Biggest Misconceptions of New Real Estate Investors
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesBiggest Misconceptions of New Real Estate Investors
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesrags to rich's in RE is a well known myth.. but there are those that succeed no doubt.
But I personally think most do very well as either very well paid w 2 and invest for the long term in quality assets and locations.
Or they get into the business.. IE work for a development company and work your way up.. start as a loan broker work your way up start as an agent work your way up.
And or sometimes contractors can do well too they know that side of the business.
What it boils down to though with great deals is simply logic and math.
Every city only has a certain amount of great deals and when gurus train thousands of people there simply is not enough deals to go around mathematically so the hard workers the better sales folks etc etc.. dominate its a tough gig to break into no doubt
17 Replies
- 2moJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
rags to rich's in RE is a well known myth.. but there are those that succeed no doubt.
But I personally think most do very well as either very well paid w 2 and invest for the long term in quality assets and locations.
Or they get into the business.. IE work for a development company and work your way up.. start as a loan broker work your way up start as an agent work your way up.
And or sometimes contractors can do well too they know that side of the business.
What it boils down to though with great deals is simply logic and math.
Every city only has a certain amount of great deals and when gurus train thousands of people there simply is not enough deals to go around mathematically so the hard workers the better sales folks etc etc.. dominate its a tough gig to break into no doubt
- 2moDonyea JenkinsPro MemberMember since 2022 · 40 posts · 18 votes
Quote from @Jay Hinrichs:
rags to rich's in RE is a well known myth.. but there are those that succeed no doubt.
But I personally think most do very well as either very well paid w 2 and invest for the long term in quality assets and locations.
Or they get into the business.. IE work for a development company and work your way up.. start as a loan broker work your way up start as an agent work your way up.
And or sometimes contractors can do well too they know that side of the business.
What it boils down to though with great deals is simply logic and math.
Every city only has a certain amount of great deals and when gurus train thousands of people there simply is not enough deals to go around mathematically so the hard workers the better sales folks etc etc.. dominate its a tough gig to break into no doubt
you are completely right and thats why I have a lot behind my name. I am a property manager(20+ years), I own a construction/maintenance company and a property management company. I have been working at setting this foundation for a while, even worked through the paralysis stage. This is the last hurdle. definitely the biggest. The only thing that makes me a bad bet is I haven't done my first deal. I see all sides. the investor side is the newest. If I can get through this, confident in what I can accomplish. Everything you said I agree with and have worked on to make myself well rounded. This is the final hurdle and the biggest. Appreciate your feedback. I needed to see that.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2mo
don't forget that creative financing can solve any problem and turn any property /transaction into a "deal"
It is very unfortunate the number of I experienced people giving this type of advice to people who acknowledge they have little to no money
7e investments53 Reviews- Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes2mo
Quote from @Chris Seveney:
don't forget that creative financing can solve any problem and turn any property /transaction into a "deal"
It is very unfortunate the number of I experienced people giving this type of advice to people who acknowledge they have little to no money
Yeah, that's a problem. Creative financing will get you to where you want to go, but it isn't being taught as a cautionary exception to the rule. You have to have access to big cash to make it work successfully.
The guys on Youtube don't discuss the flops, losses and lawsuits that I can document they've had. They're making too much money drawing people into their video training. One now focuses on RV Parks and everybody wants an RV Park. I have no idea if they're profitable.
But here's the difference, the Attorneys General look at RV Parks as a business transaction. That's a lot different than when it's somebody's private home. I think that is why the switch. It was getting uncomfortable keeping the AG's away.
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes2mo
Chaotic management with no, or poorly defined and executed processes, can wipe out any "good deal" within a relatively short time.
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes2mo
Most of the properties I have ever bought I felt I am still paying a little too much. In 17 years I have only bought one really "good deal", that made me think: wow, I can't believe I am getting this price!
When I rank my portfolio today by property best to worst, this one is definitely in the bottom 20%. Mostly because of the layout. We have improved it to it's max potential, there are meaningful upgrades left that I could do.
And the craziest part is, the extra 30% discount I was able to knock off the purchase price back then does not amount to anything relevant today. The amount of equity the property has now after rehab and 14 years later, that discount does not even visibly move the needle on equity or PITI.
In fairness, it did help me back then, because it was the only BRRRR I had ever done that fully paid for it self.
