3 Real Estate Investing Lessons I Wish I Had Learned Earlier

3 Real Estate Investing Lessons I Wish I Had Learned Earlier

7 min read
Chris Clothier

Chris Clothier began building his rental portfolio in 2003 as a successful entrepreneur looking to diversify his investments. He quickly gravitated toward passive investing, establishing a portfolio of over 50 single family homes in Memphis, Tenn. As an original client of his family’s firm Memphis Invest (now REI Nation), Chris experienced firsthand what a passive investor endures when purchasing out of state. In 2007, Chris moved his company and family back to Tennessee, wound down his brokering company, and joined REI Nation as a partner and director of sales and marketing.

Experience
Since joining REI Nation, the business has grown into the premier turnkey investment company in the country and a standard bearer for best practices in the industry, managing over 6,000 investment properties for 2,000 passive clients. In addition to managing the development and implementation of sales and marketing processes, Chris serves as an ambassador for the company, working with the team to help potential investors define their purpose for investing in real estate and educating peer companies on best practices.

REI Nation clients’ portfolios hold a value of close to $800 million in single family assets in seven cities. The company has been featured as a six-straight year honoree in Inc. magazine’s list of the 500/5,000 “Fastest Growing Companies in America.”

In 2019, Chris’ team assisted 600 investors with purchasing just under 1,000 fully-renovated and occupied turnkey homes. Chris led the re-brand of his family’s company on January 1, 2020, from Memphis Invest to REI Nation.

Chris is also an experienced real estate speaker and addresses small and large audiences of real estate investors and business professionals nationwide several times each year, including IMN single family conferences, the PM Grow property management conference, and the Ignite conference in Las Vegas each December.

Chris continues to hold a sizable single-family rental portfolio in both Tennessee and Texas. Along with his family, he owns several commercial buildings in the greater Memphis area.

When not working with the team at REI Nation, Chris is busy raising five kids, operating a racing company in Memphis, and serving as CEO for The Cancer Kickers Soccer Club, a Memphis-based 501c3 providing comfort and care for kids battling childhood cancers.

Founded in 2017 by Chris and Michelle Clothier, the non-profit organization focuses on providing a team environment for kids to find encouragement and strength in their battle. The company worked with over 500 children from six countries in 2019.

Press
Chris has been featured in stories published in Money Magazine, The New York Times, The Wall Street Journal, and DN News, as well as the Memphis Business Journal. In 2018, McGraw-Hill Publishing purchased Chris’ manuscript, The Turnkey Revolution, and worked with Chris to publish his first book in May 2018.

Chris also publishes two weekly blogs at ChrisClothier.com and REINation.com. Chris has also published articles on the BiggerPockets Blog since 2009.

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I started investing in real estate when I was 31 years old and experiencing the first real growth in my disposable income since I had started working full-time. I had started my own grocery arbitrage business, and it was growing like gangbusters.

I was in bad need of a mentor at that time. I was in need of a lot of education, but true to my personality, I chose to attack the problem of “what to do with my money” with the same fast forward drive with which I had attacked every company I had started.

Looking back, I’m not so sure I would change anything per se. But there are definitely three lessons I wish I had learned sooner in my life. If I had learned these lessons at a younger age — or even simply earlier in my learning curve for real estate investing — my own portfolio might look very different from what it does today.

3 Important Real Estate Investing Lessons Learned 

1. Testimonials Can Be Fake

I get a TON of emails from all kinds of real estate companies.

Admittedly, I click on every offer for free e-books, new websites, promotional offerings, newsletters and podcasts that I come across because I want to see what is out there and what is trending. I will write an article at some point about all of the absolute junk that is being peddled today, but that is for another day.

Right now, I want to focus on what happens everyday to investors; in fact, it happened again this morning to me. I was solicited with an email for a new “ultimate guide” for How To Build Financial Wealth With Real Estate… blah, blah, blah.”  I write “blah, blah, blah” because the link led to a landing page that looked perfect: clean, smooth lines, all the right words, just like every other same old, same old landing page you see today.

Related: The Top 8 Mistakes Made By Rookie Landlords

Why does that matter?

Because there are companies out there that build hundreds of landing pages everyday for companies. They are hired to do projects, and they use perfect-looking templates that appear just like every other landing page. They use the same e-book with a slightly different title, and the info inside is often re-tread material put through a spinner.

You may be wondering how I can make such a blanket statement (or you may be nodding your head in agreement).

I looked at the testimonials! The photos are perfect: smiling with straight teeth and perfect hair. I clicked on a link this morning from an email that promised to show me the path to my financial freedom, and I landed on a page that, as I said, looked perfect and had two smiling faces with glowing testimonials about the company. With two simple mouse clicks, anyone can expose a liar who relies on fake testimonials to sell their company or product.

You right-click on the photo, and a box with about six options comes up. One of those options comes up as “Search Google for this image.” Click on that option and see what comes up. I found the same two pictures on skincare product ads, teeth whitening ads, and the guy’s photo even came up on Stock Photos as “Smiling, Happy Guy.” It made me laugh.

