BiggerPockets

The Unfortunate Truth about Real Estate Investing

By: Jon Ellis

After working in the real estate business for nearly ten years I have learned a lot. These lessons have come from my clients, colleagues, mentors, and my own ventures. What I am about to share with you is not a secret. Well… maybe it is according to the guru’s that want you to believe that they have a secret. But, the fact is that it is not a secret. It’s just not glamorous, or exciting, or even quick for that matter and doesn’t make for good late night TV.

I’ve got to tell you that there are numerous ways to make money in this business and I have seen most of them. The flip side to this is that there are quadruple that same number of ways to lose money. We have all seen the commercials and ads promising to “reveal the 1000 secrets to unimaginable wealth in real estate for the low price of $149”…right?

I will save you $149 and tell you the secret right now…here it goes… ARE YOU READY? The only person making money on those “secrets” is the guy behind the curtain and he is only making money because your dumb ass just paid him $149 to show you what amounts to Pandora ’s Box of 1,000,000 ways to lose your shirt, your kids shirt, and possibly your grandkids shirt. “SO HURRY UP… BUY NOW!!!”

No, Don’t Do It!

The only way to make money in real estate is very easy to understand. So easy that you are going to think that I am joking when I tell you what it is. And here it is: The secret to making money in real estate is… (drum roll please)… to not lose money.

Ok. I heard everyone of you call me a smartass and go for the red x at the top right of the screen. But, if you will think about it for just a minute, I think you will understand why this little, obvious concept is so important.

Now I have made my point and (trust me) I could go on for hours on this topic. But all I want to do here is to get your head out of the clouds. I want to make two very clear and concise points that should help you understand the reality of the situation without being discouraging; because, there is wealth to be had in real estate.

Point # 1 is what I will refer to as the “Kick in the Shorts”. Point #2 should provide a glimmer of hope if you are serious about investing in real estate. Here goes:

Point #1

There are people making quick cash by investing in real estate. However, they are:

a) Few in numbers
b) They are loaded with cash to begin with
c) They are extremely well connected to their local market.

It’s just ridiculous for you to think that if you go buy a DVD from a late night infomercial that you can compete with these guys and make millions in just 4 weeks. Can I make that point any clearer?

Additionally, these investors also:
d) Pay higher taxes due to short term gains.
e) Frequently tie up large amounts of cash (their own cash).
f) Are constantly guessing at what they should pay for a property.
g) Are highly affected by market trends.
h) Consume every facet of their lives toward buying and selling real estate
i)  Are at risk of losing everything on one gamble.

Point #2

Then there are the people getting wealthy by investing in real estate.

These people:

a) Have access to large numbers of properties that will generate consistent long term cash flow.
b) Take advantage of leveraging money to make multiple purchases.
c) Have greater tax advantages from long term ownership.
d) Are less affected by temporary market trends.
e) Have the option of being active investors or passive investors by hiring a Property Manager.
f) Are using other people’s money to gain wealth.

I don’t know about you but, I think the last point is the best part.

99% of the people that want to get into real estate investing need to pay close attention to Point #2. This is the way that generations of wealth have been created. Yes, from time to time, opportunities will present themselves to make some quick cash. But, do not waste a lot of time searching for those deals. You will miss many more opportunities to provide consistent long term wealth by searching for that big shot in the arm.

Jon Ellis is a Real Estate Investor and Licensed Tennessee Real Estate Broker working in Memphis and Jackson, TN. He actively helps investors locate and purchase property for long term gain. He is available for comment or for more information here: Contact or Comments