One misconception about real estate investors is that we have piles of cash lying around at all times to make down payments. This is a manufactured narrative supporting a false belief by those stuck on the sidelines of real estate investing.
A person thinking this might wonder, why does Eric fundraise for his real estate? Clearly he has a sizeable real estate portfolio, why doesn’t he just buy everything himself and keep all the equity.
Good question. Here is the answer. Coming off the sale of a property sure, Lori and I can be super liquid, for about a month or two. Otherwise, we invest all avaliable cash flow that is not needed for property expenses and taxes pretty quickly.
It’s not that we immediately go looking for our next acquisition when a big pay out occurs. It’s that we already have multiple outstanding investments picked out that we have been chomping at the bit to get into, before a previous investment matures and hits the jackpot. This is a true real estate investor mindset. We ate always sourcing opportunities whether we have funds in hand or not.
So, the option is to pass on great potential investments by waiting till another property exits, or raise money from other real estate investors and share in the wealth with them. Easy decision from our perspective.
My last two investments were case in point. I saw an opportunity to buy two more properties in Hawaii that I believe were massively undervalued. I also had a need to transform my most valuable property into something special to create even more value from it. The overall cash need was $4mm.
None of my portfolio properties were ready to exit any time soon and I could only throw in a percentage of the need, so the only two options were to pass or fundraise & share. I chose the latter.
Why am I sharing this? I mentor people looking to get into the real estate game. The number one excuse they have for not getting into real estate investing is that they have not yet saved up enough down payment to participate.
I then share that 95% of the time I do not have a down payment in cash ready to go when a good opportunity arises. They look at me super confused, cause it shatters their built up false belief that its easy for me to invest in real estate cause I am already wealthy.
The number one excuse for not jumping into real estate investing is this one: “I don’t have the down payment.”
In all honesty, if Lori and I waited till we had the down payment every time a great deal came across our radar, we would not have the real estate portfolio we do. Real estate mogul Grant Cardone famously says that he goes illiquid two times a year, despite having a real estate portfolio, emerging on the B’s.
I can gaurantee you one thing. With how America’s financial system operates, you will not be able to save your way to wealth. This statement includes the strategy of waiting to invest in real estate until you can save up enough for a down payment. There are other viable ways to get in the game.
Don’t let your limiting belief that only wealthy people can invest in real estate stop you from taking the one journey you can embark on to join them.
