The DANGER of Traditional Real Estate Investing

What’s up guys, in today’s video, I’m going to talk to you about the danger the hidden danger of real estate investing that so many people fail to accurately assess. And I see so many investors not heeding the warnings from the past what the past has taught us when it comes to real estate investing. And so I wanted to make this video to share with you guys some of the hidden dangers that aren’t so obvious when it comes to real estate investing. So that hopefully you can avoid them and stop making the same mistakes that other investors are making. That is just robbing them of their returns. So without any further ado, let’s go ahead and jump right into it. And let’s start talking about this danger, which is cashflow. Now, cash flow generally a good words what we’re all aiming for, as investors, obviously, appreciation, equity, those are great, and a lot of us as investors really want to have great cash flow. But the other side of great cash flow is negative cash flow, or breakeven cash flow. And I see too many investors who are okay with accepting that, especially in the world of long term rentals, but I also see people justifying their purchases of short term rentals with breakeven cash flow. And I want to explain to you in this video, why that’s such a bad thing, why it’s actually so incredibly dangerous and risky to be taking little to no cash flow on a property and investing in that property. Because I understand that appreciation is beautiful. And that’s where you’re going to build a lot of your wealth over the long term. And I understand as well that you’re gonna be paying down principal on your mortgage every single month that your guests or your tenants are paying for it. And that’s going to build equity in the property. And that’s going to allow you to build wealth over time as well. But those are only two of the three pillars of real estate investing. And the third one positive cash flow is, in my opinion, the most critical to your long term success. So I’m gonna explain why. So we all know that you can build equity and appreciation. And we also most of us know that we can’t actually access that money until we either refinance the property or we sell the property. Now for a lot of people refinancing their portfolios is going to prove rather difficult, because you likely don’t have the income to support doing it with additional interest rates. And so a lot of the time, it’s just difficult to access that equity that you have in a property unless you actually sell the property. There’s nothing wrong with that. That’s okay. It just means that that money is essentially locked up until you actually do decide to sell the property or if you’re able to until you refinance or pull it a home equity line of credit or something of that nature. And so naturally, that all makes sense. And a lot of people are playing a long term game when it comes to real estate investing. So they’re okay with that. But what about cash flow? A lot of people see cash flow as the icing on top of the cake, you know, just the bonus that you get with real estate investing. But in my opinion, cash flow is actually the foundation that allows it all to work. Here’s why is if you have a property that doesn’t cash flow, let’s say it’s out of break even, or even worse, it’s not cashflow negative, then whether or not you can actually hold on to that property and reap the rewards of the additional equity and appreciation is largely dependent on factors that are somewhat or entirely outside of your control. This is exactly what happened in 2008. And I see people making the exact same mistake time and time again, right now. I’ll paint you a picture, the investor that I speak with on the phone who tells me that they have four properties that are all cash flowing out breakeven, and they want to start investing in short term rentals to diversify and add cash flow to their portfolio. Now, I think that their head is in the right place, but I can’t help but stress out on their behalf. Because the thing is, so many people look at and they go well, as long as it can cashflow at breakeven, then I’m gonna get a big payday down the road in the future. And that’s all well and good unless it starts to cashflow negative. And that’s what we’ve started seeing a lot of recently, with interest rates going up the way that they are is suddenly those properties that were cash flowing neutral are now cash flowing negative when you have one property, it’s probably not a big deal. If you have a decent income, then you can pay the little gap in the in the mortgage payment to make sure that you cover all your monthly expenses. But what if you lose your job for what if you now have four properties instead of one? Can you still afford to keep up and keep closing the gap on paying all those mortgages too often I see people having to borrow money or get creative about the way they solve that problem. And they end up digging themselves in much bigger hole because they just invested in the wrong property that wasn’t cash flowing the way it needed to be. And that ultimately is one of the biggest threats to your success as a real estate investor is being forced to sell a property. So imagine this, you’ve got those four properties. They’re cashflow negative now and you can’t afford to keep floating them every single month. Well what are you going to Do you can either hold on to the property and let them drain your bank account, which you obviously can’t sustain? If we’re having this conversation, if we’re in this scenario, or you can sell the property, you can cash out of it. But what if the market is in a downturn, even worse, what if the market is in such a downturn, that it would actually be a loss for you to sell the property. Now, even if it’s not that bad, even if we don’t see a big housing price collapse, like we did in 2008, it still might not be the opportune time to sell that property. So do you really want to sell that property at a less than optimal time, because you had to because you were forced to right, it’s going to negate a lot of