The 5 Ugly Truths of Real Estate Investing

[Matthew Irish-Jones]

After 15 years I can say I am successful in Real Estate.  I have a Brokerage, multi million dollar Construction company, Property Management company and a sizable portfolio.

Here are the Ugly Truths about Real Estate I have learned along the way: 

1. You have to sacrifice years of your life.  When I first started I worked full time and invested on the side, before going all in on investing and building the business.  Those days required 60-100 hour work weeks and almost all of the work on Real Estate was done nights and weekends.  The idea that you can be a start up investor, be passive, and be rich is false.  Bootstrapping in Real Estate is the furthest thing from passive I have ever experienced. 

2. Our team started as a rag tag bunch of laborers that specialized in trash outs, cleaning toilets (that was my job), and painting. Now our rag tag bunch characters are doing full home renovations, apartment complex's, and large scale construction jobs. Through it all we have had the same core team members driving the team forward, and have experienced (even through Covid), almost NO turnover!!!

3. BRRR investing is not for newbie's. Its highly complex and your unknown-unknowns will absolutely crush you. I HIGHLY suggest the house hack strategy for new investors. Yes its a lot of work. Yes moving sucks. Yes its not sexy. However, its safe and achievable. You need a strategy you can pull off.

4. Investing in Real Estate is RISKY. Lots of rosy colored glasses in this industry and people telling me how safe Real Estate investing is. From 2010 to 2015 Real estate investing was fairly safe and it was tough to lose. With labor costs skyrocketing, interest rates up, and inventory low, its very hard to invest in Real Estate now. Lots of investors lose money, don't kid yourself that you can't lose in Real Estate. Sometimes the CapEx and cost to maintain properties well outweighs the income and investors absolutely end up selling for losses.

5. Investing long term is a wealth diversification strategy, not a lifestyle decision.  If you come into Real Estate with the mindset of your life getting easier, you have more wealth, and less cognitive complexity you are going to fail quickly and miserably.  You need W-2 income to invest.  You have to work off  hours on investing and instead of relaxing at night you will be staying up late crunching numbers and learning.  The reality is if you get 20 doors you will retire in your 60's far better off than you would have without those doors.  Acquiring those doors requires you to live below your means, save precious Capital for your investments, and work your A** off in your free time. 

You can become a successful Real Estate investor, but the amount of time, effort, elbow grease, and the realistic chance of losing principle should not be underestimated.   

[Don Konipol]

Quote from @Matthew Irish-Jones:

After 15 years I can say I am successful in Real Estate.  I have a Brokerage, multi million dollar Construction company, Property Management company and a sizable portfolio.

Here are the Ugly Truths about Real Estate I have learned along the way: 

1. You have to sacrifice years of your life.  When I first started I worked full time and invested on the side, before going all in on investing and building the business.  Those days required 60-100 hour work weeks and almost all of the work on Real Estate was done nights and weekends.  The idea that you can be a start up investor, be passive, and be rich is false.  Bootstrapping in Real Estate is the furthest thing from passive I have ever experienced. 

2. Our team started as a rag tag bunch of laborers that specialized in trash outs, cleaning toilets (that was my job), and painting. Now our rag tag bunch characters are doing full home renovations, apartment complex's, and large scale construction jobs. Through it all we have had the same core team members driving the team forward, and have experienced (even through Covid), almost NO turnover!!!

3. BRRR investing is not for newbie's. Its highly complex and your unknown-unknowns will absolutely crush you. I HIGHLY suggest the house hack strategy for new investors. Yes its a lot of work. Yes moving sucks. Yes its not sexy. However, its safe and achievable. You need a strategy you can pull off.

4. Investing in Real Estate is RISKY. Lots of rosy colored glasses in this industry and people telling me how safe Real Estate investing is. From 2010 to 2015 Real estate investing was fairly safe and it was tough to lose. With labor costs skyrocketing, interest rates up, and inventory low, its very hard to invest in Real Estate now. Lots of investors lose money, don't kid yourself that you can't lose in Real Estate. Sometimes the CapEx and cost to maintain properties well outweighs the income and investors absolutely end up selling for losses.

5. Investing long term is a wealth diversification strategy, not a lifestyle decision.  If you come into Real Estate with the mindset of your life getting easier, you have more wealth, and less cognitive complexity you are going to fail quickly and miserably.  You need W-2 income to invest.  You have to work off  hours on investing and instead of relaxing at night you will be staying up late crunching numbers and learning.  The reality is if you get 20 doors you will retire in your 60's far better off than you would have without those doors.  Acquiring those doors requires you to live below your means, save precious Capital for your investments, and work your A** off in your free time. 

You can become a successful Real Estate investor, but the amount of time, effort, elbow grease, and the realistic chance of losing principle should not be underestimated.   

One of, if not THE best posts I’ve read.  

About a month ago some relatively new “know it all” submitted a post that they thought would launch their career as a “guru”. It described how in his first two years of real estate investing he made a ton of money by borrowing in excess of the purchase price and still had $2 million in equity.  While many responders asked for proof, and pointed out that his claims were patently false, I merely stated that if what he claimed was true it was a result of the “bubble” but prices could decline as well as rise, and pointed out the 35-40% decline 2008 - 2012.  He stated that no time in history had real estate prices ever declined even 20%, and I didn’t know what I was talking about.  About one third of the responders agreed - they actually didn’t know real estate prices, especially in certain markets can decline, and significantly.  But listen, why would they listen to people who live real estate every day, who have spent 10, 20, or 40 years buying, selling, financing, real estate; when instead they can listen to a paid actor fronting for a marketing firm out of Las Vegas or Salt Lake City selling $40,000 “mentorship’s”?