Using Real Estate Investment Strategies – THE Commandment

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As many have, and no doubt will, I learned this lesson the hard way. My mentors were of epic quality, as was my luck in the opportunity I had to learn from them. Still, there were far too many lessons I learned the hard way. Dad once told me I was far too smart to’ve been such a slow learner when it came to real estate investment.  He was especially nonplussed at what appeared to be a waste of world class mentorship. Lookin’ back, I’m a bit red-faced. My mentors allowed me to fall on my face all the time. They would then ‘invite’ me to join them for some ‘fries ‘n laughs’ at the 19th hole. That was code for ‘it’s woodshed time for Jeff’. This was particularly true when one of the immutable laws, as they called them, was shamelessly violated.

It was never less than brutal — applied with love and affection, of course.

Real estate investment strategies

  • There’s Turn ‘n Burn. There are several denominations under this tent. But they all buy, then sell as quickly as possible.
  • Buy and Hold — never to sell, as in, never, ever.
  • Buy, hold, and allow guaranteed appreciation to lift you to your dream retirement.
  • Then there’s the ‘reformed’ Buy ‘n Hold crowd. They’re allowed to refi for cash in order to buy more real estate they’ll never, ever sell.
  • The ever popular ‘Must be able to drive by’ sect. Thou shalt not invest in outa town property.
  • Last, but certainly not least, the super strict ‘magic formula’ toting, ‘gotta be a house’ faction.

All of these strategies can be used to create impressive short term profits, or long term capital gains. Just ask those who swear by ’em. Problem is, they don’t always work. When the factors drivin’ your particular real estate strategy leave the building, the magic tends to go with it. That’s when those who worship at the altar of that particular church wonder what went wrong. After all, they didn’t sin. They followed the Book of (name of strategy goes here), chapter and verse. They were betrayed!

It comes down to common sense.

We can use endless analogies for this one. Take baseball. Stealing bases is often a good thing — except when it’s not. Try gettin’ thrown out stealing with two outs, the game on the line, and your best hitter at the plate. An attempted steal at that point is beyond silly. Most of us love ice cream, but wouldn’t dream of dippin’ our filet mignon into it. It’s all about what works in what time context.

Those who insisted on buying fixer uppers in SoCal or similar markets for a quick profit in 2007, lost their shirt, at least most of ’em did. What passed for a great buy in ’07 as a fixer, was sometimes more than the fixed up version was worth in ’08. Oops.

Those who bought to hold forever, ignoring years of relatively high appreciation, missed out on massive capital growth by way of their inaction. I’ve literally seen, first hand, dozens of cases where the investor missed out on over a million bucks. I’ve shown them by way of invoking empirically historical fact, and it’s never pretty when the light goes on. Talk about ‘a million regrets’.

Ask real estate investors who’ve opted to remain in markets like San Diego the last several years, about their ability to drive by all their investment properties. Their portfolio’s equity has gone down so much they hafta  look up to see down. (badda boom) We won’t even talk about the ridiculous price/rent ratios. Yeah, Grandpa was really on to somethin’ with the whole ‘gotta be able to drive buy it’ thing, wasn’t he? The Padres will win three consecutive World Series Rings before their portfolios get back to where they coulda, shoulda, woulda been, but for their faith in the holy strategy strategy of stayin’ local no matter the cost.

The #1 Commandment governing real estate investment strategies.


In practice that means buy houses when the market gives you houses, and buy multi-plexes when it gives you that, etc., etc. Make use of tax deferred exchanges when it makes sense, and ignore it when it’s silly. Tax deferral ain’t a religion, and 1031 isn’t the magic number sent down from the mountain. Sometimes it’s the perfect move. Sometimes it’s the dumbest thing on your menu.

That goes for virtually all strategies. Strategies designed to exploit clearly defined scenarios. Absent that script, they’re often more than ineffective. We can all easily observe that when an ill-advised strategy is put into play, it can be downright disastrous, even ruinous.

If I’d listened to my mentors over 30 years ago, I wouldn’t have had to learn this the hard way. It was a slaughter.

Learn the easy way.

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.


  1. Great article. I see way too many investors in the Houston, TX miss out on great deals because they were taught years ago to only look at 3/2/2 houses within the same zip code that they live in and they refuse to evolve with the times even though they are only doing a few deals a year. Markets change and so should your business strategy.

  2. Chris Clothier

    Jeff –

    Great post. As always I appreciate the way you write the posts so their easy to understand and even easier to relate to. As far as the advice, suffice it to say, we’ve all made mistakes and most come with a side of hubris. Great post and really solid advice that hopefully will help others keep from entering the slaughter house themselves.

  3. Common sense is very rare.

    Your market is what it is.

    Never go against the market, as Jorge Perez says.

    Changing strategies to meet changing market realities can be very challenging. Letting go of what worked in the past (and is failing now) to learn new tactics and strategies is hard work.

    If real estate is not working for you in your area, then consider relocating to another area. Changing to another city or state to pursue a passion for real estate investing can be daunting. “Chunk it down” to a list of bite-sized tasks in a checklist and just do it. Research various markets and sub-markets, find the “holes” and see whether you can fill a need and earn a good profit. Listen to the advice of folks who have been there, done that, and are succeeding today. You know who the pioneers are; they are the ones face down in the dirt with arrows in their backs.

    Your passion for real estate investing must be so strong that you don’t see it as work, but as a way of life 24/7. Write a solid business plan, but be flexible enough to change it as the market changes. Then follow the business plan, and listen to your advisors when they suggest course corrections. Asking for help is not a sign of weakness. It is the mark of a professional.

  4. Thanks for the great article on real estate investment. When investing in real estate the buyer should make money when purchasing real estate. A few years back one of my clients bought a foreclosure. When the appraisal came in she purchased the home at $15K below the appraised value. For three years she lived in the home but decided to move to a different area. We listed the home and she walked away after taxes, commissions and other fees $14,897. That is one way money is made in real estate. No majic formulas or smoke and mirriors. Just common sense.

    • Jeff Brown

      Great question, Sally. Look at it like different grocery stores. Years ago when I changed neighborhoods I went from Von’s to Albertson’s. They’re mostly alike but each has items the other doesn’t. If I insist on my favorite 3 lb. pack of thick bacon for under $8, I hafta go back to Von’s.

      In AZ for example, Phoenix specifically, there’s a reason investors buy homes almost exclusively. 2-4 unit properties are almost always found in iffy (or worse) locations. Therefore locals buy homes. In Boise (Ada county) you can blindly throw darts at a county map and pretty much find as many 1-4 unit properties that you’d wanna own. In TX, my experience is that yeah, there are homes that’re decent investments, but not in the areas I prefer. Or if I do like the area, the price/rent ratios are inferior to other options. That could change this year, but I say that every year. What I’ve found there, are 2-4 units. In over 35 years as an investment broker/investor in San Diego, I’ve NEVER put a client or myself into a house as an investment, not one exception. It was always either 2-4 units or bigger. Even today, in post correction San Diego, well located homes are a nightmare. The median price is roughly $340-350K. The rents for those homes range from $1,500 to $2,000, give or take. Not exactly compelling.

      You learn what the market’s giving you by comparing location quality, price/rent ratios, and the like, including age sometimes. Relatively quickly you’ll see a trend(s) as to what’s super attractive and what’s not.

      Make sense?

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