Top 3 Reasons You Should Never Invest in Real Estate

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Let’s talk about the top three reasons why you should never invest in real estate. I know all of you out there love my blanket statements. This one is a bit of an oxymoron.

Why You Should Never Invest in Real Estate

1. First thing, it’s very hard work.

The first one is it’s just too much hard work. I come from a construction background and worked as a laborer on dirty construction sites for five years. That work, which was 10-hour days, six days a week, was much easier than running various real estate companies and fixing and flipping homes. There’s a lot of hard work that goes into it. Research, acquisitions, rehabs, project management, sales, marketing, finding a real estate agent, negotiating with the buyer, dealing with building inspectors, appraisers, and title companies. If you’re buying and holding, then property management is going to be an important part.

You’re going to have to evaluate all these people; you’re going to have to make sure that they’re doing a good job. It’s not easy guys. Everyone can do it, but I don’t recommend it to everyone. You’re pretty much going to have a full-time job for a very long time. There are only a few investors out there that can master the art of real estate investing to make it truly passive.

So if you’re thinking you’re going to start investing in real estate because you got sold on some B.S. financial freedom crap, it doesn’t work like that. It is hard work. It is excruciating, and it takes years to get to where you need to be. And even then, it’s not passive. You’ll make a ton of money but not enough to be passive. As I said, there are only a few investors that have mastered that art of making it truly passive where they don’t get bothered at all.

Related: The No. 1 Reason New Real Estate Investors Lose Money

2. Second thing, people in the industry suck.

There are a lot of people in the industry who are shady and going to screw you. Turnkey providers are the worst of the worst. Property managers are a freaking joke and nickel and dime you on everything. They make up non-existent maintenance charges just to charge you money. It’s ridiculous. Junk fees, hidden fees, it’s absolutely ridiculous. Let me go back to the turnkey providers—selling you properties for more than they’re worth, selling you properties in crappy C-class areas in war zones, and then passing you on to third-party property management companies that nickel and dime you to death.

Let’s talk about real estate agents. Do you think they really care about you? No, they don’t. All they care about is their commission. So if the property sells for $100,000 or $190,000, there is only a couple hundred dollar difference in their commission, while it’s a $10,000 difference for you. So they don’t care. They’re going to be in your ear, telling you to take an offer, and you’re going to lose $10,000. They suck.

Contractors, I don’t even want to get started with these guys. Over the last five years, I’ve lost $2 million to contractors. They took my money to buy meth, they took my money to buy a car, they took my money to take their wife on a holiday, they took my money and used it to buy materials for another job, and they took my money and disappeared. I’ve seen it all and heard it all. Guys, it’s a disaster.

Related: The Top 3 People Most Likely to Rip You Off in Real Estate Investing

3. Last, but not least, the numbers are always wrong.

It’s all smoke and mirrors. Whatever you think it’s going to be, it never really happens like that. If you’re buying a turnkey property everyone pumps up their pro formas, and whatever you’re promised on paper is never achieved in real life. Property managers with their fee structures—that’s all B.S., too. They’ve got so many hidden fees you’re never going to know what they are.

Another thing, the folks out there who are inexperienced or have the experience, you don’t know how to calculate a return on investment. You all use weird pro formas, weird calculations, weird rules, and I don’t even know what percents you’re using. There’s too much information out there, and it’s confusing. You’re not doing it right. You’re overestimating your income and underestimating your expenses, and the numbers just aren’t what you need them to be. Then, you lose money.

So those are the three reasons why you should absolutely never invest in real estate. That’s pretty much it. I have nothing more to say.

Still planning to invest? Why or why not?

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.