Lincoln, NE · Member since 2008 · 249 posts · 46 votes
There are so many different methods in real estate...I got to wonder, what are the most used methods by investors out there? I'm working hard on a plan to actually free myself from the rat race and be an independent R.E. investor. The methods I use are buy/rehab/sell and buy and hold. I haven't done a sale in a long time now but rentals are good ! The issue I find with just buying and holding is that it'll take me way to long to reach independance.
Share your methods and your thoughts.
When I was a lot younger I was sooo anxious to get rich quick. As a result I did a lot of stupid things and threw a lot of money away.
Now I buy and use lease-options. If someone buys the house, I reinvest the profit, if not I use cash flow to accumulate money for another down payment. Slow and steady wins more races!
Waking up every day and showing up. Keeping active every day in the game so I'm sharp as possible. I wholesale, fix/flip mostly, looking long term into rentals. I only have to flip 2-3 per year to replace my income, the goal is to flip one per month so I can buy 5 rentals a year. Staying positive and keeping active are my 2 main keys to success however.
When I was a lot younger I was sooo anxious to get rich quick. As a result I did a lot of stupid things and threw a lot of money away.
Now I buy and use lease-options. If someone buys the house, I reinvest the profit, if not I use cash flow to accumulate money for another down payment. Slow and steady wins more races!
This may appear to be a lame answer as I am not going to answer your directly as I use many different ways in todays market - and over the past 10 years I have used many many ways.
The most important thing I do is take action. I take long term goals and break them down into manageable tasks.
Lots of "methods" will help you succeed but if you don't take action each and every day toward your goal - well - it won't happen.
I also stay positive - be open to change - and accept change quickly - the market changes a lot these days and if your not nimble and willing to change your going to find yourself SOL sooner or later.
Thanks for the replies guys. What I'm trying to figure out is really how to take that big leap from a secure job to independence. I am an entrepeneur by heart but I just know that rentals cashflow do not leave enough at this point in my R.E. career to depend on it 100%. I think the way to complement the rental income will be to flip a fea a year.
There are so many different methods in real estate...I got to wonder, what are the most used methods by investors out there? I'm working hard on a plan to actually free myself from the rat race and be an independent R.E. investor. The methods I use are buy/rehab/sell and buy and hold. I haven't done a sale in a long time now but rentals are good ! The issue I find with just buying and holding is that it'll take me way to long to reach independance.
Share your methods and your thoughts.
:D
Flipping and wholesaling are not investing. At best you have created a job to replace your current job. Many love it, many swear by it but that will not make you financially independent. That does not mean it might not have a place in your business model but it should not BE the model.
Buy and hold is the only strategy that fulfills the goal of financial independence through real estate investing. You are able to buy an asset (house, condo, duplex, apartment building, whatever) and have someone else pay for it (the tenants) while you enjoy all of the financial advantages of owning that asset.
The devil of course is in the details and that means managing that rental asset. Some, like MikeOH here do it all themselves, others like me, don't. You need to figure out what your strengths, temperament, goals and desires indicate in how to manage your properties. I can manage my properties like MikeOH does, but I choose not to do so. That does not make my choice right or wrong. We have different business models.
The ultimate point is, you are building a business and you must look at every decision from that viewpoint.
I would also argue, you should be looking at some point to diversify beyond just real estate investing.
I just recorded part one of a segment talking about that. I am not sure exactly when it will be released into the show stream.
But, in general the amounts you are setting aside each month for long term maintenance needs might be best be held with a tiered strategy with some/much of it set aside in ETFs (Exchange Traded Funds). These are bought and sold just like stocks. Then you combine that with an appropriate covered call strategy. This will generate more income than just parking it in a CD or savings account AND if you set the parameters correctly your risk is not very much more than a CD.
Then, when your real estate is throwing off real cash each month over and above what you need (or want) to spend each month you can look at other options for that money. It might be to reinvest it in more properties but it might be appropriate to look at things like REITs. I tend to like the privately traded ones. Or a more aggressive options strategy. Or ETFs. Or join an angel VC fund. Or another type of lending fund.
But, you do these things as you grow into them. Right now, you should concentrate on building your real estate investing business and worry about the other stuff when the time comes.
Some argue for concentration because they get the best returns and I say to each his/her own but the 1980's taught me how quickly the rules can change so I favor diversification.
Mike OH, you mentioned on another post that you buy more of the middle/lower end locations because those are the rental areas. I wanted to ask you...do you see a problem in selling those properties in the future? I mean....those are mainly rental areas...and when time to sell comes....it's more difficult to sell. I have 4 out of 7 SFH in rental areas and I come across more possible good deals... but I'm afraid to get stuck with a property when I want to sell it.
I appreciate your advice.
Mike OH, you mentioned on another post that you buy more of the middle/lower end locations because those are the rental areas. I wanted to ask you...do you see a problem in selling those properties in the future? I mean....those are mainly rental areas...and when time to sell comes....it's more difficult to sell. I have 4 out of 7 SFH in rental areas and I come across more possible good deals... but I'm afraid to get stuck with a property when I want to sell it.
I appreciate your advice.
