BiggerPockets Real Estate Podcast - 970: 5 Mistakes to Avoid When You Start Investing in Real Estate

Episode Date: June 12, 2024

Before you start investing in real estate, make sure you hear this episode. Almost every beginner ends up making these five big real estate investing mistakes. Some cost money, some cost time, but all of them cost you peace of mind and push you further away from achieving financial freedom. We’re breaking down these five big mistakes so you can avoid them and start building wealth faster! Dave Meyer and Rob Abasolo are back today to discuss the five common real estate investing mistakes to avoid. From buying bad deals to doing wrong calculations, getting stuck in analysis paralysis, and beyond, even our expert investors have fallen into these beginner traps a few times. However, their previous mistakes could make you money as they share exactly how to avoid these rental property investing pitfalls. If you want to invest in real estate but are stuck, scared that you’ll make the wrong move, jump into today’s episode and take notes. If you can avoid these real estate investing mistakes, you’ll not only end up richer but with far less grey hair than even the most savvy investors. Let’s get into it! In This Episode We Cover The five biggest real estate investing mistakes that beginners make (and YOU can avoid) Why even a profitable rental property can be the “wrong” deal for you  The one thing that most new investors leave out when they’re analyzing real estate deals The “sacrifices” you can make to get the money for your first or next real estate deal  Why you should NOT borrow money to buy your first investment property  The problem with real estate partnerships and why they’re so easy to get wrong An antidote to analysis paralysis that’ll stop you from sitting on the sidelines  And So Much More! (00:00) Intro (01:25) 1. Buying the Wrong Deal (05:57) How to Avoid Bad Deals (07:14) 2. Analyzing Wrong (11:09) 3. “Lacking” Money (23:23) How to Do Partnerships (25:49) 4. Getting “Stuck” (29:01) Escaping Analysis Paralysis (31:12) 5. Doom and Gloom (34:18) Talk to THESE People Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-970 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Do you ever remember feeling really dumb when you were a new investor, Rob? Yeah, and the first live and flip that I ever attempted, I thought I could do everything myself. And so I tried to tile a little studio apartment that was under my house. It took me eight hours to tile. I would say like maybe like seven, eight square feet. So I finally, I went and hired a tile guy. I brought him in and I briefed him. I'm like, hey, man, I tried to tile this.

It took me eight hours. and it was all like uneven and kind of lopsied. He's like, you tiled this little section right here in eight hours? And I was like, yeah. And he started laughing. And I was like, uh, all right. All right. Maybe I'll just hire the pros faster next time and not try to do it all myself.

Well, that is about as classic a real estate story as I've heard because I think this is just common, right? It is a right of passage to make mistakes as when you're doing anything. And that is certainly true in real estate investing. And it's also. what our shows about today. We're talking about classic newbie mistakes. Welcome to the Bigger Pockets Real Estate podcast, everyone. I'm Dave Meyer. And I'm Rob Abbas Solo. And today we're laying down the five most common mistakes that new investors make. You're going to hear about which of these

mistakes we've made personally, how we overcame them, and how to avoid them in the first place. All right. Let's do it. So let's jump into number one here, which is buying the wrong deal. Dave, what might buying the wrong deal look like to a newbie investor? I think when people talk about buying the wrong deal, they were ideas probably go straight to a deal that loses money. And that is certainly not a good deal. But I think there are other categories here too, like one that maybe doesn't make as much money as you could. Like maybe you're deciding between two or three deals and you wind up not picking the best option.

But then there are also bad deals or wrong deals that are. just not well-lined with your strategy, like something that doesn't fit your lifestyle or doesn't fit your skill set or your long-term plan very well. So I think there's actually a broad category here. Are there any of these that sort of resonate with you in particular, Rob? All of them. All of them. I would say this. When you're getting started, you don't really know what your lifestyle is or you don't know what you want your lifestyle to be. And so I think we kind of oftentimes break into the real estate game with a little bit of stars in our eyes thinking, hey, we want this one specific thing. So, for example, short-term rentals, we know that in general, short-term rentals

yield a better return, more cash flow. And so a lot of people kind of buy into that lifestyle of like, oh, yeah, I want to get short-term rentals and I want to quit my job and blah, blah, blah. But the problem is that might not actually align with you as a person because while it might produce a lot of money, which is the thing that you want, you might hate people. You might hate hospitality. You may not be an operator that can deal with sort of the day-to-day tasks that come along with the short-term rental. And that right there could be a reason where maybe the deal isn't necessarily bad from a metric standpoint, but it's actually bad for the individual because they just don't like everything that's associated with running that particular type of, I guess, niche within the real estate world.

