At What Age Is It Too Late to Invest in Real Estate?
Whoever first said, “Youth is wasted on the young,” was a genius!
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I am one of the millions of people who squandered my youth—and my 20s, my 30s, and even into my 40s. But I did not squander them by not having a purpose in life, a career, a family, or even an education. What I squandered was my financial prowess and the chance to become truly self-employed before 50.
In my career as law enforcement, I have attended hundreds of hours of training on human actions such as thought process and deceptive traits, including physical, verbal, written, and psychological cues. All of it prepared me to find the reasons behind others’ actions or to discover their true actions. However, it did not allow me to recognize my own “inaction.”
I am not sure what exactly triggered my thought process to go from letting the chips fall where they may to searching for ways to make my money work for me instead of me working for my money. Whatever it was, I am glad my mind made the switch.
Is ‘What If’ Holding You Back?
“What if” is a powerful phrase and one that has the ability to change lives—for better or for worse. The problem is that “what if” has kept many people from “doing.”
I have done no research on the following statement, but I will theorize that it is true. Successful people rarely, if ever, start a sentence or thought with “what if” (at least in the negative aspect of the phrase). Think about why you did not invest in real estate in your youth or even in your 30s, 40s, or 50s—or why you are still sitting in the stands watching the game instead of playing right now.
I will offer that “what if” in terms of the unknown was—or is—a large part of it.
Now I am playing catch-up. I long to be 25 years younger with the knowledge I have today. Many people believe that because they missed starting to invest in their 20s, there is no reason to start now. They have lost too much time; it won’t pay off now.
This is wrong thinking. Real estate is an accommodating investment if done correctly. Furthermore, it has the capability to allow you to catch up a little, while at the same time not risking your retirement years.
It’s Never Too Late to Start Investing in Real Estate
I am 49 years old and started in real estate when I was 45. Every day that goes by, I get more and more excited about the endless possibilities real estate has to offer me and my family, including my extended family. I am coming to the end of a career in law enforcement with a poor retirement portfolio, and I am focusing on real estate to make up my financial shortfalls.
The beauty of real estate is that you can own actual property. It is not like owning stocks, where ownership doesn’t seem so tangible. Once you own property, there are very few ways it can be taken from you—and really none where you would not be compensated (as long as you pay your taxes). Real estate is something you can point to and something that is beneficial to society. Face it, you are investing in something that is giving someone else a place to live, or to work, or to store property!
I often talk to people who are wary of investing in real estate, as they have only a few years until they reach retirement age. Often, they believe that due to their age, it is too late to invest—that investment will not have the appropriate amount of time to pay for itself. However, there are multiple avenues that can be taken to combat this.
Remember, one advantage to investing later in life is that one often has the ability to invest more and the security to leverage faster.
5 Benefits of Waiting to Invest Until Later in Life
1. You have an established network.
Networking is one of the best assets an investor has. Networking can lead to a multitude of opportunities and/or even private financing. And the best part? Networking is FREE.
One big advantage that older investors have is an established circle of friends, colleagues, and acquaintances with whom they can network.
I have made a deal with my siblings and their spouses, as well as my adult children. I've asked them to tell at least three people who we are (my brother and me, that is), what we do, and what we are looking for. I've asked them to essentially tell people we are looking for private financing or owner-financed multifamily property. To tell them we have a contract that is beneficial to the note holder, and we pay competitive interest rates.
I am not asking them to seek out three people to ask to invest but to seek out three people to tell them if they know or hear of someone looking to invest in alternative investments, or someone who is looking to sell their property, to put them in touch with me.
In return, if someone they tell finds us private financing or an owner-financed property, my brother and I will give that sibling, in-law, or child, one-third to one-half ownership in the property that is acquired as a result of their actions. We will pay any out-of-pocket expenses (hopefully none), and once it is paid for, they will get that percentage of the rental income (after expenses). Or if it is sold, they will get that percentage of profit. They will essentially have no financial liability yet will gain ownership of some real estate.
This is how important I view networking to be. I am willing to take part of a deal—rather than no deal—in return for contacts. If you do not have the finances to invest, offer to do this for someone you know. You may be surprised by the results.
