What Risks Are Involved In Real Estate Investments

What risks are involved in real estate investing? In this video, we're going to talk about the risks. We're going to talk about one specific thing that you say to the end that is absolutely imperative, or you could get killed investing in real estate. Everyone thinks it's easy. Sometimes you get kind of chopped at the knees. You don't want to be those people. Stay tuned. There's five things we're going to talk about in this video. We're going to talk about strategy. There are so many strategies. I'm going to mention the five that I've loved and became a millionaire in many of them. And then we're going to talk about the one thing that actually doesn't have anything to do with the property. We're going to talk about market risks, financial risks, and then the big one thing, but I'm not telling what that is until the end of our video. All right, so let's talk number one. What are the ways that you could do real estate? There are so many strategies and it has to be driven by what's going on in the economy. Since the pandemic, there have been such a flood of just demographic transfers. And I can tell you one I'm going to start with, which will be shocking to you, is RV parks. There are more people living in RV parks. In fact, in Boise, because we're building up there, there's 2,300 people from California, Oregon, and Washington living in RV parks, waiting for someone to build them either a house or even somewhere to live. So what does that mean for the developer, right? So that's the second thing we develop. We build from scratch. We buy land. We either flip to builders or we build ourselves. So we're building four plexes. We were building single family homes. We couldn't build them fast enough. So we moved to four plexes so we can move more people in. The housing prices have gone 400 to 600,000. The rents have gone from 1,200 to 1,800. I mean, it's unprecedented if you're on that side. So it is clearly a seller and developer's market, not necessarily a buyer's market. So you have to think, well, where am I going to go? I'll switch gears. I have more clients, a lot of clients in the Midwest. In fact, some of my 12 and 18, several 18-month millionaires are Ohio, they're Kansas, they're Missouri. Oklahoma's my millionaire market. So what strategy do you want to do? A lot of them, they're doing fix and flips. Hard money lending is easy to find. If you go back to other videos here on my YouTube channel on the EIDL loans, a lot of them have gotten EIDL loans. You don't even need to pay hard money, 10, 12, 15, 17%. You can actually get your money free from the government. If you have no idea, just click back to one of those videos and check out any of the EIDLs. I have tons of videos on that here on my YouTube channel. But those of you who want to do fix and flip, you can do short-term rentals. Our folks are my clients. So many millionaires coming in hot, hot, hot in 2022. So I hope you want to be a millionaire in real estate and I'd love to mentor you through that because we're really like 2022. Sam will have done upward of 30 houses. Joe and Becky are doing a variety of fix and flips and they're moving long-term into short-term rentals. And those of you who move your long-term rentals into some combination of short-term rentals are going to have a huge success, huge success. So I just want to get you excited. There are so many ways to do it. And if you want to do it the all-terms way, you can do lease options. We do lease options from lands to larger projects. So once you decide the strategy, then what do you do? Right? Because again, we're talking about risks in this video. Let me share with you the risk that has nothing to do with the property. It has to do with the people you're involved with. Now, if you're out there and just going to do this by yourself, that's fine. But if you're going to have partners, what's the LLC look like? What's the operating agreement look like? What's the structure of the money? How are you going to manage and control expenses? You got material costs that are out of control right now with construction and rehabbing. So make sure that you have really solid agreements. In fact, I have another video here on YouTube. It's called design your divorce while you're in love, which is how do you build that operating agreement with a partner? So many people, it's a risk that just is too casual. Everybody gets excited going into the deal and then the deal falls apart. Before I go into number three, I want you to click below and to subscribe to my channel if you're enjoying this and go back. I have tons and tons of videos on many topics on how to make you a millionaire. I was a real estate millionaire. So I'm always in love with these topics and hope you decide to be one soon with me. So number three is market risks. Now, a lot of people just say, well, you're just a Midwest buyer of real estate. Well, it was my millionaire market. I did it in Oklahoma. I'm doing it in Kansas. I've got Airbnb short-term rentals. We do on the Ozarks. We're doing flicks and flips up in Ohio. Yeah. I love that market. I've done a ton in Arkansas, Mississippi, Louisiana, you name it. I love the Midwest markets. That doesn't mean that you can invest on the coast. Now what's interesting about the coast, especially I'm going to speak to California, Oregon, and Seattle, which are closer to where I am in Northern Nevada, is they are moving in like droves, right? Florida's getting the same overflow. The Carolinas are getting huge overflow. But as that exit happens, will there be opportunities out on the coast because of the vacancy rates? There will be, but you're going to have holding costs. I have a lot of Canadian clients who say, well, right now, I mean, there's just so much available. I said, I know, but do you have the holding costs? Can you rent it? So think through your location from another risk and a market risk perspective. What's the job growth, right? What's the household income? Are there renters? Are there buyers? Is there influx of other industries coming in? You've really got to look at that market risk and that location risk. Now, just financial risk in