07 Jan 14 Mistakes New Real Estate Investors Make: Part 8
In this series, we’ve been talking about 14 mistakes that every new investor can make in real estate. We’ve gotten through #11, and you can catch up on my Youtube channel! Today, we’ll cover the 12th and 13th.
#12: Not Having an Experienced Coach.
In October, we had a roundtable here in Denver. (We didn’t publish the roundtable online as we filled up registration at the Charis Business Summit back in June! This year, we’ll be publishing it to everyone, though, so stay tuned.) In that roundtable, we talked about the importance of us networking as a community and helping one another. In other words, we talked about coaching one another. And at that roundtable, I had the opportunity, along with my friend Dan Dyer, to do some real coaching on real estate.
So you need to find an experienced coach. Now, I’m coaching you through these vlogs right here! People will go to workshops and read real estate books, and that’s how you start. You may even join a real estate club. You don’t really get it, though, until you start getting in the game.
Here’s an example. Vlogging is completely new to me! I’ve only been doing it for maybe two months. There are things I’m learning about lighting, cameras, camera angles and how things work that I never even dreamed was possible. I was watching someone the other day who has been helping us with internet marketing. I had heard him say things two or three times, the exact same thing, but it wasn’t until I got in the game that the light came on and it finally clicked.
It’s the same way with real estate. When we talk about some of these mistakes, you have to get in the game to really understand some of them. When you start buying your first property, things will start to click in place. And you’ll realize you need an experienced coach.
Now, my desire is to help you with that. That could be either taking our online Real Estate Mastery course (coming 2016!), or reading the blog, or listening to the online Real Estate Mastery audio course. It could also be attending our Wealthbuilder’s Annual Conference and then going on to attend a workshop or roundtable. Those are ways that we hope to help coach you in real estate.
Remember, a good coach is the perfect example of not asking what something costs, but what it’s worth. In fact, we just learned about internet marketing that really helped me understand the value of the information we purchased. So make sure you’re reading, studying, going to seminars, and making connections to make sure you’re successful.
#13: Not Being Aware of Real Estate Cycles.
This one should be obvious to everybody! We just went through 2008-2012. People didn’t see it coming. But real estate goes up and down. It doesn’t go up and down like the stock market though! The stock market goes up and down everyday. Real estate doesn’t do that.
Historically, real estate has appreciated around 5-6% annually every year. But in the early 1990’s we saw a real downturn in California. In the late 1980’s we saw a real downturn in Texas because of the oil industry. But 2008-2012 was the first time since the Great Depression that we’ve seen a downturn on national prices.
[tweetthis display_mode=”box”]When supply is moving up & prices are flat or trending down, that’s the time to buy & hold real estate.-Billy Epperhart[/tweetthis]What happened during the Great Recession was that we had too much money chasing too little real estate. I owned a mortgage shop in Dallas at the time. And I saw the types of mortgages we were offering were start drying up. There weren’t as many offers. I knew right then that money was starting to dry up. And once money dries up, prices on real estate start going down.
That’s why you’ve got to understand the inventory of property. If you see inventory of property of six months, that’s telling you that you’re in a pretty balanced market. If you come into Denver right now, you see supply is only three months—especially on properties that are $350,000 and under. I can tell you that if you buy when there is only three months supply, you are overpaying.
That’s what I mean by cycles. You need to learn to check the inventory and check the prices. I like to buy property that I’m going to hold long term when inventory is around 7-9 months. Then when you catch an up-cycle, your appreciation is going to go way up because the demand goes up. Remember, price go up when demand goes up. So buy when demand is lower and really negotiate and find good properties. Then hold them through the up-cycles and great wealth will be created.
Don’t buy to flip when supply is increasing. If you’re buying to flip and you’re going from 4 months to 7 months, then you get stuck with a house.
Here’s a nugget. Go back and look in the area you’re buying in for the last five years and check what the annual inventory was of July 1st for each year. That will give you a straight shot on whether the inventory of properties is going up or down or if it’s flat. Most of the time if it’s flat, that’s a good time to buy and hold.
Thanks for listening, I know I covered a lot of information really quickly today. But I hope it helps. Make sure you leave a comment letting me know you’re here and be sure to like, share and post your questions! Thanks again.
Join me every Thursday for my real estate vlog! See more videos at my Youtube channel.