Few thoughts of caution for beginners

[Josh Cissell]

I don't spend tons of time on these forums but occasionally do check in and I also own a property management company so I also have lots of people ask me about investing in rental property. Forgive me if this has already been said but I don't think it can be said enough.

Getting into real estate can be exciting and often times you'll feel the need to hurry a deal up just to get in. Be aware that the economy has been in a long expansion. If you're buying on the high side and something happens with the economy you don't have a lot of room. If you buy in at the beginning of an expansion, even if you get into a bad deal, the timing of the deal will probably bail you out. It's a super fair warning to say that if you're mimicking investors that got started in the last 3 to 8 years, you need to understand they have only been investing an a big expansion. Does that mean they don't know where they are talking about? No, it just means they have not been tested during an economic downturn. Leveraging yourself out and not having much equity in properties may be great now, but not when everything hits the fan. I started in real estate in 2005 so I saw the height of the last real estate boom and I saw LOTS of people lose a lot of money. I saw lots of guys who were making money hand over fist and buying loads of property go under. I saw guys who were worth millions barely get out of it without going under. They were able to stay in it because their pockets were deep enough to sustain them for years, not just a few months.

I'm not saying don't get into the game, I'm just saying make sure you find people who have been in the game during the highs and lows of the real estate cycle and mimic what they do. It's really easy to listen to a guy that started 2 years ago talk about buying 40 properties and want to jump in full speed. But is that guy going to be here if something goes wrong? Maybe, maybe not.

Josh