Is Bigger Pockets Creating Unrealistic Expectations For Investors

Russell Brazil · 2017-04-23T19:18:06-07:00

One of the more complex parts of being a real estate agent is setting realistic expectations for what your client can expect from the market. There are always going to be people who have unrealistic expectations, but I seem to be getting more and more of these type of potential clients contacting me from Bigger Pockets lately. They think they should be able to buy a $500k property for $350k, or think they can make $100k on their first flip. They are so convinced they are right that no one is going to buy property X at price $Y, and if they do they will lose money...when in fact they are 110% wrong...someone will buy X at $Y and make good money. Or they want the cash flow of a C Class neighborhood in a Class A neighborhood.So what do you think, does BP help to foster unrealistic expectations amongst investors?

Mike Krieg

Investor / Syndicator · Austin, TX · Member since 2015 · 367 posts · 220 votes

9y

I think there is a lot of realism in the forums for newbie investors. So no, I don't think so. Cold water on unrealistic expectations dished out quite liberally here. But it's a large community and impossible to make a blanket statement. Brandon and Josh are always quick to bring people back to earth who have ridiculous expectations. That's what I've observed.

12 Reply

David Dachtera

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

9y

@Russell Brazil,

I don't think you can point that finger DIRECTLY at BP.

The problem with BP is their anti-paid education bias. All the points you mentioned can be addressed with proper education on property analysis and acting properly on the results of that analysis.

What anyone thinks about a specific property carries little or no weight. What matters is what the numbers say. If the numbers say, "No", but people go ahead anyway, it's their own fault. If they lack the education to know how to do a proper analysis, that's their own fault for failing to seek out the necessary education.

If they're led to believe that they can just "wing it" and "learn by doing" as they go, well, just listen to Brandon Turner's podcasts where he tells how much his ignorance / lack of education cost him in his first deals. He pretty much says it all, and much better than I can.

THAT is where BP "drops the ball". THAT IS an unrealistic expectation!

My $0.02 ...

10 Reply

Drake Espenlaub

Investor · Evansville, IN · Member since 2017 · 41 posts · 21 votes

9y

As a new member, and a somewhat new real estate agent, I can speak that I haven't noticed BP feeding any unrealistic expectation as much as helping people realize what they should expect. With anything that can potentially make money there will always be a level of pipe dreams.. That being said, as a part time real estate agent I have clients constantly out of touch with the market today, they are not involved in it therefore they do not understand true value, or what the market is doing, feels like there are still people stuck in the market of 5 years ago where I am.

Something I just told a woman I am working with the other day after she continually was making 15% less than lp offers on updated newly listed homes that helped bring her back down to earth is.

People are not listing their homes in todays market as much because they have to sell, but more so because they can sell and make greater profits given inventory vs demand. It is simply explaining to people the market situation.

I believe as a broker that is where the value comes in, to give them the reality of the situation and figure out their expectation before taking them on as a client.

4 Reply

Priyanshu Adathakkar

Realtor · Columbus, OH · Member since 2017 · 313 posts · 245 votes

9y

The biggest flaw I have seen here is inexperienced people giving advice when they themselves have no clue of what they are talking about!

53 Reply

Joel OwensBusiness Member

Moderator

Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes

9y

A very small percentage of leads work out to closing on something. It's just part of the business regardless of the platform involved.

When they contact me I ask brief questions by message. Then I get financials. If that looks good I hop on a 30 minute call and set expectations as they ask me about the market.

Some are looking for a unicorn property and others are realistic. I don't give anytime to the dreamers and long shots.

They can spend every waking second for a year or years trying to find the unicorn where all the stars line up properly. I will not be going on that journey.

Some of the buyers just need to be educated on the market and they are serious and ready to buy. I still look for the best commercial property deal possible for purchase with my clients but can't get them cap rates of 4 years ago at the bottom of the cycle. That is a waste of time.

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3 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

9y

Russell ,,, I see it as highly regionlized... poeple get on this site and say they are buying 2% rule and 3% rule deals all day long.. and that leads folks who live and invest in areas were that is not possible to think they are doing something wrong.

each market dictates what the market will give.. can someone stumble into or work their butt off and do better than norm yes.

However there are areas of the US were the market has never really recovered and has been flat for 30 plus years.. or there are more homes than butts to put in them.. cant compare them to high end urban areas.. its apples to Iceberg lettuce ( I stole that one from another poster I liked it so much LOL)

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28 Reply

Ozzy SirimsiBusiness Member

Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes

9y

Russell Brazil I think BP is getting bigger, and you are dealing with more newbies. It is very normal for an inexperienced person to think all of those things you mentioned. ( Except 500k property being 350k) I have 6 rentals, getting 8 more, have no doubt that I will make money on rentals cause I know what I am doing. However, I don't have as much experience on flipping, I don't understand how people buy properties on certain prices, I feel like they are overpaying all the time:))) BP is not causing it, it is just overall being inexperienced, and not knowing enough on some subjects.

