This one goes out to…the noobs I love…  (Queue weepy REM music here)

And by “noobs” I mean newbies.  I.E. anyone who’s been at this real estate investing thing for a couple years or less. If that’s you, then this post’s for you. 😉

Truth be told, there’s is there’s a heap of things I wish someone had shot straight with me about when I first got started in this game back in Y2K.  And ah boy, the headache and heartache it could have saved me.  Oh, and money.  And the TIME.  I sure as heck would have gone a lot further a lot faster if I’d had a clue on some things.

So if you’re a little green – God love ya – let me do you a solid and share with you a few things I wish I’d have known. I can think of a bunch more, but I’ll start with three things for now and go from there…

Thing #1 – Avoid First Deal Desperation

Here’s something I’ve heard from new investors over and over through the years…

“Heck, I just want to do a deal!  Even if it’s only for the experience and to show myself I can get one done.  I’d even be OK just breaking even on it – it would be worth it to have the experience of doing a deal!”

Nope.  (BUZZ!)  Sorry, wrong answer.

Man, I remember all to well the wonder years of being a green, wet behind the ears investor. So eager…so hungry to get out there and slay my first dragon.

That hunger is awesome.  Embrace it.  Be motivated by it.  Let it drive you to taking action.  But watch out, because it’ll also totally mess with your head and cloud your judgment if you let it.

Let’s be crystal clear about something: You’re not in this business to do deals, you’re in this to make money.  

Don’t let your hunger to “just get a deal done” fool you into stepping into a marginal (or even bad) deal just for experience’s sake.  Over the last decade plus, I’ve been friends with, mentored, partnered with and otherwise crossed paths with many, many new investors.  And trust me, this is a mistake and will almost always end up biting you in the butt.

Moral of the Story:   Yes, work hard to get that first deal done.  Notching that baby into your belt feels super, and it’s a huge milestone.  But make sure you have a clear picture of what a good deal is, stick to that picture, and keep “making money” top on your list of priorities, second only to “maintaining integrity”.  Learn your market and the fundamentals of analyzing profitable deals, and then stick to the wisdom of good, common sense numbers, even on your first deal.

I’m not saying don’t take risk…but don’t let hunger make you fool-hearty.  Trust me, you want to feed yourself some wins early on, and that means making money, and not just breaking even for the sake of “experience”.

Thing #2 – Choose Your Local Mentors Very Cautiously

If you’ve been around here for a while, you may have heard from me before about my first local mentor, and how he took me “under his wing” to the cleaners.

Understand, I take full responsibility for my own actions; I’m not looking to blame others for my mistakes.  But also the fact of the matter is, I was so green that I just didn’t know what I didn’t know.  And that makes for a fairly easy target.

Yes, I learned a lot from him.  And for this, I’m earnestly grateful. But I also got taken to the cleaners……

  • As it turns out, those patch-n-paint rehabs he was letting me “steal” from him at 80% of appraisal – well they weren’t rehabbed all that well after all, attested by how they started falling apart within a few months of buying them.
  • And all those second mortgages he took back and assured me he’d simply forgive?  Turns out that was loan fraud.  Yeah, OK, wow.
  • It also turns out $600/month rent minus $400/month PITI does NOT really equal $200/month “positive cash flow”.  Go figure. Repairs? Maintenance? Reserves?  Nah, who needs ’em…
  • Turns out buying his poorly rehabbed houses all over God’s creation was not actually the overall best investment or property management strategy.

I could go on and on.  Long story short, I cozied up to the first real investor I met who fogged a mirror and seemed to genuinely take an interest in helping me.  And in the end he saw me for exactly what I was to him: A naive noob he could “take under his wing” and sell a bunch of his crap to under questionable (sometimes illegal) terms, until I finally one day figured out the difference between my butt and a hole in the ground.

It took me literally years to recover from this one, seriously tough class in the school of hard knocks.

