{"id":104060,"date":"2019-11-09T09:00:33","date_gmt":"2019-11-09T16:00:33","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=104060"},"modified":"2023-08-10T13:00:44","modified_gmt":"2023-08-10T19:00:44","slug":"telltale-signs-youre-not-ready-to-invest","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/telltale-signs-youre-not-ready-to-invest","title":{"rendered":"3 Telltale Signs You&#8217;re Definitely NOT Ready to Invest in Real Estate"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC6064158489\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n<p><span style=\"font-weight: 400;\">Most aspiring real estate investors suffer from an insidious form of perfectionism. They possess all the tools to get started but get sidetracked by procrastination dressed as \u201cpreparation.\u201d There\u2019s always <a href=\"https:\/\/www.biggerpockets.com\/store\" target=\"_blank\" rel=\"noopener noreferrer\">one more book to read<\/a>, one more course to attend, and one more guru to contact. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">But there\u2019s another group of potential investors whose ambition is ready to conquer the world but they\u2019re not ready to invest\u2014yet. So, how do you know if you\u2019re NOT ready to invest yet and what steps you need to take to get ready?<\/span><\/p>\n<h2>3 Telltale Signs You&#8217;re Definitely NOT Ready to Invest in Real Estate<\/h2>\n<h3>1. You don\u2019t have a long-term investment strategy.<\/h3>\n<p><span style=\"font-weight: 400;\">There are plenty of ways to make short-term income in real estate: <a href=\"\/renewsblog\/2014\/01\/07\/flipping-houses\/\" target=\"_blank\" rel=\"noopener noreferrer\">house flipping<\/a>, wholesaling, bird-dogging, etc. But in my opinion, all those methods fall under the category of real estate \u201cjobs\u201d (or when done at scale, a real estate \u201cbusiness\u201d), not real estate investing. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">That\u2019s not to say that you can\u2019t utilize real estate \u201cjobs\u201d to help your quest to purchase long-term real estate investments <\/span><em>if<\/em> <span style=\"font-weight: 400;\">you have a competitive advantage over other players in the space. What skills, knowledge, or network do you bring to the table that give you an edge in flipping, wholesaling, or bird-dogging?<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-80043\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/09\/investment-plan.jpg\" alt=\"investment-plan\" width=\"702\" height=\"336\" title=\"\"><\/p>\n<p><span style=\"font-weight: 400;\">Perhaps you have superior knowledge of the local real estate market and the finishes that buyers prefer in that area. Or you might have a good network of contractors that can renovate properties at a similar quality for a lower price than competitors. Or maybe you have an established strong list of investors who will buy a deal from you if you bring it to them. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">These are important questions to ask yourself. <\/span><\/p>\n<p><em><strong>Related:<\/strong> <a href=\"\/renewsblog\/questions-newbies-need-to-ask-but-dont\/\" target=\"_blank\" rel=\"noopener noreferrer\">3 Questions New Investors NEED to Ask But Don\u2019t<\/a><\/em><\/p>\n<p><span style=\"font-weight: 400;\">But in the end, wheth<\/span>er you\u2019re flipping houses or wholesaling distressed deals to more established investors, you are essentially trading time for money. The income you are earning is tied to the time you are spending on the tasks that are generating it. The inco<span style=\"font-weight: 400;\">me is active, meaning, if you stop working, it stops coming in. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Now compare that with a long-term real estate investing strategy that involves the purchase of quality assets for the purpose of holding them over the long-term. There\u2019s no question that you must work to find the deal, put it together, and stabilize the property with some quality tenants. Even if you\u2019re working with professionals that are helping you with each of those tasks, you must manage those professionals and that requires work. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, once the property has been stabilized, it\u2019s an asset that works for you day and night. With each mortgage payment, it\u2019s increasing your net worth. With each year that passes, the balance between assets and liabilities moves further in your favor. There\u2019s definitely work involved but it\u2019s high leverage work. Once the investment is established, you don\u2019t have to trade time for dollars anymore. The income and net worth increases happen passively. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Don\u2019t put the cart before the horse. Strategy comes first, and execution follows unless you want to be wandering in the wilderness for years. Let me be clear: Your real estate investing strategy doesn&#8217;t have to be some formal or fancy plan. But it does require that you spend some time thinking about where you are and where you want this strategy to take you financially. Then run the numbers on how many properties that will require, how much capital is necessary, and what steps you will take to execute.