We’ve literally interviewed thousands of active real estate professionals, releasing a new Best Ever podcast episode every single day since July 2014 – nearly seven years.
Since the beginning of the Best Real Estate Investing Advice Ever show, we’ve asked every single guest, “What is your best real estate investing advice ever?” Here is the Best Ever advice from the five most downloaded episodes of all time!
1. Focus on the Value of Income
Episode 1868 with Ryan Smith – The most downloaded episode of all-time
“I’ve learned this over many years, and I would just say succinctly to focus on the value of income more than income as value. The value of an income stream is more valuable than an income stream as the value of an investment.
Let’s say you buy a property, and you find a way to make a dollar a month, each month. So at the end of the year, you have $12; you pay tax on that, assuming no depreciation offset. So you have roughly $8 at the end of the year. Every one dollar a month, you raised your net cash $8 at the end of the year. Assuming an asset is a 5% cap rate asset, if you’re able to buy a property and add $1 of NOI on a monthly basis, that’s $12. Divide that by 0.05 or multiply it by 20; it’s all the same. So you have $240 of equity that you have created per $1/month of NOI.
Comparatively, the question is what excites you more – $240 which is unrealized, so it’s not taxed, or $8 after tax? And in fact, if you focus on the $240, you also have the $8. But the point in that is if you have one unit and you can raise your NOI $1/month, you have $240. If you have ten units, it’s $2,400 in equity, so on and so forth. And the reason why understanding this is so important is working backward.
For example, if your listener who’s listening right now says, ‘Okay, well my goal is to create ten million dollars of net worth for myself in whatever period of time.’ With this, at a 5% capitalization rate, you need $500,000 of NOI to be worth ten million dollars. So you need to create $500,000 of new NOI, and that sounds like a ton, but then let’s break it down. So you take $500,000 of NOI, divided by 12 months in a year – that’s roughly $42,000/month of NOI. It still seems like a lot, $42,000/month of NOI; it’s a lot of work to do.
Now, let’s say — how many units do you wanna own? Let’s say your listener says, ‘I would like to one day own 1,000 units.’ Okay, so take $42,000 and divide it by 1,000 units – you need roughly $42/month of NOI per unit to be worth ten million dollars. And you say ‘Okay, well $42/month – that still may take some time.’ Okay, well how many years? Say five years. So you take $42, divide it by five years, so the summation of all of that is if you have 1,000 units, and for five years, each year for five years you grow your NOI by $8/year, for five years, across 1,000 units, at a 5% cap rate — you have created ten million dollars of net worth for yourself. And with that, you can then create all the income you want.”
2. Get Rich Slowly
Episode 1777 with Joe Lieber
“My best advice ever is that rich people work for assets, they don’t work for money. And I really took this to heart as a young man and accumulated as many assets as I could. For a while there I didn’t understand; it wasn’t even making sense. I wasn’t even making money, but I held these assets, and I literally couldn’t pay for lunch.
But the magic of it is that it all comes together. Real estate is a get-rich-slow business, not a get-rich-quick business. But when you get rich in this business – wow! It is unbelievable, the opportunity and the things this business can give you.
Here we are, 20 years later, and I feel good about it. I’m in a great place with my business right now, it’s real, I’m a real player, and it’s a good spot. So that would be my best advice ever – buy these assets. No matter what they are, you’re not gonna go wrong buying real estate assets.”
3. Integrity >>> Money
Episode 1775 with Gaston Teran
“My best ever advice is to have integrity. I don’t know what it is with real estate, but real estate is a magnet for people who are pretenders and scammers. You see it with gurus who prey on these newbies. For example, they’ll have a seminar for $50, and people attend, and all it is is a sales pitch for the next level, which is $1,000, which is a sales pitch for the next level for $20,000. That’s kind of disgusting.
And then the other one is I’ve had people want to buy these apartment buildings, pretend they have the money, make a good offer, we get into contract, and now they’re trying to raise all this money. They don’t have any access to the money, and they’re walking away, and sometimes they want to fight to get their earnest money back, even though they had it tied up for a couple of months.
I really suggest anyone getting into the business – perform with integrity.”
4. Avoid Paralysis by Analysis
Episode 1847 with Anna and Ken Hummel
“I think paralysis by analysis is a common phrase that I heard numerous times, and I will support the idea behind it. We’ve spent a lot of time just over-analyzing properties and thinking, ‘Well, if I do this, then that might happen. If that happens, then this will happen.’ You’re constantly over-analyzing, running numbers again and again. ‘Well, this property isn’t quite right. This one isn’t 100% what I want.’ You spend all this time over-analyzing things and you never move forward. There are certain situations where getting 80% of what you’re looking for is still better than where you’re currently sitting. And to move forward on something is better than doing nothing.”
5. Start Small
Episode 1736 with Anton Ivanov
“What I always like to tell new investors, those getting started, is don’t be afraid to start small. It’s tempting to say, ‘Hey, I want to buy a 50-unit apartment complex,’ or even a fourplex, but when you buy a bigger property like that, you basically compound your potential to make mistakes. As new investors, you probably will make mistakes, and you’ll learn from them, but the bigger the properties you start with, the more costly your mistakes will be.
Don’t be afraid to start small, whether that’s just one local single-family property. Maybe you house-hack a duplex… Just get your foot in the door. You’ll learn more through the first deal that you buy than any reading and research you do online. That will set you up nicely for growing your portfolio going forward.”
The Best “Bever Ever” Advice of All-Time
Cash flow now is great, but the true power is how increasing cash flow can increase your net worth. Focus on the value creation from cash flow more so than the cash flow itself.
Real estate is a get-rich-slow business, so focus on buying and holding your assets rather than “flipping” assets for a profit.
Having integrity is more important than money in real estate investing. Being dishonest might make you more money in the short-term but it will be in lieu of long-term success.
Avoid paralysis by analysis by realizing you will get closer to your goals by making a decision with partial information than making no decision at all.
When getting started in real estate investing or transitioning into another sector, create a solid foundation by starting small. Learn the sector with this small purchase before scaling to larger assets that come with more risks.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.