What makes this so hard?

Question

Alexander Felice · Answer

Buy and hold investing is not hard and doesn't require a ton of money. I do it, and I'm a lazy moron.

Investing and creating wealth in general is not hard at all, you just have to learn a bit and participate. I've found that most people will do absolutely neither of these. They won't read a single book or save even 3 months of expenses. Again, it's not hard, it's just that the bar for even moderate success has been set abysmally low.

Steve DellaPelle · Answer

Account Closed For me, the hardest part about REI investing is convincing myself that the world isn't going to end when I make a decision...whether that is a small decision to go with refinished hardwood over carpet or a huge decision to cash-out refinance and invest in another property...this is the hardest part.

When I take a step back I realize that this is not do-or-die it is just make a decision, live with it, learn from it, and move on. I already have 5 total units at the age of 25, I am still struggling to gain complete confidence in my decisions. This is the hardest part for me.

Cheers!

Linda S. · Answer

Account Closed,

Investing takes a lot of money, so it either takes someone who has it, or is smart enough to figure out how to get it.   Borrowing money can be very intimidating, so  I think that's likely the biggest barrier to entry for new people.

Also, it's hard work, it's a lot of stress, and if you're a tortoise buy/holder like myself, nothing is instant and it's a waiting game.   Hard work, lots of stress, and not instant gratification-- hard sell to those who aren't motivated!

Brian M. · Answer

Account Closed

I think what the hardest part is, and what trips most people up, is that it SEEMS easy at first.  But once you dive in, you realize how many little things - unexpected expenses, tough negotiations, time eating things (like repairs or loan processes) - there are that you may not have expected.  Everything can look great on paper.  Then you pull the trigger and the real work begins.

So, in a nutshell, I would say it's the unexpected little pin pricks that when added altogether can feel like a knife wound.  But, with that said, I enjoy it.. so I say pull the trigger and start the real learning.

Mike H. · Answer

I would agree with Linda D and disagree with the poster on the money. You have to have money to invest. How much money is somewhat relative maybe, but you need what I would consider a good chunk of cash to get into this.

I think a minimum of 30 to 40k to get started.

That first deal will require you to put down 25% plus pay rehab out of pocket. There are ways around that (i.e. 403k, etc) but thats pretty typical. Or else you have to be willing to use a hard money lender and come out of pocket the 10 or 15% of the deal plus the points (3 to 5) etc.

So either way you cut it, it takes money to get started.

Now once you get going, there are ways to lessen that out of pocket (hard money lender that does 100% financing) but it still takes money to fund any real growth.

What makes investing hard?1) Finding the deals. You're competing with tens or hundreds of other buyers on every house you look at. As an investor, you can't pay retail though so you have no shot at competing against owner occupants that will and do pay retail.

So how do you find that one entry point to get the deal over everybody else? Its not easy.

2) Finding financing. The first few loans are pretty easy. After that, you have to convince a local bank to do commercial loans for you. Thats not always easy to do. Depends on the area and your history and what their appetite is for those types of loans at the moment.

Expect to have to go to several banks to find one that will do it. And then expect to submit tons of paperwork to get the loan.

3) Estimating rehab. Before you can tell if you have a deal, you have to know what you're going to fix and why and how much its going to cost. When I started, I had no clue. I was having contractors give me estimates before I submitted my offers. That was not efficient. And their estimates were about as good as mine - i.e. not very good.

4) Managing rehabs. Yikes. This is a headache. Picking out materials. Getting contractors lined up to do the stuff when you need them to do it so the next one can do their stuff.

5) Estimating ARV and Estimating rent. This is easy now but when you're starting out, again, its pretty tricky. How do you know how much an appraiser will come in at? How do you know what comps an appraiser will use? Most people don't know an appraiser won't use a 1,500 sq ft two story house sale if your house is a 1,500 sq ft ranch. Not a comp.

Estimating rent is just as tricky. Some people think that if a 1,000 sq ft house is going for 1k/mo then a 2,000 sq ft house should be 2k/mo. Not how it works. There is a learning curve to seeing how the size ranges work (i.e. 1,400 to 1,600 sq ft is 1,400/mo, 1600 to 1800 is 1500, 1800 to 2300 is 1600, etc).

6) Dealing with tenants. Getting a house rented is pretty easy. Dealing with tenants can be a little tricky. You get easy ones and difficult ones. Collections. Evictions. trivial repair requests. YOu need to know what you want to say yes to and what you want to say no to.

Brian Schmelzlen · Answer

What makes real estate "hard" is that there are a lot of people who go into deals without doing their homework first, and they end up losing money.  People hear those stories, and come to the conclusion that it is difficult to make money as an investor.

While you cannot control the market, you can be successful at investing if you do the proper preparation before making a deal, and stay focused.

Brad E. · Answer

Account Closed

Finding a deal.

James Wise · Answer

What are you trying to do specifically? Buy rentals? Flip houses? Become an agent?

On top of that what is your financial situation currently like? Net worth? Liquid cash? etc.....

Brad L. · Answer

1.  Analyzing, while not over-analyzing

2. Picking a strategy and sticking to it

3. Financing and scaling

4. Being frugal

Andrew Hemminger · Answer

The concepts are mostly simple to understand...the challenge comes in when folks don't maintain discipline and allow emotions to influence their decisions.  For example, rehabbing a property to suit your tastes may not be the optimal approach depending on the market.  Eagerness to get a deal can sometimes lead folks to compromise on their criteria and due diligence.  These mistakes are more common earlier in your investing career.

Biggest thing that keeps folks from getting started:

1)  They are too afraid or suffer from "paralysis by analysis".

2) They aren't motivated enough to put in the work and commit.

What makes this so hard?

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