Personal Finance

Is the 500 Hours It Takes to Learn Investing Worth It? Yes. Unless…

Expertise: Real Estate News & Commentary, Real Estate Investing Basics, Mortgages & Creative Financing, Personal Finance, Personal Development
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There's no doubt about it—real estate can help you fast-track your way to financial freedom. It's a powerful tool, especially when combined with leverage, that millions of people have used to dramatically accelerate wealth creation.

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Every week, we hear new stories about investors who start with little to nothing and build a sizable position that propels them not just to financial freedom but beyond—into “should I buy a small private plane?” territory.

What we don’t get a ton of, however, is the story of the guy or gal who was already a self-made millionaire and then took up real estate investing. I’m sure they are out there, but I bet that there’s not much flashiness and their returns aren’t really that great.

In this article, I want to write about a concept that I think will impact many people who are well along on their journey towards financial independence. People who might be in the $500,000 to $1,000,000 or more in net worth range. People who are rich (even if they don't feel that way).

If you are in this bucket—the bucket where you earn a good to great income, you spend little, and you invest passively—you probably don’t want to invest in real estate. Yes, I am the CEO of BiggerPockets.com, and I am telling you that buying real estate as we typically like to discuss here on BiggerPockets is probably not the move for you if you are already at the high end of upper-middle-class in terms of earnings power, or if you are approaching $1M in net worth, seeking early financial freedom.

Read on to find out why.

Related: Do You Have What it Takes to Be a Successful Investor?

The Risk/Reward Concept

Investing in general is all about this notion of risk-adjusted returns. The higher your expected return, the better. The lower your risk, the better.

Risk-Adjusted Returns in Stocks

When we invest in something totally passive, like a total stock market index fund, for example, we take on a relatively easy to understand risk-adjusted return.

Many of us in the financial independence and real estate community are familiar with this example—we invest in index funds expecting the long-term returns to be in the ballpark of 8 to 10 percent (before inflation), and we understand that the stock market can be extremely volatile—it's possible we go through a period where the value of our portfolio declines by 50 percent or more.

The index fund is comprised of hundreds or thousands of companies that are publicly traded. By investing in an index fund, we diversify away the risk of investing in just one company and assume the market risk. No one company can make us rich, but no one company can wipe out our investment, either. We assume only the risk of the market our fund covers.

This is the risk/reward profile that an investor with 100 percent of his/her portfolio in a stock market index fund assumes. There is little the investor can do to change this risk profile—which is why index fund investing is so attractive. A huge chunk of the risk associated with investing is diversified away besides market risk—there is no selection of companies, fund managers, etc.

Female hand with smartphone trading stock online in coffee shop

Risk-Adjusted Returns in Real Estate

When we invest in real estate, it is because we want to put in work to get a better or different risk/return profile than an alternative, like stocks, or to diversify.

A real estate investor assumes the same types of market risks that an index fund investor assumes (although many, like myself, feel that real estate is likely to experience fewer and less extreme periods of volatility in general than the equity markets). They also assume local risk and risks inherent to the property itself—like getting a bad tenant, damage, etc.

On the upside, investors like myself feel that we can get a better risk-adjusted return in real estate, often because real estate enables us to more safely and reasonably use leverage, and at much better interest rates, than we can use investing in stocks.

How Investors Reduce Risk in Real Estate

Because so much real estate risk is local and subjective, it is really hard for a new investor to accurately assess a deal for it’s risk profile and even harder for that person to manage the property effectively during the hold period.

This means that the uneducated newbie will not get a good risk-adjusted return. Their risk of making a mistake in analyzing the deal, the market, or in operating poorly is just too high. They might do well in an up market as a rising tide lifts all boats, but they will get crushed in mediocre or down markets.

In order to get a good risk-adjusted return, the newbie will have to self-educate. They will have to read books, take free courses, listen to podcasts, read blogs like this one. They will have to network. They will have to learn from the school of hard knocks over a period of years.

