Let’s get a little crazy, shall we?
No, not in the sense of “run naked through the woods” kind of crazy.
That didn’t turn out so good last time.
No — you came here looking for property investment tips, but I don’t want to give the standard “you make your money when you buy” or “be sure to use an investor friendly CPA” tips. There are plenty of posts for that.
I want to get a little more unconventional.
The 20 Best Books for Aspiring Real Estate Investors!
Here at BiggerPockets, we believe that self-education is one of the most critical parts of long-term success, in business and in life, of course. This list, compiled by the real estate experts at BiggerPockets, contains 20 of the best books to help you jumpstart your real estate career.
5 Property Investment Tips
The following five tips might seem a bit crazy, absurd, or flat-out wrong at first glance. However, I believe these property investment tips are some of the most important I’ve ever shared, so I encourage you to spend some time digging in.
I also would like to ask
one two quick favors. There are “social share” buttons all over this page, so if you enjoy this post, could you do me a solid and share this post on your favorite social network? And secondly – I need to beat my good buddy Scott with the most comments on a post, so I’d appreciate you leaving a comment at the bottom of this article! After all, he currently has the #1 and #2 most-commented posts on BiggerPockets for the past month!
We can’t let a kid from Vanderbilt beat me.
With that- let’s get to the tips! We’ll start with one that is a bit controversial…
1. Don’t Learn Too Much
Seriously, you’ll drive yourself crazy and never get anywhere.
You see — there are WAY too many things to learn about when buying an investment property.
Flipping. Renting. Landlording. Mortgages. Subject To. Lease Options.
My head already hurts.
Instead of trying to master everything, take the “Tim Ferriss” approach and learn just what you need to know in order to get your goal accomplished.
I promise — the rest you will learn along the way.
For example, let’s say you want to invest in small multifamily properties. Great! Then why the *$&# are you reading about wholesaling? Stop it. Now.
You don’t need to know everything to get started with something.
There will be plenty of time for learning those things later.
Now, what if you don’t know what you should learn?
Good question, and something a lot of people ask. After all, you don’t know what you don’t know, and everyone starts at zero.
If this is you. Focus on learning as much “general” information as possible until you decide what you should focus on. Then focus!
I recommend listening to as many episodes of The BiggerPockets Podcast as possible, not just because of the charm and good looks of the hosts (ahem…), but because of the variety of stories you will hear. You’ll learn from those who are just getting started, from those who have been investing for decades, from flippers, from wholesalers, from landlords, and from those with expertise on so many other niches and strategies. You’ll get real-world information about the different kinds of investments from those actually doing it everyday! If this doesn’t help you identify what niches or strategies you should focus on, nothing will.
In addition, I recommend reading through The BiggerPockets Ultimate Beginner’s Guide to Real Estate Investing, which you can read online right now.
Let’s move on to another unconventional property investment tip…
2. Most Property Investments Are Not Right for You
What is the best kind of property investment?
There isn’t one. But there are a lot of bad ones — for you.
There are millions and millions of properties, and the VAST majority are not right for you.
You (yes, you with the face. I’m talking to you!) have certain talents, skills, and gifts that no one else has. That’s right: you are an original. No one else on planet earth has the same combination of experiences and natural born abilities as you.
I don’t say this to make you feel good; if anything, it makes you kind of a weirdo.
However, that unique set of experiences and abilities make certain types of investing better or worse for you. As we talked about above in the first of my property investment tips, you need to focus on the ones that are right for you.
What is the right path?
Hard to say — I’m not you.
However, ask yourself these questions… it might help you decide:
- How much free time do you have?
- How much money do you have?
- Are you “handy?”
- Are you good at managing people/contractors?
- Do you like being involved in your investments?
- How quick do you need to build wealth?
- Are you looking to quit your job?
- What is the real estate market like in your area?
Then, as you learn more of the “general knowledge” about real estate, pay special attention to what niches or strategies work best for you, your goals, and your skills.
3. Having a Lot of Money Can Hurt You When Investing in Property
Want to know what scares me more than almost any other email I get?
When someone tells me “Hey Brandon, I’ve got $350,000 to invest, and I’m ready to jump in!”
Slow down there, shooter.
I’m happy that some people have money. They’ve probably worked hard — or were born into the right family. They are doing the right thing by wanting to grow that wealth. And real estate is a good way to do it.
When you have a lot of money, buying real estate is very easy. And that’s dangerous.
Real estate is a risky business when you are first starting out, and having money can make it even more so.
You see, when you are investing without a lot of money, you are forced to use other people’s money, and other people are usually better at being objective in a deal.
For example, let me paint a picture for you:
Let’s say you find a nice single family home you want to buy and rent out. The purchase price is $100,000. You really like the beautiful front porch. The kitchen is gorgeous. The property is in a little bit of a rough neighborhood, and the taxes are crazy high — but you just love the property. You know it will rent for around $600 per month and figure it will be a fairly stable investment. You take $100,000 you have in your bank and buy the property.
