What's one investing rule you've changed your mind about?

Question

Something I enjoy about this business is how often experience changes your perspective, A lot of investors start with one belief and completely reverse course after a few deals, What's a real estate investing opinion you've changed over time?

Garrett Crosby · Answer

Good thread — this is one of my favorite questions to ask experienced investors because the answers reveal a lot about how someone actually thinks.

The rule I changed my mind on most significantly: "always buy for cash flow."

When I started, I filtered everything through monthly cash flow. If a property didn't throw off at least a certain dollar amount per month from day one, I passed. That sounds disciplined but it was actually a blinder. It caused me to ignore markets with strong fundamentals and appreciation trajectories because the in-place cash flow wasn't there, and it caused me to chase yield in weaker markets that turned into much bigger headaches operationally.

What I've come to believe instead: total return matters more than monthly cash flow, and cash flow is just one component of that equation. Equity building, appreciation, tax advantages, and forced value-add all feed into the actual return — and sometimes the property that looks thin on paper is the one that creates the most wealth over a 7-10 year hold.

The corollary I'd add is that this only works if you have the reserves and liquidity to weather the gaps. Cash flow matters a lot more when you're stretched thin. The investors I've seen get in trouble weren't wrong to value cash flow — they were undercapitalized and couldn't handle the inevitable rough patches.

So now my filter is more like: does the total return pencil out at a risk level I'm comfortable with, and do I have the reserves to hold through a bad year? That's a much more useful question than "does this thing cash flow $400/month?"

Happy to DM and compare notes if anyone wants to dig in further.

Joe Villeneuve · Answer

Actually, I adjusted my thinking for two things. That building equity in one property is losing money, and the purpose of cash flow.

When I started out, I figured the idea was to accumulate enough positive CF to live off of.  After a while I realized that this was futile based on constant unanalyzed costs (vacancy, repairs, etc...) biting into the analyzed CF, and the time it would take (and cash needed for DP's) to get to my ultimate CF goal.

Math and logic took over.  This is why when I'm asked what books all investors should read, I always say "geometry and Algebra".  I concluded the purpose of CF is to cover your initial cost (DP) and other cash inputs while waiting for your built-up equity to equal the initial equity you paid for (DP).  Then sell the property, move the equity into two times what you had initially (DP).  Rinse and repeat.

It moves fast and highly profitable.  When I get to a certain cash/equity point, then I buy for CF, but the large amount of liquid equity (cash) now available allows me to buy commercial...specifically NNN.

Cameron Tope · Answer

It's not all about cash flow...

Eric Fernwood · Answer

Hello Frankie,

My first investment property changed many of my beliefs about real estate investing.

It was a C-class (possibly D-class) fourplex in Houston. Before purchasing it, I calculated that it would generate a 12% to 14% return on investment and strong cash flow. On paper, it looked like a cash cow.

The reality was very different.

The property suffered from constant tenant turnover, evictions, late rent payments, vacancies, maintenance issues, property damage, and vandalism. The experience taught me several lessons that still shape how I invest today:

• ROI and cash flow projections only show how a property might perform under ideal conditions on the day you buy it. They do not reflect what actually happens when real tenants occupy the property.
• No property has ever paid rent. Tenants pay rent. Your financial success depends on the quality and stability of the tenant, not the property itself.
• One of the common arguments for multifamily investing is that if one unit becomes vacant, the rent from the remaining units will cover the expenses. That was not my experience. I needed rent from all four units just to cover normal operating costs. When vacancies, evictions, property damage, vandalism, and repairs were added to the equation, the expenses often exceeded the rent from all four units combined.

The biggest lesson was simple:

Paper calculations do not reflect the real world.

John M. · Answer

Location is not everything, especially when you have huge capital costs.

Paying Taxes is okay, not everything has to be a forced 1031 exchange

David Krulac · Answer

@Frankie Vozzi

1. When I started my motto was "borrow as much as I can for as long as I can."  The first 11 properties I bought were financed 100%.

2. There became a time where my biggest bill every month was paying mortgages.  I was no longer employed, by choose, and decided that I was working for the banks every month to pay the mortgages.  I decided to go on an agreesive plan to pay off mortgages, sell some properties, take all the proceeds and apply to other properties and went from more than 50 mortgages to 2.

3.  Then interest rates went to 2%, and I correctly predicited that low rates may be a once in a lifetime event, so loaded up on some refi for less than 3% fixed for 15 and 30 years. One of my kids got a 2.0% mortgage rate fixed for 30 years and I advised, Newver sell that property!

4.  In 2025 got some more mortgages at 4.25% fixed for 10 years and 4.75% fixed for 30 years.

5.  A couple weeks ago I got a 6.37% fixed for 15 years.

I've gone from all mortgages, to no mortgages, to some mortgages and may get a few more mortgages even at today's rates. The first house was 9% fixed for 30 years, another one was 15% fixed for 30 years.

6. The other major change for me is initially I would but anything that made financial sense.  the oldest house I bought was built in 1840, 186 years ago.  Other houses were built 1872, several in 1890, and a bunch in 1910.  One of the houses I bought built in 1890 had the original roof when I sold it in 2010, because it was slate.

7. Today I'm only buying single family detached houses built since year 2000, no more old houses for me, selling them all.  An investor I know used to say old houses have new problems.

What's one investing rule you've changed your mind about?

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