Have you ever been given advice that just seemed backward at the time? Maybe it didn’t make sense until you put it into practice. Then maybe, just maybe, it all clicked. It can be tough to follow advice that seems counterintuitive, especially when it comes to our finances. If something doesn’t make immediate sense to us, taking that leap of faith can be tough.
These are four lessons in real estate investment that at first may seem counterintuitive, but ultimately pay off for investors.
4 Strange But Genius Lessons for Passive Real Estate Investors
Wisdom in real estate investing tells us to move as quickly as we can. We want to diversify our portfolios, scale, and start building up our streams of passive income. The more quickly we can do this, the more money we’ll have and the more quickly we’ll have the real estate empire of our dreams.
While there should certainly be a pressure to scale and have growth in your portfolio—whether it’s by improving upon what you have or by acquiring new assets—this growth should be sustainable.
Many real estate investors would do well to slow down. Here’s what we mean. Slowing down as a real estate investor doesn’t mean you stop your plans to expand. It doesn’t mean you stop actively pursuing growth. What it means is that you have your house in order before you scale. It means knowing your purpose when you do expand your portfolio. Why are you buying that property? Is it just to buy it because you think you’re supposed to?
Maybe you do have a great reason for buying. Have you thoroughly inspected the market you want to buy in? Do you know it will be a great market for expansion? Does it fit your strategy?
What about your current situation? Is this a financially sustainable move for you right now, or will buying leave you without a safety net?
Sometimes investors just need to hold back before pushing forward.
Go the (literal) distance.
Many real estate investors are afraid of moving beyond their own city limits. What they don’t realize is that this is where true opportunities lie! Many people will tell them that investing out-of-area is unreliable. You can’t trust it. It’s too risky. While it can be risky if you don’t do your due diligence, under the right conditions and with the right turnkey partner, this is the best way to invest in real estate.
The market in which you naturally find yourself may not provide you with the best investment opportunities. You have to go beyond your own market to find the best conditions—whether it’s a better price point, more properties, a better renter market, or turnkey companies. Once you allow yourself to move beyond your own area, you’ll find a whole world of investment opportunity opening up.
Be a more passive investor.
We’ve often said that passive investing isn’t truly passive. You have to be hands-on. This is all true. Some real estate investors, however, need to learn to be more passive. Here’s what we mean: some investors have their roles topsy-turvy. Being a real estate investor isn’t the same as being a manager. It’s not the same as having a job. We treat it like a business if we want to succeed, yes, but it’s not a job. You are not a worker.
You’re an investor.
What this means is that you have to pivot and get into an investment mindset more than you’re in a job and work mindset if you’re trying to make it big as a passive investor. If you have a turnkey partner and property managers, you have to stop focusing on the details that they are doing for you. Don’t make your role redundant. Focus on what is going to make an impact on your long-term success. Focus on strategy and long-term planning. Focus on what you want. Be an owner. Be an investor.
Don’t wait until you know everything.
Lastly, jump in before you have your act together. There’s this instinct we have to know what we’re doing before we do it. We like to read the manual before we get started. While in most cases, this is good advice, it doesn’t really work for passive real estate investment.
There’s just too much to know. If you try to wait until you know enough or wait for the right time, you’re never going to get started. Modern wisdom says to start saving and start investing as early as you possibly can.
As a passive real estate investor, you have this big advantage in that you have a ton of expertise to lean on. Your turnkey company knows what they’re doing. Since they’re your partner, you don’t have to know it all right away. They’ll pick up the slack. Don’t worry so much! Time wasted is money lost. Learn as you go and let experience teach you, too.
One of the best parts about being a passive investor is that you don't have to do it alone. Partner with Memphis Invest with peace of mind.