Not Easy, But Worth it: The Top 7 Sacrifices Real Estate Investing Demands

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I get emails and calls all the time about people wanting advice on how to invest in real estate. It is sort of flattering, like I have some sort of insider knowledge of the markets or what property or type of asset is the best investment today. But I am always willing to share my knowledge. Even more interesting are the investors who say something like, “If you find a property that I can make a quick $50K on, call me. I have the money to invest.”

If I see a property with a $50K potential, it’s mine — and no one else’s if I can help it.

I get people who contact me with things like this. “I have a goal to have 100 rental properties within 10 years. I have $10K to invest now. How should I start?” I admire the goal setting, and I appreciate the fact that someone can think big. Unfortunately, if that is your way to riches in real estate, your bubble will soon be popped.

How I Bought, Rehabbed, Rented, Refinanced, and Repeated for 14 Rental Properties

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Do You Have What it Takes?

There are many different ways to invest in real estate. I personally do rentals and have done a flip. I have also sold real estate. All my rentals had to be 100% remodeled after I purchased them, so I know a lot about rehabbing. If you are thinking about any self-managed real estate, you also need to know a bit about rehabbing. Once you can rehab a property, the world of real estate can get very interesting and more financially rewarding.

If you have money, it is easier to invest in real estate. It does not mean your experience will be better, just easier. Buy a property across town, hire a property manager, and wait for the money to roll in. Or you may wait for the property manager to call and ask for a check to rehab your property (again). You may luck out for a year or two, but the proof will be when you have had to experience a property turn. If you do not know how to manage properties, you have no business hiring someone else to do it for you. Get some knowledge first, so you can manage the manager.

Related: The Rewards of Commitment: Why You Should Learn to Do Your Best With the Skills You Have

The Top 7 Sacrifices Real Estate Investing Demands

1. Living Below Your Means

To be a RE investor, you need to live below your means. You will need some capital to start; you do not get capital built up by spending all you make. You will need excess capacity on your credit line to be able to get a mortgage. No bank will loan money to someone who is already maxed out.

If you have enough money to make a cash purchase, you will be at the top of the list in terms of buying potential. The seller does not have to wait for any approvals, worry about appraisals, or deal with a mortgage company that freaks out about a place that is not habitable.

When I bought my first property, the down payment was over $80K, and I needed another $40K to fix it up to rent.

2. Committing Capital, Labor, or Both

There are no free lunches in real estate. You either need capital or labor. Or even better, both. The problem is how to get started. Most people do not have the fortitude or the money to be a real estate investor. It is a high risk game — with big rewards. Money makes the game easier, and labor helps preserve the capital. Doing you own labor also gives you knowledge for the next deal. If you are going to work anyway, why not work for yourself? If you are going to hire someone, why not hire yourself?

3. Spending Time & Effort on Education

BiggerPockets is great, but reading it alone will not get you there. Take some classes in RE education. In my area it takes about $1K in tuition to become a RE agent. It is money well spent, even if you do not actually get a license. If you do get a RE license, it will give you access to a commission when you buy a property.

4. Learning to Do the Work Yourself

For about the same amount of money as a real estate course, you can take classes that will gear you up to be a contractor. You do not actually need to get the license; you need to get the education. I hear from investors who are doing 10 flips a year: “You need to have a team.” Or: “I am too busy to do my own work; I can make more doing other things.” These are true statements, but not for someone starting out.

Once you have the knowledge, you can remodel your own properties to get experience. If this sounds like work, it is. If not, they would call it fun.

5. Using All the Time You Have Available

When was your last vacation? If you spent it in the Caribbean somewhere, you could have used that vacation money on a down payment instead. You could have used that time to take a class or do a remodel. If you called in sick from your real job because you needed a mental health day, you could have used that time to paint a kitchen rather than watch TV.

Take a week of vacation and work a side gig to get extra money. Save money by changing your own oil and mowing your own grass. Make money mowing your neighbor’s grass. If I added up all the 100+ hour work weeks I completed while working on my rentals, I would probably die from exhaustion. If you cannot take a week of vacation and work on improving your RE investor skills, you might want to try babysitting instead.

