Calling All Real Estate Newbies: 8 Reasons You Should Not Take my Investing Advice!

35

Newbies get a lot of advice on Bigger Pockets on the forums and on the blog.  There is a lot of great advice and some not so great advice.  The reason I say newbies should not listen to me is not because I give bad advice (at least I hope not).  I can’t create a strategy for anybody else, because everyone is different.  You should listen to everyone you can, but not one can make decisions for you.  Figure out your market and create a custom strategy that fits your needs.

Paula Plant had a great article earlier this week on whether you should pay off your mortgages on rental properties. The advice was brilliant; it depends on what your goals are. This may not be the advice people want to hear, but it really is that simple.  Everyone has a different strategy regarding investing, regarding goals, regarding how much money they need, regarding where they are in life.  My strategy should not be your strategy.  I have been in real estate basically my whole life, I have been fix and flipping since 2001, licensed since 2001, buying rentals for over three years and my dad has been an agent since 1978.  I am in a much different place than almost every newbie out there as are most of the bigger pockets bloggers. My strategy would be virtually impossible for a newbie to copy.  It could be a goal or inspiration, but it should not be a beginners strategy.

Every Market is Different

The biggest reason my strategy can’t be copied is my market is vastly different than every other market.  Every neighborhood is different in every town.  The rents are different, the taxes are different, the prices are different, the houses are different.  A newbie has to be able to identify and research their own market and neighborhoods for opportunities.  It can’t be done by anyone else, except for possibly a local expert.  The problem with a local expert is they will have different skills and goals then you and their choices may not be good choices for your strategy.

There has been a lot of discussion about $30,000 properties lately and if they are a good investment.  A $30,000 property in one location may be vastly different than a $30,000 property on another location.  While a $30,000 property may be a huge headache for 20 years in one area, if you had bought a $30,000 property in my town three years ago it would not be a $100,000 property.  This is why it is so important to know your market, although I personally don’t invest for appreciation.

Single Family or Multifamily, A,B or C?

In my area I can buy single family much cheaper and cash flow better than multifamily, while other markets are the complete opposite.  What type of property you invest in will greatly depend on your market.  I like B+ properties, they attract great tenants and have little Maintenance.  Other investors like C or A properties for various reasons.  Your location, money and goals will help determine what type of property you buy.

Where Are You in Life?

Are you about to retire or 20 years old and just getting started?  This is a huge factor on how aggressively you will invest and leverage your money.  I am a very aggressive investor, because I am young and I have super aggressive goals.

How Much Money do You Have?

Money is important, I don’t care what anyone says.  I make a great living as a Realtor and a fix and flipper and I am able I buy rental properties with 20% down payments.  If you don’t have much money, you won’t be able to jump right in buying multiple fix and flips and rental properties with 20% down.  If you have a lot of money, maybe buying properties with cash makes more sense.

What Are Your Goals in Life?

I have huge goals, because I want a lot out of life.  Others have modest goals or just want enough income to retire on.  Your financial goals make a huge difference in how aggressive you want to invest.  I want to buy 100 houses by 2023, some people may only want 5, others may want 1,000.

Do You Have a Family?

A family can make a huge difference in how you invest.  Without a family you may be able to move ten times in ten years and buy ten owner occupied houses that can be turned into rentals.  That would be hard to do with a family, sometimes a family can make it hard to buy one investment property.

Do You Hate Your Job or do You Love it?

If you love your job, you may only want to dabble in real estate investing to make a little extra money for retirement.  If you hate your job you may want to jump into real estate as fast as possible, get your license and make a career of it.  This will greatly affect how you invest and how aggressively you pursue real estate.

Who do You Listen to?

You should listen to everyone, absorb as much as possible and use that information to form your own strategy.  When I see articles or forum posts that tell newbies what type of property to buy,  how to buy it or how many to buy I cringe.  When I see a newbie ask if this is a good deal I cringe.  No one knows what a good deal is except the person buying it.  There was a great forum post about mentors a few weeks ago.  Many mentors chimed in and the general consensus was the mentor should give as much information as possible, but never make a decision.  It is up to the mentee to make the decisions based off what they have learned.

Conclusion

If this all sounds hard, it is.  It is not easy to learn your market, create goals, budget, plan and buy properties.  That is why investing in real estate is so great, the difficulty scares away 98% of the people and that leaves opportunity for the rest of us.  Create your own strategy and do what feels right to you, the only way you are going to truly learn is to do it.

