What you wont hear any investor tell you

[Gareth Fisher]

I have been involved with flipping properties since early 2000s.   First subbing out as a carpenter for several local investors and builders.   When the market dropped out in 2008.  Everyone I knew including myself went under.   Several years back now that the market turned around I hopped back in the game!!  Full of eagerness and drive, I thought I was going to light the world on fire.   Instead I made a little, not enough to justify my moves.     In fact looking back, I think I would be much further ahead now if I would have stuck to contracting work.   I didn't lose money, but I haven't made what I would call "money"

Here is what I learned, and here is what very few investors will tell you.  The reason why is simple, most investors out there on podcasts, selling books, or on the web.  R there for exposure.   They need the exposure to bring in capital, syndicate money, expand there "circle"    

I have met a few "stand up" friends, but they also haven't made me money either.  

First off all the shows on hgtv are branding and marketing tools for the individuals on the shows.  This applies to podcasts, you tube, and almost any other forms of interactions.

Wholesalers numbers are the worst and extremely inaccurate

Most rei groups are nothing but a way to attract to stupid money

Most investors are cheap, cut corners on the contracting side in the sake of the almighty buck.   I recently seen photos of one of the largest flippers in the area who flips roughly 200 homes in my local markets.   Frame over carpet on a concrete floor with your standard non treated 2x4s.     This a basic no brainer clear violations of building codes.

90 percent of your contractors are crooks who will stab you in the back the first chance you can get.

Bankers will lend you money on properties that are complete junk, as long as the comps ck out and the appraiser comes through.    At the end of the day your portfolio is only worth what the properties will sell for.

For every investor  that makes money there are 8 or 9 that lose money and thats in a strong market.

Most diyers are complete hacks, constantly cut corners like having lead based wooden windows in there rentals exposing young children to toxins and damaging there front cortex.  

Neighborhoods full of rentals, typically go to crap, because tenants don't care and landlords don't want to dump money into properties where the tenants won't take care of them.

Big business and syndicates have taken over the most profitable areas of real estate. I remember a time where there were local builders in every town, and a man could make an honest living building homes.  Now there are tract builders, nationwide corporations that a common man just can't compete with.

I'm not sure how I'm going to move forward. I have made enough to keep me interested, learned a ton, but feel that most of the value in real estate is in the ability to money in a safe  tangible asset.   Being that were in a 13 year high, that doesn't even seem like a wise strategy at the moment.   For all you new guys, be very careful moving forward.    Real estate investing is a very difficult business.  Sorry for the rant, but I feel that all the sugar coating and *** kissing that goes on in these circles someone needs to share the other side of the story.

[Mindy Jensen]

Originally posted by @Steve Vaughan:

I have no angle or interest so I turn em all down when asked to be a guest.

I wish you'd reconsider ONE podcast... You don't have to be selling anything, I just want your knowledge... 

[John Thedford]

Here is what they won't tell you:
It is FAST wealth.
It is easy.
If they are saying this, they have something to sell. Lots of people make money in RE. Others lose. There are reasons for both. 

[Marcus Auerbach]

Great post @Gareth Fisher! I am a natural optimist, but it's great to have this post on BP and give people a sense of the not-so-bright side!

People often forget why it is called "investing". You have to invest something, preferrably money, but time and effort or a combination of all the above will work as well. It's just too easy to get excited over a beer about getting started with wholesaleing and then do some flips to fill up the bank accounts and then buy and appartement compex and manage it from the beach. Sounds to good to be true? Well - that's because it is!

Most find out eventually that flipping is much harder to do than to watch on HGTV. And flipping is not investing, it's a project and if you do it well and you can scale it eventually it will be a business with staff on payrole and hopefully a 10% profit at the end of the year before taxes.

The only real play in REI is buy and hold - for a long time. Everything else are just related jobs or services. And REI is actually very simple, almost modane as a process (I think Kiyosaki shocked me with that statement first, but it's actually true). Buying B class rental properties is not very glamorous, it's not very cheap either, it takes a lot of efford and it takes a lot of time. It took me seven years before I was "out of the rat race" and literally every penny I had and every dollar I earned from my W2 went into it. Plus many nights and almost every weekend.

