives them enough to get started but holds the contractor accountable for the work. And in a worst-case scenario, you won’t lose everything if they run away with it.

When distributing funds, make sure that it aligns with the scope of work, and check that the contractor can provide receipts for their purchases. You can also try negotiating a lower price by providing materials and making it easier for your contractor to get started. That way, you don’t get up charged for materials, and you can guarantee that the correct materials are being used on your project.

5. Lack of reviews and references

Contractors with one- or two-star reviews—or no reviews at all—are difficult to trust. Sometimes, contractors who have had their licenses revoked or been sued by previous customers will dissolve their previous companies and reestablish them under a new name. No reviews could also simply be a sign that they aren’t as experienced in their field and have had difficulty obtaining customers in the past. 

Whether a contractor has online reviews or not, they should definitely have at least a few references. If they’re unable to provide even one, they’re probably not someone you want to work with. Contractors who are confident in their services are more than happy to share references who can speak to the quality of their work.

What to Do If You’re Already Stuck with a Bad Contractor?

If you come across these strategies once you’ve already started working with a bad contractor, you’re probably asking yourself, “Now what?” 

It can be difficult to let a contractor go once you’ve already signed a labor agreement and made payments. You’re not stuck, though. Here are some options to explore.

Align on expectations

You can try having a conversation to align on expectations and see how they respond.

The first thing you want to do is eliminate or at least minimize opportunities for tension. If there’s no way you can get out of the work contract, let them finish the job. However, remain observant and verify their work processes. 

You can do this by creating project checkpoints, where you can manually verify that the work is being done correctly before going further. If they fail to complete work on time or in compliance with local regulations, you may be able to end the contract early.

In some cases, letting the contractor complete the job would put your property and investment at risk. If you find yourself in this position, contact your state’s licensing board and file a formal complaint. The mere mention of a complaint may be enough to get the contractor to get their act together. 

Move on and start fresh

Another option is to try to get out of this as quickly as possible rather than hoping things will get better—they probably won’t. 

Start exploring additional contractor options. Get bids with timelines to see how early they can get started.  After vetting and verifying your new contractor, it’s time to have a hard conversation with the contractor you plan on replacing. 

No matter how difficult it can be to stay composed, you want to come off as professional. Tell them the reasons for the change, and make sure to agree to payout terms as needed. You’ll also want to put this in an email recap after the conversation to have a paper trail.

How to Find a Trustworthy and Reliable Contractor

Every real estate investor should know how to identify red flags in a contractor. However, even the most experienced investor is capable of missing a few. Here are five strategies you can use to prevent contractor red flags from slipping through the cracks. 

Only hire a licensed contractor

Working with an unlicensed contractor is always risky. Even when an unlicensed contractor can do a good job, they may not have the right insurance in place to protect you or your property if something were to go wrong. Minimize the chance of project delays and noncompliance fees by making licensing a priority. 

Ask previous customers

While it is an extra step in the hiring process, reaching out to previous customers is necessary when bringing on a new contractor. Following up with references and checking online resources, such as the BBB and Angie’s List, will help you gauge customer satisfaction. You should also call or email references directly to get a more personal account of the contractor’s work ethic and expertise.

Get referrals

This is similar to the previous point—the only difference is that you’re going to people you already know. Asking friends, family, your real estate agent, and others you trust is the best way to find contractors.

Real estate investing is highly relationship-based. Those around you want to maintain a positive relationship so that you can continue working together in the future. As such, these people are the most likely to give you honest reviews.

Check litigation history

Knowing if a contractor has ever been taken to court by a customer can save you a major headache in the future. Many municipalities make it easy to search a company’s court history by publishing courthouse documents online. When searching for lawsuits, check your contractor’s full name, the name of their company, and any DBAs associated with their business. 

Vet thoroughly and take your time

Outsourcing work is a major part of the real estate investment journey. As you begin to scale, you’ll need to hire professionals for tasks you may not have the time or expertise to complete. It’s better to hire slowly than hire the wrong person from the start.

Final Thoughts

As soon as you see one of these red flags in a contractor, run as fast as you can in the opposite direction. 

Hiring the wrong person for the job can easily double your renovation expenses and push out your renovation timeline by weeks if not months. They say someone else’s mistakes are the best teacher. Don’t make the same mistakes I made.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.