If you’re about to buy a property with negative cash flow or skip small rentals and go right to the big buildings (multifamily), do not skip this video. Following any of this so-called investing “advice” could push you back ten, twenty, or thirty years from financial freedom, while the rest of the real investors hit their early retirement in just a decade.
Dave Meyer:
Do you want to know why most of the real estate investing advice you hear on the internet will actually lose you money? I’ve analyzed thousands of real estate deals. I’ve bought dozens of properties. Now I’m going to share with you 10 pieces of advice that might sound good on TikTok, but are actually holding you back. More importantly, I’m going to share with you why people keep repeating them, even though they’re wrong. Some of this advice, it actually comes from people who haven’t bought a deal in years, but they keep posting because fear and negativity get clicks. I closed the deal last month, and so in this video, I’m going to break down each piece of bad advice, showing you the actual data and sharing what you should be doing with your portfolio instead. Let’s start with the worst one, and this one might surprise you because some of the so- called experts constantly repeat this.
The number one worst piece of advice that I hear about real estate right now is that it takes too long to reach financial freedom with real estate. Or you may even hear this said as real estate is dead or you can’t make real estate work anymore. And I just got to get out front of this and say that this is absolute nonsense. I have done the math. I’ve actually built financial models. You can go and download them for free on biggerpockets.com/resources. Go check them out. I have a financial freedom calculator there. And what it shows is that if you save 20% of your disposable income and you invest that consistently in real estate for eight to 12 years, you can completely replace your income and that is not doing anything fancy. You can get it down to five years if you’re super aggressive with it.
But even just buying on market regular stuff right now that gets a modest cash on cash return, if you do that consistently for 10 to 12 years, you can achieve financial freedom through real estate. So I don’t want to hear that it’s impossible to achieve financial freedom through real estate. That is complete nonsense. I think what people are really saying here is that real estate is not a get rich quick scheme. And that is true. I 100% agree with that because if you are trying to achieve financial freedom in two years or three years or four years, it might not work. It probably won’t work through real estate, but that is normal. Real estate investing is a long game and financial freedom is a long game. If you think that you can build enduring wealth, sustainable wealth in two or three years, you can’t. Even people who made a ton of money in Bitcoin, that has gone back down.
Real estate is slow for a reason because it is deliberate, because it is predictable, because it is consistent. That is why real estate is such a great way to achieve financial freedom. Even if it does take you that seven, eight to 12 years, depending on how aggressive you want to be. So don’t tell me that you can’t achieve financial freedom through real estate because you can. I’ve done it. I’ve seen plenty of other people do it. And even in this market, it still works. So that’s the number one worst advice. The second piece of advice that I absolutely hate is that you cannot scale with residential real estate. You hear this all the time. I’m even going to call out Grant Cardone. He talks about this all the time, how it’s a waste of time to invest in residential real estate or that your primary residence isn’t an investment and that you have to get to multifamilies.
That’s the only way to scale. And maybe if you’re trying to be a billionaire, that could be true. But I think for most people who listen to this podcast, and certainly for me, what I’m trying to do is live a comfortable life with a relatively small portfolio. To me, the ultimate flex is to reach your financial freedom number with as few units as possible. Let’s just speculate here. Think about this. If you bought 10 single family homes, let’s make this easy. And you paid them off over the next 10, 15 years, right? Average single family rent in the United States right now is about 2,500 bucks. So you buy 10 of those, you’re getting $250,000 in tax advantaged cashflow. When you think about the tax advantages, that’s more than having a $300,000 salary. So don’t tell me you can’t scale with residential real estate. That’s a small example.
That is an achievable goal for people who are aggressive about this. It really comes down to your own goal. It really frustrates me when people say there’s only one way to grow. You have to get into multifamily. You have to get into senior living. You have to get into self-storage. Are those good strategies? Yeah, for certain people they are, but that is not the only way to scale in real estate. A lot of my friends who are highly successful make tons of money, make millions of dollars a year, have done it entirely on residential real estate. The people who are telling you that you can’t scale with residential real estate probably want you to buy something. So I am here to tell you that is bad advice. If you want to just stick with boring old residential real estate because it is safer and is more predictable and it still offers great returns, you can and absolutely should do that.