6. Being Willing to Make the Right Choice for Your Business

What kind of car do you drive? If you are a real estate investor, a truck will do you better than a BMW. Get a real truck, one that can carry a piece of sheetrock, a piece of plywood, or a countertop. Try that in a beamer. If you cannot drive a truck because you are too vain, stay out of the real estate game. A truck will say something like “half-ton” or better. I drive a F-350 diesel. If you have to have a BMW and cannot afford a truck, you might want to skip RE investing. Use your RE license to sell real estate, not invest in it.

Related: How to Do The Hardest Thing In Real Estate Investing

7. Spending Time at Investor Meetings

When was the last RE investor meeting you attended? Odds are, you do not attend them. You may not ever find a deal in one of those meetings, but there are contacts to be made. There are bird-doggers, people with money, people who have done things in real life. Some meetings have seminars to build knowledge; some meetings have games to develop mindsets. One common theme is that all the people attending want to learn more about real estate and are willing to do something to achieve it.

If you are not willing to put in the time and effort that is required, you can just wait for me to throw you a deal you can make a quick $50K on…

What have you been doing, or did you do, to get ready for your real estate investing career? What did you find was more important, labor or capital?

Leave a comment, and let’s discuss!

About Author

Eric D.

Eric is a 55 year old, soon to be former, computer professional. He started several years ago to replace his “work income”, with other alternate streams. He is well on his way to retirement at age 56, and is currently making more money at extracurricular activities, than he is working at his full time job. Whether that is Financially Independent, or just old fashioned entrepreneurial spirit, is in the eyes of the beholder.

63 Comments

  1. Brett Pedigo

    Great article. It makes RE a little more daunting for me. I am trying the save capital and work as many hours at my job. I just started a little late and am the sole provider for my family in the LA market! My plan is to buy turnkey (for the most part) out of state SFR to triplex and have a property manager help take care of it from afar. I know this sounds risky. I can’t be the only one starting late in life in a tough market! Josh always says there are opportunities within 2 hours from any market.. would it be wiser to adjust my plan a bit? When there’s a will, there’s a way!

    • David Dachtera

      Hi, Brett,

      Any reason you’re looking to be an absentee owner (“out of state SFR to triplex and have a property manager help take care of it from afar”)? Could you do better with local properties and management companies?

      Since money is apparently a challenge for you (I’m in the same boat!), focus on learning how to find private lenders. That can get you going faster than trying to “save” your way to your goals. Just as an example, one of the people at my local investing community approached me with $75K to invest two weeks ago.

      My $0.02…

    • Susan Maneck

      I started out late. I just turned 59 and started buying real estate during the recession. When my retirement funds took a nose dive I recognized the need to diversify beyond the mutual funds that made up my portfolio. Mind you I poured every dime I could get into my retirement funds, but when the market recovered I switched a portion of it over into a solo401K. I used it to buy my last two houses. Doing your own rehab work is a prohibited transaction within a solo401K or IRA and I’m not handy anyhow. This old dog is not going to learn these kinds of new tricks in any case. Real Estate education is fine but I’m staying away from hammers and nails. Fortunately real estate is ridiculously cheap in Mississippi and so is labor. I’ve been buying houses at 30-35K , spending maybe 5K rehabbing it. I don’t buy houses that need much more than this and I could probably get by with rehabbing it for less, but I’m proud of my properties and I have a reputation for renting nice homes.
      If you are serious about making money on real estate, have you thought about leaving California? I bought my first house in 2012 with my mother investing 15K and the rest on my credit cards. My rents are now coming close to replacing my salary. Retirement is in sight, yay.

  2. jeff pollack

    All great stuff! Though I’m not in total agreement with ‘5. Using all the time you have available.’ I believe in taking some time to smell the roses (vacation, mental day off, etc) rather than always working toward some future payoff that won’t happen if I get hit by a bus tomorrow.

    I also don’t spend my time doing minimum wage work (e.g. changing my own oil, mowing my own grass…let alone my neighbor’s) in order to earn money to support my real estate investing. To me its about best and highest use of my time, which means finding motivated sellers and closing deals. I strive to outsource everything else.

    • Eric D.

      Thank you for the comment!

