I consider myself a very positive person.  As a former public school educator and athletic coach, I really see tremendous value in positive encouragement and motivation.  But, as much as I would like to tell you that real estate investing is the ultimate path to financial freedom, can change your life, ZIP code, give you wings, grow all your hair back, etc. etc., I think I really need to tell you the hard truth:

Real estate investing isn’t for everyone.

Now, it took me a long time to realize this, and I am a full time investor.  And, I am in no way trying to discourage you from pursuing your dreams through the vehicle of investment real estate.  But yesterday I sat down with a new investor who purchased two homes from a local wholesaler in Memphis(not me, obviously) who offered a ‘turn key’ system.  This ‘turn key’ system turned out to be a complete farce, and by the time the investor discovered this for himself, he was overleveraged in properties that he will never be able to sell and is going to have great difficulty getting refinanced.  So let me save you some time, money, and heartache and give you a few key pointers that you should take to heart before you begin signing on the dotted line thinking financial freedom is coming in a few weeks when someone promises you an ‘impossible to lose’ deal.

1)      Real estate investing is risky. There is no way around this.  You have to be prepared to weather financial difficulties that stem from unexpected events that take place, be it maintenance, nonpayment, eviction, natural disasters, and so on.  These things will happen.  So be careful before you commit to that 30 year payment that represents 50% of your total take home pay in the name of ‘investing.’  Anyone that tells you that you will have no problems with an investment home is LYING to you.

2)      There is no perfect system for real estate investing.  Real estate investing, when done successfully, is less of a ‘use one tool’ approach as much as it is a ‘bring the whole toolbox, and let’s see what tool we need’ approach.  So, when the gurus are selling you their be all, end all course that will solve all your problems, do yourself a favor and don’t set yourself up for disappointment when you buy the course, read a few pages, shelve it, and then say that technique ‘x’ doesn’t work.  YOU don’t work, and therein lies the problem.  For those of you that actually learn the techniques and implement them, you should realize that any investing strategy is conditional and situational.  For example, suppose you are an expert in lease options.  Don’t try to get an option on a house where the owner clearly dictates they need to be cashed out ASAP.  Obviously, you need a different tool for that.  And that is why the best investors are always learning.

3)      Buying rental properties will not get you rich quickly. The investor I spoke with yesterday had bought two 100k properties using a no money down ‘system’ invented by this local wholesaler.  When I asked the new investor, now carrying about $1300 in monthly interest payments, how much he had in total liquid reserve, he told me about 5k.  Clearly, he was not qualified to be purchasing those types of properties, in that price category – a few months of vacancy would wipe him out!  But the wholesaler would never think to ask that kind of question, because they are too busy trying to cover the payments on their new Humvee and simply make a sale.  In the end, this kind of cavalier attitude causes new investors who put blind faith in people they perceive to be experts to FAIL.  And for the wholesalers or people who sold these new investors their first properties, if the new investors struggles or goes bankrupt than that is just considered ‘collateral damage.’  Do you, as a new investor, want to become ‘collateral damage?

4)       DO NOT, UNDER ANY CIRCUMSTANCES, ACCEPT AN OFFER FROM SOMEONE WHO WANTS TO BE YOUR ‘MENTOR’. I can’t explain this enough.  Investors who say ‘we’ll mentor you’, ‘just come work with us and our proven system’ – you need to avoid these people. If I need advice on real estate and marketing, I call Bill Fell or Charles Blair.  But Bill and Charles, with whom I have the utmost respect for as investors, have NEVER chased me down and said ‘Oh, Robert, I’ll mentor you with my proven system.’  They don’t try to take advantage of me and put themselves in a mentorship role.    In fact, the most accomplished investors who are in the streets every day actually doing deals do all they can to AVOID mentoring situations, because most people who are new to investing and see accomplished investors will naturally seek them out for information.  These experienced investors, as professionals, they know that mentorship is not only time consuming but also unprofitable.  Not that great investors aren’t willing to teach what they know, but they realize that the time necessary to teach someone will detract from their business, and they have worked hard to get to the level where they are at, usually provided by the school of hard knocks.  So, usually they are extremely hesitant to just give away all of their hard earned information. If you were Donald Trump, would you just simply say ‘yes’ to everyone who saw your success and came to you, without being introduced, and asked to be your apprentice?  Of course not.  Have you ever seen Donald running around screaming ‘I will teach you how to be a multimillionaire real estate investor? LET ME MENTOR YOU!!! NO CHARGE!!! FREE FREE!!!’ Absolutely not.  So now you know to be wary when someone is offering to teach you or become your ‘mentor.’   The people who you really need to be your mentor you will usually never be in public view because they are actively trying to NOT be in the limelight.

5)      Before you point fingers at someone for problems with your investments, look in the mirror first. I have a former client who purchased properties from me, but had suck a lackadaisical attitude towards management of his properties he was unable to tell you if any of his homes are rented or vacant, or how much they are rented for. Yet, when tenants stopped paying and had to be evicted, he would come to me making monetary demands saying that the properties he bought were non performing – knowing that I was very concerned with his satisfaction, which put me in a difficult situation, because I wanted him to be happy, obviously.  The truth of the matter is, his properties were not performing because of HIS lack of responsibility and poor handling of his investments.  As a REAL investor you have to be very mature to realize that sometimes things are a result of your own actions.   Don’t blame others if you have not worked on your educational foundation which will allow you to succeed.  Learn from your mistakes – don’t hide from them.

I could go on with stories about how the sales environment of information products today creates this notion, dare I say fable, of easy riches, if only you buy product ‘x’.  Real Estate can be extremely profitable, when done properly, yet it is not without risk.  Be wary of people who are promoting themselves as ‘experts’, ‘#1 person/site/system for real estate investors’, ‘gurus’, and so on.  The true experts don’t need catchy slogans and self promotion to show that they have achieved a level of mastery within the world of real estate – their actions and the public records show it all.

Remember, the critical basis for successful real estate investing is a sound education.  Only you can obtain that for yourself, through seminars, home study, modeling other investors, asking questions, and trial and error.  No ‘system’ promised to you from glitzy marketing campaigns or shady characters will ever be a substitute for this, and no system can hope to replace the one element in real estate which is absolutely necessary to  make you successful:

Experience.

Robert Feol is an author, speaker, teacher, investor, and radio personality who’s primary focus is helping others get safely into real estate investments. Want to learn more? Listen to his radio show every Saturday at 11 AM CST on News Radio 600 WREC, Memphis.   Or, catch him at his latest project website, www.memphistenantplacement.com