Is Bigger Pockets Creating Unrealistic Expectations For Investors
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
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Is Bigger Pockets Creating Unrealistic Expectations For Investors
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Priyanshu AdathakkarPro Member
Realtor · Columbus, OH · Member since 2017 · 313 posts · 245 votesThe biggest flaw I have seen here is inexperienced people giving advice when they themselves have no clue of what they are talking about!
136 Replies
I don't think Bigger Pockets is creating unrealistic expectations, but it does definitely show, through user blogs and journals, of what's possible through hard work, due diligence, and SMART real estate investing.
I think people get hung up on if so and so made $X amount on a flip I have to too! And that person got that x% cap rate I have to too! Most people don't realize context is important and that sometimes a good deal is a good deal.
Now I'm a newbie as well and I haven't done my first deal yet either, but I don't think I have unrealistic expectations.
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
Originally posted by @Russell Brazil:
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?
You could just do what many other providers on BP seem to be doing ... just tell the newbie whatever they want to hear just to make the sale. The fact that you are not doing that speaks highly of your integrity and professionalism IMO. The sad part is that many of the newbies will ignore you and run off to work with the other kind of provider, where they will inevitably get scalped and we will probably never hear from them again ... that is the real tragedy here IMO, but sometimes you just can't save a newbie from themselves.
- Rental Property Investor · Claremont, CA · Member since 2015 · 292 posts · 374 votes9y
I think most humans are very good at selective listening. Their memory is geared towards the things they like (gives them the warm fuzzies) and blocks the stuff they don't (hard work is gross). So they listen to a podcast about making $10k per month without even getting out of bed collecting rents. They maybe hear the part where they started with little money, maybe did a wholesale deal or two and completely ignore or forget the part where the investor door knocked 1000+ homes, networked with hundreds of people, etc. before they ever got their first deal done. They just love that blissful "10k per month collect rent, sleep in until noon, no money needed, lets just wholesale" and ignore everything else.
I can tell from my personal experience as a sales manager/trainer in a very competitive sales environment that people will ALWAYS be like this no matter what they are doing. Not everyone, but the majority for sure. I remember using Grant Cardone videos in a sales meeting (he was huge in the car businesses) and people would get all jazzed up, super excited to make that huge commission this weekend for the big sale!!! ...then reality sets in and they show up for work late, ask to leave early, walk customers off the lot without actually trying to get the sale. They love the feeling of making tons of money, but hate the idea of putting the time and effort to get it.
To sum it all up, I don't think BP is at fault. I think the general mass of humans will hear what they want and run with it.
- Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes9y
@Russell Brazil Great topic! A couple of thoughts.
When I listen to the BP podcast or others that interview successful real estate investors it's amazing how many of them, myself included, started buying in depths of the downturn 2009-2013. I try to always point out to newer investors that that was a unique time and made a lot of people a lot of money and things are just different now. I still get my share of good deals these days but a lot of that is because of relationships, money, experience, techniques and other things I developed during that time.
I have historically bought a lot from the mls that I found myself or my RE agent passed to me. But one thing I have to keep beating into my own head is that if I found it on the MLS it will be very hard to flip for a good profit unless I completely transform the property. My market is fairly low-priced and it is very tough to get an on-market purchase with enough margin to successfully flip.
Instead my flips come from off-market sources and I view them as very rare. They are special situations that had to come from a seller in distress just looking to dumpt the property. Happens but is hard to find unless you're are a skilled marketer.
- Investor · Mesa, AZ · Member since 2017 · 109 posts · 57 votes9yChris Martin Not sure if this tagged you the first time: What do you do in a sellers market when you have nothing to sell? Wait? I mean I do have my first personal home purchase, but I'm not going to profit from a sale. Renting is more realistic. Im relocating and don't want to throw money away on rent. I figured purchasing one home couldn't hurt until it's a buyers market. I'd like to believe I have the hussle. Hope I'm not being unrealistic in my goals. My husband and I have been educating ourselves and getting our financial ducks in a row. Now, getting our feet wet in direct mail. Can you explain what rules of thumb to use depending on the type of market? Thanks, Rhiannon
- Specialist · Hollywood, CA · Member since 2016 · 81 posts · 59 votes9yGlass half full
- Investor · Chandler, AZ · Member since 2015 · 409 posts · 214 votes9y
It is a interesting dynamic that you are looking for in returns-
so I go to the hamburger place and "expect" a triple burger with all the fixxens plus a large fry and coke for .65
really
expectations are unachievable, for no matter whom you are, there is someone with a different set of expectations
as far as the BP community goes it is a great forum to share info and knowledge
I cant make the horse drink
to go online and think that is how you are going to make it big in real estate is a dream or to some a expectation, it just does not work that way, especially if you are a middle class or lower class person looking to make your life better- that is going to take some hard work
If making or creating capital was so easy wouldn't everybody be doing it?
