Investing Myths Proved Wrong
John Larson and the Real Estate Cowboys talk passive income real estate investing.
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Keith Weinhold: Hey, this is Keith Weinhold from the Get Rich Education podcast. You are listening to my friend John Larson and the Real Estate Cowboys. Don’t quit your daydream.
Robert Helms: Hey everybody, it’s Robert Helms, host of the Real Estate Guys radio show, and you are listening to the Real Estate Cowboys.
Announcer: Have you thought about becoming financially free through real estate investing, but don’t have the time or knowledge to get started? Welcome to the Real Estate Cowboys podcast. Each week we discuss passive income investment opportunities in the red hot Texas market. John Larson and the Real Estate Cowboys will show you how to leverage their team to build wealth in real estate through passive investment opportunities. And now here’s John.
John Larson: Hello everyone. This is your host, John Larson, coming back with another episode of the Real Estate Cowboys podcasts. Took a little break last week, uh travel schedule is pretty hectic, wasn’t able to get in the studio and get the uh, episode recorded. But here we are this week with some more great passive income real estate investing advice from the Real Estate Cowboys. Uh, this week I want to talk about some investing myths that I’ve proved wrong. I just want to debunk some of these investing myths out there. You know, many people tend to look at investing is kind of a mysterious, scary thing that is only for rich or wealthy people. If your parents or friends don’t invest, you could be less likely to invest too. Uh, I think the unfamiliarity with investing is one of the biggest obstacles that people mention when asked why they don’t invest their money can be a little scary for sure.
Uh, to make matters worse, there are a lot of investing myths out there, I would say, that go around that simply just aren’t true. And so here are some misleading myths about investing that you really shouldn’t pay attention to. These are kind of some that I hear a lot when I go out and I’m speaking to investors, I’m meeting new people. Uh, I hear a lot of these myths come up from people that are just a little bit gun shy to pull the trigger on getting involved in investing in real estate or stocks or whatever it may be. But you know, the goal is to get your money working for you. There’s gonna come a point in your life when you just can’t work anymore. You need to set yourself up for retirement. You know, there’s going to be a lot of expenses coming up in life, college tuition, things of that nature, that you’re going to need to be prepared to pay for. And then also, you know, we talk about lifestyle investing a lot on the show and we talk a lot about, you know, getting your return on life. And I really feel like the only way that you can get a maximum return on your life is to get your money working for you. And also, you know, just grow your retirement account, grow your wealth. So you know, you can buy things like a boat or you can go on more vacations or you can take more time off of work and spend more time with your family or maybe your spouse can retire early, uh, because your investments are doing so well. So that gives your spouse an opportunity to stay home with the kids more. Um, so there’s a lot that goes into it and you know, the overall goal of this show is just to talk about ways to get your money working for you, especially in real estate, especially in our private lending, which I believe is one of the best investment options out there to date, especially if it’s through a self-directed IRA or 401k. A Self-directed retirement vehicle is the greatest way to get involved in private lending because those dividends that go back to you, those monthly payments are going to be tax-free or tax-deferred. So it’s another way to kind of beat the system.
So the first thing I want to get into is I think one of the biggest misconceptions out there and biggest myths, is that investing is only for the wealthy. And it is true that most of the wealthiest people in the world are investors. Of course, names like Warren Buffet and Charles Schwab come to mind, but wealthy investors weren’t necessarily born with that wealth. In many cases, investing is what made them wealthy. For example, Warren Buffett’s started investing at 11 years old when he used the money he earned from being a paperboy to buy some local farmland. Over time, Warren Buffet, amassed the fortune he has today through savvy investments, and a lot of those were real estate investments, too. Investing is for anyone who wants to get into it.
