Top 3 Barriers To Investing: Real Estate Investing Tips
We've worked with a lot of real estate investors, and have conversations with a lot of people that want to be real estate investors. So what's stopping them? Here are 3 of the main barriers we see.
1) People Don't See The Benefit To Pursue It NOW: The key word here is NOW. Logically people understand the benefit of investing in real estate, except you're playing the long game. There is delayed gratification involved. Getting a property today vs a year from now it's going to fundamentally change their financial situation NOW. So they put it off, put it off some more, and some more. Soon you're a couple of years down the road and you're no closer to your real estate investing goals.
This is why it's important to have a sense of urgency with regards to your real estate investing. While you may not see a ton of cashflow today, you have to get the clock started. Assume a property purchased at $250,000 appreciates 7% in a year. In one year time, that property has appreciated by $17,500. That means waiting 1 year cost you $17,500. That doesn't include any cashflow, mortgage payoff, or tax benefits. But people don't approach investing with that sense of urgency.
2) "I Don't Have Enough Money": People on the sidelines use the lack of money as an excuse to go find the money. To be honest, that's a very reasonable answer. However, if you knew $62,500 (an average 25% down payment on a $250,000 multi-family property) could make you $17,500 on appreciation in a year (from the example above), would you pursue finding money with a little more urgency?
A $17,500 return on $62,500 is calculated to be a 28% return! That's because you're only putting down 25% on a property, so the 7% appreciation is quadrupled. While a lender is loaning you 75% of the money, they're not going to ask for 75% of the appreciation. That's the power of LEVERAGE!
Besides, there are a lot of different ways you can put together the money. You can use your savings. You can take out a HELOC (home equity line of credit) on your existing property. You also can tap into an old IRA (via a self-directed IRA...which we talk about in another article). You can leverage stock options, etc. Starting with a scarcity mindset around money is sure to keep you at the starting line. Money is out there. Piece together what you have and find the rest, whether it be from friends, family, or other investors.
SECRET TIP: If you can't find the money, reach out to me! Our team works with investors full-time, so if the deal is good enough, we'll work to help you find the money.
The key is to scrap together to get your first deal on the board. Once you do that, it will open up options in the future for you.
3) I Don't Know Where To Start: There is a lot to know about finding a property. What type of property? What location? What price point? Can I find a lender? How do I manage the property? How to I run projections and calculations? With all these questions, it leads to paralysis by analysis and we end up stuck and don't move forward.
The key here is START LOOKING. The more time you spend looking at properties, analyzing properties, talking to lenders, you'll gain more and more knowledge. Think of it like working out. You're not going to deadlift 400 lbs the first time you workout (or at least I can't). However, the more you go to the gym and lift, the more weight you'll be able to do. You have to start flexing your "real estate investing" muscles to get stronger.
SECRET TIP #2: If you're absolutely stuck again....reach our to me! I'm happy to help you process where you're at and come up with some logical next steps for you. I work with investors full-time, so I can give you next steps that will work for you. From there, you still have to take the steps to move closer to your goal.
There you have it. These are 3 of the main barriers we see when working with investors. You have to get in the game to get better, so don't let all the unknowns keep you on the sideline.
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