New Investors: Get Educated or not?

New Investors: Get Educated or not?

Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes

Hello! David Dachtera here.

This post is going to be a bit unpopular on Bigger Pockets because it's about education - Real Estate Investing education. The site as a whole has rather a strong sentiment against paying for education. In fact, this V2 of this post.

To some degree, that's understandable. Thanks to the many ads we've all seen on TV, and what lies behind them, Real Estate Investing education has rather a bad reputation. It's generally considered VASTLY overpriced and it's also considered to over-promise and under-deliver.

In fact, the thought which inspired me to write this post came from watching part of a "guru" ad on TV. He's talking about fixing and flipping which, in the current seller's market, is a bit more challenging than it has been. If that's one's primary - or only - strategy, seeking properties to fit one's strategy is equally challenging, whereas if one knows multiple strategies one can approach a property and be able to determine which strategy, if any, would be most suitable. After all, not every property can be done profitably.

Of course, education is about more than real estate investing, and that's where the "gurus" fall short. It's also about the kind of education none of us gets in the school system: entrepreneurial education, business education (beyond Wall Street, that is) and, of course, financial education.

Of those, financial education is probably the most important.

Now, you should know at this point that I am a student of a paid education program. Just wanted to make that disclosure.

One can scan these blogs and discussions and find lots of examples of those who are experiencing challenges which could have been avoided thru a modicum of financial and investing education.

Some folks post about not being able to get another mortgage because lenders say they already have too many in their own name.

Some folks post about needing to find funding for their deals because they lack the resources on their own.

Some folks post about deals where the costs have mounted up to a point beyond the profit they calculated from the deal.

Some folks post about being overwhelmed by the reporting, accounting and bookkeeping demands of their real estate business.

Some folks post about how a deal went sour and they lost a good chunk of change.

Now, you can learn how to deal with all of these through the experiences themselves and from the experiences of others. Not the fastest or most economical method of learning, but certainly effective over time and there's no up-front expense.

Then again, how much money can you afford to not spend?

"What's that?", you may say. "How can I lose money by not spending it?"

Can you lose $50,000 or more on a deal gone bad? Of course you can! Easily, if you have not yet learned how to avoid it.

Can you make mistakes in the course of a deal that may lead to penalties or even serious charges? Of course you can! Easily, and some of those mistakes can lead to penalties on a par with some felonies. Even just posting "bandit signs" in the wrong place can get you some fairly stiff fines.

Can you - and your partners! - lose your property or properties in a lawsuit, even your own and your family's personal possessions like your home, your vehicles, tools, bank accounts, and more? Of course you can! Easily. We unfortunately live in a society where litigation is viewed as a source of windfall profits.

So, the choice to go forward and do-it-yourself without advanced education is a personal choice. It is a serious choice and needs to be considered carefully.

Weigh the risks compared to the benefits:

  • Learn to avoid common, simple mistakes and the penalties to which they can lead, some of which can be severe.
  • Learn to protect your possessions and assets from lawsuits and liabilities.
  • Learn to select the investing strategy appropriate to a property - even if the only appropriate strategy is to move on to the next property - rather than limiting your property choices to those suitable for the strategy(-ies) you know.
  • Learn how to make your real estate investing a business which runs without you, even when you're sick or taking a well-earned vacation.
  • Learn to make your real estate business profitable and how to keep more of your earnings rather than lose them to taxes thru missed deductions and other financial missteps.
  • Learn how to turn your real estate business into an inheritable legacy for your loved ones.

Real Estate Investing Education isn't just about doing deals.

It's about finance, business and entrepreneurship as well. It's about being a well rounded business owner, a successful entrepreneur and a happier leader of your team and head of your family.

Educated investors have so much more to offer to the members of Bigger Pockets than just the results of their own experiences, also. Something else to consider.

Again, getting educated is a personal choice. "Choose wisely, grasshopper!"

We'll talk again!

Take care - be well!

Much Success!