I had contractors do bad work, charge me too much, leave a mess, steal material, damange brand new HWF, call me at 11:30 on a Sunday night to demand a down payment. And there are a handful of guys left who I work with all the time now. We had almost every problem you could have on a property: sagging ground, bad foundations, floods, sewer backups, broken sewer laterals, plumbing issues are normal, furnaces go out at -20F because the intake freezes shut you name it. I had tenants threaten me, lie to me, die on me, accuse me, take advantage of me, or leave a property full of grime and dirt. Most of them are great though! What I have learned is that there is a solution to everything andyou just have to stay on top of things and tackle them head on. It may be simple, but it for sure is not easy. 

[Ryan D.]

1. Ignore all the crap on HGTV and the guru's - they make their money selling you ENTERTAINMENT, not education. En net, all these things have done more to hurt housing markets than they have done to help.
2. Yes, most investors loose money. RE "investing" is running a small business, its not "investing" in the sense that buying stocks is investing. Owning rentals, or running a fix&flix operation, is a BUSINESS, and running a successful small business takes lots of hard work. You are not throwing money at an S&P500 index fund and then putting your feet up.  Once one comes to appreciate this, perspectives will change.
3. 9 out of 10 small businesses will fail within the first 5 years. RE business is little different. It takes a lot of hard work, late nights, and proper analysis of income & expenses. Most folks who get into RE don't want any of these three things, which is why they fail at it. Thinking one can just by a house & be on your way to wealthy with little/no work is for lottery advertisements. Simply put, most people do not have what it takes to run a small business successfully.
4. Long term success comes from lots of little wins all added up over time. You are not going to start a RE business today & retire in 3 years. Sorry, but anyone who tells you otherwise is selling something. 

[Ryan D.]

As for bad contractors - yes, there are LOTS AND LOTS of bad contractors out there. Unfortunately, odds are near 100% that every investor will run through their fair share. BUT over time, you will figure out the good & honest ones (there are plenty of them out there), and you will do your best to work with them only. Like anything else, it takes time.

[Ryan D.]

@Account Closed - i think highlighting failures is an excellent idea, with its place & time.

Success stories are for inspiration - Failure stories are for education. Everyone needs a bit of both from time to time. I actually prefer the failure stories, b/c I can learn more from them and I can make my own business better by learning from the mistakes of others. 

[Joe Splitrock]

@Account Closed one of the reasons that failures are not highlighted as prominently as success is because to be successful, you want to model other successful behaviors. I guess you could argue avoiding peoples failures is also helpful. But looking at this from a practical standpoint, why would a podcast interview someone who lost everything in real estate? Who wants to hear about the 9 out of 10 people that failed.

There is the age old question of the carrot or the stick for motivation. Human nature is that people go to greater lengths to avoid the stick than they do to get the carrot. That is probably the reason for your pilot and mechanic example.

[Jay Hinrichs]

Originally posted by @Mindy Jensen:

Originally posted by @Steve Vaughan:

I have no angle or interest so I turn em all down when asked to be a guest.

I wish you'd reconsider ONE podcast... You don't have to be selling anything, I just want your knowledge... 

Steve Mindy's gentle persuasion got me on the pod cast in about 3 years.. your message is important ,and I agree ( no offense Mindy) but many of the pod cast are just those selling something at the end of the day and I fully understand that..  But STeve would be a great guest and so many of the up and coming younger or even older but re tooling folks could learn a lot from his thought process's and how he tackles things.. this refi till you die and debt to your eyeballs needs to be balanced with how your going to actually pay that all down over time.

[Victor Viyuoh]

As a newbie who has listened to over 250 of BP’s podcasts I can’t remember an episode where the guest’s failures were not addressed. As a storyteller there’s nothing more boring than a story without an arc. The podcasts almost always go into the nuts and bolts of outstanding failures, then address successes and reasons for each. The same pitfalls you point out are pointed out weekly in the podcasts.

On a daily basis, to our left lies a thousand failures and to our right ten thousand more. For a complete failure at real estate to be featured on a BP podcast they will either have achieved Tommy Wiseau status or, ironically, will after their appearance. I am yet to get the feeling REI is easy or without pitfalls, 0-to-500-units-in-3 months-while-holding-a-full-time-job, notwithstanding. J Dorkins is always wary about short cuts, unprofessionalism, lack of sweat equity, being too trusting of people ... the list goes on. You made some good points but you took on people who are actually on your side.

[Sebastian Lee]

While I appreciate the honesty, remember just because you're not succeeding in something doesn't mean the next person can't. Your lack of success is ultimately a result of something your doing wrong, not big corps and syndications conspiring against the common man.

