1. “How much is the return?”
Beginner investors focus only on return. This is could be a costly mistake. because they ignore parameters such as their financial goals and risk exposure. Also, because it seems to them that they are chasing the shiny object that they will get rich with this one investment. If it’s too good to be true, it likely is. ROI consist of balancing risk with reward and learning the drivers behind the investment that creates the ROI. Multifamily ROI is driven by income growth, property improvements, and positive market drivers. As I always say…what people who are passionate about returns and hot dogs have in common is that they probably do not know what they are made of.
2. “But I’m stressed, no time!”
Investors are beginning to rush into investing without a strategy and without a full understanding of the investment. Why are they investing? Because everyone invests. Because the money is sitting in the bank. Because they are under pressure. Because there’s an opportunity they do not want to miss. Sometimes it is an opportunity that will not come back, but it is better in any case, to invest from a rational and calm place, and not because of irrational fears and anxieties.
3. “That’s all I have!”
An important principle for investing in general, is this: It is not worth investing money that we can not afford to lose. If you invest, you will inflict years of financial anxiety and sleepless nights on yourself. Professional investment firms will also make sure that you do not borrow the money or entrust your last penny.
4. “I’m in love with a deal”
There are deals with incredible potential, but where there is a possibility of an upside, there is also a risk. Emotions are wonderful in a relationship – but in investing, you should not fall head over heels in love and forget the pessimistic scenarios.
5. “I want a sexy location”
A sentence I say repeatedly, and do not get tired of: “We invest where Americans live, and not where tourists travel.” True, it’s more fun to tell people you have an apartment on Fifth Avenue which overlooks Central Park in Manhattan, or a property on Malibu Beach. But you will probably find the significant opportunities to generate passive income in the “real” United States.
6. “Why would they lie?”
Any data received should be checked. One should not blindly trust, even when it comes to a decent and worthy company. At the same time, one should not doubt completely, and try to reach conclusions on their own. Did you find data that you feel contradicts those presented by the company? Check the company’s response. Does the response make sense, what did you miss in your research, what did the company miss in their research? Trust, but verify.
7. “I need to learn more”
Being an eternal student, it’s like a sports fan. Watching it, talking about it, but not doing it. Learning and examining is nice, but like swimming, we need to count to three and just jump into the water, otherwise we will be addicted to the paralysis of analysis and miss the opportunity to join the investment community.
8. “Don’t bother me with formulas”
In investing, there are a lot of annoying details, which remind us of the formulas from math classes in school. But it is important to know what the terms of the loan from the bank are, to make sure that there are sufficient operational reserves, that the business plan has considered the taxation issues, the scope of expenses, how many of the units are empty, etc. If you do not ask about it and if the investment company does not talk about it, then “Houston, we have a problem.”
9. “Real Estate Always appreciates!”
Many times, rookie investors rely too much on the value-add and forget to check the cash flow. But the thing about Multifamily is when the deal is built correctly, the cash flow should be strong with a high level of confidence, and should not be ignored, because it is a significant engine for driving the upside, reducing the risk, and enhancing the reposition value. Multifamily appreciates when cash flows improve.