I think there's often this just lack of awareness that different real estate should, strategies come with tradeoffs. Everything's a tradeoff. And so I think when you talk about wrong deals, it's not just about the numbers. That's obviously really important. But it's also about, you know, making sure that it's appropriate for your skill set. And while you were talking about that, Rob, I actually was thinking of even another category of wrong deals, which sort of goes to my first deal. When I think about if and what I did wrong there, I bought, I think, the right property. think I even did the right strategy. I did the wrong structure of the deal. I had three different partners on that deal. And although it worked well for me, I sort of had this partner who was equal

in trying to do the property management. And we were supposed to split the property management work 50-50. I think most people who do partnerships probably know a 50-50 ambiguous kind of structure for that kind of thing often doesn't work out. So that's something you have to think about too is like not just property, not just strategy, but also structure and making sure that it works well for your your lifestyle and goals as well. Yeah, who are the key players on that deal? You mentioned the skill set one. I mean, this is growing pain of mine. I obviously do more of the rental side of things. I don't do a lot of fix and flips. I'm trying to get into them. I feel like I'm a newbie in the world of fix and flips. And in the last year, in two years, I've bought like a hotel or a motel specifically.

And I bought like a flip that was supposed to be a very quote unquote quick flip. But it has not panned out to be that. I'm not cut out for flips because I want everything to be really, really nice. And everything that's always really, really nice is never on budget. And I'm just not cut out for being like a budget person that's like, hey, yeah, like, we'll cut costs here. Because I just sort of want to always go to the top end of everything. So maybe I just need to go into luxury flips. Maybe that's my problem.

I'm going into the budget ones. Yeah, maybe so. But it's probably such a different mindset from your other business where it's like you're trying to curate an experience when you're doing short-term rentals, which you have to do, and that's why you're good at that. But, you know, with a flip, obviously you want to make it good quality, but the key with a flip is making it good enough, not like the, you know, the highest possible finishes, unless you're doing, like you said.

For me, it's always like, it's got to be good enough for me to live in, which is like just a very bad way to look at sort of the flipping horizon and everything like that. But that's why I'm a newbie. And I kind of want to give a little bit of time to talking about how can someone avoid this? How can someone avoid buying a wrong deal? Yeah, that's a good question. I think for the money part, it really is just learning how to analyze deals well. And I think we'll talk about that in a few minutes here.

So I'll skip over that and talk just a little bit more about really thinking hard about what your long-term goal is. And I know that's really hard at the beginning because most people are just super eager to get into their first deal. And you should be. And it doesn't need to be perfect. But even a little bit of forethought into, you know, do I want to be on the property every day? Like Rob said, are you someone who's going to deal with uncertainty really well? flips are a whole lot of uncertainty. Are you investing for cash flow right now? Are you investing for equity right now? Or are you playing the long game? And just taking even an hour to sit down and

think through some of these big questions, I think will help you build a better buy box that is more aligned with what you're trying to accomplish. So I think what you're saying is that real estate investors should start with strategy. I didn't want to pitch my own book on this show, but I did write a whole book about this topic. So if you want to read it, start with strategy. There you go. Awesome. All right.

Well, let's hop into number two. You kind of alluded to it, which is analyzing the deal incorrectly. Guilty, guilty, guilty. I've done this so many times in my career. What assumptions do you think people get wrong when they're stepping into their first or second deal? I think a lot of what happens. At least I've done this in the past is sort of buying into the best case scenario a little bit where you're like looking at the different trends.

You're like, oh, rent has been great. You know, rent growth has been great over the last year or two. And appreciation's been amazing and assuming that those things are going to continue, maybe not indefinitely, but at least for the next couple of years. So I think trying to, you know, take a sober approach. It makes more sense. But that is definitely a common mistake that honestly, everyone does this. This is not just newbies.

everyone does this at some point in the real estate investing career. But how do you make sure that you're analyzing the deals the right way? And what else do newbies get wrong? We've got more tips right after the break. Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of these smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways,

and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords, whether it's a single-family rental, a burr-builder's risk policy, or midterm holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in minutes at biggerpockets.com slash landlord insurance. Steadily, landlord insurance designed for the modern investor.