All right, so that’s bad advice. Number two, moving on to number three. This is one I hear a lot, especially over the last couple of years. The piece of advice I hate is negative cashflow is worth it for the right house. Now I know this is a big debate in real estate. What’s more important? Cash flow or appreciation. I do not buy properties that do not cashflow. Negative cashflow is the one thing that can force you to sell your property before you want to. That’s maybe the worst case scenario that you have as a real estate investor because even the people who bought in 2007, if they held on and they had cashflow, they were still making money from 2007 to 2015 until their property price rebounded. They were still getting tax benefits. They were still getting cash flow. And because they had cashflow, they could pay their bills, they could pay their mortgage, they were never under any immediate stress.
And then they got to enjoy those massive gains in property values and appreciation that we got from 2013 to 2023, depending on where you live. I am not saying that cashflow is going to make you wealthy overnight. What I am saying is that it is a requirement to make sure that you are not taking on more risk than is necessary. If you go out and buy something just because it’s going to appreciate, maybe you will appreciate, maybe it doesn’t, but that’s a way that you can absolutely get burned. And I hear people pointing to this saying, “Oh, this market in California or in Texas or in Florida, it’s appreciated on average 7%, 8% per year over the last five years.” Yeah, that was a unique time. I don’t think we’re getting to that appreciation. And even if we do, it’s still speculation. But personally, I think appreciation’s going to be muted for the next couple of years.
And that doesn’t mean you shouldn’t buy real estate, but it does mean you need cashflow to hold on, to buy great assets during this time when appreciate is slow. And then when appreciation picks up, which honestly no one knows when is going to happen. Is it next year? Is it three years? Is it five years? You’re in the game when that appreciation pop happens and that’s how you really build wealth, but you need cash flow to get there. Do not speculate unless you’re already wealthy. So that’s number three. Negative cashflow is not worth it for the right house unless you’re super rich.
The fourth piece of bad advice is people saying that you need to get to 50 doors to achieve financial freedom. Or honestly, really, this is people saying you need to get to any specific number of doors to reach your goals because door count is just a terrible metric. I already talked about scaling with residential real estate. You can build a great portfolio with five units, 10 units, 20 units. Personally, I am reconstructing my portfolio right now because I would love to get to like 15 to 20 to mostly paid off units because that could more than fund my lifestyle. I don’t need more than that, right? Now, could I go out today and buy hundreds of units? Literally I could. I have that financial capability to go out and buy hundreds of units, but I’m not going to do that because that would be optimizing for the wrong metric.
If you say, “I want to go and buy a hundred units,” fine, but why? You want a hundred units that give you a hundred bucks a month in cashflow? That’s 10,000 bucks a month. You want to manage a hundred units for 10,000 bucks a month? I could go out and buy four single family homes for cash and get the same amount of cash flow, maybe even better. Do you know how much less work that is? Do you know how much less maintenance cost that is? Do you know how much less headache it is having four paid off units than a hundred units that only get you a hundred bucks a month in cash flow? Most people don’t say, “Hey, I want to be a real estate investor because I have a dream of owning a hundred units.” They say, “I want time with my family.
I want to work less. I want more flexibility in my life.” And if you are optimizing for door count, there is a very good chance you are not actually optimizing for the things that you want. You are just doing it for vanity. It’s just ego. I’m sorry, just saying that you want a hundred units or you have a hundred units, people do that for ego. Be better than that. Think about what you actually want. What are the reasons you got into real estate and optimize for that? And honestly, nine times out of 10, you’ll probably find out that getting a smaller portfolio with more efficient units, more efficient use of your capital and time, that’s going to go further for you than door count. All right. Number five, terrible advice that people are giving out right now is to wait for the housing market to crash.