[Gareth Fisher]

@Kyle K. Thank you for helping explain my position better then I could myself. Looked at hot new reo that hit the market yesterday. Reeked of mold, mold in the basement, mold under the kitchen sink, mold around the windows. Probably has about 20k of remediation work. You could see where some contractor came in for the banks and primed over the worst of it lol. Pathetic... these banks make me sick.

[Steve Hodgdon]

@Gareth Fisher A little grumpy is good for us all. I'm pretty cynical. Let my greed take me on some roller coasters. Thanks for venting

As a whole, this community is better than most. So kudos to BP. That said, some of the pumpers, joker brokers and newbies who think they can outplay the market amaze me. 

Good luck! 

[Gareth Fisher]

Originally posted by @Steve Hodgdon:

@Gareth Fisher A little grumpy is good for us all. I'm pretty cynical. Let my greed take me on some roller coasters. Thanks for venting

As a whole, this community is better than most. So kudos to BP. That said, some of the pumpers, joker brokers and newbies who think they can outplay the market amaze me. 

Good luck! 

 Couldn't agree more.  In no way were my complaints targeted at this site or its members.  Probably the exact opposite.

[Richard Heine]

This has been a good thread so far.  I love the exchanges.

Some call it hard work. I thinks it's the ultimate game with high stakes, no limits, and thrilling to play. Risk and thrill come with the journey. Who doesn't like to stumble on that super unlisted deal through a tip from a friend of a friend or the duplexes some not-so-good landlord is sick of and wants out. That gets my blood flowing. Everyone should enjoy running those numbers over and over or working up a budget on a rehab and watch it play out as planned.  I love it when the workers or the title company or the renter calls with a problem. That's what it's all about. Solving problems is the essence of accomplishment.  It's not the destination, because you will get there. It's the ride.

[Christopher B.]

Originally posted by @Gareth Fisher:

Originally posted by @Donald S.:

so @Gareth Fisher why are you on BP if by your own definition everything here, including the BP podcasts and books, are just branding and marketing tools designed to get exposure for those in the company and get them access to capital? 

So my friends I know that have a handful of properties and make good consistent cash flow, they're a fluke? They're just lucky? Oh or are they the ones that "cut corner on the contracting side in the sake of the almighty buck"? 

Obviously you've been burned, and that is unfortunate, but I am of the belief we make our own fortune and luck in this world. Good luck out there, sounds like you need to reevaluate why you're in real estate at all. 

I'm not saying that it isn't possible to do well in real estate.  I still believe it is the safest surest place to stash money.   My point is that almost every public figure is blowing a whole lot of smoke.   Very few people talk about the risk, or the thousands of investors that have gone belly up and walked away.  There are more pitfalls, and traps in real estate then I have seen in any other business then I have been involved.  I see big banks hiding mold and lead issues, I see project managers expecting top dollar finishes at low end prices.  I know of realtors who blow more smoke then Cheech and Chong on 420.

I'm not saying it's impossible.  I'm just saying no one talks about all the pitfalls, all the crap that goes on, the lawsuits, the unpaid invoices.   

I haven't gotten burnt too bad.  I have been able to do "ok"  I have gotten extremely lucky imo.  It has helped I have years of experience doing the work.  Most don't have that.  

My problem is that no one is telling these new guys all of the problems and hardships that come with real estate investing.  That its an old boys game, where the new guys are often taking the losses.   Even cardone has said that.  It's the little guys that are going to get smashed when the market turns.   Well I'm sticking up for the little guy.  My parents raised me if it's too good to be true it probably is....

The bottom line is this more investors will lose money then the ones that will make.  There are multiple reasons for that. I personally just think this topic doesn't get talked about enough.

 You are describing every business friend. I have seen the inside of a lot of businesses over the years; equipment and party rental, paper goods retail, video store, check cash, doctors offices, liquor stores, temporary halloween stores, remodeling businesses, etc. Every single one of them have their pros and cons. Every business, regardless of industry, will fail if not operated properly. What you are describing is not unique to real estate investing. 

Raised by a family of entreprenuers and one myself I appreciate your sentiment. You're not wrong in that the big guys will always toss their weight around. It's just the American way. It's a game though, we just have to figure out how to play it better. I do share your disdain for the corner cutters. In markets like this it makes it harder for those of us not willing to operate that way. It's the right thing to do though and will pay off in the end. 