But the properties I am most happy to own today, were not "great deals" when I bought them. But they were always great properties. And I think that's what you learn after a while in this biz: it is more important that you buy a great property, than getting a great deal.
- Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes2moI agree if you’re holding medium to long term. For speculative profits buying significantly under REAL market value is a significant contributor (though NOT the only contributor to SPECULATIVE profit (improving, repositioning, rezoning, reimagining, or targeting a different use/buyer can also lead to large and fast profit.
Quote from @Marcus Auerbach:
Most of the properties I have ever bought I felt I am still paying a little too much. In 17 years I have only bought one really "good deal", that made me think: wow, I can't believe I am getting this price!
When I rank my portfolio today by property best to worst, this one is definitely in the bottom 20%. Mostly because of the layout. We have improved it to it's max potential, there are meaningful upgrades left that I could do.
And the craziest part is, the extra 30% discount I was able to knock off the purchase price back then does not amount to anything relevant today. The amount of equity the property has now after rehab and 14 years later, that discount does not even visibly move the needle on equity or PITI.
In fairness, it did help me back then, because it was the only BRRRR I had ever done that fully paid for it self.
But the properties I am most happy to own today, were not "great deals" when I bought them. But they were always great properties. And I think that's what you learn after a while in this biz: it is more important that you buy a great property, than getting a great deal.
My experience leads me to believe that significant experience, knowledge, capital and skill is needed for success in short term profits; whereas long term hold of good/great properties requires a lot less of these attributes. (Having them will most likely lead to EVEN MORE success). - Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes2mo
Quote from @Don Konipol:
I agree if you’re holding medium to long term. For speculative profits buying significantly under REAL market value is a significant contributor (though NOT the only contributor to SPECULATIVE profit (improving, repositioning, rezoning, reimagining, or targeting a different use/buyer can also lead to large and fast profit.Quote from @Marcus Auerbach:
Most of the properties I have ever bought I felt I am still paying a little too much. In 17 years I have only bought one really "good deal", that made me think: wow, I can't believe I am getting this price!
When I rank my portfolio today by property best to worst, this one is definitely in the bottom 20%. Mostly because of the layout. We have improved it to it's max potential, there are meaningful upgrades left that I could do.
And the craziest part is, the extra 30% discount I was able to knock off the purchase price back then does not amount to anything relevant today. The amount of equity the property has now after rehab and 14 years later, that discount does not even visibly move the needle on equity or PITI.
In fairness, it did help me back then, because it was the only BRRRR I had ever done that fully paid for it self.
But the properties I am most happy to own today, were not "great deals" when I bought them. But they were always great properties. And I think that's what you learn after a while in this biz: it is more important that you buy a great property, than getting a great deal.
My experience leads me to believe that significant experience, knowledge, capital and skill is needed for success in short term profits; whereas long term hold of good/great properties requires a lot less of these attributes. (Having them will most likely lead to EVEN MORE success).If the market allows. I think commercial markets are a lot more inefficient than residential single family homes. And inefficient markets create a much better playground for speculative investing.
You can't really significantly underprice a SF home: you have hundred's of buyers seeing the listing on MLS and Zillow within hours and they will bid up the price to market value. You don't have that in commercial. Developing land is a prime example. You may only have a hand full of potential buyers in the market and individually they will only look for a deal every other year
A lot of noobs will look at residential properties nobody wanted for 60 or 90 days, negotiate 20k off and assume they have bought a great deal. In reality they bought a dysfunctional house in a bad neighborhood and still paid too much.
- Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes2moGood analysis
Quote from @Marcus Auerbach:
Quote from @Don Konipol:
I agree if you’re holding medium to long term. For speculative profits buying significantly under REAL market value is a significant contributor (though NOT the only contributor to SPECULATIVE profit (improving, repositioning, rezoning, reimagining, or targeting a different use/buyer can also lead to large and fast profit.Quote from @Marcus Auerbach:
Most of the properties I have ever bought I felt I am still paying a little too much. In 17 years I have only bought one really "good deal", that made me think: wow, I can't believe I am getting this price!
When I rank my portfolio today by property best to worst, this one is definitely in the bottom 20%. Mostly because of the layout. We have improved it to it's max potential, there are meaningful upgrades left that I could do.
And the craziest part is, the extra 30% discount I was able to knock off the purchase price back then does not amount to anything relevant today. The amount of equity the property has now after rehab and 14 years later, that discount does not even visibly move the needle on equity or PITI.