Real estate investors, the April 15th tax deadline is coming fast. If you own rental property and haven't done a cost segregation study yet, you could be handing thousands of dollars to the IRS that you don't have to. These studies let you write off as much as 25% of your building and generate huge tax deductions. Costsegregation.com is an online self-guided software that makes cost segregation fast and affordable. So it finally makes sense for smaller rental properties purchased for as low as $100,000. With pricing under $500 and an average savings of over $25,000, it's just a no-brainer. What's more, audit support is included by the number one cost segregation company in the U.S.,

but you must complete it before the tax deadline. Go to costsegregation.com and use code tax deadline to get 10% off your first report. Don't overpay the IRS. Head to costsegregation.com before April. 15th. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide. Use 20 pre-built lead lists such as pre-foreclosures, tax delinquencies,

and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution. That means you can not only find motivated sellers, but you can also reach out right away. Skip trace phone numbers free on select plans, then send postcards, emails, or call sellers directly. Don't worry if you're new. PropStream also gives you AI-powered insights and comms that are over 99% accurate. So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step. Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M.com.

slash BP. Don't just dream about real estate. Make it happen with PropStream. Welcome back, investors. Let's get back into the most common newbie mistakes. I would even venture to say that a lot of people make the assumption that they're going to be a tip-top operator and better than everyone else. This is something that stepping into the short-term rental game, you're like, oh, well, I'll just manage it better than the last owner. And I'm going to make way more money as a result. Or like, oh, well, I'll just make a better flip than everyone else in this neighborhood, and I'm going to make more money as a result. So there's always a little bit of overconfidence stepping into deals. I feel like when you don't know what you don't know, and that can be kind of trouble on the assumption side too.

Absolutely. That's a very good point. I think for me, like when I think about what I've done the worst or the mistakes I've made the most, has mostly been on the expense side. I don't know about you. I think I've been like tried to be pretty modest about appreciation growth and rent growth. But stuff like CAPEX has always, at least especially early in the beginning, is like really confusing because you're like, oh, I've got to, you know, fix the toilets. I get that. I got to replace appliances. I get that. But like, I'm not thinking about replacing a hot water heater every 11 years because I didn't even think I was going to own this property for more than five years, maybe.

And so those are things that I definitely omitted in my first few deals. Yeah, let's talk about that for a little bit. So let's first cover what CAPEX even means. And this might be why most newbies even missed CAPEX to begin with, because it just sounds like a fancy word and like, I don't know it. I don't have to worry about it. So CAPEX is short for capital expenditure. And that's basically all of the major appliances and systems in your house that are going to

break down over the course of an investment. So this would be your AC, your roof, your appliances, your water heater, things like major systems on your property. Now, when you buy a house, it doesn't mean that your AC is going to break soon or that year or even the next year. But what it does mean is that eventually, if you own this house over the course of 30 years, all of those systems will break down or need to be replaced at some point. And so the idea with having reserves, CAPX reserves, is every single month, you take a portion of your rent and you put it in a bank account and you save up a really big savings account so that whenever your refrigerator goes out, you've got $2,000.

that it's going to cost to replace it already on you and you don't have to go and find $2,000, you know, out of nowhere. This is something that for me in the short-term rental side of things, I got into the game. I remember in my early days on YouTube, I would talk about, oh, my property made this much. You know, I made $3,000 this month. Or I made, you know, $4,000 and people would be like, what about CAPEX? What about maintenance? And I was always like, well, I don't, I didn't have any CAPX. So I'm not going to factor that into my calculations. But if you've ever heard the term when it rains, it pours. That's kind of how it works in real estate where when one thing breaks, it all starts to break. And so that's something I've kind of learned the hard way where,

hey, stuff didn't break the first couple of years, but years three and four, it starts to compound pretty quickly. Yeah, you just need to never have the thought in your head of like, oh, things are going pretty well at that property. I haven't had to worry about it. The second that thought enters your mind, everything will break, like in the next month. And then it will just be one thing after another. It really is kind of like, you know, rains and it pours. There are dry spells. And that's fine. That's like just how the business goes. You just need to be, as Rob was saying, you just need to be prepared for it and have that money, you know, set aside. Because otherwise, you might be put in a situation where you're short on cash. And that's,