sometimes it seems that the world has a thought of something being deserved, you deserve it because you expect it? it is a strange philosophy
I hope all who read the thread can make a educated guess on what it really takes to be successful
enjoy
- Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes9y
Another thing might be that subconsciously it allows many wannabes to bypass all the deals, because there's not enough profit and so they never have to actually jump in, but always feel like they're on the way.
I think the answer is yes and no. People tend to gravitate toward the positive. When they read success stories around people that do just that, they think that is what they should be getting, every time. We all know there are a variety of factors that go into deals like that, plus, very few people post the bad deals, which there are far more of.
It's the 80/20 (or more like 90/10) rule happening.
- Investor · Denver, CO · Member since 2016 · 736 posts · 582 votes9y
Bigger Pockets - no
The Bigger Pockets community - yes
I still like the idea of $2.99 steak and eggs but that deal is harder and harder to find these days. $4.99 is easier, $7.99 is more realistic.
Real property is the same way - there are deals to be had. Deals are hard to find and you have to think outside the box (I've seen this theme consistently come through the podcasts). The reality of it is that most of the folks flipping houses are losing money - not just from the perspective of hard physical cash losses but also form the perspective of rate of return. How much is your time worth? $10/hour? $25/hour? I can't provide hard physical proof aside from my own experience, but I doubt those that are flipping houses, when they account for their time, are making more than what they are worth via W-2 income.
With relation to rentals, it's a long term game. Based on my experience, you aren't going to make any money for the first 5 years. I don't care what other folks tell me but I have properties that make the 2% rule and all the fancy ratios....those properties do not make money for the first 5 years. Period. There's a reason banks require a seasoning period. It takes time to create stability and a good flow.
It's great to hear of folks that acquire 50 units in their first year investing. Good for them - I wouldn't want to be in their shoes. These are folks that generally are up to their ears in debt with so much stress, their head is about to pop like a pimple. Not for me - that's what passive income is about.
The wholesaling game is completely foreign to me...and I won't touch it. Turn-key providers....I can see how money is being made there and I'm certainly intrigued by the concept. I can certainly see that as a lucrative business. Land - a whole different animal with a very long turnaround.
It's a slow and steady game. Patience is the key. Things take time. Don't get yourself over-leveraged and you can generally work/push through the mistakes.
- Lender · Lusby, MD · Member since 2014 · 60 posts · 38 votes9yI thought I was the only Realtor dealing with these unrealistic investors. I remember writing 8 ridiculous offer for this young investor on New Year's Eve because he was convince that he had to offer no more that 70% of asking price. The information on BP can be misleading. An investor who started investing in 2011 when there were tons of REO properties for sale, could make all type of low offers and get deals. Those days are long gone, at least in the Hampton Roads area.
- One of the biggest problems with unrealistic expectations is that many of these people that have these expectations are LAZY and expect a great deal to fall in their lap with out doing any hard work to find it. I have one guy that contacts we weekly with the next "great" deal but has NO clue how to evaluate a deal, what questions to ask and what to look for. When I explained to him how I found my 10 properties, his comment was "wow that's a lot of work, I don't want to spend that much time trying to find a property". LAZY!!! Are expectations unrealistic...sure they are, the newbies hear these great success stories and feel entitled and don't do the hard work to find them...is it BP's fault...of course not..Get off your lazy butts and do some real work
- Investor · San Diego, CA · Member since 2017 · 190 posts · 117 votes9yNew member here too, I can see both sides
- Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes9y
Yall think this is bad... I've got a few Facebook groups I can point you to!
- Property Manager · Castro Valley, CA · Member since 2016 · 212 posts · 110 votes9y
I think part of it is that a bit of the real estate fever is back.
Many more people are in the market now talking about real estate investing.
Shoot, I am one of them.
I have been involved in the industry of condos and apartments for some time but reached the point that I want my own investment. I have dealt with maintaining all of the systems in these buildings and know how costly a beast a multi-family home can be.
