New Investors: Get Educated or not?

[David Dachtera]

Hello! David Dachtera here.

This post is going to be a bit unpopular on Bigger Pockets because it's about education - Real Estate Investing education. The site as a whole has rather a strong sentiment against paying for education. In fact, this V2 of this post.

To some degree, that's understandable. Thanks to the many ads we've all seen on TV, and what lies behind them, Real Estate Investing education has rather a bad reputation. It's generally considered VASTLY overpriced and it's also considered to over-promise and under-deliver.

In fact, the thought which inspired me to write this post came from watching part of a "guru" ad on TV. He's talking about fixing and flipping which, in the current seller's market, is a bit more challenging than it has been. If that's one's primary - or only - strategy, seeking properties to fit one's strategy is equally challenging, whereas if one knows multiple strategies one can approach a property and be able to determine which strategy, if any, would be most suitable. After all, not every property can be done profitably.

Of course, education is about more than real estate investing, and that's where the "gurus" fall short. It's also about the kind of education none of us gets in the school system: entrepreneurial education, business education (beyond Wall Street, that is) and, of course, financial education.

Of those, financial education is probably the most important.

Now, you should know at this point that I am a student of a paid education program. Just wanted to make that disclosure.

One can scan these blogs and discussions and find lots of examples of those who are experiencing challenges which could have been avoided thru a modicum of financial and investing education.

Some folks post about not being able to get another mortgage because lenders say they already have too many in their own name.

Some folks post about needing to find funding for their deals because they lack the resources on their own.

Some folks post about deals where the costs have mounted up to a point beyond the profit they calculated from the deal.

Some folks post about being overwhelmed by the reporting, accounting and bookkeeping demands of their real estate business.

Some folks post about how a deal went sour and they lost a good chunk of change.

Now, you can learn how to deal with all of these through the experiences themselves and from the experiences of others. Not the fastest or most economical method of learning, but certainly effective over time and there's no up-front expense.

Then again, how much money can you afford to not spend?

"What's that?", you may say. "How can I lose money by not spending it?"

Can you lose $50,000 or more on a deal gone bad? Of course you can! Easily, if you have not yet learned how to avoid it.

Can you make mistakes in the course of a deal that may lead to penalties or even serious charges? Of course you can! Easily, and some of those mistakes can lead to penalties on a par with some felonies. Even just posting "bandit signs" in the wrong place can get you some fairly stiff fines.

Can you - and your partners! - lose your property or properties in a lawsuit, even your own and your family's personal possessions like your home, your vehicles, tools, bank accounts, and more? Of course you can! Easily. We unfortunately live in a society where litigation is viewed as a source of windfall profits.

So, the choice to go forward and do-it-yourself without advanced education is a personal choice. It is a serious choice and needs to be considered carefully.

Weigh the risks compared to the benefits:

• Learn to avoid common, simple mistakes and the penalties to which they can lead, some of which can be severe.
• Learn to protect your possessions and assets from lawsuits and liabilities.
• Learn to select the investing strategy appropriate to a property - even if the only appropriate strategy is to move on to the next property - rather than limiting your property choices to those suitable for the strategy(-ies) you know.
• Learn how to make your real estate investing a business which runs without you, even when you're sick or taking a well-earned vacation.
• Learn to make your real estate business profitable and how to keep more of your earnings rather than lose them to taxes thru missed deductions and other financial missteps.
• Learn how to turn your real estate business into an inheritable legacy for your loved ones.

Real Estate Investing Education isn't just about doing deals.

It's about finance, business and entrepreneurship as well. It's about being a well rounded business owner, a successful entrepreneur and a happier leader of your team and head of your family.

Educated investors have so much more to offer to the members of Bigger Pockets than just the results of their own experiences, also. Something else to consider.

Again, getting educated is a personal choice. "Choose wisely, grasshopper!"

We'll talk again!

Take care - be well!

Much Success!

[J Scott]

Education is essential for any business, not just real estate.  But, when it comes to real estate, here are a few other guidelines that I like to consider, based on my experience having talked to hundreds (thousands) of up-and-coming investors who have considered or have actually invested in paid coaching:

- First and foremost, as @Bill Gulley likes to point out, focus on the types of education that can be provided by accredited sources.  Check out your local community college for courses on real estate law, finance, entrepreneurship, marketing, branding, etc.  Take a real estate licensing class (whether you get your real estate license or not -- which I think you should).  Sit down with local attorneys, tax professionals, brokers, etc. and ask lots of questions.  Too often, paid educators focus on "systems" -- but real estate isn't about a system, it's about running a business.  And just like any business, you need to understand all aspects of business to be successful; you won't be successful just by following someone else's system or blueprint.

- When paying for coaching, focus on local education, not national education. State laws vary greatly, and real estate is a local business. Someone in Texas isn't going to be able to be an optimal source of real estate education in New York.

- Focus on educators who are confident enough in their ability to educate that they don't charge large upfront non-refundable fees. The good ones will either provide money back guarantees or "pay as you go" fees that you can stop if you're not satisfied.

- Don't bother with paid education until you figure out what type of real estate you want to do, and have done your own research. A lot of educators will try to tell YOU what strategy to be using, but that's typically because it's the strategy they use. Figure out the strategy you want to employ (flipping, notes, buy-and-hold, lease options, wholesaling, etc) and then find a coach or mentor who specializes in that type of investing.

- Know the difference between mentoring and coaching. Which do you want? Which do you need? What do you expect?

-  Don't assume that a big price tag means better education.  In my experience, a big price tag means larger scale education business, which means the best educators in the organization are farmed out over dozens or hundreds of students.  That means that, statistically speaking, you'll likely not be coached by the best educators in the organization, as they just won't have the time with all the students.  As an example, I've mentored a half-dozen students (completely free) over the years and they've collectively done over 150 deals at this point with 100% success rate.  Just proves that paid isn't necessarily better than free; and certainly, higher cost isn't necessarily better than lower cost. 

-  Consider that certain types of real estate investing are going to be more suitable for paid coaching simply because they are less common strategies and/or they are higher priced investments and/or they are inherently more risky types of investments.  For example, I'd much sooner pay to learn notes, lease options or apartment investing than I would to learn flipping, wholesaling or buy-and-hold.

-  Have a paid coach you're considering?  Do a Google search (and BP search) and see what turns up.  You'd be surprised what a little bit of due diligence can provide.  In fact, there are lots of well-respected and successful folks here on BP who do coaching on the side and who many of us would wholeheartedly recommend.

All that said, here is my best tips for getting started in this business...these are the 10 steps you should take BEFORE considering spending money on a coach or mentor:

https://www.biggerpockets.com/renewsblog/2014/06/0...