It seems that when I tell people what I do for a living and that I'm a real estate investor they’re always interested in learning more. It boils down to one thing why everyone isn't a real estate investor.
Who hasn’t gotten ‘suckered’ into these sales seminars, courses, and workshops on real estate investing? Touting how easy it is to get started, how you don’t need any of your own money bla bla… These sales gurus, trainers, experts, courses, and workshops are a business in itself. Remember that. They want your money for the course, promising you’ll know
everything there is to know after you shell out hundreds, sometimes tens of thousands of dollars. Yes, that’s right, just for the course! Some of these students have been urged to take out a second mortgage on their homes to pay just for these courses! (I’d personally tell you to take that money and put a down payment on a property!)
Aren’t we all wanting a “magic pill” to make us all millionaires? So many people, (including myself) who have attended some of these courses will tell you that you will leave dissatisfied because the first course (usually free) only leads to an expensive paid course or to sign up for a paid membership. Again, I'd put the money on a downpayment on an actual property, not on a real estate course.
It’s wonderful that so many people are interested and want to get educated about real estate investing. These gurus and seminars often draw people who think there is a get-rich-quick path, or don’t have the disposable income and desire it, or are unhappy with their lives and are looking for an easy fix. In many cases, whatever life challenges got you in the loop of ‘real estate investing seems like a good idea’ -it’s not your fault. Again, these courses are not meant for you to actually get into real estate investing but to fill the pockets of the trainers. These marketing techniques can pop up in your daily feed that you see over and over. Don’t get discouraged! There is a way to get started and I’ll tell you how for free!
It's important to note that not all real estate investors or investment education programs are the same. There are legitimate and successful real estate investors who have built wealth through careful planning, hard work, and smart decisions. However, it's crucial for anyone considering real estate investment to approach it with a realistic mindset, seek proper education and mentorship, and be prepared for the challenges that may arise.
Let's break down some of these issues - right here and now.
Expectations vs. Reality: It's true that some individuals may be drawn to real estate investing with unrealistic expectations of quick and easy wealth. The reality is that successful real estate investing often requires time, effort, and a sound understanding of the market. Always add double your time frame and have a contingency of 20% for overage expenses. That way you’ll have more of a realistic picture for the first couple of purchases. Example: I want to do a flip that would take 3 months but in reality, it would take 3 months to find a property, 3 months of actual work but then selling plus time for closing will add on another 2-3 months.
Education and Knowledge: Lack of knowledge and understanding can be a significant obstacle for aspiring real estate investors. Education and training are essential for making informed investment decisions. Do you know what to do if you find mold or if there is a leak in the roof? Finding the right courses, and professionals that you can ask and help you acquire that perfect property that works for you and your lifestyle is imperative.
Personal Qualities and Lifestyle: Entrepreneurial skills, risk tolerance, and financial discipline can significantly impact one's success as a real estate investor. Do you want to do the physical work yourself? Just because you like interior decorating doesn’t mean you should be renovating homes or being a landlord. You don't have the skills yet. Are you a general contractor, plumber, electrician, structural engineer, painter, accountant, mortgage broker, or realtor? You're going to have to know a lot about a lot or hire the right professionals. You need the right people to help you make the right changes to the home you’re flipping for example.
What kind of lifestyle do you have now? What kind of lifestyle do you think this will create for you? Do you have the time and energy it takes to manage another business? Do you want to get your hands dirty? It all factors into the bottom line and paying yourself for your labour should factor in as well.
Educational Seminars and Gurus: The real estate education industry, like many other industries, can attract individuals who are looking for shortcuts or easy solutions. Some seminars and gurus may promise quick riches without adequately preparing participants for the challenges and risks involved.
Lack of Transparency: It's crucial for you to be transparent about the hidden costs such as taxes, property management costs, permits, carrying costs, environmental factors, and other non-financial risks associated with real estate investing. Failure to do so can lead to financial hardship for participants who may not fully understand what they're getting into.
Financial Risk: Taxes, taxes and more taxes! Do you know what the best way to buy a property? Factors such as high upfront costs, ongoing property management costs, market volatility, taxes when you buy and sell, and lack of liquidity can dissuade potential investors. Do you have the risk tolerance to be able to recover if you either miscalculate your fees, over-improve the property, or don’t forecast a contingency? What’s the worst-case scenario? We don’t have a crystal ball and don’t know market volatility. Things can get worse before they get better and overextending yourself isn’t fun. Real estate investments can carry significant financial risk, especially if you leverage your personal residence which many people do. Fear of financial failure can be a huge barrier for some potential investors. For most investors, this is the highest obstacle. Know what you’re getting into and your fear will be minimal.
Real estate investors understand being a people person is important. Being able to vet good tenants, being able to network with other investors, and find and trust good contractors and trades of any kind are imperative to your success. Many times talking to tenants and choosing the right kind of tenant can make or break your success. If you don’t have those skills hire a professional realtor to rent your property.
Having a plan B: If a short-term flip doesn’t work financially, are you prepared to rent it long-term? When the market tanks and mortgage rates make your investment come in at a loss or break-even scenario how can you pivot and do it another way? For example: If you decide to do a short-term rental and short-term rentals aren’t popular in the area, are you willing to get a long-term tenant? Do you know the rental laws in the area? Investors should carefully evaluate all potential scenarios just in case things change and they need to go to a plan B.
What is the one thing you need above all else? You gotta just do it! That’s the magic pill. You have to pull up your big girl or boy panties, have faith, pull the trigger, and have the courage to jump in! Whatever you want to call it you have to just do it! That’s all.
No matter how much you dream, research, or manifest- you can’t win the lottery without buying a ticket. You can’t win at real estate investing if you don’t have the courage to just do it. I’m not telling you to not watch hours of videos, read blogs, or take those courses. The more you know the better prepared you will be but the hardest thing to do is write up that offer, sign it, and submit it. Once you get over that first step the better you’ll get at understanding the process, you may not even get the first property you offer on but take a chance. Hire the right realtor who’ll help you understand the process, heck I even do a mock offer with my clients before we make a real one. It’s hard to feel the emotions when it’s ‘pretend’ money or that adrenaline rush when it’s just a mock purchase but it’ll better prepare yourself to understand the process.
Even as a first-time investor, there are ways to not have to ‘risk it all’ and go all in. You can dip your toe in the water as a newbie. You can find a partnership, be a silent investor, you can join a REIT (Real Estate Investment Trust), rent a room or a portion of your existing home, buy an RV or trailer, and rent it out…There are less expensive ways to try your hand at landlording or make a little money on the side before you risk a lot. Start small. Learn the ropes in real-time.
** It's important to note that not all real estate investment education programs are not the same. There are legitimate and successful real estate programs that will help you build wealth through careful planning, hard work, and smart decisions. However, finding one that has a mentorship program or a real person who knows the area you want to invest in is good practice. It's crucial for anyone considering real estate investment to approach it with a realistic mindset, seek proper education and mentorship, and be prepared for the challenges that may arise.