However, as my friend's parents learned, there is a breaking point beyond which the risk is simply too big. It can be overleveraging properties by acquiring too many "low-down" purchases that weren't really offers, or it might be attempting to purchase an excessive number of properties quickly. Perhaps it's the repeated refinancing of the real estate, taking all the equity out and putting it in a growing number of projects. Whatever the cause of the bankruptcy, it's obvious that the risk grew to be unmanageable, and these investors lost money.
If you dine with those cannibals, sooner or later, dear, you're going to get eaten, as rock and roll singer Nick Cave crooned. So how this could be avoided? Avoid risk at all costs? Do you only make investments in transactions that are absolutely safe?
Obviously not. Entrepreneurs must take risks, but their ability to manage those risks will determine their success. You can't always see what the future brings, where the rocks are just beneath the surface, or how the next waterfall will arise, like a group of white-water rafters fighting the rough waves. However, you can avert a premature "death" by ensuring that the right people are in the boat with you, keeping a look out for potential hazards, attempting to steer clear of potential trouble spots, and donning the appropriate life jacket.
Too many people rush into real estate purchases before they are fully informed. They just make the decision that investing in property is the best course for them, and they begin buying homes. There is a great difference between someone being busy and being productive, and many real estate investors mistakenly think that just because they are making investments, they will succeed. Never mind that they used the incorrect finance and purchased the incorrect house in the incorrect location.
I'm not referring to the late-night television, "get rich quick," style of teaching. I'm referring to investing in your future by spending the time required to establish a solid educational base. ‘Bigger Pockets' goal is to assist people in laying this groundwork through a number of tools, such as our forums, blog, podcast, and this very booklet you are reading.
Additionally, I urge you to keep studying by using free resources like library books, meet ups, and others. Education doesn't have to cost tens of thousands of dollars. You only need to go out and take information now that it has become more accessible to everyone. Nobody can carry it out for you!
I felt I understood what I did when I first started real estate investing but I didn't perform a thorough enough analysis, which led to some significant errors. I'd have found myself in the same situation as my friend's parents if I'd kept going in that direction.
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