If you know anything about me, if you follow me on social media, you see that I spend a lot of my time trying to dispel this crash narrative. I want to just say right here, right now, that crashes in the real estate market are extremely rare. I’ve spent, I don’t even know, thousands of hours looking into this. And I will tell you that there has been exactly one housing market crash since the Great Depression that was in 2007 and 2008. And it is totally understandable that people who lived through that expect that or think that a crash could happen again. And I am not saying that a crash will not happen again. I would never say that. I am an analyst. My whole purpose is to think in probabilities, and there is a chance that the housing market would crash. There are scenarios that I could see happening where the housing market crashes.
But is that a likely scenario right now? No, it is not a likely scenario right now. If you can get into the housing market and just ride normal appreciation, the normal trajectory of the housing market, that’s great. Sometimes you will buy a little high. Other times you will buy a little low, but if you keep buying at regular intervals, by definition, you are going to over time achieve that average and that average is good enough. Now I understand the impulse to say, I’m just only going to buy when it’s low, but no one knows when it’s low, literally since I’ve been a real estate investor, 16 years. Every single year, a very famous, a very prominent, a very reputable person has said the housing market’s going to crash. In 2014, really popular influencers, Robert Kiyosaki was saying that the housing market was going to crash.
I have seen other influencers say this every single year for the last 15 years, no one knows if it’s going to happen or when it’s going to happen. And if you think about all the people who said in 2015, “Oh, prices have been going up for four or five years, there’s going to be a crash.” Think about, you just missed the biggest bull market in the history of the housing market. How much wealth did you lose because of that? If you’re just sitting around waiting, you think you’re going to be spending every day analyzing the housing market and say, “You know what? I’ve figured out when the bottom is. ” Unlike every other housing market analyst who’s spending all of their time on this, I, as a casual observer of real estate who have never bought a home, never bought a real estate property, I know when the bottom is.
No, you don’t. I don’t even know. So the cost of waiting often exceeds the cost of getting in and maybe buying a little high, even if your property goes down one to 2% per year. This is the same thing with stocks, right? If you talk to any financial planner, they say, “Don’t try to time the market. Just get in the market as long as possible.” The same thing is true in real estate. I am not saying you should go out and buy anything. There is a lot of stuff on the market that is overpriced right now, but if you have a genuine understanding of market value, if you can do the things that we talk about on this channel all the time, like buying below current market comps, doing value add investing, getting cash flow, you can absolutely still make money right now, even if the market goes down next year.
That’s a paper loss. You can absolutely still make this work. Waiting has costs and you’re better off getting in and learning and allowing your investment to compound over time. That’s how you really make money in real estate. The number six piece of terrible advice is you should go out and use other people’s money. The best way to get into real estate is to figure out a way to get your own first deal. Now, if you need to partner on that, that’s a different story. If you can go out and raise some money from friends and family, you can raise a little bit of money, that’s the kind of other people’s money that I do think makes sense. That can really help in the beginning. But I would much rather all of you go out and save money for a couple years and put 3.5% down in house hack, then go out and try and raise money from sophisticated investors, from other people who are doing deals.
It’s just not going to work. I know that people say that this is going to work, but it’s not. Everyone I know who raises money for deals does it primarily from people that they actually know. In the beginning, it is friends and family. And over time, as you become a reliable investor with a track record, then you can expand out and raise money from other people. But getting into real estate, buy raising money from other investors that you do not know is not realistic. I’m sorry. Maybe it happens one out of a hundred times, but this is bad advice. Better advice. Get your financial house in order. Earn more money than you spend. Put that money away. And even if that takes you a year, I would rather you take a year of getting your financial house in order and going out and buying a property than spending all of your time naively trying to raise money from people you don’t know who are probably never going to give you a dime.