Related: How to Network Like a Pro (Even If You’re an Introvert!)

After a period of self-education, the new investor will learn the basics about how to analyze cash flow, how to project rents, the local landlord/tenant laws, the zoning rules for property in their area, how to screen tenants, how to manage contractors, and the many other models that lead to success in purchasing and managing rental property investments.

After that price has been paid, the investor can simply maintain their knowledge base and go on to reap a lifetime of excellent risk-adjusted returns in real estate.

What Is the Price?

There is no way to adequately pin down exactly how many hours of self-education, networking, and experience are needed for an investor to cross the chasm of knowledge needed to get solid risk-adjusted returns. So, I'll just offer up my opinion:

1 hour: You’ll get hosed

10 hours: You’ll get hosed

100 hours: You might be OK

1,000 hours: You’ll probably get great returns over time

10,000 hours: Please call me if you need to raise money for your next deal

Hourglass in the dawn time

Where is the inflection point? I think that’s up to the individual to decide. But the point is that the price must be paid, and I think that many investors here on BiggerPockets would agree that the minimum price is between 100 and 1,000 hours of your time. For the purpose of discussion in this article, I’ll call it 500 hours before the new investor has invested enough time to have a great shot at getting excellent returns in real estate.

Who Should Pay This Price?

This is really the question being explored in this article. Five hundred hours is a lot of hours. If your time is valuable—for example, you can earn $200,000 per year or are a self-made millionaire—this is an extremely expensive investment.

On the other hand, if you make $50,000 per year and have a net worth of $5,000, then 500 hours is a much smaller relative investment.

When I was 23, I was making $50,000 per year and had about $5,000 to my name. I had absolutely no trouble putting in 500 hours to learn about real estate investing. Heck—I put up 168 hours just to get my agent's license!

Nowadays, my time is far more valuable, and my income and net worth profile are different—in part because of that self-study. I would think long and hard before taking on a new field of study that required 500 hours of my time. I certainly wouldn’t put in that investment if I felt that I was just a year or two away from being able to FIRE with or without real estate!

Conclusion

If we agree with the arguments I present above about the price, in time, that must be paid to get a fair risk/reward profile from real estate investing, then we reach two conclusions:

First, investing the buy-in price of approximately 500 hours of networking, self-education, and practical experience is absolutely worthwhile for the relatively young person starting with relatively few assets (perhaps less than $500K) and a median to upper-middle-class income (perhaps less than $200K). The person with this profile will pay the price when their time is relatively less valuable and reap the rewards of great returns with a comfortable risk profile for the majority of their life.

Second, investing this price is probably not worthwhile for the person who is already very well off, has little free time, or has very strong earnings potential. This person will probably coast to financial freedom with a reasonable lifestyle. simply by continuing to generate their huge income and investing passively.

If you are already wealthy or close to financial freedom, you might want to rethink whether you should invest the hundreds and hundreds of hours needed to become comfortable with this line of business. It may only be worthwhile if you plan to use what you learn to go on to generate significant generational wealth over your career—perhaps a net worth in the upper seven figures, eight figures, or more.

Of course, you may also just be an investing nerd and approach real estate investing as your next hobby. In that case, go nuts!

Do you agree or disagree with my arguments? Why?

Let me know in the comment section below.

