What Excuse Do You Have for NOT Investing?
Joshua D.Pro Member
BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votesFor all of the newbies out there, I was wondering what excuses you have for not investing. I think it might be helpful to share with everyone here!
For the veterans, I'd love to hear some of the excuses you used before taking the first step!
Well . . . ?
I talk to hundreds of investors every year who:
[list]Have been thinking about investing
Have been reading about investing
Have a friend who had done well investing (The elusive friend)
Are saving for a down payment
Waiting for rates to go down
Waiting to finish their real estate course
Waiting for their mentor to tell them to buy
Waiting for summer (insert any season)
Waiting for the market to straighten out
Waiting till they can afford it
Waiting till they get a promotion
Waiting till their friend or relative can partner with them
Trying to read just one more book
Waiting till they buy their own house
Waiting till they get a raise
Waiting to graduate from college
Waiting till their friend or family member becomes a realtor
Waiting to be married
Waiting till they contribute their maximum to a 401k
Waiting till they get done working on their own home [/list:u]
Then after giving me their excuse for waiting they ask
[list]What happens if the toilet gets clogged?
What happens if the furnace gos bad?
What happens if tenant ruins the house?
What happens if the roof leaks?
What happens if the tenant doesnt pay?
What happens if someone breaks a window?
What happens if someone leaves a broken down car at the house? [/list:u]
If they dont have the question, they usually tell me about a friend or relative who had one of the above happen.
The questions that they SHOULD be asking but NEVER do
[list]What happens if I dont start investing now?
How many homes do I need to buy in order to retire comfortably?
If you could share with me your best idea, what would it be?
What kind of money am I leaving on the table by not investing?
How does the stock market compare to real estate? (that doesnt even deserve an answer)
How can I use real estate to make my dreams come true?
What would I do with an extra $500 or even $5,000 a month in cashflow?
How will my family react when I retire 10-20 years earlier?
What are my broke friends going to think when I show up in my Porsche? [/list:u]99% of people share this problem:
If a family member or friend needed $500, most people would need a ton of convincing to loan it to them, and if it wasnt repaid it would surely be a BIG problem, some people would even lose friend over such a small amount of money.
But that same person could care less about the $500-$10,000 a month that they will lose each and every month for the rest of their life by not investing in real estate.
Oppurtunity cost nobody pays attention to it.
I used to be a tight a##, then one day I got to thinking.
What if instead of worrying about ways to save money, I started just focusing on ways to make it?
That simple question changed my whole life.
What a great post esnuts. I have used these same excuses myself and talked myself out of buying several times. I have had the same things said to me by family and friends and coworkers. I am over my fears and am in the process of buying the second of I hope many rent houses. I am drinking the CoolAid :beer: I think I will copy your post for a screen saver and look at it everytime the doubt creaps up. Thanks
how about this one:
real estate investing, like any other type of investing or business takes time to learn. having said this, let me further say that many people who are considering any type of business or investing in real estate, HAVE NO IDEA about financing, financials, types of investing, how to handle agreements and contracts, laws and rules, regulations, etc.
additionally, i would just go out on a limb and say, that in my opinion, i would say that (and this is a guess) about 40% of the real estate "investors" that would consider themselves successful and maybe even many fellow colleagues would think the same about them - that they are not or will not last in the business. due to their rush into "rehabbing and selling" with little regard for an investment plan or their rush into landlording or even wholesaling or pre construction or whatever - i think many investors are on the balls of their *** right now, or will be soon.
I DO NOT WISH THIS for anyone! but i do think the whole "analysis paralysis" crap is a bunch of bull. those that get into rei but then drop off - they weren't ready and the truth is, they probably never will.
i don't care who you are, if you think or say that rei is "easy", that's just ridiculous.
it's "easy" for an experienced investor who has:
an educated mind about investing
an educated mind about business
any people who they know who can help them in the business
done it and has the drive and passion to better themselves <---this is HUGE
if you have the last one - i think this is what makes many investors successful. they have the drive and passion (love what they do) to overcome all obstacles and they realize the importance of simply educating themselves about investing!
so the ultimate excuse (reality) is alot of people are not entrepreneurs and their "employee" mindset will overcome them and thus they will not ever invest in anything other than their time as an EARNED INCOME INVESTOR.
...and that is a shame...
love your question eric - that's a keeper!
that's the "problem" with rei - or business in general - things don't fall into the "employee mindset" lap...then people like this just say, "aaahhh, forget it. it's a scam. it doesn't work..."
that's the trap of middle class poverty.
