Epic Real Estate Investing - [Encore] The Biggest Mistake People Make Investing in Real Estate | 809

Episode Date: October 18, 2019

In this encore episode of Financial Freedom Friday, Matt shares the biggest mistake people make investing in real estate. Learn how to manage your expectations in the real estate investing world, how to effectively manage your team, what most people do wrong when selling a property, and much more! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Hey, this is Matt over at Epic Real Estate and welcome to another episode of Financial Freedom Friday. And today we're going to talk about the biggest mistake people make when investing in real estate. Stay tuned. It's time for Financial Freedom Friday with Matt Terrio. All right, so the biggest mistake people make in real estate. Someone asked me this. This question came in and I was like, what is the biggest?

I actually had to stop and think if I really had to say biggest. So what's the biggest mistake? And I thought about it, and I thought about it, and I came up with more than one. So I'm going to change this to biggest mistakes. And then I thought, how many years are more than one? I came up with three, three real specific ones, that if you can avoid these, it's pretty tough to lose in real estate. All right, so the first one is coming in with the wrong expectations. And this expectations, that's a double-edged sort.

It cuts both ways. Because some people get involved in real estate, think it's going to be the savior to their life. It's going to be this automatic wealth creation thing that produces a passive income that's going to allow them to escape the rat race and quit their job. And it's just going to, all you got to do is buy it and turn the key and the thing performs

and nothing else to ever worry about. That's most likely not going to happen. Not that way. The other side of that sword is someone has a friend, or maybe it was even them that experienced them one time themselves. They bought a property. They had a deadbeat tenant. The property management screwed them.

The contractor screwed them. Everything was always breaking, and they had to evict, and then it cost money, and then the tenants trashed the place when they moved out, and it's been just nothing but one headache after the other. Someone slipped on the front porch, and they got sued, and then the toilet was backing up at least once a week so they had to get up in the middle of the night in their pajamas and go and walk over there and unclog it and uh that's the other side of that sword that's likely not going to happen either there are stories those things happen right both sides actually happen but um if you do this right

and you get get a little bit of education under your belt um you can avoid a lot of that you can avoid most of it but where what i really want to talk about expectations is where people purchase real estate and they have this idea of passive income and they got this passive wealth creation because of the appreciation and then they have this passive idea of the passive income it's going to allow them to escape the rat race and everything's going to be great but just and all that is possible it's absolutely possible but just understand or don't confuse the word passive with uninvolved passive income does not mean uninvolved income passive wealth creation passive appreciation doesn't mean uninvolved wealth creation.

You have to be involved with your asset. Okay? And that doesn't matter. That goes for every asset, whether you're investing in a business or a stock or a bond or mutual fund or 401K, you better be in control of your investments. You better be involved and help make those decisions. All right.

So go in with the right expectations. Second is, and I mentioned this a little bit up here with the expectations, talking about a team, right? So your team is going to consist of your property. manager, your contractor, and maybe a realtor. So going in with thinking that your team is going to do everything for you, people go in and they just abdicate and let the team do everything. They think they're delegating, but they're really abdicating because they give them all the responsibility and they have their hands off and let them go do their thing. And when I think back of all the

money that I've lost in every situation where I lost money in real estate, it was either directly or indirectly because of a bad property manager or a bad contractor. All right? Nice. Phone's ringing right in the middle of this presentation. All right. They're going to have to wait. So your team.

So you've got to do as much due diligence on your team, maybe even more, than you do the real estate itself. Because you know what? The real estate is not going to produce that passive income. It's not going to happen without good management. Now, you can do it yourself if you want to. but I think you've got better things to do because it's not real high paying work. There's other things you can do that you get paid more for your time.

I would absolutely delegate property management and let them take care of it. Just do really good due diligence on the team. Do good due diligence on the property management and the contractor. And I always say that real estate, it's safe. It's a safe investment. It's the people that are risky. So don't forget that part of the equation. Third thing is, selling it's a real estate.

Selling too soon. Because we're talking about being a real estate investor. Flipping properties, wholesaling properties, that's not investing. That's just trading. It's a job. It's a high paying job, but it's not investing. Investing is buying and holding. And holding, and holding, and holding.

Time is what really causes real estate to create the wealth that it has. you know, let's think about it this way. Imagine that you bought and flipped 20 houses 20 years ago. Verse, you bought 20 houses 20 years ago and you held until today. Those would be two very different scenarios, different situations that you'd be in right now, right? Absolutely, no doubt about it. So my favorite holding period is forever. I think I borrowed that from Warren Buffett.

That's what he said. But I agree, I totally concur. Warren Buffett, he's a smart guy. Favorite buying period is forever. Every piece of property, you should go in with the intent that you're going to hold it forever. Because you've got the appreciation working for you, you've got the depreciation working for you,

saving on the taxes, you've got the amortization working for you, got your tenant paying down and buying that asset for you, and you've got the cash flow working for you. You've got the element of leverage working for you, which you really don't have available to you and any other investment out there, at least the average person does it. And you got an amazing hedge against inflation as well.

So selling too soon, big mistake. Okay, so that's how I'd look at the three biggest mistakes. There might be another one or two out there. But I really think if you can get these three under control, you go in with the right expectations, understand that you do have to be involved in the process. You have to be involved in the management. Whether you're managing yourself or you're managing the managers,

you've got to be involved. We have to have the right expectations. Second, you got to do as much due diligence on the team as you do on the property as you do on the market. The team is, it's more important because that property is not going to perform all by itself. Okay? And then three, hold on to it forever. That's where the wealth creation happens. That's why real estate is created more wealth than any other industry, any other investment vehicle.

It's why real estate is the final frontier where the average person, the average person has a legitimate shot at creating real estate. wealth. All righty. So avoid those three mistakes in real estate. And it's, it's really tough to lose. It really is. All righty. I'll see you next week on another episode of Financial Freedom Friday. Take care. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.