12 Solid Rules for Real Estate Investing
Indianapolis, IN · Member since 2008 · 759 posts · 185 votes
12 Solid Rules of Real Estate Investing
1. Real estate is a long term investment
2. Cash flow, cash flow, cash flow
3. Do not let your emotions get in the way
4. Know your markets
5. Get good property managers
6. Find 3 good contractors/handymen
7. Work with Brokers that understand investors
8. When people sell, you buy
9. When people buy, you sell
10. Diversify your portfolio
11. Invest what you can afford
12. Memorize and live by rules 1-11
Make it Happen!
More wealth is made running a business... and then reinvesting the proceeds...
You may have even sold your product to me if you had a better approach as I was curious about it, but it just took a little digging to find out the truth.
Now that poor Harrison has had his thread topic hijacked, perhaps we can get back to it as I believe it started out great. :idea:
Will...
I haven't hijacked anything simply contributed from experience..
Most every single buy and hold investor that started that way... that I've ever met... Myself included... wishes they would have done it differently...
Trading up at the very least as they go etc...
I've not made any outrageous claims to date..
Just simply claims that ya'll don't believe...
Honestly I don't care...
I've got nothing to prove.. no beef.. simply a willingness to help here and there when I see folks wanting to do something for themselves...
I know how I did it... and that's the experiences/story I'm able to share...
You don't want to listen then tune out...
I noticed you have a property for sale in my neck of the woods..
Waxahachie Texas...
Feel free to visit me... we'll have lunch at Juniors in Red Oak, or over at The Cotton Patch.... oh.. but, shout first... as I'm not usually there at the offices often... I don't have a personal office there...
You can call it arrogance... if you like... but, ya'll have over and over tried to put me into some corner...
And discredit what I have accomplished and what I do..
Simply because something is different than you perceive it to be...
My opinion is simply that buying holding real estate is a long slow way to build wealth in real estate and very painful as you go...
And learning to buy and sell.. creating a cash machine.. that you then reinvest is much faster...
go pick up the book....
10 Roads to Riches by Ken Fisher...
I do not feel this thread has been hijacked, and I really enjoy, and respect, David's opinion and experience.
This is what I feel people are missing: All sides here are correct to some extent.
Real estate has so many different roads a person can travel. What other business can you make money regardless of market conditions, with/without money, and have so much fun doing it!
I agree with both sides, as it depends on your goals. I stand behind my bullet points, and I want to repeat it.
- Speculating & Flipping gets you RICH!
- Buying & Holding gets you WEALTHY!
I feel that you guys are arguing apples and oranges. Let me explain:
Getting rich is all about the cash, making money quickly, and moving fast. The best ways to accomplish this is by flipping, wholesaling, ect. It is speculative, and risky, but is the most liquid way to do business if done correctly. You can make a lot, and lose a lot too!
Getting wealthy means getting to the point to where the money works for you, equity is being built, and it is a much slower, and less liquid form of investing. The buy and hold strategy for example, as well as building a business that runs itself.
I see part of David's argument actually agreeing with the buy and hold concept, he is just investing in his business, instead of a large portfolio. Again, a different path, but leading to the same destination of freedom.
So you have two main real estate strategies, a sprint, and a marathon.
Buy and Hold is a great way to generate long term wealth with minimal effort. There are pitfalls, tenants do not always cooperate, contractors and managers do not always do their job, and it is never pleasant to argue over who broke a window and who is going to pay for it. LOL However, if done correctly, you have an asset building wealth, paying for itself, and are not as affected by up and down market conditions. You are building long term wealth and do not need real estate to become your life.
A quick note: As far as the power of leverage goes, it is awesome, but there is a problem. Too many people get greedy in the up cycle, and go bankrupt in the down cycle. YOUR INVESTMENTS ARE NOT ATM MACHINES! LOL You can not escape greed, it is in all of us, the key is to CONTROL it.
Now, if you are a flipper/wholesaler, it is a constant struggle to find houses, find buyers, and you are open to the flow of the markets. You can make money quickly, but nothing is guaranteed. Great risk = Great Reward, but it can also bankrupt you if caution is not used.
If you have a "day job" this strategy is very difficult. It takes a LOT of education, and a LOT of experience to do it right. You must run this as a business, and it is not a hobby.
So look guys, you are all right in one way or another. That is what makes real estate investing so great!!!! We are all heading for the same goal, but the beautiful thing is that we do not need to all be on the same crowded roads to get there!