If I can look around my entire market and not find a single person making money doing real estate then MAYBE I will say that I cant find any deals, but as long as there is at least one person making money in real estate then I know it is possible for me to do so.
[size=18][/size]I'M SCARED!!!!!
I am not investing yet because right now it is very difficult to find properties that will come even close to cash flow positive. Even more to the point, I believe that residential property values are poised to fall by large amounts in the near future where I plan to invest (Southern California) because of the existing real estate bubble. Why would I buy something now when I am confident that I can purchase it at 40 or 50% off in a few years?
Great topic.
My only REAL excuse is a lack of knowledge about investing in general. But that is not really an excuse at all...Bookstores sell books, and books contain information.
Biggest reason, aside from fear, is Laziness.
I personally think that there is no excuse for not investing in real estate.
-R.G.
"I personally think that there is no excuse for not investing in real estate."
Seriously?
What if you thought that the market price of an asset was going to fall by a large amount in the near future? Seems to me that this is an excellent argument, whether or not you believe the proposition is true.
No disrespect intended... I am genuinely curious. Do you not believe that residential real estate prices are not poised for a large fall, or do you believe that even if they are it's still a good time to invest? Or both?
As somone who lives in CA, Salsa, I feel your pain and that is why I look out of state to invest. Definitely tougher but not impossible to do. I would never buy a rental out here as you just can't cash flow them and I don't feel you ever will near the coast no matter how long you wait.
I disagree with this, Lashtal, but the comment makes sense considering this is a RE board. Otherwise, you could make the same excuse for not investing in stock, 401(k), IRA, etc. We each have our own interests, preferences, comfort zone and I just can't agree that everyone needs to be involved in RE as implied.
Can't say that I fully agree with the counter-argument to Lashtal's comment either, Salsa. If you're in it for cash flow and aren't looking to sell anytime soon, sitting on the sidelines even with an expectation of declining prices doesn't make sense to me. For example, if you're looking for a buy and hold property that cash flows - once you find that at a decent discount, you shouldn't necessarily be afraid of buying just because you're afraid of declining property values. After all, you're HOLDING the property so property value means virtually nothing until you sell many years from now (as long as rents hold up and you continue to cash flow).
T-bone77, I definitely see your point. You are absolutely correct that if someone is looking to invest right now, and finds a deal with good cashflow, falling prices are not a reason to wait And many if not most of the people on this board probably fall into this category. More power to them - I wish them well. However if you only have the savings, credit, and time to make a few long term investments, then it can also be a good idea to wait for the great deals instead of the merely good ones.
Lets say I find a place right now that I can buy for 150X monthly rent. OK, not bad, I could probably buy this and hold it for 20 years and do just fine. But suppose I wait a couple years for the normal market cycle to play out. Back in the mid 1990s in my area, there were lots of great properties that could be had for 100-120X monthly rent. Over the same 20 year span, these are going to yield much better profits, even considering the 150X place has a 3-4 year head start.
I guess my point is that depending on your overall strategy, then ones evaluation of where the market is headed can be a legit reason to wait. It is not automatically a sign of laziness or cowardice as many comments seem to imply.
That's exactly my point.
If you look at the statistics, house prices are always on the rise. Investments will then produce a positive cashflow.
Even if you're 1031ing, that's positive cashflow.
If you buy for No Money Down (or not YOUR money) and you're turning over an investment of Infinity after subleasing your property to tenants...that's positive cashflow.
It's out there. It will always be Out There. But it starts in your head. Your ability to see Opportunity, or Make It, determines your cashflow.
I see your point regarding limited resources Salsa and waiting for the right time. I think my concern is that if you allow yourself to be paralzed waiting for the right time, you will still be on the sidelines in 10 years. And don't forget, if you buy at a low enough ARV, you can actually refi the first property with an 80% loan and keep your cash for another investment while cashflowing the first property. I'm not saying these are easy to find for an amateur like me but certainly the pros out there do this all the time.
Lashtal, again, I mean no disrespect, but I cannot in good conscience let you say something like that without responding. This statement is just plain wrong. Anyone who spends a few minutes online can easily see that.