as a real estate investor, the one situation you really want to avoid is not having enough reserves when these things do come up. So Rob, how do you, you know, you talked about some of the mistakes you've made. how have you gotten beyond those and avoid them currently? Well, I'm a big fan of understanding sort of the, what I call like the revenue arc or like the seasonality arc of a property. This is obviously pertaining to short-term rentals, but I think it's going to come into play for long-term rentals as well. And so what I mean by this is when someone goes and buys, let's say something like

a short-term rental, I want someone to understand sort of the ebbs and flows, the highs and the lows of how much that property is going to make over the course of a year before they start pulling any of the profits out. And the way I think that this applies to long-term rentals as well is we tend to factor in vacancy into our long-term rental projections, but you don't actually know how that vacancy is going to fall out year over year. So what I tell people is for the first year of owning an investment, don't count on pulling any money out. I would let all of your income stack for the first year and kind of build up your reserves that way. I've been very, very disciplined, And thankfully, over the course of really my entire real estate career, I've always taken the stance

of, hey, I'm not going to pay myself from real estate. I'm going to figure out how to make money other ways, other side hustles, other jobs, whatever it may be. And so all of my real estate bank accounts are well past the reserve state because I just don't ever really spend my money. This is my philosophical choice. You don't have to do what I do. But for that reason, I'm always very comfortable because I've had, you know, six, seven thousand dollar repairs come up in the last couple years. And it doesn't really hurt all that much because I've saved up so much money. So I would say for anyone getting started, I know that the temptation is to like pay yourself that, you know, 200 bucks, 300 bucks here and there. But if you can really stack up your bank account,

it will just save you from the storm that will eventually happen. And you won't feel like you have to sell the property to fix the property. I think that's excellent, excellent advice. And you don't have to do that. But I do the same thing, Rob. Like every time I buy a new deal, I'm like, yeah, at least six months, you know, I put cash into a bank account and reserves and then I stack it for a little bit just to be like, you know what, something's going to break and I'm going to be prepared for it. And then when I feel comfortable, I take it out and reinvest it. I think when it comes to analyzing deals, there's like two, two things to consider. One is more philosophical. And for me, that's like forcing myself to be a pessimist.

And I think I am naturally an optimist. but with deal analysis, I just think you just like consider the worst case scenarios all the time and assume things are going to go wrong. And that helps actually with the first question too with like buying the wrong deal. Like if you assume everything is going to go wrong, then if that does happen, then and you still think the deal works, then fine, you're prepared for it. But if something goes right, which hopefully at least a few things go right, then it's just all upside. So I like to be very conservative with that. And then the second one is using good tools.

You use something like the bigger pockets calculator that asks the right questions and creates the right inputs for you. Then you're not going to miss stuff like CAPEX because it's like right there in the tool that says like, what are you budgeting for CAPEX? And if you had never heard of that, that would teach you about it. There's a little tool tip. So I think it's important to have the right philosophy and the right tools. Big time. So I've got a little system here. I call it the three reces. It's comp, calculate, corroborate. So comp is go comp comparable properties. If it's a short term, long term, doesn't really matter. Go see what the competitors or what other people are making in your area. Then go and calculate it. This is where you would go and use the bigger pockets calculator,

put in all of your expenses, actually pencil out if this deal is going to make money based on the comps. And then the third one, which is ideal. It's not always feasible for everybody, but the third one is corroborate, talk to someone in that market and find out some of the insights, some of the anecdotal insights of like the money making that goes on in that particular market. Oh, I love that. Yeah, learning like the seasonality for a beach market, right? Like, hey, in May, that's when it starts to pick up. In June, July, it's like crazy. August is like the peak month. And then September is when it starts to slow down. And the Smoky Mountains, hey, from March or

mid-March all the way through December 31st, high season basically, and then January and February are break-even months or you might lose money. And kind of understanding some of that, or like one of the things that I figured out was at a beach market, everything is going to rust. And so I go and I talk to people, I'm like, hey, what should I be factoring into my cap-x to basically figure out how much do I have the budget for fixing like appliances and things that will break a lot faster than normal? So corroboration will be huge. for you if you can find other investors in your area. And you know, you can you can also corroborate quite a bit in the bigger pockets forums. That's a great idea. I've never heard it term that way,

but I think that makes a lot of sense and it's totally true because, you know, when you're looking at a lot of deals, you can't like double check everything right away. You know, you can't go into super amount of detail. You have to analyze them. That's like the calculators of bigger pockets. They're meant to go quickly. But then you're putting it. a lot of assumptions into that calculator and you got to go double check those assumptions before you do a deal. I love that. All right. Well, let's move on to our third newbie mistake, which is letting the lack of money stop them. Rob, I actually don't really know when you first started. Did you have a hard time raising capital or were you able to just jump right in?