Scott Trench is a perpetual student of personal finance, real estate investing, sales, business, and personal development. He is CEO of BiggerPockets.com, a real estate investor, and author of the ...
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    Wenda Kennedy JD from Nikiski, Alaska
    Replied 10 months ago
    Only 500 hours? That's not much time to complete that long learning curve in the real estate business. If you are in the second or third category, then the real estate business could be the key to hold on to and shelter that wealth from the high tax bite and vagaries of life. Most people never get there. I know so many high wage earners who can't hang on to a dime. Most of them are in dire debt and they are stuck in careers and jobs that they hate. They must keep those wages coming to support their lifestyles. Real estate is a great vehicle to use to squirrel away those wages and make that little pot of money grow into financial independence -- to become a member of the third category.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Hi Wenda - I agree that 500 hours may be on the light side - it may be much more than that in order to truly get over the hump and have a good risk/reward profile as an investor.
    Mark JOhnson Investor
    Replied 10 months ago
    I call this "delayed gratification"*. It's basically the same thing parents tell there children when they want something and must earn the money before they can have it. If you are a must have it now type of person, you'll fail because you won't put the time in to be successful. This goes for college education, work training for the next promotion, or learning how to be a smart real estate investor. Smart use of time = more $$$!
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Hi Mark - thanks for the comment - delayed gratification is certainly a likely reality for many investors - that average long-term alpha is something that many of us will realize only after thousands of hours, years of waiting, and lots of struggle. It's worth it for me, though!
    Brooke Booth Rental Property Investor from OR
    Replied 10 months ago
    Pretty sure I’m definitely over the 1,000 hours mark, and nearing 5. However, I’ve found that the real estate I want to purchase is more risky and therefore I need more down before the banks will touch it. I just had to cancel a deal because the bank originally told me 20% down, and then came back and said that before they even send it to underwriting, they need 35% down. Putting in the time, just to find that you are getting denied and need *hard money* is frustrating, to say the least. I’ve been looking for this opportunity for 5 years & all I keep hearing is *not now*. :/ I keep investing time, though, so one day it will pay off. :) We do have our first rental in the process of rehab, and hope to have it finished by 2/1 & two renters in place. :)
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Hi Brooke - sounds like you are putting in a lot of hustle, and sorry to hear about the frustration you have had. I hope this deal goes smoothly and according to your timeline, and that you are able to find a financing solution long-term!
    Edward Kuk
    Replied 10 months ago
    I am in the category that you mention making ~200k, financially responsible, and (hopefully) can reach financial independence by trending down the same path. I'm no millionaire but classified as high earner, not rich yet. I have thought a lot about whether it is worth learning about real estate or if I should just focus 110% on my career path and potentially make even more than I do today. I ended up going down real estate and recently bought our first 3 plex for the following reasons: 1) High salary inherently means higher expenses: I'm not talking about being irresponsible, which there is likely some. But one reason why I get paid so much is because I pretty much work 60-70 hours (often more), I travel for work, and I'm always overly stressed. My wife also works and takes care of our 2 year old when I'm travelling. To make this work, we have a daycare and we have a nanny for a few hours a day to help us pick up our 2 year old and prep dinner. Given my work situation, I can't help out during the week so these added expenses keep my wife and the family sane. Similarly, we live close to the city. I get off work past 9 regularly, even when I'm not travelling. Adding a commute to that is soul sucking. Our place is reasonable but more expensive than if we chose a suburb. These jobs, while pay great, do require higher expenses. 2) My job is our of my control: I work for a company. Which means that if the company goes south or there are market challenges, there is a chance that I can be laid off. Unfortunately I don't control that decision so senior management can always decide to let me go. My wife and I do save and can live on one of our salary so we'll be fine either way but the fact that a large part of our livelihood is outside my control is uncomfortable. I'm at the stage where I'm senior enough to be paid a good salary but not senior enough to make lay-off decisions. This middle is often the first to be slashed since their salary can make a difference to the bottom line. Hello middle management. 