[David Moore]

@Gareth Fisher

I'm usually a contrarian, so I don't really applaud your posting, because while venting is good, you haven't shared the why about your story.  You haven't given examples of 90% of all contractors do shortcuts or are crooks.  You haven't given us any examples of properties you tried to flip, what the purchase price was, the comps, etc.  

I don't think it is very hard at all to do what you are good at, and build a team around you of people who are good at other stuff, to help you with your real estate pursuits.  

A good example of an investor who knows their stuff, who does not really self promote, who stuck to a plan and made a great return in real estate is @Dawn Anastasi.  She is very helpful when I ask questions of her.  We've done no deals together, but  she has faced the gauntlet of challenges, and has become a great success story.  Another is @John Woodrich.  These are common, hard working investors, and we exchange ideas, and do our best to help each other.  

Wholesalers get a bad rap...I cannot fault you on that.  But perhaps you have skills that could make you a good wholesaler.  Flipping hasn't paid off.   There are other plays out there.  

I will say one thing to support your post.  I think BP has gotten away from the common investor, and glorified that massively succesful investor, like the Grant Cardones.  But in their defense, I'm not creating a real estate blog for everyone else to follow.  They are doing it, and while I may think they have lost a little, I've gained so much more, by interacting with others and listening to the Podcasts.

You can make money in real estate.  The mistakes you've made are like bars of gold.  Use those gold bars of wisdom to your advantage.  You can do this.

[Ariel Hernandez]

I personally lost money on my first two deals and thought it will be easier when I got started.

I think you need to take a step back and breath a little. I found great contractors (that I still need to manage) great tenants (that I still have to call sometimes to collect rent) great realtors ( that still need to make sure they are doing their job) and I’m personally a decent landlord who doesn’t cut every corner when rehabbing a property.

Any business requires strategy, knowledge, execution, adjusting and readjusting, real estate is no different.

[Brian Bradley]

I think the information, books and forum here will help you be a more informed investor. No deal is 100%. No team is 100%. Investing will hav ups and downs. You got to know why you lost. Analyze yourself, your team, and your deal and learn from it and move on. I get frustration and venting. But it really serves no purpose since blaming others will not help you grow and make more money. Really dig into your numbers on your deals. See where you are going wrong or who is the weak link on your team. Create checks and balances with all information and quotes you get. Hold your venders and agents accountable and to each other. Fix it. Don’t just ***** about it.

[Samy Kahoul]

1)Investors who think only about the good days or RE investing as a sure thing are dangerous. Plan for the bad days, but take the calculated risk and contain the down side. 

2)Cash/Time/Expertise => Raw materials for success in RE / Up to us to mix the ingredients to get desired end result

3) Notice the patterns / Create systems / If we cant explain the rationale of how we made a profit on a deal, then it was not investing but simply fluke. Going in a deal without a plan/view/numbers is gambling. 

4) Before spending a $ in a project, look into all the things that can go wrong / and have a contingency plan. you are as strong as your weakest link, whatever can go wrong will go wrong (Murphy's law) / and thats alright as long as you see it coming.

5) Market risk is tolareted, capital risk never 

6)Book the loss, embrace the failure & move on.

[Elliot Vann]

Amazing post!
I only read like half of the about 100 posts until mine. But, pretty much there are two sides-
-the people who misunderstand what he was saying and took it as hating on RE investing and just a pointless rant.
-the people who understood that this was a real post about how difficult this business is and actually responded in kind either with sympathy or constructive points to ponder.

I would also like to comment on someone who said that this post was only for flippers and not other areas of investing. A loan is a HUGE RISK! Unless you buy properties with all cash and could afford the taxes and insurance on them forever, this is a tough and risky business no matter which part of it your in. The point is if you follow and create proven systems, work hard, have a long term goal and plan, and consistently execute there is money to be made even for new investors. Yes, the tough parts aren’t always talked about. However, they should be tools to ensure your being smart and thorough in your investments NOT something to discourage you from finding financial freedom.

Oh and also, about the podcast guests being just a plug for a product. There is no free lunch and there’s been some huge value in what these people have shared on the podcast and totally was worth the cost of hearing their plugs (even multiple times in a five minute span!)