Moral of the Story: Don’t get starstruck by the first real-deal successful investor you meet.  Just because someone’s a successful investor and is willing to “take you under their wing” doesn’t mean they’re a good mentor or even have your best interested at heart.  Don’t get in bed too quickly and if something seems unclear or even a little off to you, don’t be embarrassed press into it until you really understand it.

No , I’m not saying “trust no one.”  What I’m saying is, “Trust cautiously, and verify well.”

Thing #3 – Don’t Be an Education Junkie

We’ve all heard it a thousand times by now: “Smart investors invest in their education.”  And it’s true.  As the great Brian Tracy aptly said, “If you think the cost of education is expensive, try the cost of ignorance.”

But sadly it’s also become the enchanting mantra of everyone who’s got the latest and greatest course or bootcamp to sell you.

Here’s another important truth to consider:

There’s a big stinkin’ difference between wisely investing in your education and buying, BUYING, BUYING whatever the latest bright shiny object happens to be in front of your REIA group or on your computer screen.

Yes, investing in solid educational products can absolutely slash your learning curve and hand you the keys to the castle.  But it can also totally overwhelm you, suck your life away and drain you dry of thousands and thousands of dollars if you let it.

Ah, bright shiny object syndrome…

As hard-wired entrepreneurs, we’re all prone to it.  And oh, the horror stories I’ve heard from far too many who’ve been to a “free seminar” only to be convinced to drop $25,000, $35,000 or more on “education” they can realistically pick up at their local library.  It’s a crying shame.

My advice here is simple: Yes, be willing to invest in your education, but have a plan, set a specific education budget and have some self-control.  Know that most REI product are expertly marketed (and nothing’s wrong with that) and that they’ll most likely hit every greed gland and pain button you’ve got.  But even still, resolve to resist the endless temptation of the next bright shiny object.

My general rules of thumb are… 

  • Watch out for the “free seminars” held in hotels:  They’re almost always following the same formula, designed to lead you down the same type of sales funnel…one that gives you as little as they can get away with, while extracting as much as possible from your wallet, for as long as they can keep you hoping and dreaming.
  • Watch out for the credit limit scam:  Don’t ever buy something from someone who shared with you the secret of how to raise your credit limits as part of their presentation (hint: they’re going to be asking you to pull that freshly raised credit limit out for them a little later)
  • Watch out for obscenely high priced education:  Never give in to the guys who price their stuff in the $10,000 and up range.  I mean seriously… that’s just too much.
  • Start cheap and slowly move up: Start with books you can get the library or Barnes and Noble/Amazon.  That’s where I started, and you’d be surprised how much you can learn there.  Then gently move up to courses in the $97 to $497 range.  Then, once you’ve found your niche to focus on, go ahead and invest a few thousand into something you’re really going to commit to focusing on (i.e. bootcamps, large courses, etc.)
  • Consume quickly, then give yourself 90 days:Once you’ve made a noteworthy investment into a piece of core or continuing education (in the hundreds or thousands), DO NOT let it sit on the shelf.  Don’t procrastinate.  MAKE YOURSELF GO ALL THE WAY THROUGH IT AS QUICKLY AS POSSIBLE. Then (next) give yourself 90 days to actually give it a fair shake…meaning actually give the concepts you’ve learned a try and see how they suit you.  Then you’ll be in a much better place to judge whether or not you need to invest in more education yet, or hunker down with blinders on for a while.

Moral of the Story: Again, I’m 100% in favor of investors paying for quality industry education.  But I’m also tired of seeing so many of us addicted to buying courses and endlessly pulled along by the ring in our noses to whatever today’s hot offer happens to be.  There IS a better, wiser way, and it involves some self discipline, common sense and frankly, putting on blinders when it makes sense to do so.

Anything You’d Like to Add?

Heck, I could go on and on, but I’d love to hear what you think.  Leave a comment and let me know your thoughts, and if you want me to follow up with more things like this I wish I’d known early on.

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