By Anna Mills, President, Toledo REIA
Let’s get a little crazy. You came here looking for investment tips, but I don’t want to say the usual “make your money when you buy” or “use an investor friendly CPA” tips. I want to get more unconventional.
1. Don’t Learn too Much
2. Most Property Investments are Not Right for You
3. Having a Lot of Money Can Hurt Your Investing
4. Plan on Not Hitting your Goals
5. What Worked for me Probably Won’t Work for You
These 5 tips might seem crazy, absurd, or flat-out wrong at first glance. However, these tips are some of the most important so I encourage you to dig in.
1. Don’t Learn Too Much – Seriously, you’ll drive yourself crazy and never get anywhere. You see — there are WAY too many things to learn about when buying an investment property.
Flipping. Renting. Landlording. Mortgages. Subject To. Lease Options. My head already hurts. Instead of trying to master everything, take the QWICK approach and learn what you need to know to get your goal accomplished. I promise — the rest you will learn along the way.
For example, you want to invest in small multifamilies. Great! Then why read wholesaling? Stop it. You don’t need to know everything to get started with something. There will be plenty of time for learning later.
What if you don’t know what you should learn? Good question, and a lot of people ask. After all, you don’t know what you don’t know, and everyone starts at zero. If this is you. JOIN YOUR LOCAL REAL ESTATE INVESTORS ASSOCIATION for a pool of experts at every level.
2. Most Property Investments Are Not Right for You – What is the best kind of property investment? There isn’t one. But there are a lot of bad ones — for you. There are millions and millions of properties, and the VAST majority are not right for you. Here’s why: You have certain talents, skills, and gifts that no one else has. That’s right: you are an original. No one else on planet earth has the same combination of experiences and natural born abilities as you. I don’t say this to make you feel good; if anything, it makes you kind of a weirdo. However, that unique set of experiences and abilities make certain types of investing better or worse for you. As we talked about above in the first of my property investment tips, you need to focus on the ones that are right for you.
What is the right path? Hard to say — I’m not you. Ask yourself these questions… it might help you decide:
How much free time do you have?
Are you “handy?”
Do you like being involved?
Are you looking to quit your job?
How much money do you have?
Are you good at managing people/contractors?
How quick do you need to build wealth?
What is the real estate market like in your area?
Then, as you learn more of the “general knowledge” about real estate, pay special attention to what niches or strategies work best for you, your goals, and your skills. Moving on…
3. Having a Lot of Money Can Hurt You When Investing in Property – Want to know what scares me more than almost any other email I get? When someone tells me “Hey, I’ve got $350,000 to invest, and I’m ready to jump in!” AGHHHH! Slow down there, shooter.
I’m happy that some people have money. They’ve probably worked hard — or were born into the right family. They are doing the right thing by wanting to grow that wealth. And real estate is a good way to do it.
However… When you have a lot of money, buying real estate is very easy. And that’s dangerous. Real estate is a risky business when you are first starting out, and having money can make it even more so. You see, when you are investing without a lot of money, you are forced to use other people’s money, and other people are usually better at being objective in a deal.
For example: Let’s say you find a single family you want to buy and rent. The price is $100k. You like the beautiful porch, the kitchen’s gorgeous. It’s in a little rough neighborhood, and taxes are crazy high — but you love it. It will rent around $600/mo and figure it’s a fairly stable investment. You take $100k from your bank and buy it. See anything wrong with this picture?
Most likely, this deal is not going to be a good investment. Had you run the numbers you would have noticed one simple fact: The property loses money every month!
If you were using other people’s money, they would have you figure this out before buying the property. Your hard money lender, bank loan, partner, or whoever else would have likely told you what was up. Or you would have done a better job analyzing the deal because there was more at risk than just your own cash. Now, I’m not saying a person should not use a lot of cash to invest in real estate with. There are responsible ways to do it, and how much leverage you want to use is a personal decision. However, if you have a lot of cash, recognize that this is a liability, not an asset to your investing goals. If you do have a lot of cash, pretend you do not. No matter how much cash you have, when analyzing deals, run the numbers like it’s your grandma’s money on the line.
If you currently don’t have a lot of cash to invest, you are in luck. You can JOIN DIG for networking opportunities, including access to lenders and investors.
4. Plan on NOT Hitting Your Goals – Am I crazy? Probably. But I think you’ll agree on this tip…
Everyone knows that setting goals can help you achieve greater success. However, what most people don’t know is that setting goals too low will hold you back. If you set your goals 10x higher than you originally thought you could reach, you may not achieve the goal, but you’ll get much further than you had original planned for. Set a goal to buy 100 single family homes — which may seem near impossible to most. However, you need to understand this: if you push hard to obtain those 100 homes but falls short and only obtains half of that… that’s still 50 houses! Set a goal at 10, all actions would have worked to get you there and no higher.
By setting large, almost unattainable goals, you shift your mindset and begin looking at those problems in a new light and with a new plan of attack. So what is your goal with real estate investing? Seriously, what is it? I think you can do better. I think you can do 10x better. Can you? What would you need to shift in order to make this possible? Sure, when you “plan to miss your goals,” you may be slightly disappointed, but you’ll be far more successful than keeping the bar low. And I think that’s a great trade-off.
5. What Worked for Me Probably Won’t Work for You – I love to tell people what I’ve done, so you can learn what to do and what not to do. I hold nothing back and share every victory and failure in my career.
However, let me disappoint you: Most of what has worked for me won’t work the same for you. I’m sorry. I believe you can become a better investor through the words I say and write. However, I am not you.
There is no “instruction manual” when it comes to investing in real estate. You are not putting together Ikea furniture; you are building a real estate empire. No one is going to do your job for you. You could read every book on real estate, but they aren’t going to do your job for you, either. Only you can change your life.
You are not going to find that same property or get the same loan. You live in a different area with different connections and have different skills in a different time period. (Though you can learn at DIG.)
Instead of trying to copy exactly what I, or any other members talks about, focus on learning to apply the lessons to your life, so you can figure out your own solutions.
Can you go out and find a smoking good deal on a multifamily and use a member to supply the funding? Probably. Do you see the difference? It’s a shift in the way you think. Rather than look for the answers to the next test, look to actually learn the material, so you can handle any test.
That didn’t get too crazy, did it? I hope you can see where I’m coming from with these investment tips. Real estate is not a “conventional” investment and, we need some unconventional advice from time to time.