Yeah. So the first house I ever bought, which was a primary that turned into a house hack, I, my wife and I barely qualified. I don't really know how we qualified, but we did. This was 2013. And I was able to fund the down payment for this house. It was $159,000. We put about 3.5%. I think that comes out to roughly like $8,000. And I got a tax return that I want to say it was like $3,000 or $4,000. And I just remembered this part of the story because it was so long ago, like recently. But the other like three or four thousand dollars that I needed to fund this down payment, I didn't have, but I had this guitar amp that was like $4,000. It's expensive. I was a guitar player in a previous life. And I used to play in Sixth Street in Austin, Texas, like three, four

nights a week. And I saved up all the tips that I got, which was like $50 to $75 a night. I saved them up for a whole year. And I bought this guitar amp. And it was like the thing, my life achievement, but when it was time to buy this house and I really wanted it, I sold the guitar amp and I was like, I'll buy it again one day, you know, whenever I have it. I never bought it again because I went all in on real estate, but it was a tax return. And I tell that story because the guitar amp meant a lot to me because it was the first thing that I ever really bought. That was super nice and my hard-earned money. But I sacrificed something that I really loved, something that I really, really wanted. And I gave up this thing to get something bigger in

return. So that's kind of what I always tell people is like, sometimes you have to give something up. It's not sexy. It's not the fun thing. But it enables your path into real estate oftentimes if you can kind of put aside some of your personal desires and stuff like that. That's a very cool story. I did not know that, but something is click. Now it's clicking your love of John Mayer. I didn't realize you were a guitar player. Yeah. Yeah. Now it all makes sense to me. But I think that's a great, it's a great point. Like obviously not everyone has something that they can give up. But if you do, you know, it's really just a question of what you want more. Do you want something that you might love or need right now? And if that's okay, that's fine. It might just be slower for you to get

into real estate. Or if you're like, Rob, you can come up with a way to, you know, sacrifice something that you like for getting into the industry. For me, I kind of, I guess I kind of went, I don't know if it's the more traditional route. But I guess it's a common route for newbies. I did a combination of newbie strategies, which is I had partners. I was just saying earlier, I had three partners on my first deal. It was also a house hack. And this was way back when I'm dating myself now.

But this was when there was the $8,000 first-time home buyer tax credit right after the financial crisis. And so I took advantage of just like a couple of different opportunities to piece it together because I had no money. And not everyone, listen, like, not everyone has partners that they can find. Like, I had friends and family I could go to and partner with. Not everyone has that. But I did that in addition to, yeah, to house hacking so I could put low money down,

self-managing the properties, building sweat equity, because I didn't put any money into my first deal. I didn't have any. And so I think it's really, it's just about hustling, like whether it's the way I did it or the way Rob did it. Some people are fortunate, have high-paying jobs, but some people, you just have to figure out what you're willing to sacrifice and give up to get started. Well, you mentioned not everyone might have something to give up. I disagree a little bit. Obviously, I gave up kind of like an expensive materialistic thing. Not everyone has that,

but you can give up comfort. And if you, you know, listen to the show, you know, I'm a big proponent for house hacking. House hacking, to me is like a very low down payment or a very low cost of entry way to get into real estate. And what you're giving up is your personal space, your kitchen, your bathroom that you share with other people, to have roommates that will pay you rent to help subsidize your mortgage. I have house hacked, I think three times at this point. Every time I go to my wife and I've pitched her on the idea, it's not like, she was like, yeah, hell yeah, let's do it. You know, it's always like a, hey, this is going to be kind of tough, but I promise, if we do this, we can live in this house and it'll enable us to do bigger things.

So it doesn't have to be a materialistic thing that you give up, but it might be comfort. It might be time. It might be you going out and getting a side hustle or getting a side job to build up a little bit of income to save up a down payment. For me, I actually started a furniture building business when I was getting into sort of real estate and I was building furniture and I was making $800 a month and I would come home from work and basically go into my basement for like four or five hours a night and make tables and coffee tables. I've retired that side of me now. But I spent a lot of time making furniture so I

can make 800 bucks to kind of like fund my life type of thing. So you can build skills. You can learn a skill. It's not easy, but it works. Yeah, absolutely. That is a very good way to say. Yeah, not everyone has something of financial value. You could just sell. But yeah, like you said, you could give up comfort and giving up time is probably the number one way for people who don't have a big, you know, financial backdrop to fall onto to get started because, you know, like I, again, was able to help find people to help me fund the down payment, but I didn't put any of that down payment down. So I didn't have any equity to start.