What are your thoughts? Are you taking your OWN advice in your business?

Subscribe to our mailing list

* indicates required Email Address * First Name Last Name

About Author

Mark is Real Estate Broker and investor in Greeley, Colorado. Mark invests in long-term SFR rental homes and also does 8-15 fix and flips a year. Mark started a blog this year that focuses on investing in long term single family rentals.

35 Comments

  1. Excellent article, Mark! As you know, I’m an avid reader of all the BP blogs, and I love participating in the forums and listening to the podcasts. It has given me such a well-rounded view of REI, with tons of incredible ideas and actionable content. But in the end, you’re right – what works for you or Brandon or Ben may not work for me. It’s up to me to figure that part out based on my own goals, market and criteria.

    I’m not a newbie, however, so I can see how some of this stuff may get overwhelming to one. BP is a great complement to one’s investing career, but it can’t be the blueprint-that’s up to you to create. Thanks!

    p.s. did you mean to say a $30K house bought three years ago would be worth $100K today in your market? I think there might be a typo :)

  2. Awesome advice. I am at the information by firehose stage and it does get confusing sometimes because there are so many contrary opinions! I like being given the instruction to digest it all then make our own conclusions. I do understand that there will be mistakes made but that seems to be the case for most people from what I’ve deduced. That’s part of the learning process in life. The goal will be to make as few as possible though. Your advice is the most realistic and rings true to me. We have to take personal responsibility for knowing how our personal skills, financial pictures and markets fit the picture, then make our decisions. And I am sure our scenarios will have some growth and changes we will also have to learn to adapt for. Thanks for taking the time to verbalize it. It was a bit freeing to read.

    • Thank you Sonia! Yes there are many opinions about investing. It can get very confusing if you only depend on others advice. At some you point you have to start forming your own advice.

  3. Thank you for a great article. I agree that all of our circumstances are different as we are all learning and investing for different reasons. I do listen and read a lot about real estate investing, but I am getting the bits and pieces that I need right now and keeping notes on other bits of informations that I hope to you in the future. J

  4. The point in this article is exactly why i have trouble commenting on forum posts. Every question that I read my answer would start with “it depends on what you are trying to do”. My opinions are filtered through my own goals, reservations and comfort levels. These are probably largely irrelevant to others.

    • Ryan, I do the same thug on the forums all the time, but I still comment. Even if I have different goals my experiences may help someone create something of their own. Thank you for the comment!

  5. Advice on how to do the research to really get to know you own area is what I could use.
    I am new and I am on information onverload… I am not a quitter, but quite frankly, my headaches and confusion with making a process for myself and what to research and when is what is bogging me down right now.
    so far, I tried to streamline it to just learning about finding and EVALUATING great deals in my area. Using RE Agents as a source of information. When I sat down with my attorney, omg! so much more information, as he invests in real estate for himself, came out. Easements, adverse possession, hazard materials with fuel tanks, etc… I just was deer in the head lights! Great advice, but for a newbie is daunting to say the least. Then there is getting to know all your city codes, title aspects and when to pull these…
    I was going to start with truly honing my skills on the above and wholesale. I was thinking that I would take the rehab evaluation just a bit further than most wholesalers to ensure my deals AND REPUTATION started strong and people took me seriously…
    All the forums are great, for sure! Yet, can throw so much at you as a newbie that you just glaze over and feel hopeless.
    The other big objective it seems is to really and truly locate investors who will buy my contracts or flip with me. Everyone says put it under contract and the money will come… This seems the scariest part of it all. If that is not the case, you run the risk of ruining your local reputation on both ends of the spectrum.
    Isn’t reputation a huge part of the game? so how does a newbie do this in a step-by step process while learning all the little things that will come into play at various times… AS WE GO I GUESS!
    Okay, just rambling my thoughts. Hope someone can follow them and respond.

    • Hi Dena, I think studying your market is a great start. A far as your attorney I doubt you will ever run into most of those situations so I would freak out about that conversation.

      I think the best thing you can do to get a good rep as a wholesaler is to find great deals. If you find great deals that make others money that will give you a good rep. It is true that if you find a great deal you will find a buyer.

