I just picked up a great deal. I could sell it right now and make about $22,000 but I’m not going to do it.
I’m very tempted though. Obviously, $22,000 is a lot of money. So why am I not selling this property and taking the money and running?
Because it’s a perfect buy and hold property.
It’s a single family house, on a cul-de-sac and it’s in a place where there is a ton of military (my favorite type of tenants).
If I sold this property now I’d be a fool because when I own it free and clear in a few years it will give me around $2,000 a month in income for life.
You see, one of the reasons I’m writing about this today is because I just had a conversation with an investor in Florida who I haven’t talked to in awhile. When the market was hot this investor and his partner where flipping properties like crazy and making a ton of money.
But guess what? They didn’t keep a single property.
When I was on the phone with the investor he told me, “I always told my partner we should keep some of the properties, but he always talked me into selling so we could get $30,000 immediately and be able to buy a new car if we wanted to.”
Not surprisingly, that investor and his partner spent all of the money and have nothing to show for all of the deals they’ve done. They’re back at square one.
Listen. I know it’s not easy. If you’re struggling for money now you might have to flip a house to pay the bills. But I do mean struggling. Most people can afford to put a roof over their heads, clothes over their back and food on the table… but they think they’re struggling if they can’t get 4 cups of Starbucks coffee every day and a new car every year.
So if you’re truly not struggling I suggest you delay instant gratification.
From day one in this business I’ve been keeping a certain number of properties in my buy and hold portfolio and I’m very thankful I did, because I currently have several thousand dollars coming in every month in passive income.
And even though $22,000 would pay for one heck of a vacation today, I’d rather have the $2,000 in passive income coming in a few years from now. That last thing I want to do is have to work full time when I’m 60 or 70 years old flipping properties. And if you take my advice you won’t have to work either.
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Article Author: Jason HansonJason has written 185 articles for us.
Visit Jason's Website: http://www.PrimoCoach.com
Jason R. Hanson is the founder of National Real Estate Investor Month and the author of “How to Build a Real Estate Empire”. Jason specializes in purchasing properties “subject-to” and has purchased millions of dollars worth of property using none of his own cash or credit.
Joshua Dorkin
{ 6 comments… read them below or add one }
Jason — You may not realize how many lives you could be changing for the better with this post.
I talk year after year with ‘successful’ flippers who’ve reached their 50th birthday only to finally realize the truth of what you’ve written so well here. You’ve truly done a public service.
Aloha Jason. In a subtle way, you made a strong point that goes far beyond real estate investments. In life, we are tempted by short-term (and short lived) gains, when we would be better served by long-term (slow and steady) goals. Sure, I would love to get a brand new E-class today, but what if the true cost of it would be adding an additional year to my working life? Thanks for putting things in perspective (in a way that REI-minded people can relate).
Great point, Jason –
My real estate investing has been (for the large part) buy and hold. Occasionally someone will make me an offer I can’t refuse, but I try to hold as much as I can. I’ve never gotten heavy into the sell-side of the business or flipping properties. As I continue to acquire properties, I am looking more and more into that side of things to bolster current income.
Great post – Thanks!
Your on the money. Although I will say, discussing what I call two distinct operations. Flipping or wholesaling (heck any type of short-term merchandising) is a business. And in order to get ahead in a business one needs to take (at some) those earning and invest them. Businesses have no guarantee that one can continue to derive income from them with winds of change. I call rentals -long term retirement packages. Don’t overleverage them, let residents pay your debt down, reinvest, set on auto pilot, and enjoy the spoils down the road.
It’s good to have both running together. Of coarse everyone is different based on thier ability to get financing, cash reserves, cash flow, and capability.
Great advice!! And I’ll take it one step further. If you do decide to flip (sometimes there a good reason) don’t blow the money for an E class or a vacation. Grow you business by keeping those hard earned dollars working for you.
I agree with Clint. The decision should have all emotion removed from it. A positive side would be long term capital gains, stream of income once the property is paid for, appreciation, etc..