You can invest with as little as a few hundred dollars or as much as a billion dollars if you have it. There’s no age limit or income limits when it comes to investing. It just really depends on your financial circumstances and there’s always a good investment option available to you even based on your financial circumstances. So you know, you might have to do a little research, ask some friends ask some family members, try and get a little inside track, listen to podcasts, try to discover some, some ways to where you can maximize, you know your money, put it into good safe investments, work with good teams that have proven track records. And obviously, we all want to chase a high return but always be careful because a lot of times the high return is also associated with higher risks. So I tend to look for investments that come with a moderate to slightly above moderate rate of return.
I’d be willing to accept a little bit of risk for a higher reward, but I don’t like to jump into really risky investments. I’ve had bad experiences in the past with that, especially with rental properties, just buying in bad neighborhoods, buying lower class properties, very cheap properties that just don’t attract the best tenants, the most responsible tenants. And just put me in circumstances where there’s, you know, I’m in a situation where there’s a lot of crime in the neighborhood and there’s vandalism and theft at my properties. And so I stopped buying those just because of the fact that although they looked great on a spreadsheet, that number just never came to fruition and just really put me in a bad situation. So you know, you gotta be wise when it comes to your investments, you want to educate yourself. But like I said, talking to people, finding out what they’re investing in, finding out what has been successful for them is a great way to get the inside track on a solid investment for yourself.
And also listening to good podcasts out there. There’s a lot of podcasts, a lot of people, you know, even guys that are talking about buying those lower class properties and you know, basically telling you that they‘re going to be the greatest investment that you’ve ever made in your life because of the finance that’s available, and so on and so forth. And then people don’t buy them and they just have a terrible experience. They end up losing their money and selling the property at a discount just to get it off their hands. And it just ends up being just a totally bad experience. And it really just makes you think twice before investing again. And that’s the stuff that you want to avoid. You don’t want to invest in things that are going to make you feel like, ah, what did I do? And then it’s going to make you scared to invest in the future, right? You want to kind of start off with somebody that’s got a good track record, leverage their knowledge, leverage their skill set, leverage their deals that they have. And in most cases, why we like the private lending money program so much is you know those sponsors, those guys that have those deals, they’re doing all the heavy lifting. You know, they’re syndicating the money, they’re getting the PPMs together, they’re finding the opportunities, they’re rehabbing the opportunities, they’re managing the whole project. You just get to come in as the lender and just collect the fixed rate of return on your money. That’s why we really like that option for our investors. It’s passive. You get to live your life, do what you want to do. Your money just sits there and it works for you and you just can keep reinvesting it again and again and again. So that’s my favorite investment model right now. It would be the first lien position, asset-backed investments where you take the role of the bank and first lien and you collect a monthly fixed income check. Okay.
So the next thing I want to talk about is, anyone can pick stocks, right? So there’s a lot of self-controlled stock trading platforms online, like Etrade and TD Ameritrade. All you have to do is register, open an account, connect your bank info, and you’re all set to trade stocks. You can use the platform to buy, sell, sometimes even engage in futures or commodities trading. While it’s technically true that anyone can trade stocks, not everyone can do it well, okay. There’s a lot of just watching the markets, you know, watching the news, watching, reading the news, you know, to really, you have to really kind of get yourself in tune with what’s going on out there in the world to really be able to accurately pick the stocks.