3) Asset-based diversification: Yes, you can just invest in the market and make a decent return over a long period of time with a lot less effort. However, stock market and job security are pretty tied. You would find that when the market goes south, there is a higher chance of your job going too. Having an asset-based, slightly more recession proof rental properties provides some added security. 4) Wealth building: People tell me that there's no point building a portfolio for your kid because they will sell it. While that may end up being true, it's not enough to stop me from trying. My job and earning power end with me. The portfolio that I own and control can hopefully be something my children can hold onto to support themselves. Who knows what the working environment will look like 20 years from now but people will always need a place to live and good landlords are hard to come by. So far my 3plex has been doing alright. We have 2 tenants that can cover the mortgage (tax/insurance) and need 1 more tenant (winter months sucks) which will cover capex / opex / cash flow. There has been a few things that I have been putting money into to fix as well so I am definitely still putting money into the property. Once it's fully rented, I shouldnt have to put any more of my own money into it and it should self fund. If I didn't have my salary, I would have a hard to fixing things for my tenants if I'm waiting for that unit to rent. My salary allows me to play the long term game. I also manage it myself (for learning purposes) but calculated enough cashflow to have a property manager if I need to. Just my thoughts.
    Jeffrey Grieshop New to Real Estate from Coldwater, OH
    Replied 9 months ago
    awesome, great attitude and post. May the force be with you! How did you find the 3plex? Are you far from it?
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Edward - thanks for sharing your thoughts here and great background. I think you have great reasons to be in real estate and I wish you much success and hope that your children are able to benefit from the hustle you are putting in today!
    Michael Smith
    Replied 10 months ago
    Great article, thank you Scott! One of the few here providing 'bigger picture' and carefully defining the target audience.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Thank you, Michael! I am glad that you enjoyed it!
    Mike Hernandez
    Replied 10 months ago
    I don't really agree with this take. I started real estate investing in 2013 even though I had a six figure income from my job at the time. I knew that it would take some time to educate myself, so I bought books, attended seminars, joined the local real estate investors association, listened to podcasts and somewhere along the line discovered Bigger Pockets. Most importantly, I took action. While holding onto that full time job, I tried a little bit of everything. I scouted for deals, including doing direct marketing for probate properties. I made offers and closed several deals. Some of the properties I flipped, some I wholesaled and some I bought and kept to this day. I even started getting into larger deal syndications and partnered on a couple of deals. It was a big investment of time, but the returns have been more than worth it for me. Why go through all this trouble when I had a lucrative career? In 2010, near the tail end of the financial crisis, I lost my job when our consulting practice shut down. Not only that, but my 401(K) savings had taken a serious hit. I had one kid in college and was about to send the second one and had a negative net worth outside of my diminished retirement holdings. I was really frightened by this turn of events and worried that I might not ever experience financial freedom. I did land a new job and relocated, but I was resolved that I would never again leave myself so vulnerable through a single source of income or have my life savings subject to the volatility of the markets. I decided that real estate was the best option for me and I have not looked back. Since then, I have lost jobs twice more and greatly simplified my real estate investing activities. My net worth has skyrocketed in that time frame as well as my income and career satisfaction. I continue to expand my real estate portfolio and have a clear plan on how my net worth will double again in the next 3 years. I definitely agree that it takes a lot of time and education to be successful, but I always felt it was worth the time and effort even if I had the ability to earn a very good income from my job.
    Jeffrey Grieshop New to Real Estate from Coldwater, OH
    Replied 9 months ago
    Wow, a plan to 2x your NW in 3 years. That is one hell of a plan and it sounds like you know what you are doing by now. GL
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Hi Mike - it sounds like for you, the tradeoff was clearly worth it, in spite of being a relatively high earner and relatively wealthy to start off with! So glad to hear that real estate has made a huge difference in your life, and great perspective.
    Elliot Vann from Passaic, New Jersey
    Replied 10 months ago
