​Real estate investing has been something that has excited me since I was fresh out of college and trying to make my way in the corporate world.  I remember walking the streets of Denver every morning before work, paying close attention to all of the houses for sale or rent in my neighborhood, knowing that someday I wanted to own my own rental properties.  Finally, in 2005, with some fresh motivation from Robert Kiyosaki's Rich Dad, Poor Dad book, I purchased my first rental property.  Along the way I have learned a ridiculous amount and continue to do so every day.  Here are a few lessons that would have greatly accelerated my investment success if I had learned them earlier.

1. Real Estate Investing is a Team Sport - Take a closer look at any successful real estate investor and you will find a team of people making it all happen.  I really thought that I could do it all myself and spent years finding my own properties, managing them, doing the books, trying to learn tax law, and everything else that goes along with rental properties.  It was a mix of frugality and stubbornness that kept me running in all directions and mostly spinning my wheels.  As the number of properties I owned grew, I finally had to cave and start handing off tasks to third party vendors only to find that my operations (and profits) greatly improved as well as my sanity.  My advice to any investor is to figure out what you are good at and start building a team of partners or third party vendors to help you with the rest.  Your business will grow in multiples and you just might save your sanity.
2. Trust But Verify - As I started to build a team around myself to help with the tasks that I just couldn't (or shouldn't) take on, I was a bit naive to think that everyone had my best interests in mind at all times.  If an agent gave me a list of comps or a property manager recommended some major cap-ex improvements, I just assumed that they knew better than me and that I would be a fool to not follow their advice.  Big mistake!  I quickly learned that even if someone was not a total crook, they often had their own interests in mind that were not always in complete alignment with my interests.  Take the information and advice that you are given but verify the information, check references, and assure that everyone is on the same page regarding your wishes.
3. Manage Your Managers - Similar to Lesson #2, I quickly learned that if you don't set expectations, check in regularly, and provide feedback, your property managers will do what is best for them and not what is best for you.  Even a great manager can't read your mind if you don't communicate your goals and wishes for how the property should be managed.  You need to interview managers up front and communicate these goals to ensure that you are a good fit.  Changing managers mid-stream is a pain and disruptive to operations so choose wisely and be involved but not intrusive.  Let them do the thing that they are good at but make sure they know you are paying attention.
4. Bigger is Better - From the very start, I knew that I wanted to be investing in multifamily housing but was led astray by the ease of entry and comfort of single family homes.  Everyone's model will be different and there is no "right" or "wrong" but, I wish that I would have gone to multifamily much earlier.  I can (and will) write a whole post on the advantages and disadvantages of each but there are two major points that finally set me on the multi-family path: 
   1. Scaling a large portfolio of single family homes is a ton of work and information to manage.  It is only slightly harder to purchase a 12 unit apartment complex than one single family home.  Imagine having to go through the entire process 12 times to be at the same point.  In addition, there are tremendous cost advantages to managing and maintaining 12 units under one roof over 12 homes spread throughout the city.
   2. Multifamily values are calculated by a multiple of the Net Operating Income (NOI) while single family homes are determined by what the neighbors house just sold for.  This means that you actually have much more control over values in multifamily because you can actively manage to increase the NOI by increasing income or reducing expenses.
5. Don't be Shy - I have never considered myself an extroverted person or someone that talked about my investing life with others.  At the advice of some of my mentors, I started putting myself out there, making an effort to network where ever possible, and make sure that everyone knows about my real estate investments.  As hard as this was, magic started to happen right away when I got out of my comfort zone.  I started meeting people that could help me or I could help.  Partnerships started forming, friends that I never thought had any interest wanted to become investors, and my network of colleagues skyrocketed.  
6. Money is Everywhere - This one sounds crazy and was one of the hardest lessons for me to come to terms with.  I really believed that I had to do this with all of my own money and it was just going to take a really long time.  Even when all of the podcasts shouted out "if the deal is good, the money will come", I assumed that you had to have some rich uncle or a trust fund to rapidly scale a real estate investment business.  It turns out that there is a ton of money waiting to be invested out there.  You just have to go out there and find out.  There is currently about $29 Trillion in US retirement funds!  That would buy a few apartment complexes for sure!  I have been amazed at how many people I assumed had no interest or money to invest in real estate have gotten excited about partnering or investing in a deal. 

These are just six of the most important lessons that I have learned.  I continue to get new lessons every day and find new ways to do things.  Real estate investing is an amazing niche because so many people are willing to freely share their experiences, lessons, and knowledge with others.  I have been a huge beneficiary of this and hope to help as many along the way as I possibly can.  