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Bottom line: If you don\u2019t have a long-term investment strategy, you\u2019re <\/span><em>not<\/em><span style=\"font-weight: 400;\"> ready to invest in real estate.&nbsp;<\/span><\/p>\n<h3>2. You don\u2019t have your financial house in order.<\/h3>\n<p><span style=\"font-weight: 400;\">What do you have to do to have your financial house in order? <\/span><\/p>\n<p><span style=\"font-weight: 400;\">First, you live on less than you make and save a healthy percentage of your income every month. It\u2019s a bad idea to try to fix cash flow management problems by purchasing an investment property. That\u2019s like trying to save a bad relationship by having a child. It just doesn\u2019t work. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Second, you need to have three to six months of expenses in a liquid emergency fund. This will prevent you from impulsive, boneheaded moves (like selling in a down market) because you face a cash crunch. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Third, you protect the downside with inexpensive term life insurance equal to 10 to 12 times your current income. This is so you don\u2019t build your real estate portfolio on a foundation that could crumble any day. <\/span><br \/><em><br \/><strong>Related:<\/strong> <a href=\"\/renewsblog\/2015\/12\/28\/4-toxic-habits-sabotage-promising-investors\/\" target=\"_blank\" rel=\"noopener noreferrer\">4 Toxic Habits That Sabotage Even the Most Promising New Investors<\/a><\/em><\/p>\n<p><span style=\"font-weight: 400;\">Last but not least, unless you\u2019re planning to pay cash for your investments, you need to have a high enough credit rating that will allow you to easily secure financing. Perfect credit isn\u2019t required but it sure helps, so you should at least be on a trajectory that eventually leads to perfect credit. If your financial house is not in order, you\u2019re not ready to invest in real estate.<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-80789\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/09\/business-plan.jpg\" alt=\"business-plan\" width=\"702\" height=\"336\" title=\"\"><\/p>\n<h3>3. You haven\u2019t saved sufficient capital.<\/h3>\n<p><span style=\"font-weight: 400;\">This seems like another axiom from the Captain Obvious files, but a real estate investor needs to save up sufficient capital. Still, how do you know what amount of capital is sufficient? Sufficient capital is th<\/span>at amount that allows the investor to secure top-tier, long-term financing terms for the purchase of a quality asset that fits their risk profile.<\/p>\n<p><span style=\"font-weight: 400;\">If your risk profile calls for it, you should purchase a higher quality, lower risk property instead of purchasing whatever property your current saved capital will allow. If you\u2019ve saved $20,000, that will allow you to purchase a $95,000 property with 20 percent down plus closing costs. If a high quality asset in the market costs $160,000, that means you need to save more capital, not purchase a lower quality asset that fits your available capital but not your risk profile. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you haven\u2019t saved sufficient capital to afford the purchase of an asset that fits your real estate investing strategy, you\u2019re not ready to invest in real estate yet. <\/span><\/p>\n<h2>In Conclusion<\/h2>\n<p><span style=\"font-weight: 400;\">If you want to successfully invest in real estate long-term, there are three things you need to master before you are ready to invest. You must have a long-term investing strategy, get your financial house in order, and save sufficient capital for the right investment properties.<\/span><\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/real-estate-investment-calculator?utm_source=renewsblog\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-91220\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-02.jpg\" alt=\"\" width=\"700\" height=\"85\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-02.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-02-300x36.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p><em>Do you disagree? Is there something else you&#8217;d add to this list?<\/em><\/p>\n<p><strong>Weigh in with a comment!<\/strong><\/p>","protected":false},"excerpt":{"rendered":"<p>There\u2019s a group of potential investors out there whose ambition is ready to conquer the world but they\u2019re not ready to invest\u2014yet. So, how do you know if you\u2019re NOT ready to invest and what steps you need to take to get ready?<\/p>\n","protected":false},"author":800,"featured_media":118952,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524,7119],"tags":[],"class_list":["post-104060","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/104060","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/800"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=104060"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/104060\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/118952"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=104060"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=104060"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=104060"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}