For instance:
http://duende.uoregon.edu/~hsu/blogfiles/shiller-real.gif
Since WW2, after adjusting for inflation, home prices were pretty much constant in the long run. There were temporary run-ups in the late 1970s and late 1980s, but they quickly corrected back to the long-term trend. There is no good reason to think the current recent run-up will end any differently than those two did. Japan (talk about a place where land is scarce!!) had a big run-up in the late 1980's similar to the one we have now and home prices have fallen there for 17 straight years, to the point where you can buy stuff now for HALF what it would have cost in 1990. So although I admit it is possible to wait too long and miss out on good investments, it is also possible to jump in too soon and lock yourself into bad ones for a long time.
If you want to talk about specific markets instead of national ones, I can tell you that the one I live in (So Cal) absolutely tanked for half a decade in the early 90's. From 1991 to 1996, median inflation-adjusted prices in LA County fell by 31%. Many individual areas fell much more. Thousands of investors went bankrupt and lost all their equity.
Even if prices do always go up in the long term (which itself is not certain), if you are losing money in the short term, you may not be able hold out that long. Look, real estate can be a great investment. That's why we are all here to learn about it, right? :D If you find a good cashflow investment then awesome, go for it! But anyone who thinks that appreciation is going to bail them out of a low or negative cashflow situation is gambling, pure and simple.
My excuse - I love to see my cash stacked up in my bank statement. I am extremely cheap. Big time. Therefore, I have talked myself out of "being ready" several times. The cash money is security. Of course, I recognize that I won't move forward unless I act. My goal is to buy and hold.
What if's:
1)What if I buy the place and HOLD it right down the toilet if the RE market busts?
2)What if my first acquisition turns out sour and ends up being my last?
3) What if the area I'm interested in, while I believe it will continue to appreciate, won't cash flow 1%? It doesn't (without 20-25% down).
4) What if #3 doesn't bother me too much, even though it should?
5) Here's a ridiculous one - but I guarantee I've thought about it! What if the value of the property appreciates sharply, so that the PROPERTY TAXES (outrageous in Texas) rise to a level that can't be offset by lagging rent increases?
6) What if I can't sell it when and if I decide to do so and at least break even?
7) What if I keep thinking about this for another year while beating my head against the wall?
I couldn't agree more bigmoneysalsa! As far as I'm concerned, positive cashflow is the price of admission for a long-term buy & hold and appreciation is a bonus. People go bankrupt because they take risks beyond their means and I agree we have a cycle of bankruptcies on the way in the near future!
I also like to see the cash in my bank account but will tell you how I view your concerns eagerTexan:
If you never sell it, it doesn't matter. As long as you bought something that can cash flow, you will continue making money year after year as well as paying down your mortgage (don't overlook this benefit). Of course circumstances (retirement, medical expenses, divorce, etc.) may cause you to sell sooner than you want but let's face it, how much can you *really* lose on an investment property of let's say $150k. Hard for me to imagine that it would ever even approach $100k in resale value in a drop so you really would have less than $50k at risk in my opinion.
Certainly a possibility but if you go in as informed as possible, you should at least limit the damage if there is any. The resources here (not me - I'm a rookie - but the others! :D ) can help ensure that you don't get in over your head.
Find another area to buy or put 20-25% down. I've done both of those as I don't believe in having myself 100% financed and I'd have to put like 50% down where I live to cash flow.
Tread carefully - betting on appreciation alone in today's market is too risky a game for me to play. Maybe a decent bet 3-4 years ago but not now.
This one's easy! If Texas allows big increases year over year (some states like CA limit to 2% increase max) and you get pinched, sell! Enjoy all that profit that you just made off the appreciation!
This is a definite possibility if you don't buy at a good discount and is something you should consider when buying. If you aren't holding for a decent period of time, after considering closing costs, realtor fees, etc. - you should probably expect to lose money overall in today's climate. In addition to looking for the good deals, you should have a very clear strategy in my opinion going in or else you may lose money. I wouldn't buy a cash-flowing rental today at retail with the idea of selling in 2 years because I suspect I would lose as much on the sale as I made in cash flow over the 2-year period (obviously would have to run number to know for certain).
Then you'll be fixing the drywall that you destroyed in your own home vs. the drywall that a tenant destroyed in one of your rentals... :lol:
Hanging out in breeze on 100% financing would keep me up at night. To clarify, I'll definitely be putting down the necessary cash on whatever deal I do - at least 20%. I'll do it for my own sanity.