    Don’t forget that people who earn that much annually can also put in equity into real estate deals!
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    That's right - may be much easier for them than to learn this game on their own!
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied 10 months ago
    Several thoughts; 1) Nothing says the "500 hours" has to be all at once, & I suspect for most of us it's time spent over years, 2) What is being displaced? What are you REALLY doing with your spare time? Are you working on your master's in business to move your career forward or bing-watching netflix? or maybe that learning time would displace spending time with your friends & family. 3) What is your attittude toward "learning abou RE" --is it "work" or "interesting"? If you compare the time and money spent on some hobbies, RE seems postively sane; Skiing--spending thousands of dollars to get from the top of a hill to the bottom, again and again, and again....in the snow. Car racing -- risking life and limb, crashing perfectly good cars to drive in a circle really really fast, and ending up...right back where you started (again, spending thousands of dollars to do this). Fishing - spending endless hours (and a lot of $$$) to either to net a few pounds of food, or throw that few pounds of food back into the water (but at least you proved you could outwit a fish). I'm joking, of course, but when you think about the other ways we spend time, 500 hours on RE doesn't seem like much.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Hi Deanna - thanks for the great comment here. I love the point about the next best marginal use of your time. For me, I can't work all day, go home to my fiance, and work all night. We have to spend some time together doing something that is not "productive" in order to maintain our relationship - perhaps watching netflix together, grabbing drinks, reading, exercising, hanging out with friends, etc. I also have some hobbies, like skiing, CrossFit, gaming, etc. I need to be able to pursue those with at least some of my time, and at some point. For me, one of the purposes of saving money, accumulating assets, and creating passive income is to be able to have more time to pursue my interests. If I am already a millionaire and capable of retiring, why shouldn't I be able to pursue something that has no marginal economic utility, or even harvests my resources, instead of generating them? Once I have enough, or a clear path to enough, why not stop devoting my time to the most economical activity and instead devote it to the activity that I will most enjoy?
    William Tomp Investor from Phoenix, AZ
    Replied 10 months ago
    Very interesting article. I fall Somewhere on the border of the first and second category, and decided to take on RE investing full time since earlier this year. At 28, and the amount of $ i had built up over my last business i felt RE investing was the perfect avenue for me. I felt i could make a lot of money while working a “normal” 40 hour work week at it compared to the 70-80 I was used to. I’m well over 1,000 hours deep in experience and education now and think it was a great decision for me. I see your point on why people in a similar position as me may want to turn away from RE - people with a lot of money but not a lot of time or knowledge are the ones who can get burned badly in this business. RE has humbled me many times in my first year no doubt.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Awesome! Glad to see you could relate to the perspective in the article, William!
    Frankie Garrison
    Replied 10 months ago
    This article was very helpful for me. I’m considering real estate investing for cash flow... I fall into the “ rich even though I don’t feel like it” category. I’ve made decent income and have aggressively saved for years. I am very close to retiring. Not sure if I’ve got what it takes to be successful in the RE journey considering all the time and effort involved! Thank you for this article! Very good food for thought.
    Jeffrey Grieshop New to Real Estate from Coldwater, OH
    Replied 9 months ago
    get em, Frankie! It sounds like you are doing well and are likely older than I. REI can be daunting, there are many things to learn, and many hands to shake if scaling is in mind. I'm with you in that it can be daunting and some self-doubt sets in, let's continue overcoming that together. It sounds like you don't have to hit a home-run in your situation. If you can find a single or double that beats the equities markets, and enjoy doing it, that would be a great start.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Glad it was helpful Frankie - sounds like you have some very good options and have put yourself in a strong financial position!
    Turner Wright Investor from Houston, TX
    Replied 10 months ago
