This episode was inspired by a mutual student of mine and Larry Harbolt’s. Far too often after we invest time to educate them on the smart and safe way to buy real estate, the student will ignore everything they learned, run right out and overpay for an investment property.
Investing is exciting, however, the excitement fades, and when it fades remorse / and or resentment are soon to follow. In today’s marketplace, borrowing money has become relatively easy, lending institutions are just about giving money away.
The hype we see on TV has a way of capturing our attention and then drawing us into the romance of great riches that come from completing amazing real estate deals. During an economic boom is when the most money is lost, that is because you make or lose money when you buy (not when you sell). If you buy right, finance responsibly and manage effectively it is most difficult to lose money.
Lately, money seems easier to come by than ever before, banks are literally throwing it at us daily. When money is free-flowing, people start buying. When people start buying, the supply of available opportunities is decreased, therefore fueling increased demand. As demand increases, so do prices!
Time is (or should be) our most precious commodity on this earth. Based on this a beginning investor needs to be very aware of how they invest their time, frankly, more aware than how they invest their money. Time cannot be replaced, however, more money can be earned or replaced.
Larry Harbolt reminds us that bad financing can quickly ruin a perfectly profitable deal. When borrowing money to buy an investment property, the investor must factor the cost of those funds into the cash flow analysis, no money is free. Home Equity Lines of Credit and other loan programs may not be ideal for use to buy more property. The only way to know for sure is to do ALL the math.