So go out and get experience first. Become a great investor. Do that with your own money. Do that with friends and family money. And if you can do that, raising other people’s money will be possible, but you can’t shortcut. You can’t skip the line. You have to build up that credibility before anyone else is going to fund your deals. All right, let’s move on to number seven. Oh, man. I hate this advice. God, this is maybe the worst advice that has popped up over the last couple of years. And I feel vindicated by this. The advice is date the rate, marry the house. I know you all have heard this one. So many people have been saying this for years, and as soon as this started popping up in 2023, as soon as interest rates started going up and people were saying, “Yeah, rates are going to go down and you can refight.” I have to say, I have been right about this.
I’ve been saying for three straight years, this is awful advice because rates might not go down. Yeah, they’ve come down a little bit. They’re not at 8%, but they’re at 6.5%. I promise you, every single person who is out there saying, “Date the rate, marry the house, was promising you that we’d have 5% mortgages right now or 4% mortgages right now.” And that hasn’t happened. And even if it did happen, it’s still bad advice. Going out and buying a house or a property, an investment property, assuming that the rate is going to go down is just, it’s speculation. It’s the same thing that we talked about earlier with negative cash flow. Why would you do that to yourself? You’re better off being patient and disciplined than going out and doing that. If you are analyzing deals based on the numbers you have today and they eventually get better, great.
Cool. But the whole key here is that you have to analyze them based on what you know. What are rents today? What are expenses today? What are rates today? If they get better, great, but you don’t know that’s going to happen. So the only thing you can do as an investor, the best thing you can do to be a good investor is to assume that rates aren’t going to change and be very disciplined in your underwriting, making that assumption that rates are staying what they are and that the rate you get today is the one that you’re going to stick with. That is how you build long-term wealth, right? That’s how you don’t take on extra risk that you don’t have to take and instead build a rock solid portfolio that can withstand any market conditions.
All right, that was number seven. Let’s move on to number eight. Terrible advice. Get into real estate for passive income. This is a hot topic that I hear a lot, but people say, “I own rental properties. It’s passive income.” There is some truth to it. Real estate is probably more passive than a W2 job, but is it truly passive income? No. Real estate takes work. I actually think that real estate investing itself, calling this business that I am in, that you’re trying to get into, that you’re in, real estate investing is a little bit of a misnomer. It is entrepreneurship. You are starting a small business. How involved you need to be in that business is variable. There’s a spectrum, right? Some on one end, you could be in it a lot. You’re flipping houses. That’s a lot of work. You’re wholesaling, that’s a lot of work.
You’re self-managing 10 plus rentals. That’s a lot of work. Still worth it, 100% still worth it. And over time, you can probably get more passive. But for most people, getting into real estate, you’re going to have to hustle in the beginning. And then as you get five, 10, 15 years into your investing career, you could be a lot more passive. Not saying it takes 40 hours a week. For me, it didn’t. Even in the most busy parts of my real estate investing career, 10, 15 hours a week at most, that’s when I was self-managing properties. I still did this when I was in grad school and working a full-time job at the same time. You absolutely can do this. It is not a full-time job unless you want to be a flipper or a wholesaler or developer, but it does take work. So you need to decide if you want to be in this industry, are you willing to put in that effort?
For me, I can tell you from experience, me, my personality, my goals, 100% worth it, absolutely worth every single minute of it, but you have to make that decision for yourself because it’s not truly passive. Let’s move on to terrible advice, number nine, which is X strategy is dead. And by X, I mean, anytime someone says a strategy is dead, they’re wrong. I hear a lot of people say short-term rentals are dead. I hear people say that the Burr is dead. I hear people say that rental properties is dead. This is just not true. If maybe you’re looking for just absolute easy returns, you don’t have to think you don’t have to do anything. Yeah, maybe it’s dead. Can you just go out and do a perfect Burr without putting in a lot of effort right now? No. Does that mean Burr is a bad strategy?