2 Reply

Jonna WeberPro Member

Moderator

Investor · Boise, ID · Member since 2011 · 1k+ posts · 736 votes

9y

Ditto @Jay Hinrichs. Real estate is so local.

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3 Reply

Dawn BrenengenBusiness Member

Moderator

Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes

9y

I don't know if it's BP specific, but I do find that most investors I work with in Raleigh have a hard time paying market prices for homes! I set the expectation that we will likely be offering over asking price on any home they are interested in. If they want to continue to submit below asking offers, I'm not likely going to be working with them long. Most people believe me once they have lost a house or two (investors and retail buyers).

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6 Reply

Ralph R.

Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes

9y

Ozzy Sirimsi Russell Brazil Jay Hinrichs I gotta agree with ozzy and Jay here. I grew up in a real estate family My grand parents started in the 1920's. I myself started much later in life. I already had properties and was following the old ways I learned at home growing up, I guess when I found BP. I had several buy and hold properties but never heard of a "wholesaler" till I got on this site. My family built a base or foundation of SFR rentals and mixed that with commercial properties. They were all brokers and bought properties from people wanting to list them for sale. In those days there was no MLS. When I found BP every body had all these rules and ideas and different strategys. I think real estate is very local and you must match your strategy or goals to a particular local market. Some things work, some rules do not, depending on your local area. When I found BP I thought I had stumbled onto a bunch of real estate geniuses. As I've been on the site I now know there are far fewer experienced real estate professionals on here than new people. The stark reality is many are new comers that have learned these rules and strategys right here on BP. They are young and many not long out of school. They know the lessons and can repeat what they have learned as any good student can, but don't have the life experience to apply these principles and practices to the real world. Looking back 50 or so years we to had the same short comings. Couple that with every young persons desire to succeed or prove them selves and you get the high expectations to get rich by making 3 or 4 deals as well as the idea that it's very easy to do. RR

4 Reply

Wayne Yates

Tuscaloosa, AL · Member since 2017 · 42 posts · 6 votes

9y

Unrealistic expectations for the ones who don't truly educate themselves before diving in, maybe.

4 Reply

Andrew Johnson

Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes

9y

Come on, at least give HGTV a little credit! It's made out like a "bad" flip gets you $20K and a great flip nets you $100K. They take those expectations into their BiggerPockets experience and (my opinion) look for a "how to" guide based to get what they think are normal results. Sometimes I also feel there's little explanation on how the (very few) deals come together where you pay $350K for a $500K property. Was it through 9 months of full-time work where that person was doing 2,000 (paid) mailers a month? Did they pay $200K and take the property through a 6 month, $150K rehab? Again, I think it's taking the 1/10,000 result and making a case study out of it as though it's achievable repeatedly, predictably, and devoid of risk.

26 Reply

Joshua DiazPro Member

Rental Property Investor · Bronx, NY · Member since 2015 · 269 posts · 165 votes

9y

@Andrew Johnson You can probably also give credit to radio commercials about this super successful investor looking for people to joIn his program/team. Space is limited and he is moving fast so call for your free ticket today!! Never mind that I've been hearing the exact same commercial for months now....

5 Reply

Andrew Johnson

Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes

9y

@Joshua Diaz So I can't make thousands of dollars a month working 2 hours a week using other people's money with my horrible credit and $0 of investable capital saved? Just ruin my dreams why don't you?!?!

23 Reply

Jeff Filali

Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes

9y

99% of the people who are successful in real estate would be successful in almost any business they were involved, most started off successful in other businesses and got into real estate to diversify their portfolio. Real estate is just like any other business venture, 20% of the people who start in the business are making 80% of the money, and the other 80% will dabble for a while, many never doing a single deal, and most will eventually move on to another business they'll fail at as well. That's just life. Same reason so many will pay $10K+ to a guru course looking to get rich quick. Most do not want to do the work involved to be successful. You can't buy success. There's many who have started in real estate with a lot of money to start with and lost their butts. There's also those who started with very little, and grinded their tails off until they were successful.

Real estate is definitely a regional market. I look at those buying $500K homes in other markets in amazement, because in parts of the Midwest/Southwest/South where I live and invest I can buy 10 $50K homes and make better returns. Its hard to sell anything above $300K in our state where the median home price is barely over $100K. You can buy some very nice homes for $100K. I live in one of the best cities in the state, in a 3/2/1900sq ft that was fully updated in 2015 and the most I could sell my home for would be around $165K-170K. You can't find many 70% deals here either, that's why I invest in other cities in the state.

Those looking to get 70% deals consistently just have to look at the market they're in, and may have to look at other markets nearby or even out-of-state.

14 Reply

Chris MasonPro Member

Moderator

Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes

9y

Hi @Russell Brazil,

For the last three weeks or so, it has been a very specific set of expectations that I've been fielding relating to something we did here in Oakland.

Here is how I've been handling it, kind of making it up as I go along & patching it together.

Most of them don't have the hustle, wont do anything, and want the world handed to them on a silver platter, or they will not show any initiative.

In fact, my document portal shows that the % of people that I talk to who never send a single document in (to prove they at least have income, etc) has actually increased substantially since the thread linked above! Probably because the "get rich quick" people came out of the woodwork a little bit.

