Before the internet, real estate investors had to rely exclusively on advice from investment books that often were written decades ago. The strategies and advice may have been effective when they were originally written, but they would not work in a drastically different economic cycle. For instance, if you read a book written in the 1980s or 1990s that told you to purchase investment real estate with no money down, you would find it impossible to apply that same strategy a decade later when investment loan guidelines had changed substantially.
Furthermore and most importantly, the advice in those books was a one-way broadcast. The author wrote what he wrote, and there was no way for you to comment, get any questions answered, get feedback, or start a discussion with people around the country who had already achieved (or failed to achieve) the results you were after.
Fast forward to today.
The internet brought with it a wide democratization of real estate investing information. Let’s take BiggerPockets — the leader in the space — as an example. On this platform, you can not only access content from experts in various investing niches, but you can also comment on those ideas and get your questions answered by the author or other readers, as well as by the community as a whole on the Forums. In addition, you can “vet” different strategies with people who have played the game before and can share the results with you.
This is a wonderful thing — for the most part.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
Options Lead to Inaction
As psychologist Barry Schwarz wrote in his influential book The Paradox of Choice, instead of increasing our sense of well-being, an abundance of choice is increasing our levels of anxiety and wasted time: “Whether your choice comes down to trivial things like breakfast cereal or important things like investing for retirement, an overwhelming amount of options can lead to complete lack of action.”
In real estate investing, the idea that despite all the choices at your disposal, the perfect strategy is just around the corner can lead to paralysis by analysis. That is, you are so busy researching that you never actually execute on any of those ideas. The cost of this inaction to the average investor can be devastating. If you substitute a decade of execution with a decade of research, worry, doubt, and more research, it can cost you over a million dollars in net worth and six figures in passive income.
But although paralysis by analysis happens to some, it doesn’t happen to the majority of you. The condition that is most likely to derail your path to financial independence is what I like to call Shiny Strategy Syndrome (SSS).
Shiny Strategy Syndrome
The plot usually takes the following path. Let’s say you are a successful professional with good income whose goal is to reach financial independence through real estate investing. After researching different strategies, you come to the conclusion that a long-term investment strategy focused on quality assets that you methodically pay off over the next 10-15 years is the right fit for you. So you get a game plan together and start executing.
A year later, you own 2-3 cash flowing properties, and everything is going according to plan.
Then one morning, you read an article about someone who’s killing it by flipping houses. Next thing you know, your long term plan now seems like a slow motion plan, and you want to get on the flipping fast lane. Although that strategy isn’t a good fit for your personality or risk tolerance, you convince yourself that your duty is to make your money work as hard as it can. So not only is flipping the right thing to do, it’s the moral thing to do.
Fast forward a year, and you come to the realization that the strategy was not a good fit for your long-term goals. You may have made a little money, but you couldn’t sleep at night. It was something about your risk tolerance not aligning well. Time to get back on track with your long-term plan.
Then one day, you listen to a podcast episode that has you convinced that quality assets aren’t the way to go. You can accomplish your goals so much faster if you invest in mobile homes or cheap houses in Detroit or turnkey properties with 20 percent returns or…
By now, you see where I’m going with this.
EVERY Strategy Works
Here’s the truth that nobody ever tells you: EVERY strategy works!
Any of those strategies you read about — long term investing, flipping, mobile home parks, $30k homes in Detroit, turnkey properties, new construction properties, multifamily, subject to, owner financing land — they all work, and they’re all effective — for someone. You name it, and I can show you someone making serious money with it. In some cases (cheap homes in Rust Belt), the people making the money are the people selling you the properties, but that’s beside the point.
Now, here’s another fact you’ve probably never heard: While all strategies work for someone, most of them won’t work for your goals.
It is critical that you get very clear about what it is you are trying to accomplish and who you are as an investor. If you want to get rich in 90 days, a long-term strategy is not going to work for you. If you are a conservative investor, flipping homes will drive you crazy. The strategy you use is just a tool — and like most tools, they’re good at performing a specific job. The trick is to figure out what the job is you need to get done so you can select the appropriate tool for it. And once you figure it out, the secret is to stick with the execution despite the tempting siren calls of the next shiny strategy that claims to solve your problems.
Here’s a rough illustration of what strategy hopping can do to a long-term investor’s quest for financial independence:
In conclusion, the democratization of information spurred on by the internet has been incredible for the real estate investing space. Not only do you have access to the ideas of an incredible brain trust from all over the world, but now you can also get valuable feedback and experiences from the community as well.
You should take advantage of all these new ideas delivered through blog posts, podcasts, and webinars to educate yourself about the pros and cons of every strategy.
But once you get clear about what you’re trying to accomplish and your investor profile, pick the right tool for the job and see it through to the end. Avoid Shiny Strategy Syndrome; that will strand you in the “desert” and cost you valuable time and money.
Investors: Have you ever been plagued by Shiny Strategy Syndrome? What strategies help you keep your eyes on the prize?
Let me know with a comment!