Do you ever feel like it is impossible to get everything done and there just aren't enough hours in the day.  We are all leading busy lives, trying to balance multiple priorities and meet looming deadlines.  Just thinking about all of the tasks and fitting them in our schedules causes an extreme amount of stress.  This results in unsuccessful attempts at multi-tasking our way through varying projects.  At the end of the day, we end up with a bunch of half finished projects and no relief from the growing stress.  Here are a few tips that will help organize your work, increase your efficiency, and ultimately reduce stress.  These are not brand new, untested techniques, but rather tips that have been successfully implemented by top performers for decades.  

The primary concept is to spend some time planning your week by grouping and prioritizing tasks, then blocking out chunks of dedicated time for them.  An easy way to explain the time blocking technique is to take you through an example.  You can modify the technique in ways that will help it work better for you but here is how I use it:

1. Set aside a consistent time to plan your week.  I schedule an hour every Sunday night to plan my next 7 days.  
2. Keep a to-do list with you at all times.  I use the Notes app on my phone so that every time I think of something important, I can immediately make a quick note of it.  This relieves the worry that I will forget about it.
3. During your scheduled planning time, start by grouping the tasks from your to-do list into common projects.  Often you will find that a large list breaks down in to a few projects or categories and won't seem so overwhelming.
4. Create a spreadsheet (or what ever works for you, I love spreadsheets) where you can input your project tasks into boxes that represent chunks of time.  I have pre-existing categories for my spreadsheet that are color coded.  My main entries are the color coded blocks and I use the "notes" to enter in the specific tasks.  This allows me to look at the spreadsheet and identify what categories are taking most of my time so that I can make adjustments if needed.
5. As you go through your days, commit 100% to the task that you have blocked off for that time.  No email or phone interruptions, no social media, no switching back and forth between tasks.

Here is an example of a day out of my spreadsheet:

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A few tips that will help make this painless and keep you using the time blocking technique:

• Don't over schedule yourself.  It is not realistic to think that we can schedule every second of the day and stay on track.  I try to leave 5-15 minutes between tasks, depending on how big the transition is.  This allows time to get a drink, go to the bathroom, or walk around and get the blood flowing.  
• Leave blocks of unscheduled time for those unanticipated tasks and putting out fires.  
• If you know you will be traveling or have other commitments, put these in first so that you can schedule activities around that time.
• Leave 1/2 day towards the end of the week to finish up things that you weren't able to complete in the allocated time block. I like to reserve my Friday afternoons for this.
• Always block out time during the week for non-work related things that are important to you.  This allows you to be 100% present with your spouse, kids, or whoever is important to you.
• Place this document in Google docs or someplace that you can easily access from all of your devices.
• Learn as you go about how much time you need for certain tasks and adjust your time blocks.  The more you practice this the better you will get.

Give it a try for a few weeks and let me know how it works for you or post your suggestions in the comments section below.

Congratulations!  You saved your pennies and finally purchased your first home, shelling out a $63,000 down payment on your new digs that set you back $315,000 (the 2019 median home price in the US).  You're all moved in and ready to start writing those monthly checks for the mortgage payments.  With current interest rates hovering around 4%, those checks will be for $1203.00 per month, not including taxes or insurance.  The first few checks are pretty painless as the excitement of actually owning your own home still has you smiling, but by month six it finally sets in that you are going to be writing these checks for the next 30 years.  At that point, you vow to make your life's mission to get this debt burden off your back and pay that mortgage off early.  You start paying every extra dollar that you have toward the mortgage in order to save some of the $180,803 in interest that you would pay if the loan goes the full 30  year term. 
Is this a smart decision?  Standard financial wisdom states that being out of debt is a great thing and avoiding paying all of that interest sure would be nice.  In general, both of these statements are very true but there are a few caveats to consider before getting too crazy with those additional payments toward the mortgage.

1. Do you have at least six months of expenses saved up in an emergency fund?  It is critical to have a decent savings nest egg before sending your entire paycheck to the mortgage company in your effort to get rid of them.  What would happen if you became the victim of some unexpected layoffs?  What if you suffered an injury or illness that kept you from working for an extended period of time?  Even if you spent the previous couple of years making huge extra mortgage payments and knocked down that $252,000 loan to a more manageable $150,000, if you can't make the required payments, the bank is most likely going to foreclose on your property.  This is actually worse because they are not going to reimburse your extra payments so now you lost your home and all of the extra money you paid toward it.  On the other hand, if you had taken that extra money and put it into a safe emergency fund, you would continue making the mortgage payments and living in that comfortable home until you are back on your feet.
2. What is your interest rate vs investment returns?  This one is a little trickier because there is no definitive right or wrong but is based around your overall financial strategy and risk tolerance.  In essence though, it may not make sense to burn through your extra cash to pay off a mortgage at 4% interest when that same cash could be invested at 6% , 7% or even higher.  Many passive real estate investments are offering investors a preferred return of 8-10%.  This is called "arbitrage" - borrowing at a lower rate and investing at a higher rate.  For some people the pressure of the debt trumps all and they have to get it paid off, but it could be wiser to invest those funds and pay off the mortgage in chunks with the investment earnings.
3. What else might you need your money for?  Once those payments are made toward the mortgage, they are locked up in what is referred to as "dead equity".  The only way to get that money back is to sell the home or borrow against the home with a home equity loan.  These loans can be cumbersome and expensive and only allow you access to a percentage of the equity (usually 70-80%).  If you have kids to put through college, or your old car is about to kick the bucket, locking up all of your cash in your home might not be a good idea.  

