Consistency pt. 2 Mistakes to Avoid
So, I figured I'd follow up on this because we've had such a wild ride since I posted the original article a couple weeks back. This past week I talked to people who lost thousands, tens of thousands, and hundreds of thousands of dollars in our volatile market over the past couple months.
I wish I could say that I think the volatility is over, but I doubt it. We will probably see more of a bump to backfill the massive sell off and then a slow, if not rapid decline to start the year off. All the signs are there not to mention its been 10ish years since the last time this happened and we are due. Check out the pic to see what I mean.
Isn't it interesting how every 10 years or so this happens? Especially since we no longer have actual money, we only have currency fueled by algorithms and fussy politicians & world leaders. The worst part is, most people who invest in the market are delusional about how things work and why.
Credit to my man, Derek on the pics. He posted them to our trading group this weekend with some thoughts on where we are. What do you guys think? When the markets cycle, this is how most people react. Many, unfortunately, aren't prepped or diversified enough to weather a cycle like this or, worse yet, don't have the time to.
The good news is, there are ways to get consistent returns at any level through different methods of investment and many of you know, my preferred vehicle is Real Estate. RE doesn't come risk free, however, and I want to give you some common mistakes people make when trying to diversify into the lovely world of housing investment.
Mistake #1 - Trying to run solo. Don't do something you've never done before without having the proper guidance. Whether its managing your own rental property or doing actual work on a rehab project. Trying to do too much alone will not help your cause or reduce your stress level. Find professionals to help you manage your projects through all levels.
Mistake #2 - Failing to do proper due diligence. Have a system to understand if what you are doing is a good investment. This kinda goes into mistake #1. When investors try to do things on their own without proper systems, it's a sure fire way to create chaos and a losing investment. Perfect example. We just got a lead in from another investor who has been working on the same project for almost a year, didn't do proper due diligence, is paying hard money rates on his loan (probably 15% or more), and says the project has anywhere from $110-$140K LEFT to do. Soooooo many issues with this one that I won't go into here but it comes back to knowing what you're investing in before you do it. That brings me to...
Mistake #3 - Investing with the wrong people. This is usually why people make Mistake #1. They don't want to be taken for a ride by the slick talking businessman from California selling you land in Arizona on a 10 year balloon for a development that will never happen. Or, they don't want some contractor living in his car off fish sticks and whiskey to be the only option they have for their $50,000 renovation. Bottom line, make sure whomever you're partnering with is worth the partnership. Have the proper legal documents in place. Know what they say. Understand why they exist and what your rights are and aren't as an investor or lender.
Mistake #4 - Not being secured the right way. This is probably the biggest mistake made for those who lend on projects. Make sure your deals are documented and enforceable. Just because you have a piece of paper with someone's signature on it, doesn't mean you actually have security. Lending can be one of the easiest ways to invest in RE and one of the most secure, if it's done right. Most of the investors I teach with now only lend their money. They have no interest in actually managing a renovation and they love the consistent, double digit, compounded returns they receive year over year. Done wrong, however, this strategy can also cost you your retirement.
There is risk in every investment. Something bad can happen no matter where you have your money. 401K's, mutual funds, CD's, bonds, options, Real Estate, they all have their upside and downside. Sticking your head in the sand and failing to understand the options on how to build wealth, is not the answer. You should investigate all options because, well, no one is going to do it for you.
I've been fortunate enough to learn a lot from some of the biggest leaders in the industry over the last 3 years or so and, it's completely changed my life. If anyone would like, I would be willing to continue to share what I've learned and help you through the struggles you may be having getting started or understanding the benefits to diversifying in Real Estate. Reach out, lets have a conversation. Until then, happy investing!
Stay grateful, friends.