BiggerPockets

Great thread post!

As far as switching gears, I base that decision on the current and short term horizon outlook on expected market conditions. If a specific market is condusive to flipping (more buyers than sellers, low inventory levels, etc) I go with that strategy. If I expect a market to have a large upside in growth potential, I will accumulate as much as I can and sell at the right time to cash out my profits (of course I also make sure I buy at a good discount to help my cause). In other markets that support cash flow, I buy and have long (or at least longer) term hold periods for income via cash flow (again, I would buy at discounts).
By incorporating several investment strategies in several areas condusive to each strategy at that time, I give my business a range of income producing investments. Some provide small income streams each month while others produce large returns inside of 3-12 months, while others may take several years before cashing the paycheck.

For me its more thoughts on the cash liquidity side of things.

Since I buy ugly houses at major discounts. These houses usually have to be heavily repaired to bring their normal value.

Therefore it is important to have the cash reserves necessary to buy at the discount only to put more into it for the repairs.
Depending upon the number of deals going at one time this can reduce the liquidity quickly causing the need for leverage which in these time is often hard to come by and also increases the cost.

Therefore my leverage strategy has changed due to the economic times and the liquidity is now important where is was not as important before.

Now that I have some liquidity, I have found the banks more willing to allow me to leverage some of my deals where they were sticklers before about the NOO loans.

The cash flow generated by these properties while I wait for the right economic time to sell for the best appreciation has added to the liquidity and taught me that this liquidity, which helps to get that leverage, is more important than the leverage itself, which in turn makes the cash flow potential a very vital component in the purchase decision.

Mike (and all),

If you are ready to buy another rental and you have 2 choices, which do you go with?

a) 3-1 for $30K all-in, in a bread and butter working class neighborhood on a street where you have 2 other SFRs. Will rent for $650. ARV is $55K.

or

b) a 2-1 a few miles away in a neighborhood that is truly gentrifying. It's about 3 blocks away from newly developed townhomes on land that the developer cleared by scraping houses just like the one you are looking at. This home is clearly in the path of redevelopment, you just aren't sure how fast it will happen. The location is attractive to professionals to be close to their trendy night spots, restaurants and downtown. You can buy this home for $52K all-in and it will rent for $750. ARV is $85K. Those townhomes down the street?--they are renting for $900-$1150. This area is affected by the recession like everywhere else, but it's fairly clear that the macro-trend is pointing to continued growth in this neighborhood.

a or b?

Ok, lets not try to goat someone into changing their model which works for them.
What I am interested in for the benefit of the newer investors.

Can you share an example of a deal you chose to do that did not come off the way you expected it to and why. More importantly is how you changed your strategy to make it benefit you.

Mike, I am sure, has had some of these and has already shared that his way, when he does get into something that did not equal his formula, is to get rid of it!!

Maybe he sells it to Will for the appreciation that will may see possible?

But the most important part is why it did not work as planned, how did you miss an important piece of information that you normally would not miss, and what did you do, just gid rid of it, or change tactics to make the deal work?

In your case Jon, what you could not forsee is that because of the recession most of those popular nightspots went belly up and this trendy area became a run of the mill neghborhood where the prices never really recover. What would you do with this deal when it becomes apparant the the expected appreciation will not come, at least as fast as your model predicts?

Do you choose to hold it upping the rent until it does cash flow? Making improvements in it so that you can further increase rent? What other systems would you turn to make the best out of a deal gone wrong?

Thanks for the clarification, Jon. I kinda of souded to me like someone wanting to "clash" about the two different main strategies like in the clash of the titans.

Although the clashes will be welcome and this thread may go all over the place, which is also fine. I did not want anyone feeling like they were being targeted.

You guys continue on, gotta sleep for work tonight, will check in later.

Ok Mike. Making an assumption for the purpose of creating a scenario does have its downfalls, at times.

But for whatever reason, you have chosen to use another method, wholesaling. I would believe that you wholesaled those properties at a profit. You started out to purchase for cash flow and changed to wholesaling, taking advantage, I'm sure, of the appreciation (or equity).

We have one example of someone changing methods, not for the bad reasons I had assumed that would usually cause this.

Anyone else want to share a time when they changed methods in midstream?

Was it because of something bad, or was it a good problem, how did you overcome it?