    I'm a middle class, union electrician transitioning to REI, because I want more stability and a bigger return for my sweat equity. Just as it took me 500+ hours to become a 'decent' electrician, I know it will take many more hours to become a 'great' REI. I'm not so sure if this career choice is best suited for any socioeconomic class over another, however. Yes, I'm sure I will notice much higher returns for my efforts as an REI, but wouldn't a wealthy person who works in a highly competitive working environment notice much needed relief as a self-employed REI? After all, doesn't independence from a corporate culture have value? A wealthy person may not see drastic returns compared to their corporate income, but maintaining their income value with more independence and less stress may be worthwhile, regardless how many hours it takes to get over the learning curve.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Turner - absolutely. I think one framework I was working with in this article was that a happy life costs about the same for everyone. For example, if the goal is to generate $50,000 in passive income, there are multiple ways to do that. The $50,000 per year earner is going to have to aggressivley save and invest, and will shave decades off their timeline to retirement with real estate. The $250,000 per year earner may simply have to not go crazy with their spending, and will be able to generate $50,000 easily simply by passively investing in index funds.
    JJ GONZALEZ II from Islip, New York
    Replied 10 months ago
    Scott, I like your thinking, but I am a 69 year old successful businessman who has the 8 figures you spoke about and I just started a whole sailing and flipping business with my son in law specifically to set up a legacy business for him and our other family members. I have no idea if we will be successful, but like all things in my life FAILURE IS NOT AN OPTION. So I am willing to put in the time needed and spend on mentoring (which we have already done). In my opinion it really comes down to your WHY and how much you want it. Everyone wants to start at the top, no one wants to be the messenger with a dream to become the ceo someday. I do however take exception with the folks on BP podcast, they are all 35 or 40 and they control 100 million in RE, well the truth is probably they are the GP in a syndication and they have 100k in the deal. Brandon never asks that question, also I want to know just how successful they have been, what is their net worth. All fair questions I think JJ
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    JJ - thanks for the perspective, congratulations on all your success, and I admire your hustle. Personally, I am a slow and steady type when it comes to wealth accumulation. I spend less than I earn, I accumulate, and I invest in a cash flowing asset that I am happy to own forever if I need to. I think we probably have a similar mindset in many ways, but that doesn't mean that many of these guests are necessarily wrong - I just think that you may be rightfully concerned that their risk/return profile may not be fairly represented.
    Paul Moore Investor from Lynchburg, VA
    Replied 10 months ago
    Scott, I was prepared to argue with you at first, but it turns out that I love your article. I've been saying for some time that highly paid investors would often be better off by not trying to do a side hustle in hands-on real estate. Most of these investors would be far happier, healthier, and wealthier by focusing on their day job or enjoying their retirement and investing passively with an experienced real estate syndicator. In addition to getting better returns and protecting from downside, properly structured passive investments have all of the same (or better) tax benefits than direct active investments. For those who agree, I would recommend that they put in their basic reps/hours (1) learning what to look for in a great syndicator and great deal, and (2) carefully vetting syndicators to find the right one to invest passively with. If you find the right one(s), invest some, look for results, and consider investing more later. When I talk to highly paid professionals who are considering investing actively on the side, I often ask: "Why would you work harder than you need to... to make less than you could?"
    Jeffrey Grieshop New to Real Estate from Coldwater, OH
    Replied 9 months ago
    I agree with this too, good post
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Thanks Paul - I agree completely with your sentiments here!
    Susan Maneck Investor from Jackson, Mississippi
    Replied 10 months ago
    I don't know, Scott. I started buying properties in 2011 without reading any books, taking any courses, or listening to any podcasts. It started when I realized my own house was underwater even though I had bought it from HUD in 2003! I could either cry about this or buy up the neighborhood. I chose the latter, even though at the time all I had was my credit cards to invest with. Only later did I start educating myself about the business. I suppose Ben would consider my houses PIGs, because they probably won't appreciate much, but in the meantime I'm raking in the cash. Besides, they are very nice PIGs. I don't buy houses that need a lot of work because I don't know how to fix anything.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Susan - sounds like you have been very successful, taken on great risk, and are being rewarded with excellent returns nowadays! Congratulations, and I respect and admire the hustle and difference of opinion here.
