I read a tweet that said that people who are trying to time the real estate market are doing it all wrong and that they need to start buying and accumulating assets right now. On a 10+ year time horizon that’s really good advice, but there’s nuance to it and this can encourage extremely risky behavior.
Many people say that the market was easier back in 2011 when prices were dirt cheap compared to where they are now. That’s one of the craziest things I’ve ever heard because people don’t recognize how hard it was to buy back then. The real estate market was upside down, and 23% of GPs went utterly broke. The truth is that it’s always a scary time to buy.
Way too many people think real estate is something they need to get in immediately. They buy cheap deals without cash flow and have no value-add plan or competitive advantage, hoping for appreciation. This can easily lead them to being over-levered and underwater on their deals.
If you don’t have cash and want to get into real estate, put down this podcast and go find ways to make money. If you’re well capitalized and have the money to get in, go ahead, but most people aren’t in that situation. People think real estate is sexy and are told to go out and buy, but with high interest rates and a looming recession, these cheap deals that don’t produce cash flow can go terribly.
If you don’t have capital, you’ll need leverage. And if you have no competitive advantage, then what are you doing? Real estate can snowball wealth into more wealth, but it can’t generate money from nowhere. The only way to lose in real estate is if you get strung out and are underwater in your debt, this can crush you when interest rates rise. You need to start focusing on making more cash, and the best way to do that in my opinion is through a sweaty startup. You’ll learn how to operate, how to sell, how to manage, and how to market. This makes real estate a lot easier and will give you a competitive advantage, then you’ll have the money and experience to jump in on great deals.
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