All Forum Posts by: Brian J Allen

It is hard to find a duplex in Worcester that cash flows.  It is even hard to find one that works as a mtg helper anymore.  There are some triplexes out there that make sense but most of them trade off market.

I haven’t come across many articles connecting the Dunning-Kruger effect to real estate, so I thought I’d share my thoughts.

In short, the Dunning-Kruger effect explains how, when you know very little about a subject, you tend to think you know a lot. As you learn more, you realize how much you don’t know. Eventually, with time and experience, your knowledge and confidence begin to align more realistically.

This concept is incredibly relevant to real estate investing.

I encounter this often: an investor seeks advice but quickly tells me how much they already know. In their mind, they just need some local knowledge and access to off-market properties. They’re convinced they can pick the right house and make a fortune. In the last five years, I’ve had close to 10 investor clients who either became real estate agents or had their spouses do so—because they were certain they already knew enough to handle it on their own.

From here, I’ve seen things go in two directions.

One path is overconfidence: they rush out, buy properties, and quickly get themselves into trouble. Their perception of their skills far outweighs their actual knowledge, leading to costly mistakes.

The other path is paralysis: they begin to realize how much they don’t know and become stuck, afraid to make a move. This "analysis paralysis" can prevent them from acting on opportunities out of fear of making the wrong decision.

I’ve experienced this journey myself. Five years ago, I thought I had all the answers. But around three years ago, I realized just how much I still had to learn. I started listening more to other agents and experienced investors, which has helped me grow tremendously. Today, I’m in a place where I can share my knowledge and experience with clients, while still valuing their input and perspectives.

The Dunning-Kruger effect reminds us that learning is a continuous process. In real estate, as in anything else, the more we grow, the more we realize there’s always more to know.

People often ask me why I choose to buy investment properties and other real estate. The answer is simple:

Labor is finite.

We can only work in the present, and once that time is gone, it’s gone for good. If you take a day off and don't earn, that day will never return, and neither will the money you could have made. We all have a limited amount of time to work, and there’s a constant push to maximize that time to earn as much as possible—so we can enjoy life beyond work.

Most people work to meet their immediate needs—food, clothing, and shelter. When they have a little extra money, they invest in things that don’t lose value right away. Durable goods like fridges, cars, and houses give us more control over our time and resources. A fridge keeps food fresh longer, a car saves time by reducing the need to walk everywhere, and buying a house ensures your money doesn’t simply expire like rent.

But as investors, we’re aiming for something bigger. We take the money we’ve earned and make it work for us. In real estate, this means buying properties that generate income—while we sleep—and (ideally) appreciate in value over time. Many people believe investing in real estate is a passive activity, but that's rarely the case. There’s always work involved.

Ultimately, what we’re trying to do is transform a finite resource—our time—into something that can last indefinitely. Real estate is one of the few investments that allows us to take today’s effort and turn it into long-term gains that can continue even when we're no longer actively working.

That’s why I buy investment properties. I’m not just thinking about today, but about building something that lasts far into the future.

@Robert Cardinal welcome to BP.  Im out all the time in worcester if you would like to meet up.  I was in 10 multis yesterday which is a typical Saturday.

I agree, the Government is NOT YOUR FRIEND

@Nathan Gesner. I tried to tell that to my Brother in Law when he bought 3 properties in Worcester County, MA in cash.  Then didn't take his money out at 3% interest, and 8 years later he still knows all the answers!

We are all aware that the GSE’s Fannie Mae and Freddie Mac buy a large share of mortgages. This is believed to help put liquidity into the home buying process by taking these loans off the books of banks and mtg companies.

Now Freddie has started to purchase 2nd mortgages. There are some guidelines in place that limit the total exposure to 80% LTV which is good. This probably provides an adequate level of protection for Freddie.

It’s a concept that is hard to swallow. Basically, Americans are still using their houses as piggy banks, and this just gives them another way of doing that.

The argument is that it is too expensive to do a cash-out refinance if you have a 3% fixed primary loan, and this will provide options.

What we fail to realize is that equity in one’s home is a hedge against many things like a downturn in the economy, or inflation. Taking that money out and anything that leads to more people using the equity from their homes and reduces the friction to that process is not good in the long run.

@Gino Barbaro. I do not let my clients do that.  I just ask the buyers what they are doing and why they purchase negative cash flow properties and that is their response.  And a lot of this is fueled by the money they saw others make when rates are low, and the thought that inflation will continue and they will never be able to own a house.  I agree, it is hard to pay the taxes in MA, and now our insurance costs are going up as well, so it is very difficult to make things work

@Gino Barbaro it is great to see you weighing in on this discussion.  I went to your event in Orlando a couple years ago and it was eye opening for me.  Worcester MA has been a hot market for the last 4 years or so, a lot because Boston is so expensive and the uptick of Work From Home.  The only "investors" that are buying are a) current investors who are growing their portfolios with "dollar cost averaging" and b) High Earning W2 buyers who want the depreciation and are able to just break even on a 15 yr mtg with 25% down.  The rest of the buyers are owner occupants or first time home buyers.  But with rents rising so fast, buying multifamily is the only way they can even touch a house.  As you said, " a 1920's home generating 6k a month is overpriced at 720k" but a 1920's SF home that is smaller than one of the 3 apartments in the multifamily on a similar size lot for $450k makes that $720k option more realistic.  The 5% down buyers are driving all types of property prices up.  The difference here is we are a secondary market and the overflow buyers from the primary market (Boston) see these prices as a STEAL since they can Work From Home.