Ask yourself honestly and sincerely if who is giving you that advice is really using their own investment advice to produce their money through real estate. If the answer is “not particularly,” then you better take that advice with a grain of salt.It’s really important that you learn to take your advice from proven investors.
Whose advice should I be leery of?
Your family and friends and even more qualified people like realtors and lawyers are going to give you unsolicited advice that can be chalk full of things that are not correct. In all seriousness, if they knew all the real life answers to what worked and didn’t work in real estate investing, they’d already be using that advice to become financially free. Your mom loves you and she wants what’s best for you so her life advice is very useful to you but her real estate advice can be completely unfounded. If you could only ask one of them your real estate question, would you ask Donald Trump or your mom for real estate advice? Who out of the two of them do you imagine would give you better real estate advice? My mom is an incredible woman but her real estate advice isn’t something you’d pay money for.
Unsolicited advice is usually worth what you pay for it. Having said that, you’re going to have to find a better source for your investment advice.
The Honest FAQ Told by a Real Investor
Q: Can people actually get rich from investing in real estate?
A: Ahh… Everyone wants to know can you actually make money from real estate investing? There’s different people who get incredibly wealthy from buying and selling stocks and some people who even lose money. For the people who don’t become wealth, is it that stocks can’t make you rich or that men and women using them don’t all have the right knowledge and skills?
It’s ironic because every man is a “self made man,” it’s just only the wealthy who admit to it. The rich are what they are because they have applied knowledge that works. Studies consistently conclude that over 90% of wealthy persons have become wealthy through real estate. Does it really work? It should be obvious from the stats. In fact, you’re over 9 times more likely to become wealthy from real estate than every other business combined.
Q: What are the right and wrong techniques?
A: Unfortunately, I can’t give you a “one size fits all” answer to that question. In the United States, short sales and lease-purchases are great techniques to begin towards producing sizeable cash reserves. In other parts of the world with more difficult banking laws, you may need more complete knowledge on how to start private capital funds and other similar business ventures to get around requiring out of pocket funds.
Q: How much cash do I have to have to start?
A: Donald Trump once said that using your own money in real estate is just “lazy.” If you grasp how to correctly negotiate off the purchase price, you can always find capital partners, banks, private lenders and other money sources to fund your acquisitions. Besides, no matter who you are, eventually your money runs out and so you have to learn how to raise capital in order to build and sustain wealth. No one ever got really wealthy using only their own money.
The single greatest that most of the world doesn’t get is that having “debt” is not a good thing. Nobody makes a lot of money without loads and loads of debt. It’s true however that high interest credit cards and consumer debts are not a good thing. However, all businesses use loans and private capital debts that produce more incoming profits than the debt requires them to pay out. That is the only path to wealth. There is no limit to the number of money making debts you can afford.
Q: Where is the best place to start?
A: There are loads of free resources online that will teach you the basics you will need to proceed forwards with getting started. I would strongly urge that you simultaneously learn some marketing skills as you’ll notice that most investors come up short not because they have a shortage of techniques that work but simply due to their inability to understand marketing. Marketing is 90% of any business. You cannot achieve permanet financial success in any business without strong marketing.
Q: What is the best geographical area to purchase in?
A: There is another huge misconception that you need to buy real estate in the right location. Learn to invest your cash in the best deals, not great areas. If you’re looking to buy a second property and you want to hold it for a very long period of time, then I’d seriously advise you to check out Matthew David’s Fundamentals of cash flow. However, if you know how to purchase property with significant discounts built right into the buy, you will be immune to almost any local market conditions. To successfully make money in real estate you need to learn to buy significant equity at the moment of purchase and then sell your equity. The “best area” to accomplish that is anywhere you can find such a great deal. That’s why all great investors know that making money in real estate occurs when you buy, not when you sell.
Q: What are the best types of properties to buy?
A: The best types of properties to buy are much like what are the best areas to buy. The best types of investments to buy are ones that generate for you significant equity right when you close. That means that you are acquiring it for much lower than the rest of the local market would value that investment for. The best types of properties to buy are the properties that offer the steepest discounts with a fixable problem to why they were offered to you for that cheap. It can be any type of property. A soon to be foreclosure is a perfect of that but it is not the only one.
Q: Should I “flip”/rehab real estate?
A: You’ve most likely seen a lot on TV about this way of investing. There are many people who get rich by fully understanding how to invest in high risk stocks and there are many people who are content getting 4% in a savings account. Most generic ideas that are pitched to the public produce “slow, steady, gradual, and secure returns.” They may produce a little bit of returns but they will not ever achieve wealth.
When you rehab or “flip” a property, you’re really just exchanging your time for money. Having said that, you do not actually have an unlimited amount of time to fix properties. While you can definitely produce a profit this way, it is extremely rare for people to become wealthy from “flipping.” I have unfortunately seen investors who knew little about buying with equity put their time and sweat only to walk away breaking even with 6 months of labor and time lost. I would suggest you learn to fix contracts and financing rather than learning how to swing a hammer. The first option is much more profitable and it consumes a lot less time.
Q: Who should I get investing advice from?
A: There are many “gurus” who offer $2500 weekend boot camps and expensive coaching. The bulk of what they will teach you is motivation. While motivation is a necessary part of your success, you will probably not get any return on your investment. The best investment advice will always be found at your local real estate investment club’s next networking meeting. There you will meet real investors who are using systems that work. If you don’t waste their time, you will usually get ten to thirty minutes of their time to hit them with relevant questions about how you should focus your efforts. Just be sure to not misuse their time.
Q: What is the best real estate course to buy?
A: There are many quality courses out there that will help you find lasting success. Be wary of courses that use endless “up-sells” with expensive boot camps, one on one coaching and more detailed courses on the same material. Don’t buy hype and seminars. A true real estate course will be a complete guide from beginning to end so that you can complete the type of investment you are trying to accomplish without the need for additional courses. A good course will also include a good money back guarantee if the course is not entirely what you are seeking.
Q: What skills do I have to have to be a real estate investor?
A: Most new investors are able to grasp the techniques but they do not have enough pre-qualified sellers to use their techniques on. As with any business, you will have to have effective communication skills, good technique knowledge and creative marketing knowledge. It will take time to learn these skills but the great thing is that you only have to learn them one time to become rich.
Q: How many rentals will give me enough cash flow to retire off of?
A: This is a perfect question because most people believe that having rental properties is a great thing. Rental properties are for the uninformed. Instead learn to create real estate notes, use creative contracts, master creative finance or have rental properties managed in bulk. The banks gets rich from your real estate with very little interaction and hands on management. You can’t become financially free if you have to do stuff like plunge a toilet or worry about the hot water tank every other night. Learn methods to get around having to commit your personal time and efforts towards property management.
For instance, if you purchase a home and your total payments are $1000/month and you rent that home for $1100/month you receive a total positive cash flow of $100/month. You are still responsible and you will have to manage any ongoing issues with the property. If you sell that same property under creative financing conditions and you hold paper as a second lender, you can make the same $100/month acting like a bank without any of the head aches. In the second example you are sacrificing the equity you build very slowly over time but you do not have to manage the home. You will save years of head aches and hassles by using a creative financial agreement instead of actively managing the property. However, if you buy your equity at purchase as urged on this site, the equity lost over 30 years is almost insignificant.
Q: What if my credit sucks and I have no money?
A: Ok so then you’re majorly screwed… kidding. Isn’t it about time you improved your credit and money anyways? You can start by fixing your credit and then earning some real dough. Despite all that you may have been told, it doesn’t take credit or capital to profit from real estate.
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