I have seen clients of buildings I take care of surprised by some rather big items they were clueless about the cost of or the remaining life of that system when purchasing.
That puts me in a position of evaluating the cost of those systems and what it would take to properly maintain the building and puts me at the point of borderline unrealistic expectations.
*I don't think the agents knew much about the systems or recommended needed inspections either. - Investor · Houston, TX · Member since 2016 · 31 posts · 5 votes9yNo, unfortunatly some are just living in "la la" land. Lol! However, BP for me is more for networking. The education is Good, but from those with history.
- New to Real Estate · Los Angeles, CA · Member since 2017 · 118 posts · 60 votes9yI believe that it can be misleading for someone who takes it literal and fail to do their own research. You have to take active on your part to dig deeper than what is presented to you.
- Investor · Clatskanie, OR · Member since 2014 · 212 posts · 233 votes9y
Just finished digging out a sewer pipe. Made 3K (saved). Want a VERY realistic money making machine? Buy Orangeburg and get both hands down in that earth! She needs a fix'n!
Hoooorrraaaahhhhhh. $$$
- Investor · Aurora, CO · Member since 2017 · 34 posts · 11 votes9y
I started to follow this blog very recently in an attempt to really learn more about real estate investing. I think it has been helpful for me as a "newbie" here. With that being said, I also realize that it's easy to have unrealistic expectations when it comes to real estate.
I see people bragging about huge returns or flips, I try to pay attention to where they are purchasing those properties. I think location is key.
For example, we live in the Denver Metro area, so finding something that falls within the 1% rule is like trying to find a needle in a haystack. Developers are making a killing for sure, but for someone like myself who would just like to buy a few additional buy and hold properties to make money on, I'm not seeing it. A fixer in Denver will cost you about 400k, anything under that is typically listed as a "scrape." So unless you put a lot of money down, how do you even break even on a property?
My point is, that real estate success hinges on location and expectations. I see this site as another tool for my toolbox. I read, learn and take what I need.
- Denver, CO · Member since 2009 · 23 posts · 3 votes9y
The original question is a great one and the responses in my opinion (for the most part) all point to one glaring problem. Unrealistic is the norm since no one knows what realistic is. People being unrealistic is not being produced by BP but it's an overall lack of information one needs to make educated decisions. Investors AND Agents/Realtors are digging hard enough for it.
Let me explain...
How can an Agent or an Investor decipher what's realistic when every market, every zip code, every city block is it's own eco system of real estate activity. People on BP can tell you their stories and you can try to force their results into your market but that will almost never work. This produces frustration from Agents/Realtors trying to educate the investor with mostly sold comps from the MLS and the investor frustrated because they feel the data being produced is not good enough to change their minds creating a who's right and who's wrong scenario.
It comes down to data...
I believe the easiest solution to all of this is to find what other investors are having success with IN THE EXACT SAME AREA and emulate it. If you know what people are paying for properties, what they are selling them for, what they are doing to them (construction levels) and how long the process is taking, it's awfully hard to be unrealistic with what is possible - even if someone on BP says different.
To answer the specific question posed at the beginning of this thread, BP "can" be misleading to NEWBIE investors (and that seems to be the majority) simply because BP has gotten so large. A person will seek the answer they are looking for in the vast expanse of advice-givers. As an experienced Investor but a newbie to BP myself, I found myself teetering on the edge of that trap, but because of my experience, backed away from the edge. A newbie Investor is more likely to fall in, make a bad deal and somehow blame it on BP.
- Investor · Scottsdale, AZ · Member since 2016 · 1k+ posts · 885 votes9y
@David Grabiner @David Dachtera David Dachtera Is correct. " You can pay me now or you can overpay for it later."
I got my start as a loan officer. That Training has made me a ton of money investing in Real Estate because I know how to "make the numbers work" and what it will take for the buyer to get financing when I sell. Before that I was Professionally Trained in selling large ($100,000) computers at a fortune 500 company. Most people don't understand sales and how to find good deals and how to sell successfully, so they suffer dismal rates of return. Nationally, I've read at Realtor.com that the average flip nets about $15,000 after expenses. We produce a much better product (properties) when we are Trained.
If you take a "desk jocky" that has been in a cubicle for his short career and who wants to get into real estate and then send him out there with no knowledge of the market. . . He has NO idea about Title, Escrow, Comps, Appraisals, Liens, FHA, VA & Conventional, Inspections, Competition in the market, Fees, Roofs, AC Units, Pools, Foundations, Electrical, Plumbing, Staging, Seasoning, and on and on.
