As I type out this title I actually believe that both elements of the title are true. I believe that he lacked financial education and he made bad investments, because he lacked the education to make wise ones.
I’m sure we have all seen the post about T Pain on the Breakfast Club. In that post he claims to have lost 40mm through terrible habits and bad investments.
A lot of people are using this article to bash real estate. I think they are foolish.
In the article T Pain claims to have lost money in real estate that he intended to flip. He said that he lost all his money because the deal went bad. He said they couldn’t salvage the market. He said it was because the areas they were investing in were so bad that nothing could save them.
This was the most idiotic thing I have ever heard as it pertains to real estate.
It was foolish because there is no such thing as real estate that cannot be saved. I believe that the problem with T Pain is that he lacked financial education and this allowed him to be taken advantage of. This naiveté made three things obvious to me.
- He didn’t have the tools to create other strategic wins: Being an investor requires more knowledge than merely buy low sell high. This is the basic element of investing but it isn’t the only way to win. You need to know of all the tools in your belt otherwise you will throw your hands up at the screw in the wall because all you know how to do is pound nails in the wall with a hammer (metaphorically). If he had a screwdriver he could have accomplished the same task. Know your tools fam. T Pain could have rented out the homes, refinanced the homes, sold them and taken a small loss, held them as a form of land banking, anything but taking a big L. The problem is when you barely know something its tough to really get in the weeds, most novices float around at a basic level which gets them hustled when the world turns. Be smarter than T Pain.
- He wasn’t evaluating the deals he was just providing the money: The problem with this is then you have to take someone else’s word for it. This is very dangerous especially when working with syndicators and sponsors. These sponsors will work in fees and expenses that kill the deal but enrich them. Its important to know what you are doing not just blindly throw money and expect an ROI. Imagine if you took your numbers from wholesalers. These folks mark up the ARV, lowball the rehab and get in bad deals, because they just want their wholesaler fee. They take it and move on to the next bad deal. If you want to get a good deal from a wholesaler you have to know the market just as good if not better than them. When you take their word for it you will lose. Remember to take advice from rich people not salespeople.
- He wasn’t smart enough to determine if the play was successful or not: The big problem here is that T Pain just deemed the project a failure because he didn’t get paid. Meanwhile the contractors got paid, the brokers got paid, the lenders got paid and the person who came behind them got paid. Entertainers and Athletes have to be smart because people are looking to take advantage of you. They will eat all the meat off the bone and then tell you the deal failed because of things outside of their control. They are lying and you are losing. Educate yourself so you can determine if its a win not your adversary.
As an investor/money partner its important that you know as much about the fundamentals of the deal as your deal sponsor (the person coordinating the deal). It is not enough to just “be the money”. This is how you get taken advantage of.
T Pains story was troubling because I could tell he didn’t know what he was talking about. He didn’t speak in numbers when it came to real estate only to ideas. The market was bad. We planned to buy them and fix them up. None of that reeks of an actual analysis. The only time he dug into the numbers was when he was talking about his Bugatti.
I write this because real estate is a good investment if you are educated, wise and patient. If he was educated he would have known whether the deal was good or not. If he was wise he would have pivoted, turned them into rentals, refinanced them, rented out rooms, done anything but be a little b taking someone else’s word for it. If he was patient he could have waited for the market to come to him.
I write this blog because I see a lot of T Pain traits in others. They throw money at sponsors blindly, they only know how to BRRRR or to wholesale and they don’t have the patience to build actual wealth. We see how it ended for T Pain though. Don’t’ fall into the same trap through the same acts. Use his story as motivation to do real estate smarter not to avoid real estate altogether. Milli Out.
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