Investment education and paying for services

Been reading some comments recently made and many made in the past about this topic. Just wanted to post my 2c of opinions on this topic and how I see it. Warning, long boring post.


Above all else, the decision to pay for knowledge and/or services should be guided by 2 main questions. 1. Will paying for this K/S (knowledge or service) significantly help me in growing as an investor and allow me to take action faster and 2. Will paying for this K/S help me to reduce my risk with this particular venture/project/purchase where the benefits likely outweigh the initial costs.

Let me get this out of the way. I am a big advocate for self education. Educating yourself as much as possible over time via books, podcasts, forums etc. For most people, engaging in at least some self education will be essential if they want to build large portfolios or have lofty financial aspirations. Developing your own foundation of knowledge will greatly help you to sift through and do DD to ascertain who are the reasonable K/S providers and which ones clearly have major red flags to avoid.

Over the years my partner and I have paid more than 100k (likely significantly more) for education, services and specialized consultations. This DOES NOT mean everyone will need or want to pay this much. It is completely dependent on,

1. You're financial aspirations/chosen investment strategy
2. Your risk tolerances
3. Who you are as an individual. This is huge. We all have our own strengths/weaknesses and limitations. That's why when a random comment is made to the effect of, 'you dont need to pay for anything. All that you need is read a forum or buy X books, I learnt all I need right here' etc, it doesn't take into account who the person is as an individual and their specific needs/goals.


Leverage. Most people focus on how to best leverage their dollar (of course important) to get the most out of a particular investment. Leveraging time, knowledge, expertise, contacts etc is often seen as soft benefit. Not sure why. This is how I approach every single major business decision. I am not saying this is a model to be applied to everyone. It works for me. I'll give a contemporary example with a series of questions.

Goal: Purchase an add value property in Perth while best reducing my overall risk.

Knowledge: Do I have enough knowledge/time to do all the specific DD and purchase in the timeframe I want? No. Do I have enough general knowledge to know who to get to help me? Yes. Do I have enough knowledge to be able to work in a collaborative manner with the BA? Yes.
Risk: By engaging a BA, would my overall risk be decreased for this particular purchase? Yes, on multiple levels.
Cost/benefit: Do the benefits to engage the service outweigh the costs? In my estimation, easily.
Leverage: What will I be leveraging with this service? Time, local knowledge, BA business knowledge, BA contacts.

Overall, what is the best course of action for me with this specific purchase at this specific point in time allowing me to best reduce my overall risk? When I then look at the responses to my questions, the decision becomes quite clear.

I am not suggesting to blindly engage any K/S provider. Nor am I saying every person needs to. But there definitely is a time and place where K/S providers can be an integral part in helping you get closer to a particular goal while significantly reducing your overall risk. They also can help you overcome you. What I mean by that is if you know you lack a certain quality/skillset etc, they can become that crucial next man/woman on your team to get you over the line.

Rather than looking at it from a 'what can they do for me' perspective, try looking at it from a 'what can we do together'. The former implies extricating yourself from the entire process (which I don't recommend) while the latter suggests a collaborative, shared responsibility and DD analysis approach where more than your own limited filter is being applied.

At the end of the day, essentially its all about doing whatever you need to do to get you closer to achieving your goals with as little risk (risk can never be eliminated) as possible. The make up of decisions can look very different from venture to venture. Keeping an open mind to utilizing whatever course of action is best is key.

 

Great post, yet again Sackie

 

Agree. Big fan of both self-education and leveraging others.

But depends whether time or money is more important to you.

 

Awesome post, thanks for sharing Sackie. Most of our office has been following your posts for some time now. Just wanted to say thanks for your valuable contributions, it hasn’t gone unnoticed.

 

Learning from your own mistakes and not knowing what you don't know at the time is invaluable. Having everything handed on a plate wouldn't make life too much fun. I came close to using BAs on multiple occasions, but never pulled the trigger. It just made me more focused and motivated to get a great result on my own. A great result more on your own is a lot more rewarding, and a bad result equals fantastic hard knox learning and you can't blame others.

 

Self educating and using good services as required to work on a specific opportunity and time is a good strategy. In fact I recently started educating myself about property investment but wanted to get an IP in 1-2 months (personal reasons) and as such working with a BA. I can relate to your post and well said @Sackie based on your strong experience. Thanks for sharing.

 

One problem is that some people see internet sources as reliable, and do not go much further. Certainly there's a lot of excellent online information, but there's a lot that isn't. It is usually not possible to self-educate to an acceptable standard alone online. Also, not everyone is suited to investing. I started investing with shares, then moved to property, reading over 20 books on each subject, taking many notes.

 

Did the same. Read dozens of books on real estate, negotiation tactics, renovations and psychological resilience/mindset development and investment philosophy. Also many books on business (which more relates to my businesses not RE per se.) Made tons of notes to self.

99% of folks will never do this. Does it make a difference with your investment performance over the long term? All I can say is of my close friends who have invested similar time and dedication to their chosen fields, all are extremely successful today.