People usually succeed on the road less traveled anyway! :)
Have a Profitable Day Everyone!
- Harrison
I would also add to that post Harrison:
An investor CAN do BOTH! I buy and hold and I also flip, assign, rehab, wholesale, retail, spec build, land development, etc.
You do not have to choose one or the other. Flips and wholesale delas put quick cash in your pocket and buy and hold builds the wealth over a long period of time. Why not incorporate both as I do!
Of course I work and so do you! I'm in the rental property business and you're in the guru "I've got a secret" gibberish business. I cleaned a very dirty toilet today as part of turning an apartment but I feel a LOT better about that than I would trying to convince gullible newbies that there is some "SECRET" real estate technique that they're missing! By the way, I haven't set an alarm in YEARS and I do set my own schedule.
WRONG AGAIN! It is NOT hard to live off the cash flow from leveraged rentals if you buy at a HUGE discount and have low LTVs. Buying at a huge discount is the key and apparently what you did wrong when you were in the rental business.
EXACTLY! David, if you have anything substantive to offer on any topic, I'd like to hear it! You're 'I've got a secret nonsense' is getting old.
Mike
MIke...
I got up at 11:30 today...
I walked out side it was raining...
I went back in the house...
Played poker on my PC...
At about 3:30 went and picked up my daughter...
Went to eat with her....
Got home got on Facebook for awhile...
I am at my PC right now uploading a video behind the scenes for some students that paid me for a course a year ago... that I came across and believe it will help them...
Tommorrow.....
I will go to the office for about 20 - 30 mins...
And make sure Kristi... has everything in line to do about 20 - 25 or so deals...
From May 1 - Aug. 1..
I am not against holding...
Just holding as you start out...
It's akin to "saving Your way to wealth" which to me is the a very painful..
and slow....
After you srt making money you need some rentals... just not an entire portfolio of them...
Hey you have your way.. I have mine...
Mine worked for me...
But, I'm an entrepreneur at heart.
Build a business that creates investments... and therefore it is the investment....
Then reinvest the proceeds...
pretty simple.
I'm not remotely interested in adopting David's technique, but I am interested to find out what it is (I gather Will was at least close with his post of April 25th 2:22am http://www.biggerpockets.com/forums/50/topics/31274-subject-3-financinf?page=2).
I find it disappointing that:
1) David feels the need to adopt a condescending tone to those who choose different strategies (they don't necessarily do it differently because they're not as smart as you, David :roll:), and
2) Others, offended by that tone, feel the need to launch personal attacks against David.
How about we all take a chill pill and get back to discussing real estate investing, politely and respectfully? :cool:
He refuses to discuss any RE investing details and has proven to be just another "I have the secret" guru garbage.
Chalk it up to just another plug from another guru.
Tracey,
We haven't been discussing real estate investing in this thread. Quite the contrary, David won't say ANYTHING substantive about real estate, other than the "I've got a secret" gibberish which can have no other purpose other than to entice ignorant newbies. I would argue that discussing the "I've got a secret" gibberish is very valuable to any newbie that is thinking of giving their hard-earned money to someone who won't even discuss what they are teaching.
Mike
Tracey....
Without the personal attacks...
You'd never find me condescending...
It's just not me...
If you knew me.. you'd know different...
very, very different...
Frankly... I have contributed... it has just been about the bigger picture...
And what I've found that works...
Everyone has their way... nothing wrong with that...
Over the years I've talked to thousands of investors... that bought and held when they started.. leveraged out the ying yang... when they started...
I did too...
It went gravely wrong...
If you read between the lines... I do buy and hold.. after I've created the cash...
By turning the cash into notes and other businesses...
And even the occasional rental or two...
Just know from my experience and tons of other Investor with portfolios that would make you shudder...
That the complete rental game isn't an easy one...
Unless, it's completely self managed... that's ok, if that's your cup of tea...
For me... I got into this to create personal freedom....
A better sense of lifestyle...
Tracey, in answer to your thing about leverage...
I do leverage alot in my real estate business....
In fact my deals (wraps) are typically in the 80% LTV range where most other investors won't touch...
And then we work to get the deal back to cash...
Asset to cash to asset....
From there the money is moved to the personal investing side of the equation....
And we pay cash and turn that into notes...
Of course we get some houses back from time to time and keep them as rentals... for a bit... then owner finance them back out...
