Why All Real Estate Investors (No Matter What Niche) Should Keep a Long-Term View in Mind

Why All Real Estate Investors (No Matter What Niche) Should Keep a Long-Term View in Mind

3 min read
Sterling White

Sterling White is a multifamily investor, specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded, Sonder Investment Group, he owns just under 400 units.

Experience
Sterling is a seasoned real estate investor, philanthropist, speaker, host, mentor, and former world record attemptee, who was born and raised in Indianapolis. He is the author of the renowned book From Zero to 400 Units and the host of a phenomenal podcast, which hit the No. 1 spot on The Real Estate Experience Podcast‘s list of best shows in the investing category.

Living and breathing real estate since 2009, Sterling currently owns multiple businesses related to real estate, including Sterling White Enterprises, Sonder Investment Group, and other investment partnerships. Throughout the span of a decade, he has contributed to helping others become successful in the real estate industry. In addition, he has been directly involved with both buying and selling over 100 single family homes.

Sterling’s primary specialities include sales, marketing, crowdfunding, buy and hold investing, investment properties, and many more.

He was featured on the BiggerPockets Podcast episode #308 and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single family investing and apartment investing to mindset and scaling a business online. He has been featured on multiple other podcasts, too.

When he isn’t immersed in the real world, Sterling likes reading motivational books, including Maverick Mindset by Doug Hall, As a Man Thinketh by James Allen, and Sell or Be Sold by Grant Cardone.

As a thrill-seeker with an evident fear of heights, he somehow managed to jump off of a 65-foot cliff into deep water without flinching. (Okay, maybe a little bit…) Sterling is also an avid kale-eating traveller, but nothing is more important to him than family. His unusual habit is bird-watching, which he discovered he truly enjoyed during an Ornithology class from his college days.

Education
Sterling attended the University of Indianapolis.

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Having been a real estate investor for quite some time now, there is absolutely no doubt that I am completely in love with it. During my career, I have generated income using almost every single strategy in the book. Sure, not all the deals that I undertook had a fruitful outcome, but the thing is, if you choose not to go for something, your future is sealed to only one option: nothing.

I am a firm believer in going after your dreams and taking action (well-educated action, of course!). However, it is highly important that you don’t get discouraged if things don’t go the way that you plan because sometimes, things don’t work out. Maybe you missed something in your research or you simply didn’t do something right — and sometimes things just happen that are completely out of your control.

buy-hold-retirement

Economic Surprise

Imagine your excitement when you have almost completed the renovation of a property with a potential home buyer ready to purchase. However, one of the major employers in your area suddenly announces that their company is bankrupt, and they are about to lay off truck loads of employees in their company.

Related: What Real Estate Investors Can Learn from Facebook’s Long Term Mindset

The people are beginning to migrate out of the area, and your buyer has pulled the plug on the deal. Sure, you can go back to renting the property, but with the rental rates declining dramatically, you are sure to earn at a reduced profit.

Secret Structural Issues

In a large number of cases, a really good inspection can seriously help you to avoid some tragic conditions that could lead to major problems. However, there are times when things turn up in a property that just weren’t present until they were actively sought after.

Those being said, while some properties don’t work out as planned due to factors beyond your control, the vast majority of them fail to meet your expectations as a result of investor-made mistakes somewhere in the process.

So, which mistakes can truly sabotage your investing strategy? How many of them will cause you to stop dead in your tracks and won’t even give you the chance to redeem yourself?

landlord-solutions

Taking a Short-Term View of a Long-Term Investment

There is a whole load of successful short-term real estate investing strategies, such as the classic fix and flip, wholesaling, and so forth. However, the buy and hold strategy for rental property is definitely the opposite of this, as it takes a long-term view of things.

What Buyers Do Right

  1. Get well educated about the housing market, i.e. economics, population trends, job market, etc.
  2. Understand the rental rates, demand, and competition of rental properties in the area
  3. Become well informed about purchase negotiating and how to buy right
  4. Perform solid analysis of possible costs and cash flow

Looking at this list, how on earth could you possibly go wrong? Well, the thing is, there are still some long-term considerations that you need to bear in mind in order to avoid eating up gains over time.

Related: 5 Not-So-Obvious Qualities to Look For in Long Term Buy & Hold Properties

What Buyers Do Wrong

  1. Perform a good cost analysis in buying — however, there is a bad understanding of how to properly calculate for expenses
  2. Overestimate expected annual appreciation rate
  3. Underestimate the holding time to recoup investment and make a profit at sale

Sure, if you plan to buy and sell, then it is great to purchase a property at a discount to the current value. However, those of you wishing to go for the short-term profits should also weigh in long-term considerations, such as possible rental potential. This is simply because if you fail in the short-term, at least you have the long-term to fall back on.  

All in all, the main point of this article is to inform you that real estate can be risky if there is lack of due diligence. In order to minimize the risk and maximize the gains, you can’t simply plan for what is going to happen in the short-term, as there will definitely be things that are out of your control that may happen. However, if you plan for the long-term too, you will always have a safety net to keep you from falling into a downward financial spiral.

Do you take a short-term or long-term view of your real estate investments?

Leave your comments below!