And it really becomes a daily job, just the research alone and watching it, watching the market. Um, so it’s not necessarily the most passive option out there unless you’re going to hire a stockbroker or financial advisor to do this for you. But in that case, then you’re going to start to see that your returns become more modest, right? Than if you’re trading yourself. It does make it more passive, but you’re also kind of giving that, that uh, that financial adviser free reign to, to invest your money in whatever stocks he sees fit. Um, so the guys that I see that make really good money in the stock market, they watch on a daily basis and they trade themselves. The guys that are using brokers and financial advisors, they’re still seeing a return, but it’s moderate. It’s not as high as what you would see on a private lending deal. In most cases, half of what you could see on a private lending opportunity. Okay. But stock picking, it’s a highly complex process, really. If you want to do it right and protect your investments, you need to educate yourself about what to look for in a promising stock. You need to know this stuff. The stock market is very volatile and the highs can be amazing, but the lows can wipe you out to where, you know, the next day you’re thinking about how am I going to pay my mortgage payment? Right? Trading stocks is very similar to gambling. One day you’re worth more money than you’ve ever had, the next day, like I said, you’re worrying about how you’re gonna pay the bills. So you really have to be careful with it. And it becomes highly addictive like gambling. And I’ve seen some people, you know, really like lose a lot of money in the stock market. I’ve seen them make a lot, an I’ve seen them lose it overnight. So just gotta be very, very careful with that. And I will also caution that not everyone has the skills and knowledge to successfully pick stocks. So even though you can open up a DIY stock trading account, you may not want to trade without the help of a stock advisor or someone that you know personally that’s really in tune with stock investing.
Another myth would be you know that the best for your money as the bank. That’s definitely not true. As some of the people listening to this show, you know that people used to use pass books to keep track of their money in the bank and whenever you made a deposit or withdrawal, the teller would, uh, update the passbook with the amount of interest that the account had earned between the transactions. Those days are completely gone. Passbooks have disappeared with bookkeeping software, now? Right? Everybody can manage your bank account from their phone and computer, and banks really rarely pay out interest. Instead, they charge customers for the privilege of having a checking account. Right? Interest on the savings account is so small that it’s just really insignificant. And the bank, in my opinion obviously, and in many opinions out there is no longer the best place to keep your money if you want to earn interest. Private lending is definitely the place that you would want. If you just have money sitting in your bank account, go look and go find a private lending deal that’s going to pay you double-digit returns in the form of interest payments, right? The smartest thing you can do with your discretionary income is to find ways for your money to work for you, for you through investments, right?
Private lending, investing in commercial property, residential property, the right commercial, and residential property. Don’t go chase the high-risk ones. Like I said earlier in the show, it’s going to end up giving you a bad taste in your mouth. Trust me. But if you find the right ones that are spinning off a modest return, a lot better than what you’re going to get in the bank and in most cases a lot better than what you’re getting the stock market as well, what you’re going to get in Wall Street, put the money into Main Street. Okay. And even though you don’t know everything about investing and everything about real estate and everything about private lending, that’s why there’s companies out there like us where you can leverage our knowledge and leverage our deals because it’s very, very difficult to find deals, too in good markets like DFW. Okay? It’s not like there’s great deals just sitting on every street corner. If there are good deals in the market sitting on every street corner, then it’s probably not the market that you want to be investing in. Okay? That is the goal. Investing your money is the only way you’re going to earn a substantial interest these days. This is how you can achieve that return on life that I’m always preaching about.
Another myth. You should follow your instincts. Well, you know, as a young man, gambling on a game with my buddies, following my instincts because I thought that the Detroit Pistons were going to beat the Lakers or something. Never really proved out to be a successful, uh, you know, gambling investment, I guess, so to say. Trusting my gut has not really proved to make me a lot of money. Sometimes, you know, because now I have so much knowledge as far as, you know, real estate transactions, how real estate goes, how real estate investing goes. You know, I might be able to have a little bit of a gut feeling, but there’s gotta be financials and hard data to back up those gut feelings. But you’ll hear that people will, other people will say, you know, that it’s important to follow your instincts or trust your gut when it comes to investing. That I think is bad advice and that can land you in the poor house. Emotions can make you do things that can ruin your financial portfolio. The most important aspect of investing is to be as objective and non-emotional as possible. And I talk about this a lot when it comes to rental properties, as well. Now I do say don’t go buy the ugliest property in the lowest class area of the major metro that you’re looking to invest in because I’m telling you they’re gonna, you know, turn out to be some really, really tough properties to manage and you’re going to have a lot of bumps and bruises investing in something like that.