So I managed the property myself in order to earn equity in that deal. I also cold called for a commercial real estate broker during. that time to help give myself some money to live off and to learn the industry. And so I think there's just there's things that you can do to get started if it's something you want it off. Yeah, I love it. What are some things to keep in mind if you, like for you, you had a partner in kind of one of your first or second deal here. What's something that someone should keep in mind if they're going to go that route? Oh, this is the thing I talk about with a lot of new people. It's like, I think a lot of people go in and want partners and expect a lot out of the deal.

And I think the key to a partnership, especially if you're starting from a position similar to mine where I didn't have money to contribute to this, is like you're not going to be an equal partner in this deal. And like even if you found it, even if you're putting in the sweat equity, you have to think about the other partners in your deal and how much risk they're taking on. They're the ones putting up capital. They're the ones that could be doing other things with those money. And so I think it's really about adopting the right mindset of learning. and getting in and going slowly and knowing that if you're starting with a position where you don't have a ton of money, your first deal might not be a home run. And that's totally fine. That's how most people start. But just try and hit a single and try and build trust with your partners. So

maybe next time you can do a bigger deal or you can get a better terms on that deal. So I think that's the main advice I would give people. Go ahead and send this episode their way. We'll be right back. Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of the smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies aren't always built to handle these claims quickly or

smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on the market. landlords, whether it's a single-family rental, a burr builder's risk policy, or midterm holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in minutes at biggerpockets.com slash landlord insurance. Steadily, landlord insurance designed for the modern investor. Thinking about wholesaling or flipping your first property,

but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide. Use 20 pre-built lead lists such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution. That means you can not only find motivated sellers, but you can also reach out right away. Skip trace phone numbers free on select plans, then send postcards, emails, or call seller. directly. Don't worry if you're new. PropStream also gives you AI-powered insights and

coms that are over 99% accurate. So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step. Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M dot com slash BP. Don't just dream about real estate. Make it happen with PropStream. You just realized your business needed to hire someone, yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed, sponsored job posts help you stand out and hire the right people quickly. Your job post

jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored post. The best part, no monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through Indeed worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed. And listeners of the show will get a $75 sponsored job credit to get your jobs more visibility at Indeed.com slash rookie. Just go to Indeed.com slash rookie right now and support our show by saying you heard about Indeed on this podcast. That's Indeed.com slash rookie.

Terms and conditions apply. Hiring, Indeed is all you need. New Year, clean slate, and maybe a vacancy that needs to get filled fast, that's where a veil comes in. With Avail, rental listings can be published to 24 top rental sites with one click, completely free. That includes places renters are already searching, like Realtor.com, apartments.com, Redfin, and more. No copying and pasting.

No juggling multiple platforms, just one listing that shows up everywhere. If getting rentals organized and filled fast is on the list this year, start with Avail. Sign up for free at avail.co slash bigger pockets. That's A-V-A-I-L-C-O-Sash Bigger Pockets. Hey, everyone, welcome back to the show. If you're getting into real estate with kind of low money and your own side of things, just make sure you have a solid financial foundation. Like, I think it's really tempting to be like, yeah, I'll go raise the money

and I'll, like, have someone else pay for my first deal. But if you don't really have a relationship with debt, If you're kind of rocky, if you're in a lot of credit card debt personally, you probably don't want to go raise money from someone else. When you haven't really kind of built a solid foundation for yourself, you know, I think that just kind of goes without saying. But it's one of those things I hear in real estate all the time is like, go raise the money. And it's like, well, you kind of like cut your teeth on a few things first and then maybe go raise the money. Yeah, absolutely. Like, if you were, if just think about put yourself in that partner's shoes. If someone who

didn't have their financial house in order came to you and said, hey, will you lend to me on a real estate deal? You would probably say no. So I think you just need to think about how you represent yourself. And real estate is a long game. So like if you're in a bad financial position, using real estate to try and get rich quick or make a quick buck, it means you're going to have to take on a lot of risk. And it's not what I usually advise for most people as they're just getting started. For sure. Well, let's get into number four here, which is, you know, It's kind of a combo of two things. It's getting stuck and never taking action and getting into that first deal. So where are some of the commonplaces that newbies tend to get stuck?

