Archive for Common Real Estate Investing Mistakes
The Best Investment Advice …. “know What the #$%@ You are Doing….”
Posted by: | CommentsThere are so many opinions on what the best investment vehicle is….there are so many cliches on how to invest …..there are so many books on investing strategies ……and on and on. Why? Well….because almost everyone is asking the same question and everyone has a different opinion. The real dilemma is that there is not one answer….although any guru will want you to believe that there is…. and they do their best to convince you they have the answer. Seen any ads on gold lately?
Sitting in the audience not too long ago, I heard a speaker/guru that I respected very much say the stupidest thing. I heard him say “….investing in the stock market is a dumb thing to do because there is so much risk.” Granted he was selling his “silver bullet” program but….what a dumb thing to say. I know so many people that have done so well in the stock market in good times and in bad that I know the stock market is a great place to invest…..I say what with caution…keep reading.
I have also heard people say that real estate is a bad investment. When we all know people that have done well in real estate as well…whether the market is good or bad….again…I say that with caution….keep reading.
Of course there are horror stories for any investment vehicle…whether real etate, stocks, businesses, etc. BUT….there is one very clear statement that makes all the sense in the world in whatever investment vehicle you are investing in:
“Know what the hell you are doing…understand what it is that you investing in.” – me
In other words, have a good understanding of how your investment vehicle works. If you don’t understand it, don’t do it unless you are willing to lose. Then…if you lose….don’t #$%@!$ about it.
What I am saying is a knowledgeable investor will understand the risk, do what he or she can to mitigate it and roll with the punches of the investment. A savvy investor will do all this while taking advantage of the cycles that ALL INVESTMENTS go through.
Savvy investors know that losing money is the cost of doing business….but the key is making more than you lose. The way great investors do this is by spending the time educating themselves, seeking advice from successful investors and professionals, and mitigating risk.
Investing with little or no knowledge of what you are doing is what I call “Vegas Style Investing.”
So…then next time someone on stage or TV tells you their opinion on investing….take it with a grain of salt. Remember there are success stories with almost every type of investment vehicle as well as horror stories. The key is to understand the investment and know what the heck you are doing.
Until next time…..rob
Getting Started in Commercial Real Estate on Your Own And Without the Sales Pitch
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Greetings! My blog just got hijacked. I wonder how that happens…..well….I guess the bright side is that the “blog terrorist” felt this blog was getting enough traffic to hijack. Well….for those of you that had to endure the nonsense….I apologize. I wish I could tell you it would never happen again…but then…I am not sure how it happened in the first place.
Anyways….
One of the biggest lessons I have learned in my limited time in real estate investing is that the people to learn from are those with real experience. As with many of you, I started with books and “boot camps”….and in some cases that works well with residential investing. But with commercial real estate, the stakes are much bigger and the learning curve is much steeper. But the “gurus” don’t tell you that.
My biggest mistake was I did not research the people I was learning from. Learning how to invest from a “guru” that had limited experience with commercial real estate was a big mistake. Even more of a mistake was learning from gurus who were using other people’s experiences and successes as their own to sell their program. Yes…this happens a lot more than we think.
Luckily, I was so hardheaded and ignorant, that I took the information with confidence and pushed through. Sometimes you can push so hard that you take down a wall. Fortunately, at the time, it was the right wall. But, with that said, there were a lot of mistakes that only guidance from experience professionals could have helped me avoid.
Now…what I am NOT saying is…”it takes years of experience to start investing in commercial real estate.” That is not what I am saying at all. But….what it does take is the correct education and guidance. Honestly….this is the best way and your success can be realized much faster than you think or what others tell you.
So…you are probably expecting a sales pitch here….but on the contrary, here are some tips on how to get started on your own….that is right…. how to get started without a flashy package and a smooth talking guru….
Rob’s thoughts are ideas on getting started in commercial real estate:
1) Keep your money for now. Thinking about spending 2K, 5K, 10K on a good looking”how to invest in ……” package where the marketing says “20K in value…but for a limited time….only $4,999.00 you can have the plan to wealth…and my personal phone number.” When you hear that….tighten up…have a cup of joe….and remember my words here…KEEP YOUR MONEY.
2) Buy a good book on commercial real estate. Don’t buy a book from a “guru” where all the information in the book is to push you to a boot camp. Now…there are good books out there that are trying to sell you something, but they give you a lot of value too. One of my favorites is Investing in Commercial Real Estate for Dummies by Harris and Conti. A great book in explaining the basics. Another of my favorites but will bore you to tears is The Handbook of Commercial Real Estate Investing by John McHan. The importance of reading up on commercial real estate is to see if you even have a true interest. If the books above get you excited, you may have commercial real estate in your blood.
