Do You Have What it Takes to Be a Successful Investor?

by | BiggerPockets.com

Like a lot of people, I once held a stereotype of what I thought investors were like: That they were predominantly wealthy, 60+ years old, and male. It’s unfortunate to report that after being two years in this business, accumulating my own investments, and meeting a lot of interesting people, that stereotype hasn’t been completely abolished in my mind. The good news is there’s nothing about age, wealth, and gender that qualifies someone to be an investor and disqualifies anyone else from also being an investor. So, let’s look at some of the assumptions about investors and see what shakes out.

They’re Male

Males make up 75 percent of the investor pool, while females make up 25 percent. This is a pretty crazy statistic considering women make 85 percent of consumer decisions and 91 percent of home-purchasing decisions. So why do they drop out when it comes to investing? I think it has to do with being risk adverse. And their inability to self-identify may lead to self-exclusion. This is frustrating and unfortunate, since that stat about making 91 percent of home-purchase decisions would suggest females are more qualified to invest than their male peers. But that’s not how it shakes out. If you are female and are considering investing but you are hesitant, I challenge you to question your assumptions by asking yourself: Why can’t I invest? What makes me think I’m not ready to invest? Is my money worth less than someone else’s? Are most older males that I know smarter than me? (You might smirk at that last one, but seriously — ask yourself that, because the stereotype is a loaded assumption.)

Related: A Beginner’s Introduction to Real Estate Investing

They Already Own a Home

It makes sense that you would assume you need to own a home first before investing, and 80 percent of investors do. Part of this is likely related to the fact that Home Equity Lines of Credit (HELOCs)— a.k.a. leveraging your existing property to get a down payment for your next property — are tied to your primary residence. That makes investing easier, but it’s by no means a requirement. The big difference when acquiring an investment verse a home is that an investment requires you put down 20 percent of the property’s value. Whereas a home requires 5 percent. And that’s built in because if the economy goes south, people are much more likely to protect their home than they are an investment. But let me repeat this: For an investment, have to put 20 percent down, and prior home ownership does not matter.

They’re Country-Club Rich

About 45 percent of investors make $125,000 or more a year. The other 55 percent make less than that. Approximately 30 percent make $75,000 or less. This is now more feasible. And here’s another thing: You don’t have to go at it alone. You can partner with friends who have a few grand here and there to leverage your way into acquiring investments.

Related: Am I Missing Something, or Is Real Estate Investing Really Not That Hard?

The Truth

The title of this article was a trick, because YOU HAVE WHAT IT TAKES. Assuming you have a job, you are interested in wealth accumulation, and you can do a little research, you have what it takes! But if you want to do more research and learn more about investing, check out two of my other articles (3 Reasons Aspiring Investors Never Land a Deal and 5 Ways to Know You’re Not Ready to Invest in Real Estate). Those can help you determine if you’re there yet or if there are things you can do to help get you there. And, finally, if you have questions, reach out. Ask me. This site is for helping others and I love engaging with each of you.

What other assumptions do you have about investors?

Share them below so we can break them down!

About Author

Erin Spradlin

Erin Spradlin co-owns James Carlson Real Estate. She loves working with first-time homebuyers for their enthusiasm and excitement, and loves working with investors because she’s a fellow spreadsheet nerd. She and her husband own three properties in metro Denver and are currently in the process of acquiring a duplex in Colorado Springs. You can find Erin’s blogs here: https://www.biggerpockets.com/renewsblog/author/erinspradlin/ and her airbnb video series here: https://www.youtube.com/playlist?list=PLgSUZKLPRI9tK3Vd-qpH3Sk2Rh-_pIrNN.

4 Comments

  1. Michael P. Lindekugel

    caveat…..using a HELOC to acquire an investment property caused many primary residence foreclosures during the recession. Since the HELOC debt was not used to acquire or improve the primary residence the forgiven debt in a non retention or retention loss mitigation solution is economic event under the Internal Revenue Code and potentially taxable income.

    • Erin Spradlin

      I think this comment is unnecessarily scary. Like all investments, it’s important to be smart about what you are doing, but HELOCs are basically the number one way people get into investing. It’s why so many people acquire wealth through real estate is leveraging the asset they already have to acquire more assets (it’s how we’ve done it.) In a worst case scenario, you can get rid of your investment and stay in your primary (my fear was that it would impact my primary, but for the most part you are fine.) Obviously, it’s important to be smart and measured- but you should also take advantage of tools that can help you get ahead- like a HELOC.

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