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There is a good chance you have the same question, but here you are on my real estate site, so there is a good chance you already have a feel for the answer. This is an easy question for me to process, but writing out and explaining it to a new investor in a short article is a little challenging. Let’s give it a shot.
If you are considering real estate, I will advise you not to give up on your dream or interest. The short answer is yes; this is an excellent time to begin. Give me just a few minutes, and I will keep this as concise as I can. We can dig deeper in upcoming posts or through conversations when you are ready to contact me.
I know the fears about the current state of the market and our society.
Prices are too high;
Interest rates are too high;
Legal fees, closing costs, insurance rates are too high;
The future is uncertain and property values could crash;
It takes 30 years to realize the profits.
Okay, I just talked myself out of further investments with that list. LOL.
Unless you strike lightning with the next great invention or idea, real estate is the greatest and most common wealth generator there is in our world. That is because it consistently works and you can do it part-time. I am not going to tell you that it is a slam-dunk-no-risk-opportunity or that it is easy, but you can absolutely find success when using proper techniques. Let’s dive into my list from above:
Prices, interest rates, fees, costs, and rates are too high:
I was paying 7.5% to 9% interest as a new investor on rentals in 1998. Everyone was paying high rates and they had been for a long time before I was around. I realize that other factors were different back then too, but the secret is to buy right and start thinking like a professional. Don’t make an investment purchase based on emotion (“This house is so cute,” “I just want to get that first one,” “I love this neighborhood,” or a million other bogus emotions). Save that for the dream home you move your family into once you achieve success.
Do not buy your first property through a Realtor listing. The competition in that world pushes the purchase price too high and the accompanying interest rates, fees, and costs will make it impossible to cashflow. A pro will use unconventional techniques to locate deals, and will still cashflow even with higher rates, fees and costs. Those expenses (or hurdles) do not stop the well-informed investor. Buy right and incorporate higher expenses into your budget. The deals are out there.
The future is uncertain and property values could crash:
If it is considered foolish to try to time the market, then it is especially foolish for a beginner to try to time the market. Research, education, attention to the procedural details, and understanding your ‘outs’ will keep your financial outlook safe even if the market turns. Yes, a market correction might come, but being well informed and living within your means will allow you to clear that hurdle as well. Think of it this way. I teach my students to start out with the idea of acquiring just one rental property. Don’t get caught up in worrying about, “What happens if I am sitting on 15 houses and the market tanks?!”
Just focus on learning how to start with one house (or duplex), buy it right, gain experience, and make sound financial decisions. From there, you can consider your next move. It is easier to make your long-term goals after your first success. You will learn so much by going through that first process that your long-term route will become much more visible to you.
Here’s an analogy. You can plan your hike with a good topographical map, but your journey becomes much more evident when you can see the trail ahead from the top of that first peak. It is much easier to decide how far to go and where to camp for the night when you see it in person versus solely relying on the map.
In terms of market fears, let the market do what the market is going to do. Let us tackle the challenges that we can control and influence. PRO TIP: seasoned professionals know that money is made during uncertain times. Those who sit on the sidelines are the ones who worry about the uncertain times.
It takes 30 years to realize the profits.
Do you seriously think all these young up-and-coming real estate millionaires (and the tycoons you’ve heard of) really waited thirty years to become wealthy?
Not. Even. Close.
You don’t have to wait either.
The process of generating wealth in real estate goes far beyond the patience of waiting to pay off mortgages. The use of financial leverage and the income tax breaks that are allowed by our federal government are the real icing on the proverbial real estate cake. Just owning one rental property allows your accountant to give you the full set of benefits when you file your income taxes. There is no quota for how many you need to own. The benefits you feel from one rental will absolutely make a difference. The details of leverage and tax breaks are too much to cover in this short article, but I will go into those sometime too.
It doesn’t happen quickly; you have to work hard and put yourself out there, but the reward of generational wealth is more achievable with real estate than with almost any other endeavor you can try.
By reading my article, you are telling me that you have ambition, and you want more out of life. You could be playing video games, or some other time waster, but you are searching. You have already shown that you have what it takes to achieve success in real estate. I am not special, my mentor was not special, and most other wealthy investors are not special. Anyone who is willing to take action can achieve wealth. That is all I did, I started taking action. I also made a lot of mistakes along the way. We all do. Don’t dwell on those.
PRO TIP: you do not need hundreds or dozens of units to become wealthy. You can change your future with a small handful of good rentals. Not many people realize this one simple fact.
Best of luck!