the upside potential that you could have had, if you bought the right property at the right price. Guys just want to take a quick break here to say that for those of you watching, who want to build cashflow, and long term wealth by purchasing Airbnbs, and short term rental properties, there’s a link in the description right down below for a free training that will walk you through my exact strategy for investing successfully in Airbnb. Now, if you’re not ready to actually buy properties, and you want to get started managing other people’s properties on Airbnb the same way I got started and build a full time income managing other people’s properties, there’s actually another free training linked in the description down below as well, that will be a really great fit for you. So whether you want to invest in short term rental properties, and actually build amazing cash flow and long term wealth by acquiring the assets, buying the properties themselves, or you’re looking to earn a full time income, managing other people’s properties on Airbnb, we’ve got some awesome trainings that are linked in the description down below, it’ll definitely help you out. When you sign up for the trainings, we’re also going to send you a few other tools and resources completely for free just to help you get started. Again, the links to sign up are in the description down below. And both trainings and all the tools are completely free. So make sure to register for the trainings, links in the description down below. So that’s why I find cash flow to be such an important factor when it comes to real estate investing is because that’s what allows you to stay in the game. Ultimately, a lot of us who are investing in real estate have high incomes. And so we fall victim to this fallacy of thinking that that’s never going to happen to us that we’re never going to be able to be not be able to afford the property even if it does cashflow negative. But the challenge is that just limits the amount of growth you can have in your portfolio. Because you can only grow your portfolio by enough that you can comfortably sustain it, you’re never going to be able to grow it to 20 3040 listings with a cash flow negative, it’s just not going to happen. Because no investor is going to look at that and be willing to take on that kind of risk. And that kind of monthly liability where’s the money going to come from not to mention that it also cuts off your lifeline of funding, right banks and lenders are not going to lend you money. If your properties are cash flowing negative, they’re going to see a lot more risk in your portfolio overall, as they rightfully should, and they’re going to stop lending to you, which is also going to stunt your growth potential. The only way to counteract this is to invest in solid cash flowing assets. And so that’s why again, short term rentals are such an incredible way to invest in real estate. There’s also ways you can structure your deals so that it actually does count as income. There’s also lenders you can work with that will count your short term rental income when lending to you, that’s what they’ll look at. And they’ll then based off of that income, there’s all these amazing ways to use short term rentals to allow you to grow your portfolio to not take on that much risk and to have significant cash flow. What I’m finding is that most investors can reach their short term and oftentimes even their long term goals with as few as one to four properties when it comes to short term rentals. Now comparatively, you generally have to have about 20 long term rentals to reach the same financial goal when it comes to cash flow. So why put in all the work? Why put in five times as much effort just to get to the same end result? It just doesn’t make sense. So if you’re looking to build cash flow, you’re looking to direct you don’t want to fall victim to that danger of real estate investing where you’re putting yourself in a tight cashflow position, short term rentals may well be the answer for you. Again, check out the training linked in description below. It’s completely free, we’re going to walk you through every single step of the process of how we invest successfully, and how we’ve worked with hundreds of people to help them invest successfully in short term rental properties. If that’s something you’re interested in, again, the link is in description down below for our free training. Again, no cost to it at all. We’re going to send you some free tools to help you get started. We’re going to walk you through the whole process step by step and it’s all completely free. How can you say no to that?

So again, check that out. It’s in the link in description down below. And share with me your thoughts. I want to know from you guys, I hear from a lot of people that I speak with on the phones and then I’m talking to you every single day. But I want to hear from you guys as well. Let me know what your thoughts are on investing in properties for the one day someday maybe pay off. Maybe you think about it differently. Maybe you think it’s an absolute inevitability that the property is gonna be worth more and you’re willing to take neutral or negative cashflow. Or maybe you’re like me and you think that that is crazy and way too risky to bet your savings on. I want to know either way, let me know in the comment section down below. If you got value from this video, if you found it insightful, if it kind of made something clicked for you, or now you’re gonna be able to avoid that mistake, then make sure you let me know by dropping a like on the video just hit the like button there it takes half a second and it really really helps me out with knowing what kind of content you guys enjoy. And also with getting these videos in front of more people so that we can help more investors to succeed with short term rentals. Last but not least, make sure you hit the subscribe button there to make sure you stay up to date with the two new videos I post every single week here on the channel. With all that said, thanks so much for watching, and I’ll see you in the next video.