Great question. I guess there are maybe two or three areas that I would say. First and foremost is deciding where to invest. I don't know if you get that question as much. I do a lot because I talk about this. Yeah. Number one question. What market's a good market? Yeah, what market is a good market? That has to be the number one. And I'm going to be honest, Rob, I take some blame for this because like four years ago I started publishing these lists that was like, best market to invest. And like there's a point to those articles, but they are largely to point you in the right direction. And I really want to stress the point here that there is no such thing as the best market to invest. It really is finding a market that aligns with your strategies, your abilities, and what's realistic for you. But, you know, how do you answer that when people come to you with that question? I don't believe in there being sort of this magical market, this like unicorn market that, oh my gosh, there's like these untapped gems across the country. I'm personally a believer that every market's a good market and you have to make deals in whatever market that you're in.

This goes short-term rentals. If you are in a quote-unquote oversaturated market, well, you just have to stand out from the competition and be better than everyone else so that the saturation doesn't really matter. If it's a long-term rental, maybe you can't go out and buy a property on the MLS. Maybe you have to go and buy a fixer, add some value, refi. And again, put in your time there so that you can gain equity and a, you know, a cash flowing property in that instance. So I don't really buy into the magical markets necessarily, although, of course, there are some that are better than others. But for the most part, I think whatever city you live in, you can make real estate work there. if you really, really want to.

It might be harder if you live in L.A., New York, San Francisco, where it's really expensive to live, but it's not impossible. And I know this because thousands of people do it every single day. Totally. I often think of James Dainert, who's been on the show a couple of times. He's one of the guest hosts of On the Market, one of the best, most respected investors in the country, I would say. And he's made his whole career in Seattle, which I would think most, you know, nine out of

10 people you said like, is Seattle good market to invest in? They would say no. But he's made a great career out of it. I don't think I could do it personally. But he's just good at the strategies that work well in that market because he lives there and he decided, hey, I'm going to figure out the ways to make money in that market. Those are different strategies and tactics that I had to develop in my own portfolio and different from you. Do you want to know a quick way to find out if if real estate works in a particular city? Yes. Okay.

If you ever drive around any street in a city and you see a construction crew working on a house, real estate works in that city. Yeah, someone has penciled the deal. That's so true. So there's another kind of big hang up that I think a lot of newbies get stuck in or in a rut. And I think that overall, and it's a skill that you have to build, I think. But overall, I think newbies getting into the game, have a really hard time with goal

setting and sometimes they tend to set their eyes on like the big goal, which is like, oh, I want to retire early or I want to have a giant portfolio or even a goal as big as I want to buy a house. And because the goal is so big relative to their experience or where they are in that particular journey, it can feel a little overwhelming. It can lead to some analysis paralysis because if you say, you know, basically, Dave, if you're like, hey, I want to flip a house in Seattle, let's just take that as an example. but you've never done it before. Now you're thinking, okay, I want to flip the house, but now what do I do? Oh, I got to, do I get pre-approved first? Do I find the house first? Do I find the deal? And you start

kind of scrambling and get stuck in analysis paralysis. What I think would solve this would be to break down your big goal into a lot of tiny goals. Brandon Turner called this MINS, most important next step. So instead of saying like, okay, hey, I want to flip a house in Seattle, break it down, right? Get pre-approved first. go find your lender. If you're going to do a flip, find a hard money lender. If you're going to buy a house to house hack, get pre-approved by a traditional lender, find a realtor, schedule a showing, run your numbers on the house that you did the showing for, make an offer on that house. If even that scares you, you can say, hey, get pre-approved, find a realtor, make an offensive offer that you know is going to get rejected and then do it again. Like if you can break it down

into like a hundred little tiny steps, pretty much any big goal you have becomes very, very obtainable when you see the A to Z blueprint that you can like, you know, write out on a sheet of paper. That's such good advice. Yeah, it's really the same as any problem, right? Like any challenge, it's not unique to real estate. It's like it can feel overwhelming if you start at point A and you're looking at point Z, which is like owning the property. But it's really reducing the complexity of the problem down to just what do I have to do today really is a great, great recommendation there. Yeah, yeah.