Bottom Line:  Paying off your home mortgage early can save you a lot of money in interest payments and relieve the stress that goes along with knowing you will be in debt to the bank for 30 years.  Just don't go full bore toward payoff without having a comfortable financial backstop and some careful planning for your future needs.

Get any group of people together for a discussion on whether it is better to buy or rent your home and you will be sure to have a passionate debate on both sides of the argument.  There are a lot of points thrown around as "set in stone" rules that all should abide by, but the truth of the matter, as in most debates" is - it depends.  That sounds like a cop-out answer so let's dive in a little deeper and see what it depends on and what factors sway the decision.



How strong are you financially? We'll start here because if you can't pass the financial strength test, there is no reason to dive deeper and torture yourself over the decision to rent or buy.  Continue renting as frugally as possible until you can answer Yes to all of these questions:

• Do you have enough saved up for a reasonable down payment (ideally 20% to avoid Private Mortgage Insurance)? 
• Do you have adequate reserves to cover at least 3-6 months of expenses, including your new mortgage if you become unemployed? 
• Can you afford the mortgage from a cash flow perspective?  A couple of rule of thumbs that most banks look for is to keep your mortgage at no more than 28% of your pretax income and total monthly debt payments below 40%.

How do prices compare to rents? This sounds obvious but is often overlooked in the excitement of purchasing your very own home.  Compare a monthly mortgage payment, including taxes and insurance, with monthly rent on comparable properties that you are interested in.  In almost all markets, home prices have been rising much faster than rents over the past decade.  As of May 2019, the National Median Home Price was a whopping $315,000.  Estimating for property taxes and insurance (which will vary depending on location, construction, etc.), you are looking at a mortgage of about $1550 with a $63,000 (20%) down payment and a 4% interest rate 30 year loan.  The Median National Rent stood at about $1500 in 2019.  The problem with these statistics is that they are medians.  You really have to dig into your own market to see how prices stack up to rents on comparable properties.

How long do you expect to live there? Determining how long you expect to stay in your home is one of the most crucial factors.  There are significant costs to purchasing and selling real estate including closing costs, loan fees, and realtor fees.  You can reasonably estimate 2-5% of the loan amount in closing costs and 6% of the sale price at disposition.  In most cases (but not always) you won't recover these costs through appreciation in less than a couple of years unless you are "forcing appreciation" through sweat equity like remodeling the home.  Remember that you are most likely going to pay capital gains taxes on any profits unless you live in the home for two of the five years previous to sale.   One other caveat is that the housing market is somewhat unpredictable and selling may not be an easy or profitable endeavor if you have to sell quickly.   Bottom line: unless you have a specific strategy- it is better to rent if you plan to move within a few years.

What is the growth rate of prices and rents? There are a lot of data sites such as City-data.com that will give you historical growth rates of median home prices and rents but you will have to make some educated guessed on where things are heading.  If you expect rents to rise significantly over your time horizon and can lock in a fixed rate mortgage that you are comfortable with, that may be your best bet.  

What is important to you? It will take more than a financial analysis to help you decide if you should buy or rent.  What is important you?  The freedom and flexibility to move that comes from renting, the long term stability and pride of home ownership?  Do you enjoy fixing things yourself and maintaining a property as your own or would you rather have someone else be responsible for repairs and maintenance so that you can spend your time (and money) doing other things?
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Here are a few myths that I hear a lot but don't believe to be true:

• "The mortgage interest deduction makes purchasing your home a way better deal" - Regardless of your tax bracket, you only get to deduct a percentage of the interest you pay so you are still a net loser with interest expenses.  Plus you can only take this deduction if you are itemizing deductions instead of taking the standard deductions.
• "Owning your home is the best way to build wealth" - It is true that over history, home prices have appreciated greatly and you will be earning equity by paying down the mortgage each month.  This really only does you good if you sell your appreciated home and move to a significantly less expensive area or downsize your digs.  If your home appreciated that much, most likely those around it did too, so moving into a new home will cost you as much as you sold yours for.  You also need to consider the "lockup" of capital used in your down payment that may be better utilized investing outside your home.

There is a lot to consider when deciding to buy or rent.  Answering these important questions will get you started in the right direction but it will take some serious consideration and conversations with family members to decide what is best for you.  There really isn't a "right" or "wrong" choice if you can back it up with good data and reasons.