      • @ Mark
        Thank you for the response and support. I still am very nervous to start putting stuff under contract without knowing I have an end Investor. If it was a flip, that is a whole different story. For wholesaling feel I need to make those connections and soon. I have a plan so we will see where I land. Hoping the REIA meetings will be one area. Are there actual websites (like this one?) where we go to shop those deals? Have not been given that information by anyone except a friend David and I will have to confirm the name of that one.
        Your thoughts on those types of sites would be much appreciated by me as well as I am sure by other newbies.
        Thanks again!
        Dena

        • One more thing Mark… as I am perusing online at various homes and comparing them… the question comes to mind, that yes… you compare like to like in finding your market values of homes… however…. I KNOW THIS IS GOING TO BE A STUPID QUESTION TO YOU… BUT REMEMBER I AM TOTALLY NEW AND NEED CONFIRMATION OR SQUASH WITH SUGGESTION! LOL!..
          back to my thought… so if I am looking at 3+2 SFR that is all well and fine, but to me… the sq. ftg is key in knowing your values… many different 3+2 SFR in regards to sq. ftg.
          So my question/thought here is it is better to pay attention to SQ FT as I am training myself in my area and doing comparables to learn the area.

          Right?
          Thanks,
          Dena

        • Dena, are you in a late or small market? If you pay for a bigger pockets pro account you can advertise deals on the website. If it is a good enough deal you will find buyers. The good wholesalers don’t have to advertise because the buyers are lining up to get the deals. REIA meetings are a great place to start.

          As to the other question beds, baths and sqft all have to be considered when valuing a property.

  6. Thank you for this article!!! As a newbie I have been going through a lot of back and forth about where should I start and how am I going to do it. I find what you said to be absolutely true, everyone has different circumstances and we all can’t start at the same pace. I definitely see there are levels to this work and I plan on reaching the top. I will be getting the most that I can from this forum and others. Thanks again!!

  7. As always, great article. I would even add listening to advice you disagree with can be beneficial. The worst case scenerio in listening with an open mind is no new ideas gained.

  8. Great advice. As one with a mix of experience and newness I find lot of good advice here, but I tend to treat it as you indicate. I accept it as an example of that person’s experience, but apply it to my circumstances to see if their thinking fits. Your example about multis is a good one. I thought I was the only one not seeing the logic, because in the neighborhood where I am i investing SFRs pay out at at great rate, and all of the multis I have seen so far have cap rates at 5%, and the owners beam about their great returns.

  9. Awesome article Mark,
    I was just thinking this the other day when an investor came to me asking me advice about a deal and financing it. He asked me before explaining his situation – How much cab he afford, does this fit is goals for the year or if he has the right team in place.

    Although this article is anti-advice, the best advice you gave is that no one knows what the perfect deal is other than the investor because everyone situation is different. That advice can go for anything in life as well.

    As long as we listen to experienced people and take pieces of information that directly effect our business- I think its fine to listen to advice.

    – Cheers

  10. Great post Mark!!! Perhaps Brandon could re-post as a must-read, notice, disclaimer or sticky for everyone to see (especially, new sign ups).

  11. Abel Vazquez on

    Great article Mark. I totally agree, I am a newbie and I was one of the guys that thought I should run every plan I had to a more experienced investor which always led to me being told in different ways why some thing won’t work or wasn’t a good deal and was lead into different investing strategies that weren’t my forte or my cup of tea but I though I didn’t know any better and assumed because they had more experience they were right. Until I found Biggerpockets and realized that if I learn to read my market or a market I want to work in and took the time to pick a niche that I was comfortable with and learn the most I can then jump in and learn by doing then I would be better of then letting some expert decide for me what it is I want to do. There is a saying I heard I don’t remember by who but it applies perfect to this article and it goes like this ” Don’t ask successful people what you should do, DO what successful people DO”. Anyways great article again and thank you.

    Abel

  12. But wait are you saying there is not one perfect strategy for every single person out there???
    *GASP* (Monocle falls into my Champagne flute)

    Seems pretty obvious but you might forget sometimes seeing people pooping all over what other people are having success with.
    I think it is fine to give advice and to advocate what is working for you to try to help someone find their way. What isn’t cool is ripping on someone’s ideas just because it isn’t what you do and you can’t imagine it is a good idea, even though you have no experience with it.

    Heck I’m even okay listening to Gurus hype their systems and strategies. The only ones I generally totally dismiss are the ones that push really hard that their system is “The Only Way To Make Money In Real Estate Today”. Since that is total pile of Bull poopies you can’t really trust anything they say.

    • Shaun, very true. There are so many people out there saying this is the way to get rich. What they need to say is this is how I got rich and it may or may not work for you. But that may not sell as well as the other option.

Leave A Reply

css.php