 

That's why education without the complimentary mindset is useless. Imho it's 80% mindset, 20% mechanics.

 

Agreed. Aptitude can be added to this, personal traits like patience, not spending now on discretionary items so that future gains are enhanced, a long-term focus and more.

I use professionals for jobs that they can do legally, better, faster or at a lower overall cost than DIY. This means sparkies, plumbers, tilers, property managers, tax advisor etc. I do the share and property management, no delegation, although I often seek advice on minor aspects. Financial planning and management also keeps my brain (such as it is) active, and gives a sense of self-worth, top of Maslow. It's interesting and sometimes challenging. The balance is about right for an old person like me (over 30). This was especially so during the pandemic when going to the shops was a a risky trip, and staying home a lot more than normal was the new normal.

 

totally agree to this and I follow this same approach

 

That part about knowledge and time makes a lot of sense, especially with your example of an interstate purchase. I can't help but wholeheartedly agree. I also think skills of an expert could be handy in a buyers market which I think we're in now, in that any fees may well be less than the savings made on the purchase price. But I do have one question. Do real estate agents generally prefer to deal directly with the prospective buyer who doesn't have an agent or with a buyers agent or there's no clear answer? And if it's the agentless buyer, would they favour that buyer over the buyer with the agent? Ok that's 2 questions. I got my last house on the vendor's choice after a tie in offers and felt maybe it helped that i spent time chatting to the real estate agent a few times, but of course i'll never know the reason. Maybe a real estate agent or a buyers agent might have a good idea about this. Or others might also. Thanks.

 

In my experience REAs like to deal with anyone they think is a legitimate buyer. They don't care if you're represented by a BA or not. They'll play all fish on the hook against each other as much as they can before trying to secure the best deal (or close to it) they can for their client.

Of course it doesn't always work out in the best interests of their client as agents really care most about closing the deal. So a savvy well connected buyer in some instances will have some leeway with an agent. Eg an agent contact of mine knows I'm a serious repeat buyer and brought me an off market deal first before anyone else to have first stab at it and I managed to get it at a great price compared to if it hit the open market. I closed within 12 hours of seeing it. Agent happy. Seller happy. Buyer happy. Was it the best outcome for the seller though?

 

Without knowing the proportion, I suppose some offers fall through and so REAs may value a buyer's reputation such as in your case and maybe in my case it was secure employment. Loan approval and amount of deposit I'd imagine are among other things they look for. In my opinion the one downside among many more upsides of going through a BA is when it's a hot market and there's a delay caused by the REA having to go through the BA to the buyer, back to the BA and then to the REA. And this is where my thinking was on whether REA prefer to deal with the buyer directly. Also in a hot market I'd be a bit concerned a BA may be busy for several crucial hours. Having said this, I believe this could be dealt with, with both the buyer and the BA being in direct contact with the REA. Though I am curious if this can be the case, as it would be important for me so as to feel a sense of control.

 

Thanks for your educated input Sackie.

After reading the book Rich dad, poor Dad, I whole heartedly agree with the notion of surrounding yourself with people who are smarter than you in the areas that they specialise with the aim to learn from them and improve your financial knowledge.

I'm very much at the start of my property investment journey and I'm having trouble finding the genuinely valuable experts from all the spruikers. Are you just referring to BA's in your post or have you used/purchased other streams to grow your knowledge? I've looked at PK Gupta and Empower Wealth but I'm not sure if their courses/services are the best way forward.

Any help with mentor suggestions, courses etc would be appreciated.

 

Hi @DANger-is,

I always recommend to anyone who wants to build some wealth with RE to start from the beginning. Learn the basics, build your foundation of knowledge over 4-6 months from the ground up and it will serve you for life. I wouldn't bother even considering to attend any courses until you have at least done this. I would get stuck into some good books and learn the basics.

How to build a team
Who is on the team
How to use leverage
Different investment strategies
Who are the different players in the game and what bias/conflict of interests they may have
CG Vs CF Vs balanced approach
Understanding roughly how property cycles work
How to do DD on property markets? specific properties?
What to stay faaaaar away from.
Easy pitfalls to avoid.

etc etc etc

After a while it will start to come together for you and you will know what questions to ask. The forum is obviously also an excellent resource to ask questions, attend meet ups etc but don't ignore some structured learning via books, podcasts etc.

 

Rich dad, poor dad is not what it seems. John T. Reed's analysis of Robert T. Kiyosaki's book Rich Dad, Poor Dad, Part 1 Just because a book sells well it does not mean that the book has good advice. Another investing book advocates insider trading and sundry other illegal actions. Harry Dent is another. How Often Has Harry Dent Been Wrong? Harry Dent - Wikipedia

I'd start with a library and op shops - I've got a lot of $20-30 books from there for a dollar or two. Just keep reading and asking questions. It will take time and it will be hard at first. Persist.

 

Personally, I agree with you. I actually can't stand RK and I think he's full of self serving crap as well as some of the advice he gives is borderline idiotic to downright dangerous.