The RISKS of Real Estate Investing That No One Talks About

Hey, what’s up guys, in today’s video, we’re going to be talking about some of the hidden risks with real estate investing that I think no one really talks about. Honestly, real estate investing can be risky if you don’t do it the right way, especially short term rental investing. And so I really wanted to put a video together sharing some of the risks that I see people taking far too often. And I see you will get burned. And unfortunately, I speak with people that don’t heed my warnings on these things, and that go and take these risks unnecessarily. And they end up getting burned because of it. So I wanted to put this video together to hopefully help you avoid some of these risks. Because short term rental investing in real estate investing in general can be very, very lucrative, and a whole lot of fun, it can create an amazing lifestyle for you, but you want to do it the right way. And before diving into the video, I also want to share that if you want to work with our team to help you avoid these risks, and make sure that you navigate everything properly, not making any of these mistakes, then make sure you book a call with us. Check out the link down below we’ve got a free training. After that free training on how to invest successfully in short term rentals. You can also book a call with our team to talk about how we can help you to navigate these potential pitfalls. That being said that out of the way, let’s dive into it. And let’s start talking about some of the biggest risks that I see people under estimating when it comes to real estate and short term rental investing.

The first one is the use of leverage, I think that a lot of people just don’t really appreciate the level of risk that comes along with using leverage. When we talk about, you know, borrowing money to go and invest into stocks or buy stock options, it’s very apparent that that’s extremely risky to do. But when we talk about borrowing money to invest in real estate, it’s just become the norm. And then on the flip side, people like me love investing with leverage because of the upside potential it gives you and that you actually can protect the downside in a lot of scenarios. But I think a lot of people just don’t think deeply enough about it. And so they’re attracted to the reward without really opening their eyes to the risks. And that’s just honestly something that I see we all make mistakes on all the time. So I just would really, really recommend that you consider the fact that when you’re buying a property, even though you are only putting 20% down, you are buying a property that’s worth a whole lot more than that, assuming that you’re doing what most people do and put 20% down on a property. So the reason I say this is a risk is because let’s say that you put $100,000 into a property that’s worth $500,000. Well, if that property drops by just 10%, right, if the value of the property drops 10%, that means it loses $50,000 with the value, but you only put $100,000 in. So now you’ve lost $50,000 That means you lost 50% Because the market dropped 10%. So that’s where it gets quite scary, right? Now, the thing to remember is that, like I mentioned, you can protect against this downside, the way to protect is to just not sell the property, right seems pretty obvious if the property value drops by 10%. Just hold on to it and wait for the property value to come back up like they always do. If we look back over history, we know that the property values will keep going up and up and up over time, there are going to be periods where it goes up and down along that path. But it’s generally trending up into the right whenever you look at that graph. And so naturally, pretty easy, just don’t sell the property. But unfortunately, that’s not what people do. Oftentimes they panic, they’ll get rid of the property or worse, they bought a property without actually protecting against the downside. So they don’t have the option to hold on to that property, they don’t have the option to not sell because they bought a property that doesn’t cash flow positive. What that means is that now your mortgage payment, your utilities, your insurance, your property taxes, those things add up, and they’re actually being paid for out of your own pocket every single month because the property isn’t able to bring in enough revenue. I just talked to someone this morning on the phone that was in this exact situation. You know, her mortgage payment was more than she was bringing on the property. And so she was looking at three to four months before she would have to sell the property, the property is not worth as much as as what she bought it for right now. So that’s a really, really awful position to be in. So how do you protect against that due diligence analysis? That’s why I’m so big on this channel all the time. In my videos, I talked so much about doing proper due diligence, analysing all your deals properly, and making sure that even in a worst worst worst case scenario, you’re still going to be cash flowing at least neutral, you should obviously be aiming for cashflow positive, we tend to aim for 15 to 20% cash on cash returns. But you want to make sure that at the very least in a worst case scenario, here you bring in enough to cover all the expenses going out. That will mean that no matter what happens in the market with the value of your property, you’re never going to be forced to sell the property you can always keep it operating because it’s at least breaking even covering all of its costs. You don’t have to take money out of your pocket to carry the cost of that property every single month. So that is the number one best way to protect against the downside that comes along with using leverage. Because again, leverage can be something amazing. It means that if the property value goes up by 10%, you also now gained 50% on your investment, as opposed to just gaining 10%. Right. So there’s a whole lot of upside there, you just have to make sure you protect against the downside by ensuring that you’re never going to be forced to sell. Now, the other thing that you will make the mistake on all the time is just overlooking the cost of mistakes. They underestimate how expensive mistakes can be in real estate. And again, this is one of those things where if you pay too much for that property, that $500,000 property, let’s say you pay just 1% Too much for that property that’s $5,000 that you’re paying for. Right? And if you overpaid by 5% 10%, it really, really adds up quickly. Now, what if you get that property that you’re projecting to bring in $100,000 a year on and instead of bringing $100,000 You underperformed