The #1 Thing to Know Before You Invest in Real Estate

by | BiggerPockets.com

Today I’m talking to all of you newbies out there about the number one thing you need to know before you invest in real estate.

The most important thing to know is this: you should focus on people first—before anything else. I speak to so many investors every single day it’s mind-boggling. And one common trend that I’ve seen among them is they all think they’re experts. You’re not an expert just because you did a Google search or checked out some statistics on a data platform or Zillow. Looking at the Estimate and speaking to an agent and having them send you a pro forma doesn’t make you an expert either.

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Forget the Statistics

You can’t focus on stats and demographics of a particular area. Forget about employment. Forget about capital appreciation projections. And forget about population. Honestly, the stats and demographics are not going to make you money. It’s the people. It’s the team on the ground who you are going to trust with your hard-earned money, who are going to be your eyes and ears—heart and soul—in that particular area. I don’t care if you’re investing in your own backyard. Someone will always know more than you do.

Related: 6 Aspects of Real Estate Investing You MUST Understand Before Your First Deal

With that in mind, surround yourself with people who are smarter than you. It’s something that I’m very good at doing. I quit school at the age of 14. I can hardly type. And I can hardly read. My math skills are shockingly poor. (Thank god for the calculator.) But I am smart enough to surround myself with people who are smarter than I am, and are doing the things that I can’t do (or don’t want to do).

Check out this book, Think and Grow Rich, by Napoleon Hill. There is a section where Henry Ford speaks about something really cool. He talks about pressing a button on his desk to summon any man who could answer any question that he needed to be answered. That has really stuck with me. I’ve always gone about my real estate endeavors by surrounding myself with amazing, smart, awesome people who I could trust. People who are going to be my eyes and ears and heart and soul in real estate and in other industries.

So flip the script here. Forget about the stats and demographics of a particular area. Focus on the people first. Establish trust and relationships with key people, no matter what strategy you’re looking at. Make sure to build trust and to build that relationship, and make sure it’s long-term. Don’t work with people who are after a one-night stand. Guys, there is no wham, bam, thank you, ma’am, here. Real estate is a long-term play. Plant a seed now, and reap the harvest later. You want to work with someone who is going to have your best interest at heart over five, ten, or 15 years. You don’t want to work with someone who jumps in bed immediately, does the deal, and then they’re off the next person (or the next victim).

It’s About the People

That is my advice to you. Really focus on the people first. Forget about the stats and demographics. I’m going to blow a little bit of wind up my own behind right now. I’m based in Toledo, and I am the biggest single-family home buyer in town. Investors talk to me about stats and demographics, about this particular region here, and I kind of laugh at it because I am the stats and demographics. Sorry, I am. We buy so many properties in this market that I am the stats and demographics. I do deals on a daily basis. I make the stats and demographics that they read online every single day. Yes, it may sound a little pompous, but that is the truth. So you should trust me and what I’m saying. That is what I believe in, and that’s the truth. You can take it or leave it.

Related: 7 Life-Changing Lessons I Wish I Knew as a Real Estate Newbie

And I’m going to end with this bit of advice: If you buy the best house on the best street in the best area that has the best capital growth projections but your property manager is incompetent or a cheat, you’re going to lose money.

Why? Because the property manager is going to steal your rent or they’re going to misplace it. OK? Now, flip the script. If you buy in C- or D-class warzone area but your property manager was born and bred in that particular region and he’s honest, he’ll deposit that rent right in your account.

So it really comes down to the people. That is my experience over the past six years. Focus on the people first because they are going to make or break your investment.

Do you agree or disagree?

I’d love to hear your opinions. Make sure to share them below!

About Author

Engelo Rumora

Engelo Rumora, the Real Estate Dingo and your favorite Australian, quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate all over the world and has bought, renovated, and sold over 500 properties. He is currently in the process of launching an ICO that will “Decentralize The Real Estate Industry.” He’s also known for giving houses away to people in need and his crazy videos on YouTube. His life’s mission is to be remembered as someone who gave it his all and gave it all away.

21 Comments

  1. Erik Whiting

    For someone who is barely literate and can’t do math…you write pretty coherantly. How was it your got thru “Think and Grow Rich” by Napoleon Hill? While it’s not exactly Shakespeare, I rate it at least an upper level high school text. Books on mp3/cd/tape?