In fairness, it did help me back then, because it was the only BRRRR I had ever done that fully paid for it self.
But the properties I am most happy to own today, were not "great deals" when I bought them. But they were always great properties. And I think that's what you learn after a while in this biz: it is more important that you buy a great property, than getting a great deal.
My experience leads me to believe that significant experience, knowledge, capital and skill is needed for success in short term profits; whereas long term hold of good/great properties requires a lot less of these attributes. (Having them will most likely lead to EVEN MORE success).If the market allows. I think commercial markets are a lot more inefficient than residential single family homes. And inefficient markets create a much better playground for speculative investing.
You can't really significantly underprice a SF home: you have hundred's of buyers seeing the listing on MLS and Zillow within hours and they will bid up the price to market value. You don't have that in commercial. Developing land is a prime example. You may only have a hand full of potential buyers in the market and individually they will only look for a deal every other year
A lot of noobs will look at residential properties nobody wanted for 60 or 90 days, negotiate 20k off and assume they have bought a great deal. In reality they bought a dysfunctional house in a bad neighborhood and still paid too much.
- MD/DC · Member since 2024 · 1k+ posts · 1k+ votes2mo
Big misconceptions: You can start investing without any money and that most people can purchase and manage enough rentals to quit their day job.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2mo
@Jules Aton - just saw a fb post in one of the cult guru groups where someone posted and literally said they spent 5 hours watching videos over the weekend and couldn't not believe how easy it is to get into real estate with no money and how easy it is to make money in real estate.
I just shook my head...
7e investments53 Reviews - Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes2moHere’s what I found after 50 years in real estate investing
Quote from @Chris Seveney:
@Jules Aton - just saw a fb post in one of the cult guru groups where someone posted and literally said they spent 5 hours watching videos over the weekend and couldn't not believe how easy it is to get into real estate with no money and how easy it is to make money in real estate.
I just shook my head...
To sustainably make money as a real estate investor you need:
knowledge
experience
(access to) capital
Knowledge is NOT the knowledge you gain by studying a guru’s “marketing” program put together by a sales organization operating out of Provo, Utah. It is knowledge and understanding of real estate principles, real estate law, and real estate finance.
Experience is the kind you gain by being involved in, or carefully observing the decision making process of real estate transaction in the property type, location, and sector you will be operating in.
(Access to) capital is not a generic pre approval letter from a private lender; it’s your own capital or capital you control, or at the very least capital you’ve sure of obtaining because the source had invested successfully with you in the past.
- 2moStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
Some of these gurus are getting out of control. The speed at which they shift from one investment strategy to another and immediately start selling courses, systems, and other products around the latest strategy is remarkable. I foresee a lot of 18 U.S.C. § 1343 wire fraud prosecutions in the not so distant future. Once they start, I think there will be a wave of them
- Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes2moI think you're correct in that. People don't realize that a lot of their transaction is federally tracked and the data and proof are there. The Feds seem to have their hands full right now though with other matters of massive fraud. But computers have a long memory span and are easy to search.
Quote from @Stuart Udis:
Some of these gurus are getting out of control. The speed at which they shift from one investment strategy to another and immediately start selling courses, systems, and other products around the latest strategy is remarkable. I foresee a lot of 18 U.S.C. § 1343 wire fraud prosecutions in the not so distant future. Once they start, I think there will be a wave of them
- 2moG. Brian DavisPro MemberInvestor · Hatboro, PA · Member since 2016 · 3k+ posts · 886 votes
I think the last one is probably the biggest. When you’re new, it’s hard to know what you’re missing. A deal can look great on paper and still have problems you don’t see yet. The more deals you look at and the more experienced people you have around you, the better you get at spotting those things.
The thing which got me is, operational excellence is where the money is made (or rather where it is lost). Setting up systems to create that operational excellence is a lot more work than expected. Lots of people will point out that you can run this sort of business on a handful of hours a month, but that's once you have trusted contractors and operational systems in place, not as a beginner.
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes2mo
Yes on systems and operational excellence. And "systems" is not as easy as downloading an app. I am not a beginner and even with systems it takes a LOT more than a hand full of hours! That's the Instagram dream. The problem is you are working, even when you are not working: you might be in Italy sitting in a cafe - but you are still talking work. The stuff that falls outside the system still needs to be handled.
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