You just finished reading Rich Dad, Poor Dad, attended your first real estate seminar, or had some other introduction into real estate investing. You are extremely excited for the potential of achieving financial independence or growing your own business empire with real estate. And you want to scream it from the rooftops.
The next time you see your family or friends, you bring up your new aspirations and what do they say? “Investing in real estate? That’s risky!” and “Ew. Why would you want to be a landlord and clean toilets?” and “my uncle invested in real estate and lost everything when the market crashed. I’d avoid real estate like the plague” and on and on.
Can you relate to this experience?
Since these people should know us the most, are closest to us, and love us dearly, how much weight should we give to their advice and criticism?
The answer like most things in life is it depends.
Jack Petrick, who has been a full-time investor for 15 years, faced this dilemma when he first started, and continues to face it to this day. In our recent conversation, he explained how this “free advice” can end up being the most expensive advice you receive.
Jack’s Best Ever advice is that free advice is expensive advice. “There’s a lot of people that have opinions on what we do,” Jack said. “There’s just a lot of naysayers that don’t have necessarily the experience to be able to provide an input or opinion in your life if this is what you want to do.”
The most expensive free advice that I can think of would be to not invest in real estate at all! Another example would be passing up on an extremely lucrative deal because you were talked out of it by your mother.
Maybe free advice isn’t the best term. There are a lot of free resources (podcasts, webinars, YouTube videos, etc.) that offer sound real estate advice. I think “unfounded advice” rings truer. If you were to have a health issue, for example, you wouldn’t ask a family or a friend for medical advice (unless they were a doctor, nurse, etc.). You would ask a professional who has experience diagnosing and treating medical issues. The same logic should apply to real estate investing, and business in general, as well.
Personally, some of the worst investment advice I’ve gotten is from family members, who should know me the best. Fortunately, I didn’t act on that advice, and that’s how I’ve gotten to where I am at today. However, I did take some advice from them on other things and it has helped me out. We’ve got to be able to distinguish between the good and the bad when it comes to the advice provided by those with minimal to no real estate experience, and especially if they are loved ones since there’s emotions involved.
When asking for real estate investment advice, Jack says, “I would just really vet out the experience of those people that are providing that advice.” To add to that, I would say to find out how much experience they have in the niche you want to pursue. It’s important to get advice from people who have done what you are currently doing, and even better, are still currently in that niche.
For example, if you want to raise money from private investors and buying large multifamily buildings, you will likely receive better advice from a multifamily syndicator with hundreds of transactions compared to a fix-and-flipper, a syndicator with no deals, or your uncle Bob.
Additionally, certain advice may be good or bad depending on what stage of the process you are in. You can get the same advice, but it can be either good or bad depending on where you’re at in your business cycle. In the beginning stages of your career, for example, you can afford to have a more aggressive business plan. But 20 years later, when you are approaching retirement, you will likely have a more conservative approach. Also, if you are a brand-new investor who is single, you can likely take more risks compared to the brand-new investor who is married with four children.
Overall, when actively asking for and passively receiving advice, it’s important to pay attention to who is giving that advice and understanding if they have the expertise to back it up.
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