Absolutely not. I personally have been pretty critical of short-term rental investing over the last couple of years. I’ve been saying the last three or four years that I think it’s oversaturated, that returns are going to go down, and that only the best operators are going to do well. And that is the key difference in what I am saying, and I think what you hear a lot out there. Short-term rentals aren’t dead. You just need to be very good at it to make money. And you know what? That is normal for every single business. If you think you can go out and open a mediocre restaurant and you’re going to kill it, why are you an entrepreneur? You have to try and be good at the things that you’re doing. So anytime you hear someone say, “Short-term rentals are dead,” they’re wrong. What they mean is you need to be good at short-term rentals to make money.
And it’s true if you’re not committed to being good at that strategy, don’t do it. It’s not going to make you money. If you’re not committed to be good at Burr or good at flipping, maybe it is dead to you. But every single real estate investing strategy makes money. I see people making money on flips right now. I see people making money. Burrs. I know people making tons of money on short-term rentals right now because they’re good at it. So these blanket statements that any strategy or approach to real estate investing are dead, it’s just bad advice. All right. Number 10, bad advice that I hear. It’s our last one today, and it is quit your job and go all in on real estate. A lot of my friends, full-time real estate investors, that’s great, but the idea that you need to quit your job, and that is a prerequisite for being successful in real estate is just complete nonsense.
I have taken a completely different approach to real estate, and I know a lot of people have. I have worked a W2 job because that provides me stability. It gives me healthcare. It gives me an income that exceeds my living expenses so I can save money and put it into my real estate portfolio. It allows me to be patient in real estate because if I don’t do a deal this month, if I don’t do a deal next month, if I don’t do a deal this year, I’m fine. It doesn’t matter to me because I have an income. It allows me to be opportunistic. I don’t have to take on excessive risk because I’m not that thirsty. If you have a job that you like or have a job that allows you some level of disposable income, that is such an advantage in real estate. You are going to be more lendable.
It is so much easier to get a mortgage if you have a W2 job instead of flipping houses. That’s just true. You’re going to be more lendable. It allows you to take more risks. At the same time, it allows you to be more patient. There are so many advantages to this. So I’m not saying you shouldn’t quit and go all in, but I am saying that it is not a prerequisite and everyone should be thinking about this for themselves. And so don’t get caught up in this bad advice that you have to quit your job to get into real estate. All right. Those are the 10 worst pieces of advice that I hear right now. And just as a recap, number one, takes too long to reach financial freedom with real estate. No. Number two, can’t scale with residential real estate. I’ve seen literally hundreds, if not thousands of examples that are contrary to this.
Don’t listen to this. Number three, negative cash flow is worth it for the right house. Disagree. Do not speculate. It’s not worth it. Number four, you need to get 50 doors to achieve financial freedom. Absolutely nonsense. Optimizing for door count is optimizing for the wrong thing. Don’t scale for scaling’s sake. Number five is waiting for the crash. No one knows when it’s going to happen and there is an opportunity cost for waiting. Do not forget that. Number six, go out and raise money from private investors. Where are these people? I don’t know. If you can raise money from friends and family, go do it, but do not waste your time thinking that you are going to go walk up to a sophisticated investor and pry money away from them before you have experience. Not going to happen. Number seven, date the rate, marry the house.
Hopefully everyone has seen that this is bad advice. Do not underwrite your deals with anything other than the rate that a lender has quoted you in the last couple of weeks. Number eight, do real estate for passive income. Real estate is not passive. It does take work more passive than a full-time job. It’s faster than working for 45 years for a shaky retirement. I promise you that, but you’re going to have to put some work into it and it’s well worth it. Number nine, X strategy is dead. Don’t listen to anyone who says short-term rental strategies are dead or burr is dead. They probably are trying to get you to buy some course on the strategy that they’ve just pivoted to two months ago. Number 10, bad advice. You got to quit your job and go all in. If that’s you and you want to do it, go for it.
Best of luck to you. It works for a lot of people, but it is absolutely not a prerequisite for being successful in real estate. So those are the 10 pieces of advice I hate. What do you hate? What is the worst real estate investing advice you’re hearing right now? Drop them in the comments I would love to know. Thanks so much for watching this video. I’m Dave Meyer. I’ll see you next time.
Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here. Thanks! We really appreciate it!
