Hi, it’s Peter Aquart from American Wealth Builders.
Just the other day I was talking to someone about what I do and they said the same thing I hear over and over again from many people…
It’s like these conversations were scripted once, thousands of years ago, and are just being played out day after day.
“I don’t like investing in real estate… it’s too risky.”
Many people equate real estate with risk.
Why is that?
I think the reason is because everyone knows someone who knows someone who knows someone who got HOSED as a real estate investor.
Like the guy the other day who said real estate was too risky: when I asked him what he meant, he said that he had an uncle who owned a rental property next door to the home he owned, and the tenant was nothing but trouble. Never paid on time. Trashed the house. Etc.
And, as if confirming his theory, the same guy said that his neighbor had tried flipping houses in 2007. He bought a house for a lot of money, entirely on credit, he sunk a bunch of money into it, and then failed to sell it in 2008, 2009, and 2010. When he finally sold in 2011, he took a bath on the house.
Well I agree. These things are risky.
But I also wouldn’t describe them as “real estate investing.”
Most people lump all real estate deals together and assume it’s all real estate investing. I suppose, in the strictest sense, it is.
But doing that is silly.
It’s like saying “eating vegetables is risky… because I know someone who knows someone who bit his tongue while eating a salad.”
Being a landlord is not really real estate investing… it’s more like a job. It takes time. It’s a hassle. Your “customer” (the tenant) is annoying to deal with. You have to get them to pay and that can be a lot of work sometimes if you don’t know the right type of tenant to look for.
Flipping houses is not real estate investing… it’s more like a job AND speculation. You buy low and hope to sell high after adding value. But you’re really dependent on the real estate market when you buy and when you sell, as well as the cost of goods and labor to get the house into sellable condition.
That’s why I don’t think of these things as real estate investing.
(Ironically, most people I meet who feel that real estate investing is too risky will then put their money into stocks, which is considerably more speculative and even has the possibility of going right down to zero!)
If you’re on the fence about investing in real estate because your brother’s friend’s cousin lost a lot of money on a flip, or because your neighbor owns a vacation rental in Arizona that he rented to a bachelor party and they trashed it… well, the problem is not with real estate investing, it’s with your definition of real estate investing.
When it comes to investing (in anything), you need to weigh the following components:
- How do the returns come to me?
- Do I need to give up any of the capital to extract my return?
- How much control do I have over the situation? (Or, how speculative is it?)
- How active/passive do I need to be in order to generate those returns?
If you think real estate investing is riskier than stocks, check your mindset to see if you are basing that on a negative experience that you’re aware of.
Nine times out of ten, your idea of real estate investing has been broken by someone who wasn’t actually doing real estate investing at all.
Want to see how we invest in real estate? Turnkey investments are completely different: they provide steady, predictable, high yield returns.
They cash flow right from day one, they’re hands-off investments that you can own from anywhere.
Their returns are not speculative or based on what other people think they’re worth (but rather on rental income); and they are a REAL asset, which means they’re protected from going to zero like a stock would.
Are there risks to investing this way? Sure there are. Every investment has risks. But smart investors compare the risks and returns of all potential investments in a sound, clear-minded way and avoid being influenced by that guy they knew once who went to a real estate conference, learned to flip a house, then tried it and lost a ton of money.
If you want to invest in real estate the smart way, talk to our team about how turnkey real estate works. It’s completely different than what you’re used to.
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