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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
11y

Education is essential for any business, not just real estate.  But, when it comes to real estate, here are a few other guidelines that I like to consider, based on my experience having talked to hundreds (thousands) of up-and-coming investors who have considered or have actually invested in paid coaching:

- First and foremost, as @Bill Gulley likes to point out, focus on the types of education that can be provided by accredited sources.  Check out your local community college for courses on real estate law, finance, entrepreneurship, marketing, branding, etc.  Take a real estate licensing class (whether you get your real estate license or not -- which I think you should).  Sit down with local attorneys, tax professionals, brokers, etc. and ask lots of questions.  Too often, paid educators focus on "systems" -- but real estate isn't about a system, it's about running a business.  And just like any business, you need to understand all aspects of business to be successful; you won't be successful just by following someone else's system or blueprint.

- When paying for coaching, focus on local education, not national education. State laws vary greatly, and real estate is a local business. Someone in Texas isn't going to be able to be an optimal source of real estate education in New York.

- Focus on educators who are confident enough in their ability to educate that they don't charge large upfront non-refundable fees. The good ones will either provide money back guarantees or "pay as you go" fees that you can stop if you're not satisfied.

- Don't bother with paid education until you figure out what type of real estate you want to do, and have done your own research. A lot of educators will try to tell YOU what strategy to be using, but that's typically because it's the strategy they use. Figure out the strategy you want to employ (flipping, notes, buy-and-hold, lease options, wholesaling, etc) and then find a coach or mentor who specializes in that type of investing.

- Know the difference between mentoring and coaching. Which do you want? Which do you need? What do you expect?

-  Don't assume that a big price tag means better education.  In my experience, a big price tag means larger scale education business, which means the best educators in the organization are farmed out over dozens or hundreds of students.  That means that, statistically speaking, you'll likely not be coached by the best educators in the organization, as they just won't have the time with all the students.  As an example, I've mentored a half-dozen students (completely free) over the years and they've collectively done over 150 deals at this point with 100% success rate.  Just proves that paid isn't necessarily better than free; and certainly, higher cost isn't necessarily better than lower cost. 

-  Consider that certain types of real estate investing are going to be more suitable for paid coaching simply because they are less common strategies and/or they are higher priced investments and/or they are inherently more risky types of investments.  For example, I'd much sooner pay to learn notes, lease options or apartment investing than I would to learn flipping, wholesaling or buy-and-hold.

-  Have a paid coach you're considering?  Do a Google search (and BP search) and see what turns up.  You'd be surprised what a little bit of due diligence can provide.  In fact, there are lots of well-respected and successful folks here on BP who do coaching on the side and who many of us would wholeheartedly recommend.

All that said, here is my best tips for getting started in this business...these are the 10 steps you should take BEFORE considering spending money on a coach or mentor:

https://www.biggerpockets.com/renewsblog/2014/06/0...

See this reply in the discussion

42 Replies

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  • Investor · North Richland Hills, TX · Member since 2011 · 789 posts · 403 votes
    11y

    @J Scott  I would add...to the top of that list...

    find the flight school where they speak English.   

    Make sure their airplanes are flightworthy

    Make sure the planes have 2 radios!

  • Investor · Santa Rosa, CA · Member since 2012 · 402 posts · 96 votes
    11y

    I've heard of at least a couple guys that got their start with Carlton Sheets or some other infomercial back in the day, must have been something to it I imagine, although I don't know personally. 

    I loved the university days but the dominant thought on graduation day was that you can learn anything you want with a little curiosity and determination. I think you ignore the cloak of legitimacy at your peril, better to be a banker than a shylock, but if some guy admits on a podcast that he doesn't know anything about real estate but has enough hustle and specialized knowledge to support his family with a thriving business, I can't muster an ounce of disdain for him.

    I just read through an accredited RE Principles course, and it was good stuff, I liked it, but it didn't teach me to market for deals. 

    Anyways, we're probably on the verge of some new regulations, and it's probably for the better, but this little mini gold rush hasn't been boring. 

