Are You Building Wealth or Just Real Estate Debt

There is a double edge sword when you get into Real Estate Investing that no one seems to talk about. Yes, it’s very true that you can make a lot of money and change your life. But the dark side of the equation is that you can get in over your head and what looks like building wealth is just building a lot of debt.

When is it time to step back and reevaluate your current situation. If any of these signs sound familiar, then it's time for you to make some adjustments to your plan.

Avoiding the Buying / Rehab Cycle

One of the biggest mistakes that investors make is getting into what I call the buying to cover costs cycle. This is a dangerous cycle, as it can quickly lead to you getting in over your head in real estate debt and possibly going bankrupt or having to quickly sell off assets to regain your footing. In a lot of the cases, most investors do not realize that they are in this situation until its too late. It starts off looking like they are killing the game as their net worth increases with every closing they attend. Only later to realize that they are not buying Real Estate but only buying Real Estate debt. It starts off with them using some of the rehab escrow, to help cover the costs of an old project that has yet to be completed. In the worst cases I have seen these investors have to use some of these escrow funds to cover daily living expenses, while they are waiting on the projects to get completed, flip or refinanced.

If you find yourself in this situation, it's time to take a break and reassess your situation.

Not Having Enough Cash Reserves

Cash remain King in every market and every situation! Another sign that you might be in over your head is if you constantly lack cash reserves. Having to borrower money (credit card, friends, etc.) to pay for an appraisal, cover your closing costs, not having the initial project startup costs, etc. then its time to evaluate your situation. You are not a Real Estate investor you are just a person doing Real Estate.

Building Wealth in Real Estate

Building a stable, profitable, and long-lasting Real Estate business is like everything else. It takes patience, planning, and surrounding yourself with the right team. Real Estate one of the best businesses to get into to change your financial life quickly. But if not done correctly, it’s a business that does not suffer fools easily! Now, get out there and make some Money!