Early on in my real estate career, I was naive, and I just never imagined faking testimonials. I could not imagine someone thinking it was a good idea to post fake names, fake pictures and fake words about their company. Thanks to Google Image searches, using fake pictures is no longer a good option, and it is an easy way for an investor to root out the kind of person/company to avoid in business.

2. Cash Flow Is Not The Same As Income

One of the biggest fallacies that I faced as a young real estate investor was that cash flow was king.

It was a common mantra amongst wholesale property sellers and self-proclaimed mentors. When I began to attend local REIA meetings in Denver in the early 2000’s, that phrase was used dozens of times at every meeting and by every fast-talking, easy-buck artist in the room looking for newbies to work over.

It sounds kind of harsh, but that was the reality. There were only four kinds of people in the room — and I had no idea at the time. Out of 100 people, there were one or two who had good intentions and would help anyone who needed it. The rest of the room was divided into three groups:

1. People who couldn’t care less about anyone else because they were successful and only came to the meetings in the hopes of finding one person or one idea that could help them.

2. People who have no idea what they are doing, what is being said or how to get started (newbies). They look like deer in the headlights and have no idea that sharks in the room can pick them out the second they walk through the door.

3. The sharks. The ones who know exactly what to say and how to say it to make a quick buck off of the newbies.

I was picked out of the room quickly (I have never told anyone this story) by a couple who could smell the “I have no idea what I am doing” coming off me like a pheromone! They worked me over during a short three-week period for almost $10,000.

How did they do it?

They helped me do my first deal. Did they actually help me? No. I did all of the marketing for my first deal, negotiated the first deal and closed the first deal. But they were with me on my two trips to the property and the two trips to meet the buyer. They encouraged me that I could get more for my deal and that I just needed to learn how to talk.

I listened to them talk all about cash flow and how they equated it to disposable income. They knew that was the nectar that would sell this property. So they talked it up over and over. Cash flow = income = vacation = new car = backyard pool = private schools = new watches, fancy clothes, flowers for your wife. In hindsight, it was like watching a bug slowly fly into a zapper! He could not say no.

We closed the deal and made $20,000 on a quick wholesale deal where I assigned the contract. I split that money with them, when in reality, all they did was teach me a lesson. The buyer ended up buying many more houses from me, including properties in Denver and Memphis.

However — and there is a big however here — his first deal was not a cash flow king!

He didn’t lose money on the deal, but he heard exactly what he wanted to hear and made a decision on his own numbers. He was seduced by the words “cash flow,” and it definitely swayed him to the positive. He would later tell me that his mistake was equating the words “cash flow” with income. And only time and experience would help him (and me) understand that they ARE NOT the same!

3. There Is Only One Donald Trump — and I Am Not Him!

When I first started, I had this idea that all real estate investors start at the bottom. They all attend REIA meetings and learn the ropes from trial and error, and some even have mentors and pay for coaching. I just thought there was this process that everyone went through if they were going to be successful.

That simply is not the case.

At least, it is not the case for everyone. I should have known better, but I was so naive about investing that I latched onto a lot of really dumb thoughts. It happens to a lot of new investors. We seem to lose our bearing and forget the lessons that life has taught us. We fall back on this idea that real estate is somehow different and that common sense does not apply. We have to learn a whole new set of lessons.

So how does Donald Trump play into this?

I basically threw out every business lesson that I had learned in starting several extremely successful companies to that point and thought I had to learn all over again. I read several books by Donal Trump and failed to realize that no, not every real estate investor starts at the bottom. There are some really good investors who apply their common sense and good business judgement to their deals. I failed to realize that Donald Trump did not go through the same hard knocks and sure didn’t surround himself with the REIA crowd I described above.

He found great mentors and surrounded himself with people who knew A LOT more about certain subjects than he did. He gambled and took chances, yet always looked for ways to protect himself and was two or three moves ahead. When I started investing, I was two or three steps behind!

Related: 3 Real Estate Lessons I Learned from Playing Professional Soccer

It cost me a lot of time, money and aggravation. I learned through some very hard years that investing in real estate was no different from any other business venture for me. Use your strengths and your smarts. Surround yourself with great people, and only listen to the advice of those who you know have your best interests in mind because they know your interests!

Lastly, never try to be someone else or follow in their footsteps. You can follow their path, but you need to make your own way. When I started doing that, my own personal portfolio began to clear up and resemble one I was proud of. My business began to flourish even more, and I stopped making dumb decisions — and I sure stopped seeking dumb advice!

It is easy to get caught up in trying to be someone else or duplicate someone else’s success, but it is hard to actually achieve.

I probably could have titled this article “100 Real Estate Investing Lessons I Wish I Had Learned Earlier,” but I thought we as a group could reach that number by sharing our experiences with each other.  

Take 2 minutes and share a lesson you wish you had learned earlier with all of the other readers, and let’s build a great resource article for other investors!