      Once you are established, you can outsource the lower priced work. When you do not even have one property, and not enough money to buy the first one, you have to get capital somewhere.

      Most new investors spend too much time looking for the $50K win in the MLS. They are better off with lottery tickets. By the time a property gets to the MLS the first and easy money has already been made on it.

    • >>I strive to outsource everything else.

      There is a big problem with this – you won’t learn how things are done and what things should cost.

      We’re picking up a deal at the moment. A very experienced investor walked away from a $35k deal. House needed too much work he decided. It needed rewiring (according to his electrician as it was ready to burn down) ($8k), the HVAC was shot ($5k), the roof needed replacing ($6k), and it needed a septic to sewer conversion ($8k).

      We saw the prices he laid out, and it was obvious, that despite his considerable experience, that his contractors are screwing the guy over – not for any other reason than he doesn’t really understand the job involved.

      We were offered the house and bought it off our own inspection. Our contractors were eventually called in, HVAC needed $300 service (low on gas), the electrician needed $1k to bring the house up to code, the roofing guy couldn’t find a problem, and the septic sewer conversion is not $8,000 when the parts (tubing) for the job cost less than $200 and the job itself is 2 guys working 4 hours (AT MOST). Seriously “washer needs to be hooked up” – that’s $45 in parts and about 15 extra minutes.

      So despite being very experienced, but having no hand in these jobs and subbing everything out, he let a deal walk. Heaven knows how much money he overpays his contractors for other work.

      I watched an HVAC unit die last week at another house. I called our contractor – burned out fuse. $70. Next time, I’ll check the 15c fuse myself before calling him out. A little bit of knowledge goes a long way.

      • Understanding the rehab process is key. If I was a lot more wealthy, I might hire out more. When you are a new investor, anytime you can invest, whether it be in education or physical work, it beats the money you make sitting on the couch. And far too many newbies look for deals for years, and never ever land one.

        Those newbies should just jump in, and donate some labor to their own investment to learn. Losing your labor in a bad deal hurts, but losing your money hurts more. And when a good deal turns great due to the minimal labor, it’s real nice.

        I did one deal in 2013/14. ~80 hours of work and pulled in a decent sum, over ~$25K. Hiring it out might have taken 20% of that.

  3. Nice Eric,
    This is easier to read than to do. Save yourself a lot of extra work and follow Eric’s advise. A lot of times people don’t understand how much time, money, and sweat it takes in rentals. They maybe looking at the glory instead of the work required. Glory without work is “Puff the magic dragon.”

    • Eric D.

      Thank you for the comment!

      It looks easy after you are established. Even easier when you are selling for big bucks. Just like when I owned a tavern. On Saturday night everyone thought I was making a killing. But they were never there Monday through Thursday…

      No pain, no gain. That’s true in most of life.

  4. karen rittenhouse

    What’s more important? Capital. Hands down.

    We can only get 24 hours each day which is why we end up hiring out as much of the work as we can.

    Capital? It doesn’t matter how much you have, it will not be enough. In this business, you can always spend more than you can get so begin getting as much as you can and never never never stop obtaining capital.

    Thanks, Eric, for your post.

    • Eric D.

      Thank you for the comment!

      Capital is most important. Wen you are looking for the first deal, you usually have more time than money. That is the opportunity to raise funds and learn how to save money when you get a deal.

      Hiring out everything is a sure fire way to lose money as a newbie. Especially if it was not a great deal to begin with.

    • Eric D.

      Thank you for the comment!

      Hard work will pay off. Real estate i snot a game for the lazy. My original title of this article was “Are you too lazy to be a Real Estate Investor”. BP changed it to be better SEO and politically correct. (Thanks BP for keeping me on track.)