  • Qualicum Beach, BC · Member since 2015 · 18 posts · 4 votes
    11y

    Hi,

    Great thread and well written.I am sure it is beneficial and helpful for all of us.It is great and good feeling after reading .I really appreciate your  hard work and it is very helpful post .I found it is interesting to read .A big thanks to you for this wonderful post . 

  • Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    11y
    Originally posted by @Bill Gulley:

    Folks, as @J Scott pointed out, you need to do your due diligence before signing up for any program. If you don't personally know of someone follow that outline. A college course won't need much investigation beyond the material to be taught, any course that has a state certification for licensing, you can be assured there isn't any flim flam stuff. 

    The challenge with an accredited course is that by the time it is vetted, scheduled, catalogued, enrolled, etc. it is very likely to be so out of date as to be of limited value. Some of the classes to which I'm connected have been updated four times in the past 30 months due to changes in legislation and in the market place.

    I'm glad that some community colleges and other institutions are beginning to offer more entrepreneurially oriented curricula. These days "job security" is an oxymoron.

  • Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    11y
    Originally posted by @Jesse Pearson:

    @David Dachtera great post. i just recently attended a 3 day RE workshop during which 'team leaders' pitched various levels of mentorship programs, which I'm guessing is somehow what led you to your RE education? I'm curious of any details about cost and levels of 'aftercare' if any you were provided with after attending any paid classes you'd be willing to give? if you could shoot me an email id appreciate it greatly, i did not go forward with any paid training as i wasn't sure how fast they'd turn and run w my cash. i am however looking for education into RE anywhere i can find it. I'm interested in wholesaling and getting into rentals.

    thanks,

    Jesse 

    I just sent you a private note. Will e-mail, also.

  • Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    11y
    Originally posted by @Jeff Rabinowitz:

    I've taken a few paid courses to learn techniques new to me or to get familiar enough to recognize an opportunity if it presents. Some of those have lead me to deals that returned far more than the courses cost.

    Indeed! While "overspend" is usually a subjective judgement, many people who make the choice to invest find that they get their money back on the first deal or two.

    Put it this way: if spending $x on a course of classes keeps you from making a $x mistake or a 2($x) mistake, did you make money, lose money or break even?

  • Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    11y
    Originally posted by @Russell Ponce:

    ...

    I just read through an accredited RE Principles course, and it was good stuff, I liked it, but it didn't teach me to market for deals. 

    Anyways, we're probably on the verge of some new regulations, and it's probably for the better, but this little mini gold rush hasn't been boring. 

     Well said, Russel!

    In my experience, the primary barrier to accreditation for some classes sold is the monetization of how they are marketed. I'm working on a way around that, working within the available system for now.

  • Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    11y
    Originally posted by @John Jackson:

    @J Scott  I would add...to the top of that list...

    find the flight school where they speak English.   

    Make sure their airplanes are flightworthy

    Make sure the planes have 2 radios!

    For what it's worth, John, I got my pilot's license back in the early 80's - Single-engine, land, VFR only, no IFR, no complex, no turbine. I never even reached 100 Hrs TT before I had to quit, mostly for money reasons.

  • Investor · Santa Rosa, CA · Member since 2012 · 402 posts · 96 votes
    11y

    Thanks David, your post has spurred the members for some good dialogue. In a couple other endeavors where I've spent quite a bit of time and energy, the information endorsed by the largest and most credible organizations has often been the most bland and ineffective. 

    That being said, I'm reading J Scott's book and love it, and I have great respect for Bill's tome of knowledge. One day, after stumbling and clawing my way long enough, I'd like to carve out a modest place for myself in this exciting industry. 

  • Investor · Greensboro, NC · Member since 2015 · 36 posts · 5 votes
    11y
    Originally posted by @J Scott:
    Originally posted by @John Jackson:

    If I wanted to learn to fly a plane..I wouldn't read a forum or a few books...I'd get a mentor...nuff said...