by 10% That’s pretty reasonable. Lots of people do that the majority of people that host your property on a short term rental will underperform and leave at least 10% on the table typically 2030 40% on the table. Now suddenly, you’re leaving 10s of 1000s of dollars on the table when you could have done otherwise, right. Now what if you tack on to that the you hired the wrong property management company, and you’re giving them 20% management fee or even 10%, there’s 10s of 1000s of dollars again, now what happens if you didn’t do the right inspections on the property and suddenly, there’s a repair that needs to be done that was unanticipated, there’s an easy another $10,000 Maybe the roof needs work, maybe the foundation isn’t great. There’s all kinds of hidden potential risks. And the reality is we’re dealing with an asset that is worth half a million dollars. And again, people don’t tend to pay attention not so much because you might only be putting $100,000 on down on the property, but it is worth $500,000. And so there’s so many opportunities for your money to get eaten up by small little mistakes that really really add up to big big dollar amounts. 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 Airbnb ease 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 ease. 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’ll 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. That’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. Again, how do you protect against this knowledge experience? Those are the best teachers but they are the most expensive one. So whenever you can, you really want to make sure that you’re learning from other people’s knowledge from other people’s experience. So they can help you to navigate and avoid those potential pitfalls. Like making sure that you don’t overpay for the property making sure that you don’t miss analyse the property that you make sure you actually run your numbers properly. So you buy the right property and make sure that you can actually perform well with it. Make sure you don’t buy the wrong amenities that aren’t worth worth the money and make sure you don’t do the wrong renovations, make sure you don’t overlook anything. Again, there’s just so many different areas where you can go wrong. And I see people too often feeling overconfident about this stuff. And the reality is you probably won’t make all these mistakes. But you’ll almost certainly make one or two of them if it’s your first time investing in real estate. And you don’t work with someone who’s already done it before multiple times successfully and knows how to avoid these pitfalls. That’s why the very first time that I started investing in real estate, I did it with my business partner Riley, who’s now my business partner at the time he was and he was just a colleague of mine, but I knew that he had the experience of having done it multiple times. So that’s why we now help people the way that we do with the NBA in our circle, showing them mentoring them through exactly how to invest successfully in short term rentals is so that we can help people avoid those exact mistakes. Again, we’ve got a link to a free training down below. The reason that free training exists is to help you avoid some of those mistakes, avoid some those potentially very, very costly mistakes that will set you back because again, this kind of ties into that risk. And that thing that I see people overlooking is that oftentimes people look at the risk and they realise what it is but what They’ll then do is trick themselves into thinking that they can stomach it. And they just fail to think long term about these risks. Because the thing is, if you’re investing especially in your first property, it’s really, really important that that first property does exceptionally well, if you buy your first property as a short term rental, it’s an investment property, it’s your first investment property, and it makes you an additional $50,000 a year in cash flow. That means that every couple of years that property on its own without you having to save a single dollar out of your earned income, that property allows you to buy another property and another property and another property, and it starts to compound every single time you do that. And so now suddenly, you’re off to the races and your growth curve is going to be exponential. But if that first property loses you $10,000 Every single year, or breaks even now, suddenly, it’s not helping you to accelerate towards your financial goals goals, it might actually be holding you back, it might actually be draining money into your pocket that you otherwise could have been using to fund that next investment property the second one, but now instead of doing that, you need to funnel that money into the first property. So now it’s just a lead weight that is attached to your ankles holding you back and not allowing you to excel towards your financial goals. So if you are going to be buying that first property, you want to make sure that you don’t make mistakes, because those mistakes are only going to compound over time. And as human beings, we’re very bad at looking at the long term compounded results of our actions. And I can tell you from experience that too often people fail to properly analyse that risk and they fail to properly mitigate it as a result. So my advice to you is that if you are going to be buying your first short term rental property, or your next one if you haven’t, you know maybe you got lucky with the first one or maybe it didn’t go so well. If you want to make sure that you do it without making mistakes, then you want to work with someone like our team who can help you to avoid those mistakes and who’s already been there and done that trust me, it is way less expensive to do that than to learn on your own and deal with the costs associated with all of those mistakes. So if you’re interested make sure you check out the link in the description down below. Watch that free training book a call with our team we would love to talk to you more about how we can help you with your short term rental investing goals. If you liked this video if it was valuable to you if you think it’s going to help you to avoid some of those mistakes and shave years off your timeline to financial freedom then make sure you hit that like button hit the subscribe button as well to stay up to date with the two new videos you post every single week and let me know in the comment section your thoughts your you know anything you want to share with me. Let me know again hit the like button hit the subscribe button. Check out the free training linked in description down below and I’ll see you in the next video.