3) Take a Real Estate Licensing class. I recommend Kaplan based on my experience. The licensing class does not mean you have to get a license. It is a good course to get you familiar with the laws, codes, etc., in your area for not only real estate but property management as well. I learned a lot in my licensing class. More than I thought I would. But I also learned that one of my instructors had no clue about commercial real estate….just residential 
4) Take the Certified Commercial Investment Member (CCIM) courses. This is the boot camp you want to attend. Yes…it is somewhat expensive and time consuming. There are four classes and each class lasts five days. But, if commercial investing is where you want to be, this is the course you want to take. This will help you analyze projects at depths you had no idea existed. You will also learn how to do demographic studies, leases, etc. Plus the networking at these courses are invaluable. When you finish all the courses, you will have an opportunity to get certifed but you will have to meet some strict and demanding guidelines just to qualify to take the final test. But…I digress.
5) Find a friend, make a friend. Find someone in your local area that is successful at doing what you want to be doing and follow their lead (also known as modeling). This is by far the best advice I can give you. If you have a great interest in commercial real estate, finding someone who is a success at it is the best thing you can do for yourself. This may take some time and it is uncomfortable at first….but well worth it. Chances are this person/mentor will be a real estate agent/broker/CCIM investor.
If you do all the above and still want to go to a smooth talking guru…..by all means….but I definitely went full circle starting out with gurus and ending up with the “right way.” Real experience from real investor is by far the best way to find success in commercial real estate.
Until next time…..rob
Real Estate Investing – Your Biggest Investing Enemy?…..Emotion.
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Washington D.C. in the fall
Greetings from Washington, DC. One of my favorite cities…..if not my favorite city. I’d have to think about it.
As funny or odd as this may sound, Washington D.C. is a very romantic city. There are so many positive emotions that bubble up that I think the word “romantic” is fitting. But…not a place for a honeymoon….but then…what do I know.
Today….We spent a lot of time at the Smithsonian Art Museum. Just amazing. I have never been more captivated by art. Living in New Mexico….the art galleries are endless…from Santa Fe to Taos. Walking from art gallery to art gallary in New Mexico is great….but nothing like here in D.C.
So…as we made our way through all the exhibits at the Smithsonian….one painting captivated me….Repose by John Singer Sargent. A girl….lounging on a couch. You can tell this lady is deep in thought….possibly sad. I wondered for a long while what was she sad about?…what was she thinking about? I came up with my on conclusion….but I digress.
Repose by John Singer Sargent
Anyway….
Getting caught up in all the amazing emotions touring D.C. reminded me of how dangerous emotions really are. We all are familiar with emotions when it comes to relationships. The old saying “love is blind” is a great example. Well…guess what, emotions are dangerous in business as well.
I remember as a “newbie” investor how wrapped up I would get in a deal…..to the point where blindness would set in. Getting emotional over a deal is a great way to cloud your vision. All of a sudden you are compromising….or worse….justifying.
Think of it in terms of personal relationship. Before you start dating someone, you have criteria….then all of a sudden you fall in love and the criteria goes out the window…all in the name of “love.” All of a sudden the things that you would not compromise on become “cute” or “no big deal.”
Well…in a personal relationship….the relationship ends in heartbreak. But in business….the results could be financially devastating.
So….
Here are a few ways to avoid getting emotionally involved in a real estate deal.
1) “Fall in love with the numbers first.” This is probably the most crucial tip. Focus on the numbers first! Knowing how to analyze a deal and understanding the numbers is crucial. Letting the numbers dictate your next action is a great rule of thumb.
2) Use the facts. Real numbers should be your focus. Proforma numbers are “hopeful” numbers. Never use proforma numbers in your initial analysis. Yes…proforma numbers have their place in the big picture of things….but not when you are trying to understand the asset. Proforma numbers only help you fall in love with the property…which is a bad move. By the way…come up with your own proforma numbers. Never…ever…ever use a real esate agents or seller’s proforma numbers.
3) Try not to visit the property until you have fallen in love with the numbers. You may be tempted to go visit the property….but…this may only impact you emotionally.
4) Have someone else look at the numbers too! Having a third party look at the financials will give you a different perspective as well as help you stay focused on the numbers.
5) Write down your investing criteria and stick to it. In other words, write your plan…work your plan!
Of course…there is a lot more to this but the tips above should give you good start in the right direction.
Until next time…..rob