    As someone who used to fly airplanes, I agree.  I'd also add that if they had the kinds of gurus in the pilot training world that they have in the real estate world, you'd see lots more airplanes crashing on a daily basis....

     @J Scott

     As a pilot, I love this analogy. Just as with flying or many other skills, successful real estate investing is a mixture of study and practice. You could read about the principles of flight and how to fly all day long but you won't be able to fly (legally or safely) until you actually get in the cockpit and practice, practice, practice. Also, flight training isn't always with your instructor or mentor, many of your time is spent flying solo during your training. The first time you solo in flight training is a big event. It builds confidence, you know you can fly a plane, you just did it by yourself. 

    Mentor yes, guru not so much. Experience is the best teacher and it's much more beneficial and affordable to gain education from self study, networking and finding a true mentor rather than throwing money at overpriced courses in hopes of overnight success. 

  • Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    11y

    Well, I'm not clearing anyone to takeoff without ground school! LOL

    If you are only VFR rated, you better know what WX0F is on the weather report at the next airport! Ground school isn't just the principles of flight, it's very similar to what real estate IS and it's effects in our economy and social foundations, the basics of RE will get more involved. Understanding those principles will keep you much safer than striking out on your own taking off from some cow pasture, stepping in it and getting nailed by regulators. 

    Now, I have to disagree somewhat with @David Dachtera. Things do constantly change in RE, generally they are small issues, some court ruling or local ordinance or a new financing requirement. Since our bubble got popped, we have had major changes, the SAFE Act and Dodd-Frank, states and the feds have better defined predatory practices. The SEC allows crowdfunding. There are new license requirements, the whole industry has been effected by regulatory changes. So, I can see a college curriculum may have been changed....but;

    The principles of real estate have not changed, economic drivers have not changed, basic financial products have not changed, most laws and requirements haven't changed basically, business law is still under the same basic principles, taxation and how you account for your business earnings hasn't changed basically. Proper RE terms and vocabulary has not changed, how many people post about a Tri-plex in the multi-family forum?

    IMO, about 75% of all the questions asked on BP can be answered by understanding the basics of real estate. If most newbies would begin with the basics, we'd have much more time to devote to more advanced and creative matters, but I get hung up telling someone it's best not to use a quit  claim deed in some transaction.......basically because they don't understand deeds of conveyance. 

    There is some information in what I call the basics that you'll like not need, like the grid system used for a meets and bounds or how many square feet are there in an acre. But, at some point, you may find a legal description that doesn't "close", how will you know if you can't read and understand a legal description? This stuff has not changed! After you get hit with a $5,000 survey bill that will allow you to sell that deal you picked up, you'll wish you had studied the basics!

    There is absolutely no transaction dealing in real estate that is not anchored in basic business law, real estate law, or the fundamentals of real estate! There is no guru magic. What can be magic is your understanding of the fundamentals and your imagination along with your knowledge of basic legal requirements! It takes all three aspects to succeed, you have to know real estate before you can deal in real estate.

    Too many guru type programs or classes treat RE as a widget, like a car, use this form, use this contract, this disclosure, this pitch, smile, sign at closing and pick up your $25,000 check. Horsefeathers! RE is not a widget, it is unique and necessary, not a luxury item or something to be cavalier about. 

    Real estate is the most shark infested industry I know of and I'm versed in several, not just real estate.  

    The sign says: Check in at flight operations before take off! You won't know how to file a flight plan without ground school! 

    Investor, you're cleared for VFR take off, runway one eight, climb to 5,000 turn right, report departure of control space, wind calm altimeter two niner point niner seven, have a profitable day!       :)

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    11y
    Originally posted by @Bill Gulley:

    Now, I have to disagree somewhat with @David Dachtera. Things do constantly change in RE, generally they are small issues, some court ruling or local ordinance or a new financing requirement. Since our bubble got popped, we have had major changes, the SAFE Act and Dodd-Frank, states and the feds have better defined predatory practices. The SEC allows crowdfunding. There are new license requirements, the whole industry has been effected by regulatory changes. So, I can see a college curriculum may have been changed....but;

    The principles of real estate have not changed, economic drivers have not changed, basic financial products have not changed, most laws and requirements haven't changed basically, business law is still under the same basic principles, taxation and how you account for your business earnings hasn't changed basically. Proper RE terms and vocabulary has not changed, how many people post about a Tri-plex in the multi-family forum?