    Btw, I agree with your premise that real estate investing is primarily a people business. Screening tenants, contractors, etc. can make or break an investor. Buying right too…you can have the best and smartest people bit if you buy wrong even the best people can only “polish a turd” so much….

  2. Costin I.

    Ok, so that’s not really rocket science – if you surround yourself with people smarter (“amazing, smart, awesome, trusty”) than you that “have your best interest at heart over […] years” (“be my eyes and ears and heart and soul in X”), you are bent on doing great (for sure better than on your own) in whatever domain.
    So, the 64K questions: How do you do that? How do you find those people, how do you get them to work with you, for you, for years?
    Now that would be a blog worth reading and striving to follow and apply.

      • Costin I.

        Yes, that is networking (very important) and socializing. But how do you get them to work with you, for you, for years? Especially when you are a newbie.

        Sure, you can build your dream team, but it will take you years. And by then, you’ll be a seasoned investor. And maybe then, you’ll have something substantial to offer to those “amazing, smart, awesome, trusty” people to work with you and/or for you.

        As a newbie, you have to be naive to think that dream team will materialize immediately, eager to serve you (unless you are oozing money left and right). That, or your reference level has to be pretty low and everybody is “amazing, smart, awesome”. In poker terms, If you have been in a game for a while, and you still don’t know who the patsy is, you’re the patsy.

        Most likely, you’ll have to look for “amazing, smart, awesome” people and join them, their team, and offer your services/work/time in the hope you’ll pick up some of their knowledge and skills. You’ll surround them for a good while before you’ll be able to surround yourself.

        • Engelo Rumora

          “Newbies” need to do it all themselves for a long time.

          Something must be built before others will want to be a part of it and continue building.

          Thanks

    • Engelo Rumora

      Thanks Costin,

      It’s a tough one to answer.

      Most folks stand for nothing so they fall for everything.

      A great vision should attract great people.

      There are many variables tho to retaining great people and I am yet to master that myself.

      Thanks and much success

  3. Nastasia Jenkins

    I think this is really a great post. People are the heart of any business, no matter the type. Everything is based around some sort of customer, some type of interaction. You want to know how to do it? Pick up the phone and start making calls! Build a relationship! And if you’re like me, send cookies 🙂

  4. Joe Scaparra

    I get the people business, no problem. It really doesn’t matter what business your in, to be successful you have to be in the people business. Yeah, its better if you can find smarter people than yourself, but your article leads one to believe there are people more interested in your welfare than yourself and that just isn’t the case.
    Especially for a newbie, I would say learn as much as you possible can about the environment, economics, and specific pros and cons of the type real estate you plan on pursuing. If possible, find a mentor who you trust that will help guide your way, but don’t be afraid to ask questions or challenge what you are being told.

  5. Rome Wells

    Indeed, it’s all about people… So I guess now all I have to do is figure out how to connect with the right people.

    Yet the reality of it all… knowing inner math behind the deal and connecting with other knowledgeable folks is the key.

  6. I totally agree. The people = the market. Give the people/market what they want and you will never be broke. There is no market without the people. People make you money, not the products or services. You can have a poor product, but with good marketing to people, you will thrive. Remember Novell Netware? Superior server product but poor marketing. Microsoft offered a weaker solution but was heavily marketed. Guess who won out? Microsoft.

  7. Numbers and data are as crucial as your people/team. It’s all important and all part of the process in investing. In my experience, with regards to the post, a great property manager will save you a great deal of difficulties and eliminate some stress by passing on some liability. Finding a great property manager and other team members (contractors, service professionals.. etc.) comes from work, of course, like everything else in the process. Once you have those people, as with running any business, treat them well/respectfully so that you can hopefully keep their help over the long haul.

  8. Nilofer Sickander

    Great advice Engelo.

    As a newbie, I felt that there is not much that I can contribute to or add value to people but I am slowly realising that its the small cumulative steps. Joining a local real estate meet-up, maybe even a construction/remodelling focussed meet up, offer to take an investor/realtor out for coffee/lunch, capitalize on church community and shaking more hands, joining local chamber of commerce etc. There are tonnes of options and ways to expand network but I had to ask myself how to make it happen as opposed to ” I’m new and I don’t know anything/anyone”

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