[Samy Kahoul]

<<Here is what I learned, and here is what very few investors will tell you. The reason why is simple, most investors out there on podcasts, selling books, or on the web. R there for exposure. They need the exposure to bring in capital, syndicate money, expand there "circle">>

Yes I agree, however their is a great amount of valuable free content that can be used. As in all things in life, you either sell or get sold. Just need to be self aware,

<<Most investors are cheap, cut corners on the contracting side in the sake of the almighty buck. I recently seen photos of one of the largest flippers in the area who flips roughly 200 homes in my local markets. Frame over carpet on a concrete floor with your standard non treated 2x4s. This a basic no brainer clear violations of building codes.>>

Supply & Demand / their is a market for low quality products just like their is a market for high quality products. In terms, of a general consensus that profitable flipping is based on crossing the law, I wouldn't agree as these individuals in the long run would be put out of the market by regulators. 

<<90 percent of your contractors are crooks who will stab you in the back the first chance you can get.>>

It is up to the investor/project managers to put the contracts and systems in place to monitor the successful completion of the project. Systematically blaming the contractant is lack of leadership, and as a business we should not let room to our suppliers/contractors to take advantage. 

<<Bankers will lend you money on properties that are complete junk, as long as the comps ck out and the appraiser comes through. At the end of the day your portfolio is only worth what the properties will sell for.>>

No, the property is worth based on the cash flows/expenses. Buying in the hope of selling after doing some renovations is playing the musical chairs game, at some point the music will stop. Buying based on cashflow analysis is investing

<<For every investor that makes money there are 8 or 9 that lose money and thats in a strong market.>>

Not sure of the numbers, but yes its a game where we need losers and winners.

<<Neighborhoods full of rentals, typically go to crap, because tenants don't care and landlords don't want to dump money into properties where the tenants won't take care of them.>>

A landlord will not put money anymore in a property if he deems no more value can be created from additional investment

<<Big business and syndicates have taken over the most profitable areas of real estate. I remember a time where there were local builders in every town, and a man could make an honest living building homes. Now there are tract builders, nationwide corporations that a common man just can't compete with.>>

Yes consolidation in the industry, however big fishes and small fishes can coexist in the ocean, enough space for everyone

[Jason Wade]

Originally posted by @Steve Vaughan:

I get what you're saying. Kinda funny when you listen to a lot of podcasts and they just interview each other. This one has a program, that one a book, the other a secret SEO plan or a lender or another syndicator. 

I have no angle or interest so I turn em all down when asked to be a guest.

I'm glad I got started before HGTV, BP, podcasts, Amazon or any of that. Nobody was doing it and my expectation was to sacrifice, work hard and grind for decades to hopefully have an extra dozen houses or so paid off at retirement. Now the success stories and 10x rules make you feel like a loser if you don't have a dozen or 100 a year.

Learning from a fire hydrant of concepts and ideas isn't always best. I checked out 1 book at a time, sometimes the only one on RE available at that library. Master something as opposed to knowing a little about everything. Squirrel! Just read about how that gal is killing it wrapping lease option mortgages inside a triple syndicated lending STR flip!

Thanks for the reality check even if on the dramatic side. It's not all roses and cashing fat checks.

 I needed to read this!

[Valerie Copeland]

@Gareth Fisher I am standing on my feet applauding you!!! I have not read the threat just the initial posting....Off to the 9-5, can't wait to read everything...Again thanks Gareth Fisher!!!!

[Account Closed]

I tend to agree with the OP here - It has been 10 years since the downturn. Myriad investors, including myself, have never experienced a down-turn in the real estate market. That scares me! What is going to inevitably happen? 

At the end of the day, only go for deals with a healthy margin of error, never have too many projects at once, don't over-estimate your cashflow.

[Joshua Willis]

Interesting viewpoints and I appreciate the opportunity to read your experience. In my first deal I was green excited eager and had money to spend. Well as I’m sure we all know money only gets you as far as the person spending it. Long story short I took a loss on my first deal. But I learned a lot.

I love bigger pockets because it’s a place with a lot of positive opinions. I tell people all the time when looking for someone to talk you out of starting a business go to the internet. The guys that are making money don’t have time to go and post rants about how great the business is treating them. On BP it’s actually the case that some do.

In response to the original post. It is hard some contractors cut corners. The DIY’er’s like myself don’t always have the all answers. The way I look at it the first time I learned to ride a bike I didn’t hop on and ride Tour de France. I busted my *** got up and tried again.

I don’t know about you all but this is the life I dreamed of. The bumps the scrapes the bloody knuckles. Just come with the territory.

I appreciate your honesty.

Joshua W.