  5. Julia Rowling

    Hi Eric! Yes, yes, yes! Let’s see, 1) I have always lived below my means and have always had money in the bank. 2) I am about to sell my first property (which I paid cash for and which has appreciated 10x in the past 18 years) so I will have capital to invest; I also have experience rehabbing so I plan to put in a lot of my own labor into my next investments; 3) am going to take a real estate sales course and maybe get my license if that seems worthwhile; 4) see 2, pretty much the same point; 5) OK, here I haven’t quite lived up…though I haven’t taken a vacation in I don’t know how many years (probably over 10), that’s mainly because I’ve been underemployed and don’t want to spend the money. I try to spend some time every day increasing my knowledge, but I also try to find a good work/life balance. I don’t want to spend all my “good” years killing myself with work… 6) I haven’t had a car for the last two years, but my husband/partner recently purchased a small truck, considering it the most practical choice for a real estate investing; 7) I plan to attend as many real estate meetings as I can.
    Yes, some of these items fall into the “future plans” category, but that’s because I’m stuck outside of the country and there’s only so much I can do until I get back to the US.
    Thanks for the post – it gives me hope I’m on the right track!!

  6. This is a great article and my hubby and I have pretty much done most, if not all of these things. When we got married, we got an apartment and then we got ourselves a cheap little condo after awhile and everyone asked us, “Why aren’t you buying a house?” Bu our cheap little condo enabled us to have the capital to invest in four small quadraplexes or 16 units total! (By the way, I paid off the cheap little condo in five years… not bad, huh?!?) We put in all of the “blood, sweat, and tears” that it takes to run rental property (including managing the buildings ourselves for many years) and just sold them last summer. We recently completed our 1031 exchange into much more passive real estate investment (triple net lease properties, also known as two dollar stores!) And we are still living in our cheap little condo even after purchasing two dollar stores! Hmmm… maybe it’s time to start looking for a house! Nah, I love living so inexpensively and having money to do other things, like travel if we want to! Everyone, real estate is worth EVERYTHING you need to do to make it work! It sure beats (at leas to me) a 9-to-5 job (been there, done that, thank you very much!)

  7. Jeff S.

    Hey Eric, enjoy your grit. Have spent my share of weekends and after work evenings doing clean-up and paint to get a quick turnaround. It is a PITA lots of times to find the handymen and cleaning people so just jumping in and doing it fast works well.

    I am retired now and while don’t have the units like you do will still jump in and help work a rehab.

    The time to retire is when you know you can continue to grow w/o the w2. You don’t always recognize you can retire from the man but if you can buy and rehab w/o that job it is a good sign you are able.

    I did a rehab gaining 50k equity with 4 months of hard work. Then I did one and got 50k equity with 20 days of easy work. Probably wouldn’t have recognized the easy kill w/o the labor intensive work out.

    • Eric D.

      Thank you for the comment!

      I find that handymen are too expensive and many are not that handy. Some can paint and fix a wall. Some can hang a light fixture. Finding one that can also wire a three-way switch and replace a shower valve is rare.

      It’s a great skill to have and give a person a sense of accomplishment too. I am retiring my FT job in 2016.

  8. Scott Trench

    Eric – thanks for this awesome post! I love all seven points, but I make the personal choice to focus most heavily on number 1 – it seems like everything else is easier when you live below your means and control your spending!

  9. Jonathan Key

    What a great article Eric! It sounds like you started in the same place I am now and have ended up where I want to be in 10 years! Thanks for being an inspiration to those of use just starting out. I look forward to reading more from you here on BP!

  10. You nailed it!, I started in real estate investing at age 27 and was able to retired at 45 from my full time job! I managed all of my property in which I am responsible for 20 families, and that is the way I see it!

  11. The home reno shows make remodelling look so easy. From the very little reno experience I have done to help out my fiance (he’s super handy), it is a LOT of hard work. My fiance and his brothers own a rental property together and have invested a lot of time, money and labour in it. He spends a lot of his spare time doing work on the house. There will be times where I’ll barely see him (and we live together), due to fixing up the rental property and dealing with any possible BS from the tenants.

    • Eric D.

      Thank you for the comment!

      It reminds me of my rehabs. Every Saturday and Sunday, I met a guy at 8:00 AM that I worked with. He was a pretty good laborer, and we both worked until ~5:000 PM. Then he left, and I continued past 8:00 Pm. And every night during the week too.

      No pain, no gain.

  12. What are your thoughts on some of the crowd-funding platforms popping up in the real estate investing area?

    I personally like more passive investments that don’t require a lot of work on my end, so maybe that makes me lazy. I just feel like I have a higher and better use of my time making more money to fund my investments.

    Cheers!

