June 7, 2022

First things first, definitions matter! I’m strictly using “getting paid” for being an investor as the baseline here. So, here’s a list of things that are taken into account while making the differentiation between what qualifies as amateur vs professional investors:

• Getting paid = compensated by the deals they have created directly and indirectly
• Professional investors have short- and long-term plans and strategies for building their portfolios for specific financial goals (as opposed to property collectors — buying for the sake of buying)
• Professional investors have an exit strategy on how they transition from being the managing/active partners (most of the times in the beginning) to being the capital/passive partners over time
• Professional investors also recognize that they are amateurs at the same time — more of a growth mindset driven statement

The inspiration for this article came from a few readers’ suggestion (you know who you are) — thank you and hope you enjoy this!

I guess this is in line with the previous 4 articles. However, the funny thing is this: what I’m about to share are things that had been ‘taught’ to me early on in my financial education. Yet, many were not ‘learned’ (and felt to be true) until years later. Some of them MUCH later.

Before going any further, I want to be extremely clear about this: knowing how to spot them doesn’t mean you treat the any differently in terms of respect. The purpose I want to accomplish with this topic is to help you become more efficient and effective as a real estate investor — both as an amateur and professional. Yes, I said both. I believe that we are all both at the same time these days in the world of real estate investing especially if you follow the SMP Philosophy. Nobody truly knows and has executed on EVERY SINGLE strategy available. In addition, nobody’s invested in every single (viable) market available.

Knowing how to spot them means you can pivot and create more meaningful and productive conversations when you first meet them. And, perhaps, supportive and mutually-beneficial long-term relationships!

So, let’s dive right in!

How many properties do you have?

This one is probably the biggest tell-tell sign.

Most professional (and trained) real estate investors understand that property is simply the investment tool we use to achieve the financial goals we have. And, once again, following the SMP Philosophy, property is at the bottom of the list.

For amateurs, it can seem like this is the fastest way for them to size up the other person. Using the number of properties the other person has to determine how much respect, time and patience they should give — especially at a networking event. Even if the intention is positive — they want to learn from someone who ‘knows’ more than they do, this often backfires because people can sense it when you are disingenuous in your interactions with them. The opposite is also true. People who have collected properties over time may use that to judge how much time they would spend with the amateurs. If this describes you in any way, STOP IT! You’re letting your ego get in the way.

From both personal observations and personal experience, a newly educated investor on a single strategy with a focused market picked out can easily outshine a wealthy property collector.

The point is this: it’s not a bad question, it’s just a bad first question. If you are hunting for a REI Mentor, it’s natural that you are curious and want to know more about their experiences — in strategies, markets, the types and number of properties they have transacted and held — to give them the financial freedom (or independence) that they have today.

Remember, everyone has something to offer regardless of how you classify them. With amateurs, I simply want to see if I can add value to their growth — be it a chat to share experiences, adding to their knowledge vault (or bridging their knowledge gap), or helping them get started by working on a deal together. With other professionals, I also just want to see if I can add value to their journey — from trading ‘war’ stories to collaborating together in any other ways possible. The common thread is — add value. It’s not about you.

I use the BRRRR strategy.

This is a short but brutally important one. BRRRR (buy-renovate-rent-refinance-repeat) is NOT a strategy, it’s a process. I cannot stress this enough.

It’s the fundamental process of performance improvement regardless of the asset class you choose to use. This is a marketing term that became popularized in recent years. Strictly speaking, when you are leveraging a property-first strategy in real estate investing, 99% of times you NEED to BRRRR. Otherwise, what is the point?

BRRRR was known to me as:

• Buy, add value, cashout-refinance (commonly used in the US), or
• Money in, money out, income for life and asset for free (if you get to pull out 100% of your initial ‘money in/investment’)

From day 1 of my financial education, without fail, every trainer and Mentor has emphasized on the concept of value-add in every deal, every property and every step of the way. One of them call ‘real estate investors’ as ‘transaction engineers’. That also took me a few years to fully grasp through living the life of a full-time investor.

With a hard asset like real estate, value-add has a broad spectrum of meanings. Putting it plainly, value-add can literally mean anything between sweat equity to a gazillion dollars. You can paper flip through the Wholesale & Assignment strategy. You can also take a piece of empty or under-utilized land in the middle of nowhere on this planet and put a world class city on it (think of Dubai and Las Vegas).

So, I’ve learned to stay hip and relevant by using the phrase ‘BRRRR’. I’ve also learned to use it like: We leverage the BRRRR process in all of our property-first strategies/deals. This ain’t about sounding smart. It’s simply about sounding like you understand how business works — even if your business is real estate investing.

One last note on the BRRRR process is that it does NOT say anything about cash flow/profit, or as we call it, performance of the asset. This is why, it’s NOT a strategy. A strategy tells you how you make money and how much money you make in the world of real estate investing. I’m only highlighting this because I’ve seen way too many folks BRRRR themselves into even more financial distress. While, on paper, it sounds great and makes 100% sense, it is only a part of the process of any good deal.

I regret selling my properties.

Amateur alert!!!

My best analogy (which I’m oddly proud of) is that properties and buildings are like people. The older we get, the more problems we have. Meaning, the more expensive it is to maintain.

Here’s a quick techno-babble for my trained RE investors: your NOI (net operating income) goes down over time typically with every property in your portfolio. This decreases the capitalization rate (aka. Cap Rate). With the rising interest rates, your cashflow will decrease from higher debt servicing amounts.

A professional investor understands (at all times) that learning how to invest is learning how to make money work harder for us. As pointed out in Financial Education: Know the Difference — Cash on Cash Return vs Return on Investment, real estate is just our vehicle in investing. The goal is to create better financial resources and blueprints for ourselves, and hopefully generations to come. Making sure our money is working hard for us at all time is, in my opinion, the highest level of the art of investing.

Why would you want to make 10% when your money can be making 20%? Why would you want to make 50% when your money can be making infinite return? Selling your properties for the purpose of reinvigorating your capital’s ability to work harder for you is not only smart and the way the pros do it, but an absolutely necessary and natural part of being an investor.

Anyone that tells you to simply hang on to your properties for life is an amateur. This is a lesson that I refused to see early on when one of my Mentors pointed out to me. Silly me!

With that said, this directly ties to the concept of “velocity of money”. For those of you who are curious and interested in learning more, there are lots of articles and videos available for your research.

Tomy dedicated readers, I thank you for your support and feedback. If this is the first time you’re reading one of my publications, I hope you’ve enjoyed it and learned a thing or two.

If you’re wanting to be a part of a community of real estate investors from around the globe, here is the T.A.L.E.N.T.ed Investors Facebook Group. It’s a place where people come together to share experiences, knowledge, successes and challenges, and money making opportunities!

For those of you who prefer watching videos, here is the YouTube channel where some of my work (very raw) has been shared.

Lastly and definitely not least, Bootcamp! If you prefer the live interaction and delivery to help you build some foundation, our next Bootcamp is just around the corner. Go ahead and register for a session for either June 11 or June 12 to help you further your financial education.

(Written at home in Edmonton, AB)