general, you get out of bed and you have financial risks. So you get up and you just walk through life. You've got financial risks you're doing all day. So how do you then assess them inside real estate? So inside real estate, number one is, is there an ROI, right? From where you're buying it to whether you're going to rehab it, have short-term or long-term rent, how are you going to monetize the asset? And then you really want to look at the IRR part of it, which is the tax side. And that is with a very smart tax accountant, not just, you know, your typical H&R blocks that are down the street. We're talking real tax strategists who know how to book the depreciation schedules for you. So all of that financial risks need to be looked at. Ideally, you have a financial mentor, you have a great tax strategist, but I would run that by a few people, not just count on those online, you know, cashflow calculators that everyone just, you know, looks at. As you can see through my YouTube channels and through all of my work, I'm not a fan of just the standard traditional stuff that's out there. So I want you to dig deeper. I want you to go those who have success that have proven success in today's market, not 20 years ago. There's a lot of people that are in the space of the internet right now. They did this 20, 30 years ago. And yes, I was a millionaire 20, 30 years ago, and I'm still amazingly active. I mean, my real estate portfolio and activity in three, four markets is more aggressive than most people even do in a lifetime. So I love it. I will always do real estate. Let's go to the next and the biggest one. The one thing that could absolutely kill you if you don't do it right. It's due diligence. So in my third book, The Millionaire Maker Wealth Cycle Investing, I actually have an entire chapter on due diligence. I have forms that you can download on how do you walk through due diligence, but I want to go through that checklist with you right now. So get a pen and paper. Let's go. So I want to read exactly the seven things that you need to do for due diligence. And again, I'd encourage you, you can go get My Millionaire Maker. It's my third book. It's Wealth Cycle Investing. Read the chapter on due diligence. It's phenomenal. At the end of this video, I'm going to give you my blueprint on how I became a millionaire. So stay tuned, but I want you to write these down. And the seven questions that absolutely need to be asked as you're doing due diligence. Number one, is it congruent with my investing rules? Right? So you say, well, I don't have any investing rules. Again, a whole nother chapter in my Wealth Cycle Investing book about money rules. I'll give you a basic money rule for real estate. Are you investing for appreciation and cash? Or are you investing for cash flow? And you can say, well, I want both. Well, I can tell you in a land development deal, you're going to get one. You're going to get cash. You're going to get appreciated, cash out, big payday. You're not going to get cash flow. So if you want an RV park, like the RV park to our building, one of them has 66 units. That'll be a monthly fee of say approximately 500 bucks per unit per trailer. It's going to work, right? So that's cash flow. So that's a money rule, for example. So do you have congruence with your money rules? What's your exit? Are you in this for a long time, short term? What's your deal? Number three, what's big money investing? You know, for some of you doing a hundred thousand dollar deal is great. There are some of you that you won't even get out of bed for a million dollar deal. Well, I have clients that won't do anything less than a $25 million deal. So what is big money to you? And what can you really, I'm not going to say afford, because I don't even like that language pattern, but what kind of capital do you have that you can have access to now? And I would highly encourage you. How I became a millionaire six months in real estate was a team. I joined another team of 20 year successful folks. So some of you, you know, doing it alone, it's suicide. All right. Who has the oversight? Like who is actually looking at the QuickBooks? Who's actually looking at the data? Who's signing off on material costs? Are the economics of the offer just sound, right? That's a huge due diligence question. And then will the marketing, the business plan actually deliver the outcome that you're wanting? And then number seven, which again, I still think is the number one of above all in every business industry is your team. Is, do you have a team who has expertise? Or are you just a bunch of, you know, beginners wandering around together? I would highly encourage you to get an expert on the team. And the one place I would never do due diligence is the internet. The internet is like the bathroom wall. So yes, it has great information, but I always say, you know, it's like the bathroom wall, meaning anybody can write anything about it. So there's the good, the bad, the interesting out there. And it's really tough until you get the real background of the people. In fact, with my higher end clients, we encourage them to do background checks and really thoroughly vet each other. Are you really going to do this and be in this, meaning business and finance and doing a successful real estate transaction? So due diligence is the number one strategy or the number one thing you really need to be looking at and learning about. And I would love to help you through it. I actually wrote a complete blueprints called the Millionaire Maker Blueprint. And you've got to go to the notes below into the description. I want you to click on the link. I want you to go through the blueprint thoroughly and then have a one-on-one consultation. And I would love to mentor you into your millionaire status. I can guarantee you could talk to them. I've got 12 month, 18 month, and 24 month millionaires since the pandemic. Yes, some 2020, they came in hot and they're doing exactly what this blueprint says. So click on the link. And by the way, if you're liking this video, I want you to share it, love it, like it, get a team together and get people in the same conversation about money.