Just look at the questions that newbies ask on posts at BP. Yes, they could take six months and read through everything at BP and then they become experts, right? (No, they just think they know everything.) How many houses could they do in that time with help? Trouble is, those who don't value coaches don't value their own time and money, that's all. That's Okay, if they want to do it the "hard" way. But, we were all new once upon a time. And we "didn't know it all."
Are you going to tell me that he will not spend more time and money learning it the "hard" way than paying someone to walk him through step by step? Give me a break.
Would you go to a dentist who is learning it the "Hard" way?
Only the ignorant despise education.
- Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes9y
Originally posted by @Account Closed:
@David Grabiner @David Dachtera David Dachtera Is correct. " You can pay me now or you can overpay for it later."
I got my start as a loan officer. That Training has made me a ton of money investing in Real Estate because I know how to "make the numbers work" and what it will take for the buyer to get financing when I sell. Before that I was Professionally Trained in selling large ($100,000) computers at a fortune 500 company. Most people don't understand sales and how to find good deals and how to sell successfully, so they suffer dismal rates of return. Nationally, I've read at Realtor.com that the average flip nets about $15,000 after expenses. We produce a much better product (properties) when we are Trained.
If you take a "desk jocky" that has been in a cubicle for his short career and who wants to get into real estate and then send him out there with no knowledge of the market. . . He has NO idea about Title, Escrow, Comps, Appraisals, Liens, FHA, VA & Conventional, Inspections, Competition in the market, Fees, Roofs, AC Units, Pools, Foundations, Electrical, Plumbing, Staging, Seasoning, and on and on.
Just look at the questions that newbies ask on posts at BP. Yes, they could take six months and read through everything at BP and then they become experts, right? (No, they just think they know everything.) How many houses could they do in that time with help? Trouble is, those who don't value coaches don't value their own time and money, that's all. That's Okay, if they want to do it the "hard" way. But, we were all new once upon a time. And we "didn't know it all."
Are you going to tell me that he will not spend more time and money learning it the "hard" way than paying someone to walk him through step by step? Give me a break.
Would you go to a dentist who is learning it the "Hard" way?
Only the ignorant despise education.
I agree, education is very important. Unfortunately in real estate, most 'education' offered is nothing more than a cash grab for a fast talking scammer. The programs consist of little more than building up people's hopes and dreams to keep them paying for more good feelings. If folks really want a solid education in real estate, I'd recommend taking the classes needed to be licensed as a broker and as a loan officer. Then take training classes from the various associations like NAR. Maybe even some construction training as well. And definitely learn how to run a business since most of the tasks can be delegated out to professionals.
Or, they can team up with someone who can mentor them. Or just jump in and learn as you go, since making mistakes in real estate just looses you money, unlike in dentistry where you are affecting your patient.
I'm not painting every real estate program with this broad brush, but the vast majority are complete garbage. Working off your dentist example - What happens in these real estate programs is like a first year dentistry student being told that he can learn to be a dentist if he takes a single class. Then when he takes that class, he gets all pumped up about dentistry, but needs another class to learn the how to examine teeth. Then at that class, he gets pumped again and learns he needs another class about diseases. It doesn't happen like that in real educational programs - the student knows up front that he need years worth of classes and thousands of dollars in fees and knows what to expect.
- Investor · Chattanooga, TN · Member since 2016 · 146 posts · 108 votes9y
@Account Closed I never said whether I agreed or not with paid education I only mentioned that he posts about it often and the reason is because he profits from it, as do you. Nothing wrong with profiting from education, all though many people use the guise of education to separate suckers from their money.
Only the ignorant think education must cost money to be valuable.
People are at all different levels in their investing career, have different skill sets, and learning styles. To say people don't value their time or money if they don't want to pay for a coach is simply not true. Some people can weigh the options and pick the way that works for them. Yes I'm relatively new to investing and I have had success at it. Most of it was just down to common sense, investing in the right market, using my existing skill sets, and reading books. I can't even credit BP because really I didn't start looking at BP until this year. For me, spending 70K on a guru seminar, or paying 12K for coaching, or paying 25K for the privilege of being in a JV will never be worth it for me.
- Alexandria, MN · Member since 2017 · 2 posts · 0 votes9yEveryone's situation is different this question is a waste of time
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