See anything wrong with this picture?
Most likely, this deal is not going to be a good investment. Had you run the numbers through the BiggerPocket Rental Property Calculator, you would have noticed one simple fact: The property loses money every month!
Now, if you were using other people’s money, they would have likely helped you figure this out before buying the property. Your hard money lender, bank loan, partner, or whoever else would have likely told you what was up. Or you simply would have done a better job analyzing the deal because there was more at risk than just your own cash.
Now, I’m not saying a person should not use a lot of cash to invest in real estate with. There are responsible ways to do it, and how much leverage you want to use is a personal decision. However, if you have a lot of cash, recognize that this is a liability, not an asset to your investing goals. If you do have a lot of cash, pretend you do not.
No matter how much cash you have, when analyzing deals, run the numbers like it’s your grandma’s money on the line.
If you currently don’t have a lot of cash to invest, you are in luck. BiggerPockets just released The Book on Investing in Real Estate with No (and Low) Money Down written by yours truly. You can pick it up on Amazon or check out “The Ultimate Package” by clicking here.
Okay, let’s move on to one of the most controversial tips on this list…
4. Plan on NOT Hitting Your Goals
Am I crazy?
But I think you’ll agree with me on this property investment tip once I explain myself.
Everyone knows that setting goals can help you achieve greater success. However, what most people don’t know is that setting goals too low will hold you back.
I’m currently reading The 10x Rule by Grant Cardone, as recommended by Anson Young on the 96th episode of the BiggerPockets Podcast. One of the key points in this book is this: if you set your goals 10x higher than you originally thought you could reach, you may not achieve the goal, but you’ll get much further than you had original planned for.
Mark Ferguson, a writer here on The BiggerPockets Blog, made mention of this phenomenon in his post, “Why Making Big Goals Will Make You More Successful.” Mark’s goal is to buy 100 single family homes — which may seem like a near impossible feat to most. However, what Mark understands is this: if he pushes hard to obtain those 100 homes but falls short and only obtains half of that… that’s still 50 houses! Had he set his goal at 10, all his actions would have worked to get him there and no higher.
By setting large, almost unattainable goals, you shift your mindset and begin looking at those problems in a new light and with a new plan of attack.
So what is your goal with real estate investing?
Seriously, what is it? Are you thinking of it right now?
I think you can do better. I think you can do 10x better. Can you? What would you need to shift in order to make this possible?
Sure, when you “plan to miss your goals,” you may be slightly disappointed you didn’t hit the high goal, but you’ll be far more successful than those who kept the bar low.
And I think that’s a great trade-off.
5. What Worked for Me Probably Won’t Work for You
If you’ve been around BiggerPockets for any length of time, you probably know a little about me.
I’m not saying this to toot my own horn; I’m just saying that I put out a lot of content here on BiggerPockets!
As such, you’ve probably read my articles, listened to my story on the BiggerPockets Podcast, read my new Book on Investing in Real Estate with No (and Low) Money Down, attended one of the popular BiggerPockets Webinars, or heard me offer advice at a local real estate meetup. I love to tell people what I’ve done, so you can learn what to do and what not to do. I hold nothing back and share every victory and failure in my career.
However, let me disappoint you:
Most of what has worked for me won’t work the same for you.
It’s not that I’m making up things or trying to deceive you. The stories I have told are 100% true, and I believe you can become a better investor through the words I say and write. However, I am not you.
There is no “instruction manual” when it comes to investing in real estate. You are not putting together Ikea furniture; you are building a real estate empire. And as such, no one is going to do your job for you. You could read every book on my “21 Best Real Estate Books” list, but they aren’t going to do your job for you, either.
Only you can
prevent forest fires change your life.
I can tell you all about how I bought a 5-plex for $90,000 and used a private loan from a fellow BiggerPockets member to finance it… but you are not going to find that same property and get that same loan. You live in a different area. You have different connections. You have different skills. This is a different time period. (Though you can learn about that property here.)
Instead of trying to copy exactly what I, Mark Ferguson, Ben Leybovich, Josh Dorkin, J. Scott, or any other BiggerPockets members talks about doing, focus on learning to apply the lessons to your life, so you can figure out your own solutions.
Can you buy a 5-plex for $90,000 in your area? Maybe not. But can you go out and find a smoking good deal on a multifamily and use a BiggerPockets member to supply the funding? Probably.
Do you see the difference?
It’s a shift in the way you think. Rather than look for the answers to the next test, look to actually learn the material, so you can handle any test.
More Property Investment Tips
That didn’t get too crazy, did it?
I hope you can see where I’m coming from with these investment tips. Real estate is not a “conventional” investment and, as such, we need some unconventional advice from time to time.
However, I only listed a few tips above. I would love if you would help me add to this list by leaving a comment below.
Do you have any tips you want add? Or let me know what your favorite tip was!
Onward and upward,