But also keep in mind, even when you get in the B class range and you start to get into the middle-class neighborhoods, some of the houses might not be the most attractive. That might not be something that you would live in. But that’s where you got to take the emotions out. As long as it’s in a solid neighborhood area where you‘re getting that entry level, middle class to the middle-class tenant, and even though the property is not something you would live in, that’s where you got to kind of take out your emotions, right? Because at that point, you know you’re looking at the numbers, but also don’t delve so much into the numbers that you’re solely basing your decision on the numbers and not thinking about the area itself and the type of tenants that you’re going to attract with that property. You know, you want to think about that stuff, but don’t look at it from a standpoint of, would I live in the house, right?
That’s going to make it very, very difficult for you to find good solid investments in today’s market. So be careful of that. But instincts and gut feelings, in my opinion, have no place in investing. Your instincts may serve you well in other areas of your life, but unless you’re a full-time financial professional, this tactic is a bad idea. There’s no magic when it comes to successful investing. You need to look at the facts and the figures and make decisions on hard evidence; inspection reports, right? Scope of works from trusted contractors, area data, area statistics, area demographics. That sort of stuff is going to help you make a solid investment decision. You know the economy in that area. That’s all data that you can pull right from right the internet, right from Google. So definitely do that sort of research before you invest in anything. All right, so we’re going to take a quick commercial break. When we come back, I‘m going to debunk a few more investing myths.
And welcome back from the commercial break. This week we are debunking some myths out there about investing. Uh, so we already talked about a few. Um, investing’s only for the wealthy. Not True. Anyone can pick stocks. Definitely not true. The bank is the best place for your money. No Way. You should follow your instincts when it comes to investing. Definitely not very good advice in my opinion. You’ve got to look at the hard data. Now we’re moving onto private money lending is only for professionals. And I think, you know, because of the fact that you have to be accredited, especially with our deals, uh, that we’re offering that maybe that makes people feel like, oh, this might be a little bit too in depth for me or a little bit too, uh, maybe just kind of turns you off cause you think there’s just a lot of moving parts when really there’s not. It’s actually probably the most simple opportunity that you can get involved in because it’s a fixed rate of return for a certain term and you have first lien position on the asset.
Okay. But private money lending is an investment option that many people will assume is only for professional financiers, right? It’s true that private money loans typically serve professional level development projects, but hundreds of thousands of dollars are pulled together to fund things like housing developments, manufacturing facilities, and commercial office spaces more and more. it’s happening more and more. It’s becoming more and more popular. And if you’re researching it, you’ll see that the private money that’s getting put into the lending space has been increasing drastically year over year. What isn’t true about this investing myth though is that private lending is only for professionals. Any accredited investor can privately lend money to a project, and honestly sophisticated investors can as well. Non-accredited’s as well, it just depends on the structure of the deal and what type of deal it is. How many lenders are on the project. Um, is money crossing state lines? Is it a publicly solicited offer like ours are, which is why we fly into that 506 (c) rule. Uh, under the Regulation D with the SEC, we publicly solicit are opportunities. That’s why all of our investors need to be accredited to get into our opportunities. The key to success is to choose the project sponsors wisely. You want to make sure they have a proven track record, you know, look at their history of following through on the loan terms as well as any other details. But you do not have to be a professional investor. I repeat you do not have to be a professional investor to make money from private money lending. All right. I know a lot of people out there, my grandmother, okay. Other people in my family, some of our employees that make great returns off of private lending through their IRA or 401k. Double-digit returns, fixed and have had a great, great passive experience.
The next myth I want to debunk is, history can foretell the future. How many times have we heard history repeats itself? Look to the past to see the future. These may or may not be true in other situations, but they aren’t true in investing. In fact, anytime a public company puts out earnings reports, there’s always a small print that says something along the lines of past results do not represent future results. That’s because these companies know of this. They know of this investing myth and they want to ensure that investors aren’t making important investment decisions based on historical data. Okay. But pretty much I just want to finish with the fact that there’s a ton of investment myths that won’t serve you well. If you want to make your money work for you, the best thing to do is educate yourself. Seek the advice of professionals or family and friends and make up your mind. Make up your own mind, right? Make an educated decision of what investments are right for you.