Let's move on to our last newbie mistake that we're going to talk about today, which is getting bogged down in negativity. This seems rampant today is a lot of negativity. Now, on TikTok? Everyone on TikTok so uplifting these days. Oh, my God. And YouTube, all the fire backgrounds and stuff? Oh, my God.

What's the dumbiest YouTube clickbait you've seen lately going around? There's this company called ReVenture Consulting. I don't know if you've heard of it, R.E. Venture Consulting. And they just put out just shameless fearmongering clickbait. And they've been wrong for so long. I don't understand how people keep listening to it. They've been calling a crash for like seven years, you know. They'll eventually be right. Yes, exactly. Broken clock, right? And so it's, I just, I can't stand it. What about you? Okay, so I saw one recently that was called Why You Shouldn't Buy a Home in 2024. I think Graham Steffen did that. And you know, you're like, uh-oh, you shouldn't do it. But, you know, I think that's kind of like one of those things. It's exactly what it is, right? It's clickbait to get someone to click in and hopefully get them engaged.

You have to deliver on the clickbait. I think the thing that tends to annoy me about this stuff is where people, they read the article headline, but they don't read the article. And so people get scared by the headline and they don't ever, they're like, oh, man, okay, don't buy a house in 2024. I'm not going to read the article, but the whole article could be like, you know, here's how you can actually buy a house in 2024. And it could actually be a positive thing. So I think a lot of people tend to take things that face value, especially a lot of newbie investors. If they don't know anything and someone says something kind of controversial or like a hot take, they stop looking into it because they immediately like believe it. I think doing a lot of research into whatever niche that you're wanting to do, I think there's always

a solution. There's always a way to overcome whatever the doom and gloom you might be hearing in media. Oh, totally. Yeah, I completely agree. Listen, if you do your research and you genuinely feel that real estate investing is a bad time, that's a totally fine decision. But just make the decision based on actual information. And like Rob said, not just based on headline or not just based on common sentiment because people have been saying that the real estate market is going to crash. Robert Kiwasaki has been saying that real estate market is going to crash since 2014 for 10 straight years.

And if you go and understand like why he or other people have been saying it, it's not based on fundamentals of the real estate market. So hopefully on this podcast, on our other Bigger Pocket's, podcast, we share with those numbers. And no one knows for sure. Even when we talk about fundamentals, economics, no one knows the future for sure. But there are some sound economic theories that you could follow and understand before deciding if it's a right time or a good decision for you to get into real estate or not. For sure. I think my one piece of advice for anyone that gets, It tends to get a little bummed out by the clickbait or the news or whatever it is.

If you're that person, but you still really want to get into real estate, my one piece of advice for you is go talk to someone that's doing it. Go talk to someone that is successful in real estate. Go to meetups. Go actually network with people that are their full-time job are real estate investors. Because I promise you, if you would have talked to James Dainerd in the last two years, if you asked them, hey, should I not do real estate? he'd be like, what?

No, you should totally do it. Yeah. It's harder, but you should totally do it. Why? Because he's still doing it and he's still crushing it and he's still able to make deals work, right? So if you're that kind of person that, yeah, if you tend to get bummed out by the stuff, just find someone that can do it. One conversation with a successful investor can completely change your mindset.

I love that. That's such a good point. And I mean, all of the residential investors I know are still continuing to invest right now. I do know some people who focus on multifamily and commercials. who are sitting on the sidelines a little bit. But you'll learn that by talking to a successful investor like Rob said. Like if you went and talked to a commercial investor, you might be a little timid right now. And there's probably good reason to be timid. In residential, almost everyone I know is putting their money where their mouth is and are continuing to invest right now. So that is an excellent,

excellent tip. All right, I think we did it. We have solved every problem a newbie could ever have. So after listening this episode, no one will have problems anymore. Absolutely not. So let's precap what we talked about today, the five most common mistakes. One, buying the wrong deal. Two, analyzing the deal incorrectly. Three, letting lack of money stop you. Four, getting stuck and never taking action. And lastly, five, getting bogged down and negativity. Hopefully this is helpful. And some of the tips that we gave you were actually actionable in your journey. If you want to connect with me and Dave, we'll have some information in the show notes for you. We appreciate everybody joining on today's episode of Bigger Pockets.

We will catch you on the next episode of Bigger Pockets. See everyone later. Bye. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K.

Copywriting is by Calico content. And editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free Newspletter, please visit www.biggerpockets.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance

is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.