Should You Listen To Free Real Estate Investing Advice?
Beware of free real estate investing advice!
At the very least be cognizant of the fact that much of that advice is being doled out by people who have no business doing so. In other words, many of them have never owned an investment property in their life!
Until someone has signed their name on the dotted line and bought herself/himself an investment property, they have no business handing out advice.
I don't care how smart they are, how many books they have read or how many real estate investment courses they have attended they shouldn't be handing out free real estate investing advice, let alone charging for it! At the risk of mixing metaphors and at the very least overusing them... until someone puts their own butt on the line, and gets their hands dirty, they just cannot offer other people the complete picture necessary to teach them what they need to know about investing in real estate. Especially commercial real estate.
I'll tell you why.
Back before I had purchased
my first real estate investment property
in early 1995, I was given a piece of "free real estate investing advice" from a mentor of mine who had been investing in real estate for many years. He said,
|"There are two things that you have to ask yourself when you are considering a deal (or for that matter considering investing in real estate in the first place). First, can you hang on financially? And second, can you hang on emotionally?"|
Think about that for a moment. It may be the best free real estate investing advice that you will get.
Now, I am willing to bet that if you have invested in real estate before, you said to yourself "I know exactly what he's talking about". If you have not purchased an investment property before, you may or may not see the importance in that advice. Bear with me.
The fact is, unless you have actually dealt with the emotional ups and downs of owning investment properties, you will tend to downplay that side of the equation (the emotional side that is). Sitting at your desk and analyzing the numbers of a deal can be a very cut and dry process. And a very unemotional process as well. The decisions you think you will make if you purchase the property may be completely different than the ones you actually make when your money (and your butt) is on the line. I am not a psychologist by any stretch of the imagination, but I think it is important that you consider long and hard whether or not you are cut out emotionally to be a real estate investor. (I'll give you some tips on that at the end of this article)
Let me give you a "non real estate" example of what I am talking about.
When I was studying for my MBA I took several corporate finance courses related to valuing companies, and in turn, determining if their stock price reflected that value. The type of analysis we employed is what is called "Fundamental Analysis". And in order to reach our conclusions we studied financial statements, credit risk, industry risk, markets, competition etc. From this analysis we then predicted future price movements in the company's stock price.
A few years later (when I was out of school and actually had some money to invest in the market), I become interested in a technique for analyzing price movements of securities (stocks, bonds, commodities etc.) called "Technical Analysis".
I was intrigued.
I soon learned that technical analysis is the antithesis of fundamental analysis in that it relies only on the historical price and volume of a security in order to predict future price movements. Using charts and indicators such as moving averages and Bollinger bands, technical analysts look for price patterns and trends and then attempt to exploit them for a profit. Some analysts even devise elaborate computer programs to take a lot of the human error and emotion out of the equation.
Now, why am I telling you this?
You came here for free real estate investing advice and I'm telling you about trading securities. Here is how it's relevant.
Before I actually started trading my own account, I employed a technique called "paper trading" in order to practice and test my strategies. In other words, I "pretend" traded. I pretended to buy a stock at one price and then pretended to sell it later at another. The idea is that you do this for a while before you actually start using real money.
On "paper" I was doing fine. Actually making some pretend profits. But there was one thing missing. That's right.
Because I didn't have my own cold hard cash on the line when I was paper trading, my decisions were all very matter of fact and unemotional.
If I was losing money on a trade, I sold and "cut my losses".
If a trade was going my way, I "let my profits run".
What happened when I started trading for real? You guessed it. My emotions started to take over! I held my losses a touch too long and sold my profitable trades a touch too early. All because of emotion.
Here is another similar example.
You have probably seen (many times) ads on TV for free online poker sites. Have you ever wondered how they make money? I'll tell you.
Aside: I am not a poker player or gambler of any type for that matter, so my observations are strictly from a business model standpoint.
Let's say you are a poker player or maybe you want to learn how to play. You sign up to one of the free sites and begin to play. The "money" you use if fake (much like the paper trading example above), and you use it simply to gauge whether you are winning or losing. And these "free" sites know this. The goal of the free site is to lull you into thinking you can make money at this so that you will sign up for their "pay" site, where they make their money.
The problem for the people that do make the switch to the "big time tables" is that now there is real money on the line. And when this is the case, most people find out that their emotions take over from strategy and disciplined money management.
They lose horribly.
Real estate investing is not much different from an emotional standpoint.
So how do you decide whether or not you are emotionally "cut out" for real estate investing? Unfortunately it is tough to really know until you actually do it.
Are you nervous? That's not unusual. Every time I have signed my name to purchase a real estate investment, whether it was a single family home or a commercial property valued in the millions, I had a good supply of butterflies in my stomach.
Free Real Estate Investing Advice For Dealing With Emotions
The best way to avoid being emotionally (and financially) devastated form a bad real estate investment is to not make that bad investment in the first place. I know that sounds overly simplistic, but too many people run out and buy the wrong property at the wrong price before they really know what they are doing, or worse, based on some free real estate investing advice that has fooled them into thinking they know what they are doing.
I have said it before, your first real estate investment can literally propel you into many more successful investments, or devastate you financially and emotionally, to the point where you never want to invest in real estate again.
Here is some free real estate investing advice to help avoid disaster.
1. Educate yourself. And more importantly, continue to educate yourself. Get yourself some "inexpensive" books and or courses to start with. Learn the basics, and build a solid foundation of knowledge. If you are interested in apartment investing, here is a fairly priced course to teach you the basics.
Just remember what they say about free advice (an especially free real estate investing advice)... you get what you pay for. The same usually holds true for free real estate investing advice. Pay a fair price but go and get yourself some solid information.
2. Learn about your market, and markets you are going to invest in. You won't get this knowledge from a book or course. You have to find this out yourself, and with the help of a good commercial realtor. You must get to know as much about your market as possible.
3. Finally, use other people's emotions to our advantage. Some of my best real estate investments have come from my ability to go against the grain. For example, buying before real estate prices start rising in an area or town, when most people are afraid to buy. Use your knowledge to overcome your emotions.
Here is one last piece of free real estate investing advice. (And I promise it will be the last, at least in this article).
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. I am constantly updating and adding to this site, the best way for you to "stay in touch" is through my newsletter.
My goal with this site is to try and provide people like yourself with an insider's look at this business. Not just the same old regurgitated information or run of the mill free real estate investing advice.
I hope you enjoy it, and prosper from it.
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