Does Education Paralyze Us? An Argument for Action in Real Estate

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Being in the real estate circle, I am always meeting new investors. One of the best things about new investors is their ability and willingness to learn the tricks of the real estate trade. If the investor learns the right way to do things and puts that knowledge to work, great things happen. On the other hand, if the investor receives bad advice and makes the wrong decisions, then the mistakes can sometimes be costly.

I recently met a new investor, and his story is one that I feel is important to share.

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Lots of Start Up Expenses

I met Harry at a local real estate club back in the summer. At the time, he was just starting out in real estate and had not done any deals yet. After chatting with him for a bit, I found out that he had spent a significant amount of money (over $20k) on a series of real estate courses. During those courses, he learned a ton of stuff about tax liens, setting up legal entities, creative financing, apartment investments, and even took a class on mobile home parks.

Since Harry knew that I am a CPA, our conversation naturally evolved into him asking me some tax questions regarding whether his education expenses would be tax deductible. After getting a general idea of his situation, I told him that one of the best suggestions I had for him at this time was to actually focus his attention on identifying the one direction that he will be taking in real estate.

Whether he was going to do flips, single family rentals, or mobile homes, it was important to define exactly what his next move was going to be. Rather than flying across the country to learn about all these different types of real estate investments and spending a ton of money in the process, I felt that it was time for him to put a stop to the learning and to kickstart the doing.

Putting the Brakes on Education?

I hate to say the words “time to stop learning,” because I actually feel that education is one of the most important things that we can do for our real estate businesses. Continuing education can often catapult us into the next phase of real estate investing. The best investors in the industry are lifelong learners.

Related: Where’s the Wealth in Real Estate Education?

I was attending a creative financing class one day, when I came across a nationally acclaimed real estate teacher who told me that even though he’s been in the industry for almost a half century, he always learns something new when he attends a class. It could be a class taught by another veteran investor or even a class taught by a fairly new investor, but even the smallest things that he learns can often help him to significantly grow his business.

In Harry’s example, however, I felt that his education was pulling him in too many directions. Instead of spending all of his time and money trying to learn everything he can about all these very different real estate products, he could redirect his resources into one specific market and one specific type of real estate. By having laser sharp focus on his next steps on the investment side, he would be one step closer to his immediate goal, which is actually making money in real estate!

Maximize Tax Benefits by “Doing”

By actually focusing in on what you can do to kickstart your investment activities, another potential benefit is making a nondeductible item tax deductible. For example, if Harry didn’t initiate offers or real estate related transactions, it would be hard for him to make an argument with the IRS that he had started his real estate business. On the other hand, if he made a lot of offers, started to negotiate deals, or worked with investors on his real estate, then he would have a much easier time justifying the write-off of his $20k education expenses.

At the end of the day, it’s not about the education itself, it’s about what you do with that knowledge.

Related: How to Start Wholesaling: Getting Past The Education and Into the Field

Some people may disagree with me for saying this (and I do expect that I will get some nasty comments below), but I am a firm believer that too much education can actually hurt you. In Harry’s example, had he only taken a class to learn about single family rentals, his only decision today may have been where to invest. However, because he learned so much about the various types of properties and different markets, the choices to him seem to be endless. The result is that it will be much harder for Harry to reach a decision.

The Perfect is the Enemy of the Good?

Ever hear the saying, “The Perfect is the Enemy of the Good”? I feel like this sums up the dilemma that Harry and a lot of other new investors that I meet face. Whether it is attending seminars, reading books, or blogging on BiggerPockets, the goal is not to find the “perfect” or “best” deal. The goal is to simply empower yourself with enough information and knowledge to be able to make good decisions with respect to your real estate investing business. The truth is that there may not be a “perfect” deal. If you wait for that deal to come along, then you may be letting lots of other “good” deals pass you by.

So here is some tough love: Stop hiding behind education, and start taking action to implement what you have already learned. After all, remember that $20k that Harry spent on the education classes for all those different types of real estate? Well, before spending another $20k into education, he may want to consider using that money to purchase a $100k rental property and actually generate some rental income instead.

