The case for starting a business before getting into real estate

[Alton P.]

Too many RE gurus are telling people to overleverage themselves into the worst housing market (and potentially economy) in decades. Half of them are below 30 and have never seen a downmarket in their investing lives, and are getting new investors prioritizing the wrong things, with highly risky strategies backed by long strings of "ifs." This post is my small way of advising against that and hopefully steering some people straight.

There's no shame in sitting on cash, building reserves, and being patient right now. The one benefit of a semi-locked market is that you won't get left in the dust. Take the time to prepare for major expenses, whether that comes from your dayjob, some small side hustle, or a startup you're grinding on day and night.

I sold one company and started another before getting back into real estate recently. Several years ago, even with high cash flow from a business, I felt fairly locked out of the places I wanted to purchase due to endlessly rising prices and rates that required constant underwriting revisions to the point where it wasn't worth the time expense. The liquidity event helped, as have recent MicroSaaS and other projects that bring in some butter and egg money. 

The takeaway is that yes, while inflation destroys cash, it is still king. It's very hard to play the game of real estate without it, and I'd encourage all new investors to work hard to maximize their income upside, and work hard to get into a stable position before obliterating your DTI on a capex nightmare. Don't be house poor or you may be houseless when the next downmarket, job loss, recession, or stubborn leak shows itself.

If anyone is looking for advice on small software companies, or agencies, or balancing a startup during a day job, I will try to reply or answer DMs as best possible.