Those areas should be the same first time homebuyer areas for low/middle income areas. You will probably sell to an FHA buyer, first time homeowner, but it should sell just fine.
I am in the rental business - I don't plan to sell the goose that lays the golden egg.
Yes. The first year I bought 10 rentals, just as planned. Then, as my business grew and my name got out there, deals started coming in faster and faster. I was able to significantly exceed my original goal of 50 rentals in far less than 5 years.
Don't want to poke to much but how were you able to buy so many rentals in such a short period of time? Did you use the bank? Private money?
I think I have an idea of your business plan from reading so many of your posts but as new investor funding is a major issue. Just wanted to know what a big time player like yourself did to go from zero to 50 plus.
Mike OH, you mentioned on another post that you buy more of the middle/lower end locations because those are the rental areas. I wanted to ask you...do you see a problem in selling those properties in the future? I mean....those are mainly rental areas...and when time to sell comes....it's more difficult to sell. I have 4 out of 7 SFH in rental areas and I come across more possible good deals... but I'm afraid to get stuck with a property when I want to sell it.
I appreciate your advice.
Those areas should be the same first time homebuyer areas for low/middle income areas. You will probably sell to an FHA buyer, first time homeowner, but it should sell just fine.
Anson, I guess in my area....these properties are not very popular with the Home buyers...but I get your point...those would be priced for lower/mid level first time buyers. Thanks !
Mike OH, I understand your point also....Rental business...not sale business. I am just trying to think of a possible exit strategy before going in. I don't plan to sell my rentals for years and years to come...not until they are all paid off and I'm ready to retire.
I have the same concerns regarding eventual exit strategies, especially for multi-family units in low-income areas, which pretty much are only sold to other investors.
The only viable strategy I can see in that scenario is buying at a big discount ensuring a very good return. Hopefully, another investor will at least give me what I paid, kind of like a CD maturing where you get the principal back.
I don't bet on appreciation saving me sometime in the future.
I buy a rental every time I find one that fits my criteria and I can afford it. If there is money to be made but it does not fit my rental criteria I flip it and pay down the principal. Never take profit from your real estate except rent. This will ensure, as Mike always says it, "you don't kill the goose that lays the golden eggs".
You can also buy rentals in highly appreciating markets and sell off half to pay the remaining half off. A combination of both will do you well.
I think for me the only methods that can make you succeed for whatever kind of business you are into was that it is must come from with in your you must have the eagerness to succeed and everything will follow.
Buying property is not difficult. I was speaking at a seminar a couple years ago about buying properties and ways I'd done it in the distant past. I was told it wouldn't work now. I said BS and accepted the challenge.
I picked a state, Texas and challenged myself to buy one home every day for a month. I didn't succeed, but came close. I bought 26 homes in 35 days. Dallas, San Antonio and so Texas. The MAJORITY were owner financed homes with not less than 7 yr calls and some were 30 year loans!!(I'm in one of those now). I also purchased some at foreclosure sale for cash. (8 homes).
I still believe you can do it anytime and anywhere. I've purchased, or built and closed 67 homes in the last 19 months. Some were sold and some are now cash cows. It is time to invest in another state and I hope to acquire over 50 the next 12 months. I have offers out on 16 at the present time. Rich.
so Rich... Who manages the properties for you... It seems like you just get the map out and pick a state... my fear in that sense is "management" and not really knowing the areas in those unknown cities for me.
I think for me the only methods that can make you succeed for whatever kind of business you are into was that it is must come from with in your you must have the eagerness to succeed and everything will follow.
The hell is this crap? :roll: Success does not follow simply because you're eager. It is earned because you get your butt out of be every day and work HARD at a specific method that you have tested for your specific market and you know is repeatable.
Simple, repeatable, hard work is the secret to this.
What I do to succeed is look at the properties that are so cheap that other investors assume that they "must be" bad deals. 95% of them are bad deals. I only need the 5%. I take these properties out of vacancy and make them perform.
At best you have created a job to replace your current job. Many love it, many swear by it but that will not make you financially independent.
...but this isn't.
A real estate flipping business -- if done right -- is no more or less a business than any other business geared towards buying and reselling commodities.
If you run it as a business, scale it as a business, and automate it, you can build a successful business flipping houses that can bring you the same level of financial independence that owning any business can.
Of course, it's not easy to create a successful business (in any industry), but creating a business buying and selling real estate is no harder than creating a business buying and selling any other commodity.
My intent this year was to pickup the pace... but with all this financial mess...the Banks got very tight...and needless to say...I only bought 3 properties this year... One of which is now FOR SALE....as a flip...I have all my capital in that property now...and this market is so slow ! ...Can't wait till the buyers start looking again...which I think will be in February.
the thing about lower to middle income rentals is that its the majority of your rental client base. You have a lot of potential tenants for these properties.
The only way to get people in the more expensive locations, (the easier way I think) is to have a great location, with no other houses are for sale, or to rent to teh high income professionals with credit problems that cant buy houses because of credit issues, or just dont want the extra work of owning a home.
More expensive locations....are very difficult to cash flow... they never make the numbers...even houses that need a lot of work...if they are in a good/ higher end location...they go fast...without a proce reduction...So... most of my rentals are in lower/middle class areas.