Agree? Disagree?

Either way, I want to hear from you! Leave a comment below.

About Author

Amanda Han

Amanda Han of Keystone CPA is a tax strategist who specializes in creating cutting-edge tax saving strategies for real estate investors. As real estate investors herself, Amanda has an in-depth understanding of the various aspects of investing including taxation, self-directed investing, entity structuring, and money-raising.

27 Comments

  1. Luke said that sometimes nothing is a very cool hand.
    Some French guy who’s name escapes me right now said that perfection is the enemy of good.
    I say both things and add something which basically says to avoid the paralysis of analysis.
    Because in the end nothing matters except action and persistence.
    Always do Something – even if it’s wrong. Because doing nothing is almost always wrong.

    In general, most things have a good-enough requirement – few have the need for perfection, or even for excellence.

    stephen
    —————

  2. Lumi Ispas

    Hi Amanda,

    I agree with you. It is easy to not take action thinking that you need to understand how to analyze the deal a bit better, or thinking that you’ll find a better deal if you keep searching…

    As a Real Estate Broker I have to tell investors all the time that the “deal of the century” is on the market every day. It might be hidden between the other hundred of listings, however when you find it, just take action and things will fell in place and you’ll learn the details of the transaction faster than any book you’ll read.

    One of the first deals I bought few years ago, was because a client of mine refused to buy it thinking that it must be something else better in the market. I told him that if he is not buying it – I will, and I did. It is still giving me 20% a year return cash on cash. I wish all my deals will have this type of cash flow.

    Don’t think too much, act, and make sure you have a good RE attorney and broker in your team, that can cancel the deal if it is not turning to be as good as you thought. All you need if few exit strategies in the contract.

    Rarely there is a negative consequence in the deal if the CMAs were done correctly. And if the property is bought for cash flow, even if the price turns out to not be exceptional, while the cash flow is good, the Real Estate market is forgiving, and in time, the deal will become better and better.

  3. Donna Paget

    Hello Amanda
    Thank you for your insightful article. I am a fairly new investor, but I have done a few deals over several years. I am teacher (with the teacher’s notorious low salary!), so now I’m ready to amp up my real estate investing. I have a lot(!) of education for my teaching, but I’m just getting into the in’s and out’s of real estate. For me, the education is giving me confidence to make good decisions, or at least more educated decisions.

    I see some new investors in my area and they are still on the fence. Part of the education they’re NOT getting is going out there to see what a good (dare I say, Perfect?) deal looks like. I’ve been driving my realtor friends crazy, by sending them all sorts of houses to look at for me! For each one, I pick their brains about the property, the community, and prospects of selling or renting. I haven’t bought one, yet, but I’m getting closer as I am now able to put my book learning together with actually looking at properties and possibilities. My mentor tells me if I can’t find a deal, I should be looking to create a deal!
    Thanks for the tough love and encouraging us to get out and DO!

  4. Michael S.

    Amanda you have IMO some of the best articles on here! I totally agree, and I have fallen into the category of too much education. As a very conservative/introverted person it can be difficult not to overthink real estate investing. but you are so right in not looking for that perfect deal but rather a deal in general. I believe in a balance though. Like, waiting to get your finances in good shape as in trying to get stupid debt (car loans, credit cards, college) paid off, no need in putting your family at risk. waiting because your scared is silly and emotional. If the numbers are good go for it!

  5. I purchased my first duplex for approx. $20,000 and I guarantee I got an education. lol
    It was actually a great cashflowing rental for 15 years until I sold my lower end houses and upgraded via a tax deferred exchange. That small investment was the beginning of owning a large number of properties. It is funny how people think spending money on educational courses is not risky, but spending the same amount of money on a cash-flowing asset is too scary. The best way to learn to swim is to get into the water.