I've never used a bank loan to buy a house...
I don't have credit... ..
So, I had to create system that works without banks...
I learned the hard way about de- leveraging personally..
We had a little over 70 properties... as rentals... and the economy turned... taxes went up... rentals didnt go up...
And we had huge negative cashflows...
That's when I learned a new thing...
When you buy a property with equity...
Then you now have a new formula..
Example...
Let's say..
You buy a house for 75k with 10k down.
The house is worth 100k..
And then you Lease option it with 5k... and it cashflows 400/month..
By all means that normally is a good deal right...
I'm not even going to argue maintenance, vacancy etc. for the moment...
Because you got 5k of your money back...
You have 5k left in the deal...
You're getting 400/month...
$4800 per year...
That's a 100% return on your money...
Most would say it's a good deal..
I learned different... when the economy turned... the leverage killed our cashflow... and most of our properties were negative...
Again.. we won't even get into all the other stuff...
(everyone thinks it won't happen to them)
So, we then figured out our returns...
But, this time... how much invested and the fact that we had already gotten our cash out long ago...
Well it didn't matter...
What matters it turns out... is... that when you buy or create equity...
You realize the return you are getting on that equity...
I call it ROE...
And what cashflow we were getting on that equity was less than 2%...
That meant at the time we would have made more money with that equity turned into cash and put into the bank in Cd's...
We thought we were smart... all these high leveraged high return deals...
Hey even those infinite deals...
The ones like I do mostly nowadays... where you have little to No cash invested... and create equity...
So, I learned... Leverage.. but, the best and highest use of that equity purchased will never be higher than the day you bought or created the deal...
From their you are counting on loan paydown.. for equity
Or appreciation for equity...
Both are slow.... what I call saving your way to wealth.....
So, if you get the cash out.. then reinvest... Cash is king...
I learned that from several friends who tried to tell me.. both are still very retired...
At least as retired as you can get...
when you are an entreprenuer.. and investor... and it's in your blood to build, and create...
And that's where you get to pick and choose your work...
And several years back.. I finally listened...
Is it possible for you to take notice and post in these threads in the proper format. Many of us have pointed this out as we do when others post in all caps and yet you refuse to listen and make the change. It would be much more easily readable in paragraph format. Your return key must be worn out by now!
This is
absolutely
unnecessary,
obnoxious,
and down right
rude
considering
you have been asked many
many
many
times.
We don't care about misspellings,
improper punctuation
or the like,
as we are not
in English class,
but a proper
paragraph style post
would be
much
APPRECIATED!
What
are
you
trying
to
say
Will?
Don't
hold
back,
tell
it
like
it
is!
Thank
you.
M
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Waht wluod be hrriboly itingtirrag wluod be if he tpyed lkie tihs and tehn uesd the wlohe 'raed btweeen the lneis' b/c then it wluod jsut not be cool. I've psonallrey gttoen over bnieg contnrfoatnioal with Divad simply b/c I ustanderd he does tnghis difrfeently but I would apciaprete if he at lseat wtore an aclitre or a blog or a dnecet post gnviig smoe ture insghit to waht his strtgaey incldues. I dno't blveiee it wloud hurt his slaes but it wluod at lseat to me add more crdblteiiy to him as an invsteor. Thats all for now, I've got a few other things that are keeping me busy but reading these posts sure are entertaining.
Wow... :whistle1:
I have been following this post for a while and as a newbie I have been learning a lot...namely that Joshua Dorkin was right...
...of the 12 solid rules at the begining of this thread...definately an interesting conversation.
I can't believe I missed this thread.
That said:
1 - Everyone needs to chill
2 - I'm not going to permit the formatting that David has been using anymore. I agree with Will. It is simply obnoxious and impossible to read. I haven't made it through one post of Davids yet.
David - If you wish to participate on the site, please post in paragraphs like everyone else. If you continue to post as you've been doing, I will remove your posts. I could care less about the content, it is the formatting that is incomprehensible.
3 - Now that this thread has run amok, I'd actually like to get back to the original real estate that Harrison posted. So, lets get back to it or this topic is closed for business.
Thank you!
Sorry, I guess I could have been less cryptic.
Joshua
...and the commentary I have been observing really seams to be focused on #10 and #11 diversification and investing what you can afford. It would almost seem to me that what someone can afford equates to the ammount of risk one is willing to take.