    Winnie Beach
    Replied 9 months ago
    As someone in this category, I started on real estate investing in 2009 with one property. It is really crazy to manage full time work, real estate education, managing 7 rental properties, a little private money lending and some flips with partners. Part of my reasoning for starting in real estate is that it would give us something different to do during retirement, plus a hedge against running out of money 30 years after retirement. And it is sort of a hobby! When we do retire, I think it will have been worthwhile. But it has taken an enormous amount of time and energy that could have been spent with family or actually relaxing! Like Susan above, we bought the first house with absolutely no idea what we were doing. But along the way, I have read MANY books, articles, joined my fantastic local Real Estate Investment Association and attended some one day seminars. The education (and the education from making many mistakes!) has really allowed me to narrow my focus to what is manageable for me. After I finish the current flip house! No more for me -- only rentals and truly passive investing for the future! Flipping is another job, which I don't need. With the experience I now have, I feel good about assessing passive activities and pursuing those in the future.
    Jeffrey Grieshop New to Real Estate from Coldwater, OH
    Replied 9 months ago
    nice, thanks for sharing. I hope your house sells for millions.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Awesome - it sounds like you put in your dues, and while you will put in more over time inevitably, are over the hump in terms of knowing exactly what you want and how to get it. It sounds to me like you have a good chance at getting that great risk/return profile I mention in the article!
    Brian Chu
    Replied 9 months ago
    Definitely agree. Especially with the last two sentences. When my friends ask me why I bother investing in real estate when I could just park my money in an index fund, I tell them that half the fun of real estate is finding and closing a good deal. I've felt 100x better about getting an awesome real estate deal than putting in a buy order on an individual stock.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Awesome! Sounds like you love real estate investing and have found yourself a great way to make money and a wonderful way to pass the time as well.
    Mark JOhnson Investor
    Replied 9 months ago
    I managed a company and earned enough profit every 100 days to buy the owner a company jet. I was then told it was a privilege to be able ride on it for company business. The moral learned was that regardless to your title, you're just an employee if you dont own the company. I now own my real estate investing company and the profits and debt belong to me. That is more satisfying then any 6 digit income from a 8-5 salaried job.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Mark - love it. This is the reason for many of us - we want financial freedom, to be the owner of the assets. I think that's a great reason to pursue real estate.
    John C. Investor from New York, NY
    Replied 9 months ago
    Absolutely. I’ve been telling new investors not to get in unless you’ve read and researched for months or a couple years. Most new landlords fail bc they fail to read and prepare. All they know is that “the rich got rich by buying real estate.” So they just blow their retirement funds on a rental property and hope that it all works out. Unfortunately, we all know that More often than not, they don’t work out, or don’t work out as well as just passively putting money in an index fund.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Proper Prior Preparation Prevents Piss Poor Performance...
    Devin Warrington from Kansas City
    Replied 9 months ago
    Your post outlines exactly the question I'm asking myself right now. I'm maybe 60 hours into podcasts and forum posts for the past month. I have a 6 figure job and have always been a good saver. I'm heavily invested in mutual funds and ETFs. I'm hoping to retire in about 5 years at which time I'll still be in my 40s. I've been considering real estate investing to diversify my investments and put some of my money into something with a real asset behind it. Looking to remain mostly passive (rentals w/ property management, syndication, or possibly lending). I do enjoy learning about real estate investing, but I also wonder if I should just stick with what's always worked for me. My primary objective is to decrease risk to my retirement cash flow, so this doesn't make sense if it actually introduces higher risk. I've got a lot to consider.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Devin - very glad to hear that you fit the profile I outlined in this post. I am glad it makes you think and hope it helps you reach a great decision.
    Paul Findley Realtor from Boston North Shore
    Replied 9 months ago
    I agree! Completely and absolutely
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Thank you, Paul.
    Jason Ridout Rental Property Investor from parksville, bc
