My Biggest Fear—Even After 500 Real Estate Deals

by | BiggerPockets.com

Even after doing hundreds of deals, something still scares me about real estate.

But before I share my biggest fear with you, let me give you a little background. I’m going to try my best to relate it to those who have only done a handful of transactions so far as opposed to the seasoned vets.

For those of you who don’t know me, I have done a lot of real estate transactions and a lot of real estate deals. I stopped counting around 500. I’m not saying that to impress you, I just want to lend credibility to what I’m about to tell you.

Real Estate Still Scares Me—Here’s Why

Throughout my investment journey, I’ve been a “no leverage person.” I prefer cash and want to do cash-only transactions.

My whole goal when starting my real estate journey was to do as many transactions as I can to make as much profit as possible. I did this to achieve financial freedom and earn a passive income that would enable me to live the life that I want to live.

As the years have gone on, that number has grown. And there are a lot of folks who come out of the woodwork once you start doing well! I personally ended up adding them to my payroll—but that’s OK because I want to help out as many people as I possibly can.

So, of course, my passive income target goal has expanded and gotten larger.

Related: Which Real Estate Investments Provide True Passive Income & Financial Freedom?

Real-World Example of How Things Could Go Wrong

Let’s say your passive income goal is $10,000 per month, which is $120,000 per year. In my eyes, to achieve that goal I must have spare capital available to invest $1.2 million.

That amount invested at a 10 percent return will equal $120,000 per year in passive income—no leverage and cash only.

For simplicity’s sake, I’m not going to talk about taxes. But hypothetically speaking, if that is your passive income goal, you need to stay liquid to continue buying, fixing, and selling properties (or whatever your real estate investment strategy is) to continue accumulating profit and get to a stage where you can tie up that money and live the life you want.

In my case, I run various companies and always have to stay liquid. I wasn’t able to tie up my capital in passive income investments that would produce a monthly cash flow so I could sleep in peace at night.

It’s kind of like a double-edged sword. You’ve got the capital and can do amazing things with it, but you don’t really have the security of knowing there is always going to be a paycheck.

This is something that’s kept me motivated, inspired, and moving forward, but it’s also scary! I’ll give you a real-life example of what makes me fearful.

I have a lot of capital tied up in various transactions and businesses. With that, you need to support staff, you need to pay for company overhead, you need to acquire properties, and you need to spend money on rehabs. You also need to pay an accountant and an attorney. I mean you name it.

woman with hands on face looking concerned, worried, sad, scared

My Advice for Beginners—Don’t Do What I Did

The moral of the story is I have a lot of capital out. Now, what happens if the economy tanks?

All of a sudden, folks tighten up. There’s no more spending, and people aren’t buying real estate anymore. The perception is the world is going to end. Meanwhile, I have to ride it out and see what happens.

This actually happened recently! We had a pullback in the stock market. We lost a lot of sales because a lot of people got scared.

Related: March Madness! Yield Curve Inverts and the Fed Throws in the Towel

This is why my biggest fear is that I’m going to have too much of my own capital tied up in various transactions and businesses. The economy could tank, and I won’t be able to get that money back.

To somewhat prepare for situations like that, I’ve stashed quite a bit of cash. Additionally, I’m currently looking for some passive income.

I’m in the business of selling passive income, but I actually haven’t accumulated enough myself. Which is weird, right? It’s kind of hypocritical.

So, what am I, “The Dingo,” doing? Why aren’t I buying passive income properties?

The reason is I had to stay liquid. But ultimately, I’m at a stage now where I’m considering taking all my capital and tying it up somewhere. That way I can get that consistent stream of passive income. Then I wouldn’t have to worry where my next paycheck is coming from.

To relate everything back to the person who has only done one or two transactions—where you don’t have 17 businesses like I do—here’s what you can learn from my message.

Do not invest what you cannot comfortably afford to lose. You should only be investing spare capital that you do not need for any emergencies that might come up in your life.

It’s something I’ve always said to every investor. I do not want any capital that you invest in flips to affect your family and your life. Because that’s it—it’s my biggest fear.

What’s your biggest fear? Do you agree with mine? Where do you see the economy going? What do you think of the stock market?

I’d love to hear from you in a comment below.

About Author

Engelo Rumora

Engelo Rumora, a.k.a.”the Real Estate Dingo,” quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate all over the world and has bought, renovated, and sold over 500 properties. He runs runs Ohio Cashflow, a turnkey real estate investment company in the country (Inc 5000 2017 & 2018) and is currently in the process of launching a real estate brokerage called List’n Sell Realty. He is also known for giving houses away to people in need and his crazy videos on YouTube. His mission in life is to be remembered as someone that gave it his all and gave it all away.

7 Comments

  1. Adrian Ayub

    Hey there Engelo,

    Much appreciated for the honesty,

    I have the majority of my networth as a 22 year old tied up in my Toledo and Cleveland ragtag rental portfolio and I have felt the pressures of opportunities near and afar.

  2. Mike Lowry

    My comment is this… there are a myrad of actual material goods that are rare but easy to store in any environment, that are always in demand. I personally have a small nest egg in these materials. Paper money in any form of us dollars is actually WORTHLESS ! However, most all persons will take this worthless paper and coin for things of value that everyone treasures or needs to survive that one can universally trade in exchange for anything one might need…. do a lttle thought about this simple fact. The smaller the commodity the better.. of course. What is right in front of you and simple is actually the least thing most financially creative people never grasp. Example : Water or Water Rights. How can one live without such. As a real property inverstor how many of you own such water rights ??? I do… and never worry about economic down turns and water and who have it… rules LIFE IT SELF.. including your own and your family. However, knowledge is the power even in a common thing such as water and every local has different resource and governance. Study…as without such real little known information generally you will always be the few with the key to financial security.. the rest.. .of people… not . I store other intems that everyone needs to survive as well…. not paper money.

  3. Kevin McGuire

    Engelo, always enjoy reading your posts and appreciate their frankness and honesty.

    Your post got me thinking about how we spend a lot of time analyzing opportunities but not so much analyzing risk, which is odd given ultimately all investments have a risk adjusted return.

    The financial crisis was in many ways at its core a liquidity crisis. The more illiquid your assets the more risk you take on because you may be forced to liquidate at a lower price than you want. Its why margin investing accounts are so risky; margin calls will ruin you. As an industry becomes more leveraged and illiquid, the worse the compounding effect: all sellers and no buyers forces prices down which can force more people into being sellers… Real estate has the added problem that you can’t sell 10% of a house.

    Of course there’s no profit without risk, so instead of avoiding risk we must seek to mitigated it. You can then ride out the bad times. Personally, I only buy rental properties which cash flow after mortgage, oppex and capex. They might not cash flow much but I know that I can, with that model, have a self-sustaining investment that will not require me to fund it out of my own savings and day to day living.

    • Engelo Rumora

      Thanks for your detailed comment and kind words Kevin.

      “Personally, I only buy rental properties which cash flow after mortgage, oppex and capex. They might not cash flow much but I know that I can, with that model, have a self-sustaining investment that will not require me to fund it out of my own savings and day to day living.”

      Great way of thinking mate.

      I wish you continued success.

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