Having great “go-to” resources is one of the key components you need to have set-up in your real estate investing business. Whether that be resources for getting a house fixed up, sold, or financed, they’re all important. The other resource you’ll need is education. I’m not talking about $997 education (or whatever the current Guru price structure is), I’m talking about $.01 education!
This is my second contribution to the unofficial “Education that Costs a Penny” series I suppose I’ve started on BiggerPockets. My first contribution to the series was in regards to inspecting a house. I will soon be using a word that I’m sure will send quivers down the spines of some of you, and rightfully so, but all I ask is that you hear me out.
College Tuition that Costs Less than a Dollar
I’m a college graduate, so I’m not completely calling the college system a scam; however, what I am saying is you do not need to pay thousands upon thousands of dollars to get a college education.
One of my favorite books pertaining to real estate is Principles of Economics by Gregory Mankiw. At the time of this article, there are numerous copies of it available at Amazon for a penny.
Yes, this is a textbook. After that shiver has subsided… read on. I promise a bit later in the article I will go over how I ‘read’ books such as this, but I first want to answer the question…
What Does Economics Have to do with Real Estate Investing?
The study of economics is a great way to transform the way your mind works. It’s not about memorizing definitions or mathematical formulas.
I think the best way to look at economics is the philosophy and theory of business.
I’ll be the first to agree with anyone that says “theories are only so useful”, but my counter-argument would be that it’s not the theory that matters in the long-run, it is the thought-process.
Key “Thought-Processes” For Real Estate Investors
There are numerous ways the basics of economics can transform our mind and way of thinking, so I’m only going to touch on a couple that are always at the forefront of my mind. I should note that not only are these ways of thinking great for real estate investing, but they’re great for ALL aspects of your life: business or personal.
- Opportunity Cost. If you only take one thing away from the above book, this concept should be it. The saying “there is no such thing as a free lunch” is derived directly from this economic concept. The one cost that is associated with ALL that we do is time. No matter what you are doing, you are “spending” your time doing it… including sitting down for a free monetary lunch.
Applied to real estate investing: what is your opportunity cost within your business? Are you spending your time doing things you are good at, or are you wasting your time doing things you should be outsourcing? If you are sitting around trying to draw up your own rental contracts, your opportunity cost is the time you are losing potentially finding your next hot deal. That seems like a pretty big cost to me!
- The Law of Diminishing Return. Simply put, the more of something that occurs, the less impact it has. I used to absolutely love macaroni and cheese. In college I ate it almost everyday. Fast forward to the present day… eeeek! I can still eat it, but it no longer produces the incredible taste-bud rush like it used to.
Applied to real estate investing: don’t expect to be a master at something right away. Just because you have a failed negotiation with a motivated seller doesn’t mean you are terrible at it, you just need to do it more. The more negotiations you have, the less difficult it will become. Is your direct mail not producing the results you want? Keep at it! The more and more you do direct mail, the more and more you will learn, and hence, the less difficulty you will have with it.
How to Approach Reading a Textbook
Have I read this entire book from cover to cover? No!
Let’s apply the principle above of opportunity cost. Is my time best spent reading a college textbook from cover to cover? Absolutely not! But is the time here and there I spend to read it worth the knowledge and thought-process I gain in the long-run? To me, it absolutely is!
Some principles I use when reading a textbook…
- Always read Chapter 1. This will give you the groundwork and frame of reference for whatever topic you are covering.
- Skim. Skim. Skim. You’re not reading the book to pick up a degree in economoics (or whatever topic), you are reading it to try and pick up ideas and new ways of thinking. Briefly scan pages. If something catches your eye, read it more in-depth.
- Always buy a used book. Read the comment section on Amazon or eBay or whatever. If they say “lots of highlighting and markings”, those are the ones you want! The more markings a book has, the more it has been “read read” (not skimmed) by college students. This will save you time with your skimming as you can just look at highlighted and underlined sections.
- Cut your loses immediately. There is lots of information in a textbook. If your skimming produces something you may think is worthwhile to “read”, but then as you read you see it is not. Stop immediately and move on. No sense in trying to fit a square peg through a round hole.
Finally, in regards to purchasing textbooks, you want old editions! Although a math book may be on edition 25, I’m pretty sure that 2+2 still equals 4. My rule of thumb is this: if I’m paying more then $5 for a textbook, I’m not buying an old enough edition.
I’m a firm believer in economics (so much so I actually minored in it in college) and the way it makes you look at the world of business. While it certainly is lots of theory and philosophy, it creates a new little voice in your head that is always ensuring you are formulating logical business ideas.
What about you? Do you think I’m crazy for buying college textbooks? Any good textbooks (no matter the topic) that you’ve found helpful in your thought-process molding? Please leave your comments below!