We talk a lot about the different programs that we offer here. You know, and I’m not just saying, Hey, invest with our company. There’s tons of companies out there. There’s tons of groups out there that offer great, great opportunities. You’ve just got to find them. And how are you going to find them? You can do some research online, reach out to the investor community, family and friends who have invested with certain groups, get their feedback, get their experience. I’m investing with these groups and you know, maybe look to that, but do your own due diligence as well. Don’t just take everyone’s word for it. It wouldn’t hurt sometimes to fly out and meet the people that you’re going to be investing with, the groups that you’re investing with. Just to get a feel for how they are as a person. Right. Go drive around and see some of the projects that they have. Have them show you some of the projects that they have going on currently. Um, ask for references, you know, speak to those people, ask about their experiences, working with that those companies. Um, and I’m sure they’ll tell you some, some good along with maybe some things that the company could do better. No one’s perfect, no company is perfect. So take that with a grain of salt as well. But as long as you’re getting the return that you’re looking for and the project is proving out, just like the sponsor said that they would, then I would definitely look into that company for sure. Okay. And uh, same thing goes on the single-family rental side. I always talk about, you know, if you’re going to invest in rental properties and it’s out of your comfort zone, out of your own backyard, it’s probably always a good idea to fly out and look at those properties, look at those neighborhoods and meet that team, especially the property management team that’s going to be looking after that property because property management is just such an important aspect of the whole single-family rental program and whether it works for you or it doesn’t, I believe location and market are very, very important factors. But then also property management is just right up there as well because they’re the ones that are dealing with the day to day operations of that property and that portfolio. Okay.
So I hope that you found the information that we gave this week. Insightful, interesting. Um, you know, you can always go back and listen to past episodes on iTunes or any of the other podcast platforms that are out there. Or you can go to our website, RealEstateCowboysDFW.com and you can go back and listen to past episodes as well. Look at the titles of the episodes. There’s some great, great information on a lot of the past episodes that we’ve done and there’s going to be more great information to come on future episodes on the Real Estate Cowboys. Uh, but if you’re interested in learning more about our investment opportunities, that would be through our investment company, American Real Estate investments and we have a website there as well, AREIUSA.com. There you will be able to find marketing material on all of the opportunities that we have, whether it’s single family homes, vacation investments or our private lending opportunities. You’ll also be able to check out a marketing brochure on our current private lending opportunity so you can get a little bit more information from there. And then if you’re accredited and you reach out to a member of our team, we can get you the actual PPM, the private placement memorandum to read more information and delve deeper into the deal to decide if it’s something that you want to move forward with or not. I do know our current offering pays 12% for 12 years, or sorry for 12 months, so one year. 12% for one year. So a hundred thousand dollar investment will pay you back $12000 in one year. The time is running out on that opportunity. We only have a few spots remaining. That was a $3.5 million total raise, and I think we’re right at about 3 million. So we’re about ready to close that one. We do have another one following that up but it’s not going to be 12% percent, unfortunately. So if you want to get in on the 12% and take advantage of that, make sure you go to AREIUSA.com. Put your information in and a member of our team will reach out to you right away with the information and instructions on how to move forward. But that’s all we have this week. Thanks for tuning in. We’ll see you again next week. This is John Larson signing off and always remember, what is your return on life? Have a great weekend.
Announcer: All opinions expressed by the host of the show are the opinions of American Real Estate Investments LLC and do not reflect the opinions of guests or sponsors. No personal or professional advice on this program should be considered an endorsement to follow a real estate financing or investment strategy. Before acting on any information, seek advice from your financial tax, mortgage or real estate advisor, as the information is not guaranteed and investment strategies have the potential for profit or loss.