Time. What a concept. What a shame it’s so often underappreciated – everyone is so busy trading their time for money. Or put another way, trading a limited non-renewal resource for one that is limitless and always renewable.
I’m not going to waste your time and promise you something that is impossible for your situation. Rental property investing isn’t for everyone. There is no one-size-fits all approach – if you show me someone that claims there is, I’ll show you a someone you shouldn’t trust.
Is the approach of investing in rental properties from across the country right for you? Does the following describe you?
You Have or Will Soon Have Money to Invest
This is about making your money work for you. It’s not about conjuring money out of thin air. So you either need to have a chunk of money already or have a great job that allows you to save a significant portion every month.
You Are Pretty Young and Stable
This is a long-term plan with plenty of benefits in the short-term as well. Real estate investments aren’t nearly as liquid as stocks – there are significant transaction costs and when you hold for many years, there are scheduled times when you get money back. It’s not a sell on demand type thing.
You need to have a long-term view and the stability to see the plan through. You don’t need to know exactly what your life looks like the next 15 years, but you will need to avoid the “oh my god I need money right now” situations.
Test: Are you able to approach this as a 10-15 year investment portfolio where all the profits get reinvested?
You Won’t Hit the Panic Button
Expected results don’t always match actual results, especially in the short term. This happens in the stock market as well and absolutely crushes dumb investors.
If things go poorly at the beginning, can you weather the storm? Or will you freak out, sell immediately at a loss, and never invest in real estate again?
Test 1: You buy a $100k property that rents for $1k per month. Then we enter another recession and people stop buying homes. It still rents for $1k per month, but the price drops to $85k. Are you ok waiting out the recession for a few years? Or do you sell in a panic because you hear prices might drop all the way to $70k?
Test 2: Here is a completely made up scenario to see how you would deal with an actual loss. A sadist is running your company’s HR department. Rather than offering a 401k match, he devised a game where the you can gamble $3k of your 401k contribution at an expected profit, but with the chance you lose it all. If you choose to play, he will roll a die to determine your fate:
- 1 – you lose and the company takes your full $3k
- 2, 3, 4, 5 – you win and the company adds an additional $1k to your contribution
- 6 – you win and the company adds an additional $3k to your contribution
Your expected winnings are $667, a quick 22% return… but you could lose it all. Let’s say you decided to play last year and rolled a 1 – your hard earned savings went down the tube and the jerk HR director loved it. Are you ok playing again this year?
You Are Able to Get Shit Done
It’s amazing how many people can’t set a goal and work towards it. If you can’t, don’t start here. The good news is if you have a job that allows you to save $1000 a month, you are probably a pretty capable person.
Test 1: Would a friend label you a procrastinator?
Test 2: Able to keep several projects going in tandem? Do you have the mind of a manager, able to switch between them?
You Have a Strong “Why”
This isn’t the path of least resistance, so you need a reason to stick through the tough times. I’m going to show you it’s not as difficult as you may think, but there will be stumbles along the way. You need to know exactly why you will put in the effort to overcome those obstacles.
Here are some examples:
- You want to be able to retire in 15 years, not 30
- You just got married and now feel the financial responsibility to provide for your future family
- You recently had kids and want to pay for their college education some day
- You want to be able to take time off work to travel
Whatever your reason, it has to be motivating for you.
Test: Can you answer these questions: Why bother doing all this? What is your motivating future result?
You are able to ignore the haters
Sheeple need not apply. If you want the same results as everyone else, take the same action as them. If you want different results, you are going to have to have strong convictions in order to shield you from the haters.
This isn’t rocket science, but it is against the norm. You need to be able to come to your own conclusions and not be held back by people around you that don’t get it.
Test: Do you believe something that most people think is crazy?
Get Started Now with a Baby Step
Are you nodding along? Are you potentially a fit for this? If so, don’t be that guy that waits for the perfect time, then looks back 5 or 10 years from now and says “damn, I wish I started earlier.” There is a famous saying “don’t wait to buy real estate, buy real estate and wait.”
If you want the results, you will have to take action, get educated, and build trust with people who can help you reach your goals. There are a lot of steps to get there, but it all starts somewhere and it might as well start now.
Your baby step today: become an email subscriber. You will get 1-2 emails a week to help you on your journey. This is just the start of building a trusting relationship with someone you’ve never met in person, which is going to be important throughout this process.