What Does it Take to Achieve the Dream of Full Time Real Estate Investor?
After 45 + years as a real estate investor, broker, lender, fund manager and syndicator, I’ve become aware that the “dream” of many investors and investor “hopefuls” is to be able to generate enough cash flow to live off their real estate holdings and accumulate enough wealth to make “work” optional. While this is a great and highly motivating goal, most people are either clueless or incorrect in their belief as to what is required to obtain this “lifestyle”.
Understanding of the “how to” get there is further obscured by the misleading, and often patently false “pathways” sold by real estate educational MARKETING companies as workshops, upsold to association memberships, upsold to mentorships. These marketers would have the novice investor believe that the narrow focused “education” they provide combined with the “holy grail” formula (wholesaling, subject to, flipping, lease option, discounted note purchase, etc.) is most, if not all, anyone needs to become “independent” and successful, usually by month 12. My best guess is their failure rate is more than 98%.
The truth is not as “convenient”. What is required to obtain real estate investing independence is the following
1 - TRUE education in real estate (1) principles, (2) law, (3) finance. Without a firm base and working familiarity with these three areas the investor will not have the knowledge to analyze, negotiate and close advantageous real estate transactions.
2- Experience - the first few deals are likely to be smaller, harder, with more “surprises” and not as profitable as the investor imagined. As the investor gains experience, they are not only able to more successfully foresee the “bumps” along the way, able to handle recessions, temporary negative cash flow, unforeseen capital expenditures without panicking, but will also recognize the opportunities necessary to turn a loss into a break even. A break even into a profit, and a profit into a windfall.
3- Capital - I used to state this as access to capital, back when the rules were loser, the regulations less onerous, and information less readily available. In those days it was possible to locate and tie up a “killer” deal, and close the transaction with absolutely zero of the investors own money. For those interested, a combination of mortgages with no “due on sale” clause, mortgage companies loose due diligence, and title insurers willingness to “turn a blind eye” to practices that wouldn’t pass scrutiny now, resulted in tactics like the “second mortgage crank” which not only allowed investors to purchase properties with no money out of pocket but allowed investors to actually walk away from closing with “cash in their pocket”. My experience in the last 15 years is that except in the most extreme circumstances, an investor is going to need some of their own capital to make a deal fly.
So, how much time does it take to obtain the knowledge, experience and capital to begin makimg a serious movement toward this “dream”. Well, of course it depends on the individual circumstances, the amount of time comitted and the capital available. In my case I began a “serious” real estate education and experience in 1979 ; by mid 1981 I was able to successfully conclude what for me, at the time, was my first “major” purchase. It was the purchase that jump started my real estate investing career by providing a high consistent cash flow, and a large capital gain 4 years later. But without the experience, knowledge and capital (actually CREDIT CAPACITY) I accumulated the prior 2 + years, this transaction would not have been possible.