    Replied 9 months ago
    Fantastic article. I couldn't agree more. Real estate is an incredible way to build wealth from scratch if you are willing to put in the time and effort and take some risks. It's a way for a 9-5 middle class worker to get ahead in life with some extra hustle. If you get paid well, like your job and have good net worth, real estate might be more of a burden than a reward. For me, I love real estate and will grow my portfolio until I die. It provided me a life I could have never had, but for most people dealing with contractors, tenants, vetting deals and educating yourself is work. For me, I'm lucky enough to love it.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Very glad you love it and that you liked the article, Jason!
    Jeffrey Grieshop New to Real Estate from Coldwater, OH
    Replied 9 months ago
    to love all of that is indeed lucky, thanks for sharing
    Sean Tagge Investor from Memphis, TN
    Replied 9 months ago
    I like you insights here Scott and I would add a little here. I also think the main knowledge and networking you need are the following: Knowledge wise you need: 1- How to valuate properties (estimate the FMV and ARV You’ll get hosed if you dont do this correctly) 2- How to estimate repairs (You’ll get hosed if you are wrong on this) 3- Estimating rents (again You’ll get hosed if you are wrong on this) 4- Market Knowledge (You’ll get hosed if you are not familiar with areas) Networking wise you need: 1- People to get you deals (wholesalers, agents, etc) 2-People to renovate for you 3-Lenders (Hard money, private money, long term lenders) 4- Property management 5- insurance, title cos, etc. I think these are two different types of knowledge intellectual and social so if you are weak at either it might take you longer or you might never be able to figure it out. So 500 hours might not do it for you if you are really weak in either category. Thus you may need to either partner with someone else or find alternative strategies if you are set on real estate.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Thanks Sean - totally agree that the characteristics, or qualities, of the investor can matter as much or more than the knowledge alone!
    Tom King
    Replied 9 months ago
    Great article! I fall in the category you describe. We own a couple businesses, make enough money to live comfortably and are plowing our way toward total finacial independence. Our net worth not including our home is 3.5 mil and we are about 5 years away from total financial independence. Our businesses are somewhat seasonal and during my slower times I am constantly reading about REI. I contemplate daily whether I should keep my focus narrow on what I'm doing now or broaden it and begin buying rental properties. We own the property our businesses operate on as well as farmland in the mid-west that we rent out with positive cash flow. The majority of our net worth is in real estate. What the article doesn't cover is at 55 yrs old, I kinda feel like a new challenge in life. I love what I do but after 20 years of doing it I miss the excitement of new challenges. For now, I will continue to read and talk with people successful in REI. But .... one day ... who knows!
    Boris Harhaji Investor from Washington, DC
    Replied 9 months ago
    This article offers very intwresting approach to RE investments and I somewhat (would) agree, but as many other have stated- freedom is what I (we) want. At 32 and 28, me and my wife are pulling in $250K-$300K per year with close to seven figure net worth. And we work normal 40 hour jobs. But I still feel like something is missing. I simply don't want to be an employee. I have a boss (and so does she). I can't travel where I want and my money is doing good in the market, but I'd love to get deeper into the RE game. We own 1 rental and have the funds to buy 10 more at least (leveraged, fo course). I REALLY want to be a diversified investor and have some 50/30/20 (RE/Stocks/Gold) ratio. That way, all of the basis are covered. Scott - it seems that no matter our financial status- all of us reading your articles cannot be persuaded otherwise :-)
    Scott Trench President of BiggerPockets from Denver, CO
    Replied 9 months ago
    Thanks Boris - you should definitely take the plunge then. The only disagreement I'd have with anything you said is the 20% in Gold ha!
    John Murray from Portland, Oregon
    Replied 7 months ago
    Here is the truth about how to become a multimillionaire. I are one. One must find and hone your VOCATION not your passion. My passions are skiing, surfing and hotrods. They make me zero money and just money out. Now my vocation is everything electrical and mechanical. This vocation and combined hard work has propelled my wealth building. Working some upper middle class job turns my stomach, kissing somebody's ass that you don't respect is even worse. Another thing that separates the investor class is physical fitness, go to the gym. This pays back dividends even if you don't become a multimillionaire. This process is a minimum of 10,000 hours. I think I hit my first million in net worth at about 20,000 hours but I'm not that smart.