Today's a really useful topic because we're talking about the worst ways to
invest in real estate. Listen, you hear me talk all the time about the best ways
and the ideal ways and the best strategies and the formulas for success
but you know what? The reality is, I meet so many people that are dogging it and
they're making choices that are hurting them financially so today I'm going to
be sharing with you the top two worst ways that I see most investors get
started that end shortly with quick regrets.
Today we're talking about the worst way to start investing in real estate.
Steven, we have heard our share of horror stories over the years working with a
variety of men and women everywhere who jumped into real estate and had a really
souring experience right out of the gate and they quickly became what we call
don't wanters. Steven, what's a don't wanter? - A don't wanter is someone who don't
want to do it anymore. - They don't want their real estate anymore like
save me, save me. Throw me a lifeline.
- You know, I think most people, the biggest problem is they jump into real estate
without a plan and we talk about plans a lot here. Having a plan is super critical
and crucial in having success in real estate but if you see, you've got your
aunt, your uncle, your good friend over there that's done real estate,
they've had some success and so because you see them doing all these things, you
just kind of, you know, close your eyes, pinch your nose and you jump in the
water, right? That's a horrible plan, that's not a plan and so
because you do that, you get into a space where oftentimes you have no idea what
you're doing, you don't know what your goals are, you start getting bombarded
with the pains that real estate can offer because by the way, can real estate
hurt sometimes? - *speaks German* - That's German for it hurts.
Sometimes real estate can hurt and the reality is, if you don't have
a proper plan in place then when that hurt comes along, when it smarts just a
little bit, it's going to stop in your tracks so and you become a
don't wanter. - Today we're going to be talking about the
two worst ways to start investing in real estate and the first one we want to
start with is the flip. There's a lot of people attracted to flip. Now by the way,
we're not saying flips are bad but flips require a level of some
know how, some experience is helpful and so a lot of people will jump into a flip
and when they haven't properly run the numbers, they haven't thought through
everything and often, real estate on paper ends up being very different than
how it turns out in real life and so what I've seen happen many times with
the flip is someone jumps in on a deal that has less margin or less to gain
than what they had thought or what they had hoped for or number two, they hadn't
appropriately planned on how much the property would take ten thousand dollar
repairs turn into thirty thousand dollars in repairs or they got into the
project and all of a sudden they start peeling up the the flooring and the
walls and started realizing, oh my gosh, there's way more problems here or they
start going overkill on doing way too much work.
A flip is a great way to sink the family farm right out of the gate and it
doesn't mean don't do it but it does mean that this is one of the worst ways
that you can start your investing career, is going in with no experience right
into a flip. Steven, if someone didn't want to do a flip and want to do it
correctly, what advice would you give them? -- I mean, if you want to do a flipping,
you want to do it right. I would say number one, find someone who's had experience
doing flips. - And how much experience by the way? - I mean, you know, we say this all the
time but unless you've done probably a hundred or more of a specific type of
real estate, the chances are is you've got the door wide open for some massive
failure so I would find someone who's done a lot of flips, someone who's done a
hundred or more flips, they understand how it's done,
they understand the ins and outs and that doesn't mean that there aren't
going to be little things that may come up but it does mean that they're going to
be able to really prepare you for what is going to happen right because with
real estate it's not about if, it's about when it's going to happen. - And I would say a
lot of flips that are at the price of the home median or lower in your area, a
good flip is usually going to make a ten, twenty, thirty thousand dollar profit. It
can sound like a lot of money but you can lose ten or twenty thousand dollars
really fast on having miscalculated the after repair market value of the
property or how much the property really needed or some unknowns when you got
into the deal so that's one of the things for you to be aware of. Okay,
the second worst mistake that investors make hands-down is they get into a
30-year rental property and become a landlord on a deal with no equity, that
becomes high maintenance and that is a fast road to don't wanters and you
actually start getting phone calls for the broken toilet and fix this and my
door squeaking, you have not set yourself up very well and you'll start quickly
realizing, oh my gosh, what's the deal, why is everyone saying that real estate
is such, like, this is a nightmare. - I'll tell you what I want. What I want
right now is for in the comments below, for anyone that's watching this, if
you've had a bad I'm a landlord and I hate it experience, in the
comments below, we want to hear your experiences and your stories
- Teach us, share with everyone what you've been learning. - Because the reality
is, most people or almost everybody that gets into real estate who becomes a
landlord, at some point in their career, decides I don't want to be a landlord
anymore. I don't know anyone who says, oh, I just love being
a landlord. No, people love what real estate can do for them, people love the
returns, they love the equity and the growth of the cash flows,
they don't necessarily love the problems that come along with being a landlord.
- Yet now being a landlord is not necessarily all that bad, this is when it
goes wrong, when we talk about the worst way to start investing on a 30-year
project of buy a home, 30 years from now, it's paid off, this sounds smart, right?
There's one of two mistakes that generally get made. Number one, there's
not enough cash flow. So when the property has maintenance, when it has
needs and you're starting to pull money out of your pocket or every single time
the tenant calls with wanting more, wanting this or wanting that,
you're going to start hating it because when money's tight and you
have to fix the incinerator under the sink or whatever it is,
it's like nails on the chalkboard. The other problem that people make with this
worst way of getting started with that and become it don't wanter landlord is
that they don't buy the property of the equity. Here's what that means, I bought a
property, someone said, I see this all the time, "Hey, I watched some videos. I heard
that I should get into real estate so I bought a home." That terrifies me, that
usually means a person said, "Hey, I found a home that was worth two hundred
thousand. I paid two hundred thousand for it. I rented it." And what you're going to do
is, first of all, if you get in a bad pinch where you need to sell that house,
I'm sorry but the 6% you pay in realtor fees to sell a home plus the
closing costs plus any motivated drop sale, you can buy something for two
hundred thousand and if you want to sell it for even just two hundred thousand,
you might be walking away with fifteen or twenty thousand dollars out of pocket
so because you don't have that safety margin that Warren Buffett talks about,
that margin of safety, that's another thing that will really get you in
trouble because you only have one option then it's like, either take a twenty
thousand dollar hit that a lot of people can't and it means well now I have to
hang on to this property and I have to do the maintenance and I hate this half
to property that I no longer want so if you don't buy your, this is really what
we're saying, if you don't buy property right, that is a quick way to start off
in the worst way possible and say, real estate sucks, real estate doesn't work. I
don't know what all these people are really talking about but I do want us,
Steven to throw a little bonus for everyone right now which is, what would happen if
you took the benefit of a flip which is good money up front and you were to
combine it with landlord and what if there was a perfect hybrid?
We would call that our lease option system. In fact,
if you go ahead and click the link up here and actually, you know, go through
and see some of the different services that we offer, we'll share with you what
we believe as opposed to the worst way of starting, we're going to share with
you the most intelligent way that you can get started which is, how do I get
paid up front for my real estate, how do I hold it for a short period of time, how
do I maximize my cash flow on it, how do I walk away from all landlord-isms on it
and then how do I eventually sell it and trade up for a lot more real estate to
give me the same benefits. Well those would be the best ways that you can get
started in real estate so click up here and get started Have you had a bad real
estate experience? Did I just describe your story or if you found other ways of
how to not invest in real estate, comment below, share that wisdom with us but also
if you want to know the fastest track, the most accelerated track for getting
where you want to go, click the link, get in touch with me and my team and let us
enlighten you on some of the options that will give you your shortest path to
success.