2. You have the wherewithal to ask what needs to be asked.
Another simple action that prevents many from finding a deal or closing a deal is the simple art of asking. When doing drug interdiction during a traffic stop, law enforcement officers are trained that it is more important how you ask a question than what you ask. For example, if you ask a yes or no question and receive an answer that is not yes or no, it is a sign of deception. If you ask someone if they have anything in the vehicle that you should know about, they likely will say no. In their mind they are thinking, “No, you don’t need to know about the pound of meth hidden in the dash.”
Instead, be specific. Is there any meth in the vehicle? Cocaine? Heroin? Etc.? Once that line of questioning is done, then you ask about drugs on their person.
Asking can result in unexpected answers. When I send out letters to prospective property owners, I always ask if they know of anyone wanting to sell property via owner financing. I have had more than one call or email from someone saying that they are not interested in selling but they do know of someone who is.
I know I have heard this on BiggerPockets several times: “You don’t know what you don’t know.”
If I did not ask, I would not know or have been put in contact with those interested in selling. So, I would add to the above: “You don’t know what you don’t ask.”
However, many people are scared to ask, as they do not know what the answer will be. It’s fear of the unknown. As an investor, you have to learn to get past this. As a mature adult, it’s more likely you already have.
3. You pay attention to details.
Another advantage that the older generation has is attention to detail. Often this is learned over a lifetime of employment.
Attention to detail is more of a learned behavior than instinct. However, this detail orientation can also make older investors wary of investing, as they worry about the minutiae of the deal rather than the whole picture—or to steal a law enforcement term, the totality of the circumstances.
Attention to detail can give one an advantage if it is managed and not allowed to overwhelm your decision. Common sense is a good equalizer. Use it when looking at and analyzing property.
4. You have people skills.
People skills are an important aspect of investing. While it may not seem so on the surface, having the ability to talk to potential investors, owners of prospective property, banks, and prospective and active tenants goes a long way in terms of the success of your real estate investing career. People skills are frequently honed throughout years of talking and listening to people.
Listening is an aspect of people skills that few understand. There is a key difference between hearing someone and listening to them. As I have heard many times on BiggerPockets podcasts, you have to listen to the reasons people have for doing or not doing something.
If you can master the art of listening, it can go a long way in enhancing your investment opportunities and in lessening your fears of failing.
5. You have wisdom.
In my opinion, wisdom is one of the greatest psychological factors that prevents people from investing. Wisdom is a great tool when used correctly. But when used incorrectly, it procures a false sense of “doing the right thing.” Wisdom is essentially experience. From a young age, most everyone has heard and is taught (to varying degrees) that debt is bad. Sure, debt to buy a personal residence is okay, but debt in general is frowned upon.
That psychological factor has kept many people on the sidelines. So in this case, the “wisdom” that prevents one from purchasing an investment that will pay for itself is bad.
Make sure when you are contemplating a foray into real estate investing that your “wisdom” is kept in context; do not allow it to overshadow your common sense.
“You must spend money to make money” is true of virtually every investment vehicle in the world.
The Psychological Biases of Investing & How to Mitigate Them
It is easy for me to sit at my computer and write about the reasons you should invest or the psychology of why you do not invest. It is far harder to put those ideas into practice when real dollars are on the line—especially if they could negatively impact your life in retirement. As the old saying goes, “The devil you know is better than the devil you don’t know.”
However, as I frequently write and always preach to my peers, education is a great equalizer.
Educate yourself about real estate. Learn about the different ways to invest, the types of investments, what is more risk tolerant for your situation.
Educate yourself on the ways some investors fail, and then educate yourself on the ways to avoid those situations. Network with others who are like-minded.
Remember: youth is wasted on the young. You do not need to reinvent the wheel. Learn from those who made mistakes and avoid those mistakes.
Keep in mind that you are not necessarily looking to fund your retirement but to simply supplement it. You do not need to own dozens of properties when one or two may suffice.
Fear is a good emotion. It keeps us from doing stupid things. However, use that fear of failure to educate yourself and to increase your odds of being successful.
Do not let fear of failure keep you from investing in real estate.
I read a quote years ago, and I wrote it down. It was a Somali proverb cited in a short story by Ernest Hemingway: “A brave man is always frightened three times by a lion: when he first sees his track, when he first hears him roar, when he first confronts him.”
Real estate is like that lion. It may be scary at first, but press on and you will move past that fear and into investing.
Are you in your 30s, 40s, or 50s and want to invest in real estate but haven’t started? Why not? Do you have any questions for me?
Leave a comment below.