The Investing Skill Every Passive Investor Should Master

Not sure if now’s the right time to invest because the market seems crazy?

It's easy to get overwhelmed by the nature of today's real estate market. The ups and downs can make anyone hesitant, especially when considering investing in multifamily real estate.

So how do you overcome this?

The key is mastering an investing skill that no one ever shared with me, but when I discovered it on my own, it allowed me to move forward and make real, measurable progress.

The Root of Investment Fear

Fear in real estate investment often stems from the perceived risk of losing money and the uncertainty of market conditions.

For many passive investors, the idea of putting a lot of money into a property only to watch its value plummet can be scary.

But that scenario isn’t always the case.

In fact, if you follow the right process and invest with proven, experienced operators, your money is in a much better position to grow.

Here’s the crux of the strategy: by factoring high interest rates into our underwriting from the start, we nullify the risk they pose. Moreover, using fixed-rate debt ensures that we are insulated from any wild swings in interest rates. This means that the typical concerns about interest rates no longer apply to our investment decisions.

Transforming Fear into Strategic Investment

What ways can you overcome these fears so that you can start investing in real estate?

Stay calm and informed.

Knowledge is a powerful tool.

The market isn’t nearly as fragile as the media and the news want you to believe.

By understanding market trends, economic indicators, real estate fundamentals, and adequately vetting operators, you can make informed decisions rather than reactionary ones.

Staying calm and collected allows for a clear-headed assessment of opportunities and risks.

Embrace counter-culture thinking.

Apartment investing in and of itself is an alternative investment.

Warren Buffet famously said, “Be fearful when others are greedy, and greedy when others are fearful.”

This approach suggests that the best time to invest is often when others sell, and vice versa.

By resisting the herd mentality, you can identify undervalued assets and invest wisely.

Value and risk-adjusted returns.

Focus on the value of the properties and the returns they generate relative to their risk.

Understanding the concept of risk-adjusted returns can help identify investments that offer the best balance between risk and profitability.

Understanding market dynamics.

Multifamily deals NOW are entirely different from multifamily deals two years ago.

And they’ll be even more different two years from now.

The nature of these deals will change over time. You must stay current with current trends and market conditions.

Courage to act.

None of these are the most significant barriers to investing in apartments – or even trying anything new.

Market conditions .. education .. even money .. are just contributing factors.

The biggest reason people don’t act is because they don’t have the courage to. But once you get educated, you’ll become comfortable with the idea of investing in apartments.

This courage to act, backed by knowledge and a supportive network, can lead to significant progress and rewards.

Debt is everything in today's market. Deals with fixed-rate debt carry virtually no interest rate risk, making them stable investments. High Loan-to-Value (LTV) ratios might pose a risk, but securing anything above 80% LTV is becoming increasingly difficult, hence rarely a concern. The focus should rather be on the reliability of the debt structure and other critical financial indicators.

Personal Experience and Learning

Looking back, there were plenty of moments of both fear and greed.

When I first started pursuing passive income, I opened too many restaurants too quickly. I also invested $300K of my own money with a developer I barely knew in Northern Virginia.

Both of those resulted in hefty losses.

I was greedy, and because of my failures, I had to overcome my fears about starting a new venture: flipping houses.

And I had to overcome them again when I first started investing in multifamily real estate.

Conclusion: The Time is Now

Waiting for ‘perfect' market conditions in multifamily investing may result in missed opportunities.

The key is to educate yourself, stay calm, think independently, and be ready to take action.

With these principles, navigating the real estate market becomes less about fear and more about seizing potential.