5 ways in which real estate can lose you money

Real estate SHOULD be safe, but here's how that logic falls apart

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5 ways in which real estate can lose you money

Welcome back! 👋

Over the course of my new venture I've heard an endless number of comments from LPs that sound like one of the following:

1. “This investment feels safe, but I just wanted to get your thoughts”

2. “Worst possible case here seems to be that I get my money back”

3. “Real estate is an asset, so worst case scenario is we can just sell it”

4. “This investment has to be safe because everyone needs a place to live”

5. “The GP said the investment returns are guaranteed”

I hear from LPs that have lost a substantial amount of net worth in an investment and they tell me that, at the time of investing, they had preconceived notions that were similar to one of the above comments. I hope that the majority of you can read each one of the above and understand why the reasoning in each statement is faulty at best and perhaps dangerous at worst.

As I discussed in detail in my earlier post below on the investor’s mindset, a healthy dose of skepticism is critical to any investor … and I hope you can use the above examples to practice this. Simply ask yourself, what could go wrong? What’s a counter example.

Hint: if you can’t find a counterexample for an assumption or statement, you probably don’t understand the topic well enough and should be careful making an investment.

An investor's mindset and principles

Today, I'd like to quickly give you feedback on the five comments above while also providing you with a detailed list on of the top 5 reasons a commercial real estate deal can lose money:

1. Deconstructing the 5 misconceptions

2. Top 5 ways to lose money in a real estate deal