April 13, 2023
By: Travis Watts, Director of Investor Education
Being a real estate investor doesn’t come without challenges. There’s psychology and self-discipline required and an endless amount of information to sift through when it comes to investing. In this article I’ll provide several tips that can help you beat the odds during your investing journey.
A strong conviction based on your own beliefs can be your downfall.
Allow me to unpack this . . .
Although many people know me as an apartment investor, when I first started investing, it was in the stock market. Leading up to 2008, I had some college money saved up, and 100% of my capital was tucked away in mutual funds with the help of a financial advisor.
My parents, my advisor, and I were all taught similar convictions about investing. Buy low and sell high, invest in the stock market, diversify into mutual funds and index funds, hold for the long term, and so on. It was during this time that I started educating myself on investing, which began to change my perspective.
I have always been fascinated by the idea of multiplying money without having to work a job. For me work was a grind growing up, watching my parents struggle with small businesses and try to work up the ladder in the corporate world. I discovered that I rarely enjoyed work because I was only doing it for the money. From age 15 with paper routes to digging trenches, painting houses, washing cars, and working in oil and gas, it was 100% for a paycheck and 0% for fulfillment or purpose.
If I had kept a strong conviction for betting on the stock market and working harder for money, what would my results have looked like today? If I had to guess, I would probably be burned out with little to no interest in investing. What ended up happening instead is investing became my fulfillment and purpose, and “work” became optional.
Questioning convictions made all the difference.
Now that we’ve discussed the importance of questioning your convictions, let’s talk about the importance of odds. Go with the odds because the numbers don’t lie.
I made a tough decision to pull out of the stock market in 2007 during college after reading Rich Dad’s Prophecy, a book written by Robert Kiyosaki about “Why the Biggest Stock Market Crash in History Is Still Coming!”
I doubt the author really knew that 2008 was the chosen year for the Great Recession meltdown, but I did learn that the odds were stacked against the market at that time due to having a long bull trend in the years prior. I wasn’t trying to time the market; I was looking for something more predictable and steady to put my money into, ideally, something that produced passive income.
It was during this time that I truly began my study of investing and finances. This is when I started considering the odds for the first time. For example, if you pull up the Forbes 400 list, which is a list of the 400 wealthiest Americans ranked by net worth, you can see which industry they made their fortune in, and most fall into the category of finance and investments.
I also remember reading from various sources that 90% of millionaires invest in some type of real estate.
Source: CNBC. “Real Estate Is Still the Best Investment You Can Make Today, Millionaires Say—Here’s Why,” October 2, 2019, https://www.cnbc.com/2019/10/01/real-estate-is-still-the-best-investment-you-can-make-today-millionaires-say.html
I started working at one of the largest brokerage firms in the US several years later and learned about how economic cycles work and why assets move in cycles. This was fundamentally important to stacking the odds in my favor. It is common among investors to wait until the market has been doing well for years, and then dive in. It is also common for investors to wait until a crash occurs before exiting the market, just as the pain gets too hard to handle. Then what happens? The market begins moving up again . . .
The reason I ended up leaving the Wall Street world is that real estate just made sense to me. I had a hard time talking about mutual funds all day when the reality was that I was investing in real estate. I found that it was pretty easy to understand and appealing to base my investment decisions on real estate fundamentals as well as. In additional to all the other aspects such as forcing appreciation into a property, receiving tax benefits, using leverage (having a mortgage), and my personal favorite – collecting monthly passive income.
In contrast, I found speculating to be much riskier and similar to playing blackjack in a casino, where there is an element of skill and an element of luck. In fact, the odds are about 42% for a win, so the house wins in the long run – statistically speaking.
Source: PlayToday.co. “A Must-Read Guide to Blackjack Odds and Probability,” December 9, 2022, https://playtoday.co/blog/blackjack-odds/
So consider the odds when investing—go with the numbers.
Avoid the Mirage
It’s human nature to chase the mirage or to want to get rich quick:
- The California Gold Rush
- Buying penny stocks
- Playing the lottery
- Gambling in casinos
- Moving to Los Angeles hoping to get famous
- Multilevel marketing schemes
In most cases, these are high-risk, high-reward options, but they rarely pay off for most people.
Of course, some people become wealthy from chasing these ideas, but are the odds in their favor?
I want to end with something interesting I was reading. This comes from The Journal of Roman Studies, and the chapter is about Rome nearly two thousand years ago (volume 67, published in 1977).
Take a look at the first two sentences:
Multifamily apartments have been around for thousands of years. Rental real estate is not a mirage, it’s not the latest trend, and it’s not a get-rich-quick scheme: it’s a simple human necessity.
It’s something to think about this month. I hope you found some value in this short article. If I can be a resource along your journey, feel free to reach out to me anytime at travis@ashcroftcapital.com.
To your success,
Travis Watts
If you would like to learn more about investing in multifamily assets, visit https://info.ashcroftcapital.com/fund, or schedule a call with our Investor Relations Team at investorrelations@ashcroftcapital.com.