  6. Chad Carson

    AGREE! Well said, Amanda. I think your point about focusing your education is most important. People get duped into thinking more education is better (usually by people selling education). More is worse if it pulls you all over the place. More is worse if you’re overwhelmed and paralyzed by fear.

    I think simple, baby steps are the key at first. I also like real-world education to balance the books – i.e. studying your market, asking questions to people actually doing business, walking your neighborhoods, etc.

    Thanks for sharing.

  7. Margaret J.

    Amanda, that is an excellent article. I started with lots of education and it was paralyzing at first…. so much information and so much to know. One of the first sayings that I posted on my was “Analysis Paralysis”. I’ve been told I’m a risk taker and sure enough, I jumped in and bought my first REO in 2009. It was supposed to be a Fix n Flip, but I lost the sale due to a low appraisal and therefore learned another of many lessons on that property. I was nervous, but I knew I couldn’t lose because I could always turn it into a rental, and so I did. Every deal I’ve done since then has taught me some sort of lesson.

    I find that I still get sucked into more education and lots of times I have to stop myself from buying an attending more seminars. The more experienced I become, the more education makes sense and I retain what I learned. With that said, what I’m realizing now is that it can also be a distraction away from moving my business forward. I’m still working the full time job and time is the most precious commodity. So am I working on my business or taking an educational break? Because there’s not enough time to do both.

    Michelle, I so agree that the best way to swim is to get into the water. Something else I learned is that if you surround yourself with other professionals, you can always pull them into the deal to help. My last wholesale deal was not only a Lease Option, but also a probate deal and a little complicated. I brought in a partner to walk me through all the paperwork and now I feel like an expert. Experience is a great teacher.

  8. Amen Amanda! Once you have the basics, then you have to dive in and do as Michelle noted. It’s likely that as a beginner, your deals won’t be huge and mistakes will be mere bumps in the road. I would advocate for an iterative process – invest, learn what it is exactly that you don’t know in real-life real-estate situations, then go out and get the answers which may require further training. Basically use your investing to help you identify your must-fill knowledge gaps, then take focused training or seek out expertise to fill those gaps. In that way what you learn will be immediately applicable and valuable to you as an investor.

  9. Brian Gibbons

    Amanda, awesome! I refer many people to your site and blog posts.

    In 1988, I was a young ex Marine. I broke sales records in health insurance by going door to door exchanging cards with business owners. I just asked them if they were paying too much for for health insurance and would they like a quote.

    What does that have to do with real estate investing? Sales! People! Money! Emotion! Negotiation! Marketing!

    And…Frustration! Aggravation! Deals falling apart! Rude people! Liars! Lol Get it? Not for the meek!

    Real estate takes energy, focus, heart, dedication, synergy with other fields of business, team player attitude, people skills, you know EQ stuff, not IQ.

    Real estate is an entrepreneurial activity. And No Whining! there is risk!

    I think my friend @Rick Harmon should add to this.

  10. Frankie Woods

    Awesome article! As a fairly new investor, I couldn’t agree more that education can hinder one’s motivation to get started because they want to find the “perfect deal”. The problem with the perfect deal is that you may only find one in a lifetime. I’d much rather take several base hits to win the “wealth” game!

  11. Amanda,

    As always, great stuff from you! One of my favorite quotes, that hangs on the wall in my office, is that
    “Education without implementation is just entertainment”. It always amazes me when I get a new student because, almost without exception, they have spent a ton of money on the same education that is free here on BP. The simple reality is that they all already have all the tools they need to “be an investor”- they just aren’t aware of it! Thanks for driving that point home!

  12. jen kurtz

    I absolutely agree Amanda! I get very excited easily by opportunities. I am set on buy & hold SFHs and 2-4 unit MFHs, but I do find myself getting excited about wholesaling, tax liens, opening etsy stores, owning a cotton candy stand at fairs, “ooohh another shiny object!”

    I think its difficult for entrepreneur types to shut off that 6th sense that can see opportunities where others may not. I always remind myself to refer to my shorter list that I want to focus on and work on expert staus rather than the Jill of all trades, master of none!

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