    This is another common tactic of the guru educators -- FEAR!

    They employ hyperbole and lies to scare novice investors into thinking that if they don't sign up for their classes, they will lose money, get sued, get thrown in jail, etc.

    If you are considering a coach or educator and they are telling you how risky REI is how you'll lose lots of money if you don't sign up, that's another red flag in my experience...

  • Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    11y
    Originally posted by @Bill Gulley:

    Well, I'm not clearing anyone to takeoff without ground school! LOL

    .

    .

    .

    The sign says: Check in at flight operations before take off! You won't know how to file a flight plan without ground school! 

    In light of your flying analogy, I wanted to share this...

    I drove from suburban Chicago up to M/Sp, MN back in early February, 1981. This was the ORD ATIS broadcast at the time:

    " ... the 0710 weather: Indefinite ceiling zero, sky obscured, visibility zero. Temperature 32, dew point 32. Wind: calm. Altimeter two niner seven four. Notices to airmen: the airport is closed."

    We drove the tollway up toward Wisconsin watching the lines on the pavement because you couldn't see 50 feet ahead of the car.  All the leading edges - the aerial, the hood ornament, the grill, ... acquired a good half-inch of clear ice.

    As a potential student pilot, I did not consider it a "red flag" when my (future) instructor talked about restricted airspace with me and other potential student pilots lest one find one's self being "escorted" down by military aircraft and "detained" quite extensively, especially now as compared to when I was student flying in the early 1980's.

    I'd have considered it a "red flag" if he hadn't, actually!

  • Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    11y
    Originally posted by @J Scott:
    Originally posted by @David Dachtera:

    This post is going to be a bit unpopular on Bigger Pockets because it's about education - Real Estate Investing education. The site as a whole has rather a strong sentiment against paying for education. In fact, this V2 of this post.

    Btw, I thought the above comment was interesting...

    .

    .

    .

    David - I'm curious why you believe BP is against education...or even paid education?

     I believe the paragraph after that addresses your question:

    "To some degree, that's understandable. Thanks to the many ads we've all seen on TV, and what lies behind them, Real Estate Investing education has rather a bad reputation. It's generally considered VASTLY overpriced and it's also considered to over-promise and under-deliver."

    Notice that it calls out "Real Estate Investing education" explicitly, then explains the reasons for that conclusion.

    I may be wrong, but that statement seems (to me) to be congruent and consistent  with posts from you and from others. If I created an inconsistency or incongruency in any of that, by all means - do point it out. I'm always trying to improve my writing skills, if you can call 'em that! ;-)

  • Investor · Conroe, TX · Member since 2015 · 4 posts · 0 votes
    11y
    Originally posted by @Franklin Romine:

    You can not buy common sense, curiosity and having the ba**s to take action.  These are the pieces in my real estate puzzle that have created my success.

    Working for an employer for many years can cap, brainwash, control and drive fear into almost anyone.  Pull out of this sabotage and come back to being creative like when we were a child.  We overcome this and we all will be successful and rich.


    Frank 

     Truth!

  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    11y
    @David Dachtera:  Great post.  We believe that a percentage of budget should be set aside for continuous learning.  That's what we do each year.  The learning can come from a variety of sources & for a variety of reasons.  Our reasons for training are usually understanding changes in laws, implementing a new strategy, or even using the training as an opportunity to network.  
     
    Regarding guru training- We've worked & partnered w/ folks over the years who have taken "guru" training.  The unique quality of the successful ones was their ability to listen, process information, then act.  They did not get caught up in the hype & were realistic on their business expectations.
  • Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    11y

    If all you have are 20% down opportunities, with lenders, can you be successful?

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