My intent is to hold for many years. Finding a decent discount is the difficult part for me. I've not found any multi-families in good neighborhoods that adhere to the 100Xmonthly rent rule of thumb. Sure, there are some rougher 'hoods where I've seen those. I don't mind the rougher 'hood idea but I'm afraid my wife is not particularly fond of it.
:lol:
I'll be honest. I fear rejection from banks trying to get a loan due to my credit and dumb mistakes I had in the past. I am defiently open to ideas. I am not surrounded by people that can borrow me the money or are in a situation where they could be a co-signer. I am looking for ways I could convince a bank to loan me money for and income property..As I have never invested before I am dying to get into it, Just financially it looks dreadful. Please Please Please I am highly motivated for this and need HELP and ADVICE!! Email me or post on here. I am in the process of reading all the forums on here and looking things up, I want to get into this now! lol. Everyday that goes by that I do nothing kills me, mainly because I am a person that really is not afraid to do it. Now I have purchased a house by the skin of my teeth, and for more details about that if someone out there wants to personally write me and maybe school me Id appreciate it very much!
Anthony
The biggest excuses I hear are that they no nothing about REI, fair enough. Most of it you don't learn in school. Financing maybe. The other excuse is they think it takes a lot of money down, or they have been misinformed by someone that wasn't educated and had a bad experience. I thought it would take me a few years before I bought my house, but the more I got educated, the less it took. Well, a few months later I bought my first house. Now I am getting a little more educated and looking at some more to perhaps flip.
So many people decide to put it off and do it down the road, I didn't want to pay one more cent of someone elses mortgage.
Honestly, get educated on the subject. I had my dad to ask questions to and listened to some of his seminar cd's. I also read a book called Rich Dad, Poor Dad by Robert Kiosaki. The book isn't going to magically make you money, but it may change your way of thinking about money.
Papesmurf
You know Ive been educating myself, been reading books, and of course joining great forums like this and has definetly begun building my confidence on doing it. Just sometimes things happen, somethings alot of things happen all at once in your life that tries to discourage you. I have been hearing alot about the rich dad, poor dad book and on that note I may stop at the bookstore today before I get on the train, Maybe Im not seeing this whole investing process completely three dimensionally. Thank you very much for the ideas though!
my fear about re investing has to be that i might invest in a "lemon" and what ever exit strategy i have wont work. or if i buy into a rental income property i will encounter a hidden expense that i could not have foreseen no matter how much i analyze.
but my latest fear is that i am finding the good deals but because i have allowed my credit history to slip i wont find funding for them in a timely manner.
i know the deals i have been researching will make money for me even if i get a higher interest rate. i have even thought of assigning these deals to other investors for a fee (bird dogging) but i am still trying to build a list of serious investors who will act and are not just talk. (so if you are a serious investor looking for good properties let me know)
i also fear that the longer i wait to buy the worst my personal cash situation will get thus making it that much harder for me to eventually get myself in on a property.
Anthony,
I'm a n00b right now, too. I'm 27, have a mortgage on my current residence, but haven't made a purchase for investment yet and I work the rat race still, just like any other aspiring investor here. That's just so you know who you're hearing this from.
But it's two words that give me unwavering confidence: LIVE DELIBERATELY.
Ever since I was about 12, I've had a vision in my head about where I wanted to end up, what I wanted to do, what my lifestyle would be like, etc... Every major decision I make and have made up to this point is pretty much based on the result of one question: "Is this going to help me get there or not?" It's probably not surprising, then, that I'm a single guy who still works full time and lives well below his means. Heck, I still drive the same car I drove in high school. OK, so that one's a bit wierd, but it's a neat car and I enjoy it. No one said you shouldn't have fun along the way!
I'm learning what it takes to get started in this, and I'm working to get myself into a great position to begin. When thinking about my excuses for not yet starting (thread topic), I made two lists: reasons for not starting, and reasons why I should. The end result was 4 and 4. They cancel each other out. So I do nothing.
The main reason for not starting at this point is that I just don't know enough yet - how to find a place, how to finance it, what to do with it, how to market it, how to deal with the taxes, etc... There's a lot to know! Once I can answer the main questions from the beginning of the deal to the end of the deal, the tally will be 5 reasons to do it and 3 reasons to not. That's 2 more reasons to do it. I'll know what to do, and I'll do it because that's what will get me to where I want to be. I can't wait to get started!
great topic, gave me a kick in the you know what,and a little education.
figured out my problem...no real plan just a lotta hope...keep the advice coming!!!!