But, a few will do what it takes, I have no doubt. So it is worth it, for those few persons in the minority.

So, I will continue to assume everyone to be one of that few & act accordingly, until proven otherwise about that specific person!

8 Reply

Michaela G.

Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes

9y

@Chris Mason , you have a lot of patience

1 Reply

Chris MasonPro Member

Moderator

Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes

9y

Originally posted by @Michaela G.:

@Chris Mason , you have a lot of patience

Everyone in the mortgage industry tells me that I'm a complete idiot for focusing on REI.

Over 20% of my Bay Area $ volume is the high price McMansions that came specifically from REI referrals to their (extremely high income) friends and family.

But, I don't know. We will see how this plays out.

I'm a pretty open book.

0 Reply

David Grabiner

Investor · Chattanooga, TN · Member since 2016 · 146 posts · 108 votes

9y

@David Dachtera I was wondering why so many of your posts referenced the benefit of paid education and then I looked at your profile and saw my answer.

7 Reply

Will Pritchett

Rental Property Investor · San Antonio, TX · Member since 2011 · 513 posts · 290 votes

9y

No more than anything els

0 Reply

Chris Martin

Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes

9y

We are, what, 5+ years into the urban real estate recovery? I'd say 95+% of BP Members didn't own or have real estate through the great recession. It's still a sellers market. The investors I know who have gone through a correction or two, we sell in a seller's market and buy in a buyer's market. If people look at methods and rules-of-thumb developed in the wrong market cycle... well, all I can say is these are the people I want to sell to.

A market correction (local, regional, or national) is the best way to adjust expectations. There was a time when nothing would sell. I was going to say 'remember those days?' but alas most on BP won't. I do. I was buying. I about what an appraisal showed... the last correction was not fake;)

5 Reply

Will Pritchett

Rental Property Investor · San Antonio, TX · Member since 2011 · 513 posts · 290 votes

9y

No more than anything else published in books; less in fact. I hear (and read) more perspectives here than anywhere else and all differ. I see this as a forum for exchange of information. What aspect of BP do you refer to as setting them up? Blogs? Podcasts? Forums? Books?
I understand you are posting a question here and my answer is "no". I wish this was around when I was younger. I attribute most of my success and RE motivation to things I learned from this site and associated resources and library books.
None was conveyed with a "get rich quick" slant.
Why do you contribute? I read your posts quite often. If it is solely a marketing platform for realty clients I would think it would be disappointing because people here are looking for that discounted property that is harder and harder to find because you are selling something that is being priced by a market with many active participants. Could the frustration be that the market has changed such that it is difficult to find "diamonds in the rough" on the open market but more people wanting them? I rarely buy off MLS any more but started out that way exclusively. Just a thought.
Tone is difficult to convey in type so I apologize if this comes across as confrontational. Not the intent. I was discouraged from starting in REI when young and credit this site for a TON of my education and success!

1 Reply

Rachel H.

San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes

9y

Unfortunately, there's always going to be hype. I don't think BP is to blame. It's the users that spread this kind of information who make it sound easy. But it's not.

The opportunities you talk about can be done but in reality they happen due to luck. Being in the right place at the right time. And I don't think many new investors get that.

Success takes time and hard work. It could be years before someone finds their first deal. Most aren't willing to do the work. They want someone to do it for them. And it's a recipe for disaster.

1 Reply

Ibn Abney

Rental Property Investor · Chicago, IL · Member since 2016 · 318 posts · 307 votes

9y

Bigger Pockets is to real investing; what Rich Dad Poor Dad (Robert Kiyosaki) is to personal finance!!

Newbies are newbies. In 2017, you have tech savvy newbies. The fact that they are on the MLS expecting those returns, state the obvious.

I would suggest developing a series of questions to screen clients better.

1 Reply

Shawn L.

Rental Property Investor · Natick, MA · Member since 2015 · 128 posts · 188 votes

9y

Originally posted by @Jay Hinrichs:

Russell ,,, I see it as highly regionlized... poeple get on this site and say they are buying 2% rule and 3% rule deals all day long.. and that leads folks who live and invest in areas were that is not possible to think they are doing something wrong.

each market dictates what the market will give.. can someone stumble into or work their butt off and do better than norm yes.

However there are areas of the US were the market has never really recovered and has been flat for 30 plus years.. or there are more homes than butts to put in them.. cant compare them to high end urban areas.. its apples to Iceberg lettuce ( I stole that one from another poster I liked it so much LOL)

I'd vote for this 10x if I could. I found BP about 6 months after purchasing my first property and once I started reading I thought I had made a terrible mistake buying a property with monthly revenue just below 1% of purchase price. I have since had a single turnover and I raised the rent $200/month and still had well over 100 inquiries on the listing. I would imagine this is not so easy to achieve in some of the 2% to 3% markets.

2 Reply

Is Bigger Pockets Creating Unrealistic Expectations For Investors

Is Bigger Pockets Creating Unrealistic Expectations For Investors

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