    • Eric D.

      Thank you for the comment!

      Crowd funding can be OK, but you have to wonder why people cannot get a loan. The higher credit score people should be less risk. There may be real estate people with too many other loans that do not qualify for new loans that may be OK too.

      I think Crowd funding is a higher risk than RE, and you have not as much control over the risk. Spread the loan amount across many people, and only go for higher quality applicants.

  13. This is great advice.

    Like anything else, it takes hard work to make something happen. I have a family member who bought a fixer upper to flip and learned just how much hard work it takes. She eventually sold for a decent profit but swore she’d never do it again. I’m sure it would have gotten easier though.

    In your experience, how many people take the RE courses and forego the license?

    Thanks,
    Laura Beth

  14. Bart H.

    Eric,
    Thanks for sharing this information. I’m new to RE investing and am also in the computer field 22+ years. I started looking for another career to go into years ago and bumped into RE investing as a great fit for me. No sugar coating in what you said is expected as an RE investor. I heard that ‘success’ only comes before ‘work’ in the dictionary. In real life, its the opposite. You have to put in the work. You just cannot be an arm-chair investor, you’ve got to put in some work.

  15. Candis Robinson

    “When you do not even have one property, and not enough money to buy the first one, you have to get capital somewhere.”

    Can we talk about the above a little bit? For a person who may not be able (or rather it is less desirable) to house hack (has children/size of family), is working class (meaning little disposable income) what strategies work to get the capital? How does one get out of that cycle?And how much capital does one need to truly get started? Is 50k not enough to get started? I think when people say “hey, I have 50k let me know if you have any deals” what they really mean is ” I’ve finally saved some coin! Praise God!!! Can you counsel me on how to go from a renting consumer to an investing creator? I’ve read & researched, but now that I have the money I can’t figure out how to cash flow with what I’m encountering”. At least that is what I’d be saying.

    There was an interesting article I read about buying an investment property before buying your own home for living purposes. It brought forth some interesting points- since many 1st time investors may be renters and buying a home to live in obviously doesn’t cash flow for them (unless house hacking), so they feel stuck/don’t know where to go next. Especially those who are “late in the game” or have young & growing families.

    Myself, I’ve come up with a solution for my family, however it is atypical so I have no idea if it would work. I’m currently creating basically a business plan for my idea. Been trying to gain access to great minds and prospective team members to make it happen and make sure my plan is realistic & profitable. But yeah, it’s no cake walk. Especially, networking with zero investment experience. It’s discouraging to read the even once you have capital, it doesn’t make the barrier to entry any lower.

    • Thank you for reading.

      Actually, the investor had the money, way over $50K, and wanted to make a “quick $50K”.

      If I was just starting, I would get a duplex, or even rent a room in my own home. It lets you gain more cash and not have to dish out too much.

      Or buy a dump, live in it while you fix it up, and sell after two years. Do it time and time again.

  16. Eric Duhaime

    Great artical Eric! This really hits home because I often wonder if anyone else in the beginning spends countless hours at their property like myself trying to master every trade to save money for the next rental purchase… This write up shows i am NOT alone…..

  17. I appreciate the articles that try to give the sanity check. I\’m new to RE as a goal but I get sick of reading books or articles that are unrealistic or simply refer to RE investing as a way to secure your retirement. This is a complex and labor-intensive endeavor; and all the more rewarding for it.

  18. Robert Christiansen

    This is one of the best articles I have seen on BP. You have confirmed what I have learned from my study and my initial efforts in RE investing. I am an oldie in life but a newbie in RE investing. So far I have not bought a single property but I have bid and lost on a couple. Not a problem–they were great deals but one of them I lost because funds I had turned out not to be as liquid as I thought. So I am taking a few months off (from looking to purchase) to learn more and to be sure I am in a strong financial position.
    Also, I am somewhat handy but not experienced in all areas needed to rehab a home. Your comment (“you can take classes that will gear you up to be a contractor”) in item 4 interests me. Could you or anyone else reading give me advice on where such classes might be available? That is: community colleges, trade schools, “we train you” businesses, etc.). I have always held that “experience is the best teacher” but I am not afraid to get a head start from teachers who know their stuff.

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