Rich don't sell, they leverage
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesWhat you're missing are the 2 most important concepts of all...and they trump the rest.
Concept #1: "The Wealthy own nothing, but control everything".
It's not about being rich, or about ownership, it's about control...and control costs you "nothing". What you need to have control is the mindset that money is a verb not a noun. It must keep moving. The more it moves, the more it touches. The more things it touches, the more you can control.
Equity, bought by the investor, is dead money...mainly, because it stops moving. Equity, bought by the tenant in a property you control, is free money...to be accessed later.
Concept #2: When Einstein was asked, "What was the greatest invention of the 20th century"... he answered, "Compound Interest". What he said after that was more important. He said, "Those that understand it, will live off of those that don't". This concept is the secret to great wealth...and infinite control.
30 Replies
- 8yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
What you're missing are the 2 most important concepts of all...and they trump the rest.
Concept #1: "The Wealthy own nothing, but control everything".
It's not about being rich, or about ownership, it's about control...and control costs you "nothing". What you need to have control is the mindset that money is a verb not a noun. It must keep moving. The more it moves, the more it touches. The more things it touches, the more you can control.
Equity, bought by the investor, is dead money...mainly, because it stops moving. Equity, bought by the tenant in a property you control, is free money...to be accessed later.
Concept #2: When Einstein was asked, "What was the greatest invention of the 20th century"... he answered, "Compound Interest". What he said after that was more important. He said, "Those that understand it, will live off of those that don't". This concept is the secret to great wealth...and infinite control.
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes8y
@Mary Jay, depends on what was bought with that $100k. A "rich" investor is not likely to have wasted the $100k they borrowed against their 100 yo investment property, and they likely won't be concerned at all about the vagaries of the economic cycle which could technically place them "underwater" for that property, because, they will have a large portfolio of diversified properties, and will only be leveraged at around 75% of their current book value, which means that the economy would need to to take a really steep dive for their $135k property to become only worth $50k. Also, they will have taken their rental return into account, which carries on!
But I reckon those same "rich" folk do occasionally sell/trade-up. ie. not mantra-obeying robots!
Question: Why wouldn't you borrow as much as you could at around 5% interest rate, when the returns on what you buy with that borrowed money gets you 10%+ return? Especially when, even the 5% interest you owe is being paid off via your tenants!
ie. You can get a return, from Other People's Money! Who wouldn't want that?...
- Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes8y“Lets say you dont want to sell...You refinance it again, but then you may be get stuck with a property that you have a mortgage on for 100K but its worth 50K because the market is down and you refinanced it when the market was high, and now you have a problem..” Why do you have a problem in this situation if you are never going to sell??!! Who cares if you are “underwater” if the asset is making you cash flow...just don’t sell and you won’t have a problem. Also, the rich might still sell, they just might sell and re-leverage into a larger property.
- 8yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Originally posted by @Kyle McCorkel:
“Lets say you dont want to sell...You refinance it again, but then you may be get stuck with a property that you have a mortgage on for 100K but its worth 50K because the market is down and you refinanced it when the market was high, and now you have a problem..”
Why do you have a problem in this situation if you are never going to sell??!!
Who cares if you are “underwater” if the asset is making you cash flow...just don’t sell and you won’t have a problem.
Also, the rich might still sell, they just might sell and re-leverage into a larger property.
One more very important item that comes from a positive cash flow property. Since you tenant is paying the mortgage for you, how much did the property cost you? The answer is, whatever you put down as a down payment.
This isn't your personal residence, where you are the source of the funds for the DP and the mortgage. This is a rental property, where you are the source of the funds for the DP, and the tenant is the source of the funds for the mortgage. This is the biggest reason why you don't want to buy a rental with negative cash flow, you want the lowest DP as possible, and you don't want to pay additional funds from your own pocket to pay down a mortgage. Paying off your mortgage is your tenants job...not yours.
- 8yMary JayGlendale, AZ · Member since 2017 · 1k+ posts · 236 votesOP
Originally posted by @Joe Villeneuve:
What you're missing are the 2 most important concepts of all...and they trump the rest.
Concept #1: "The Wealthy own nothing, but control everything".
It's not about being rich, or about ownership, it's about control...and control costs you "nothing". What you need to have control is the mindset that money is a verb not a noun. It must keep moving. The more it moves, the more it touches. The more things it touches, the more you can control.
Equity, bought by the investor, is dead money...mainly, because it stops moving. Equity, bought by the tenant in a property you control, is free money...to be accessed later.
Concept #2: When Einstein was asked, "What was the greatest invention of the 20th century"... he answered, "Compound Interest". What he said after that was more important. He said, "Those that understand it, will live off of those that don't". This concept is the secret to great wealth...and infinite control.
Love your posts! and always appreciate you sharing your thought!
1) So concept number 1: so when you say money needs moving, are you in favor of never selling (or almost never selling) and keeping leveraging?
2) Concept number 2: I always though that Einstein meant stock market, and never in my mind applied that quote to real estate. But I guess it does make sense to apply it to real estate...I bought one of my little rentals for 25K and now its probably worth 70-80K.... But even then, tenant practically paid my mortgage for me....
- 8yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Originally posted by @Mary Jay:
Originally posted by @Joe Villeneuve:
What you're missing are the 2 most important concepts of all...and they trump the rest.
Concept #1: "The Wealthy own nothing, but control everything".
It's not about being rich, or about ownership, it's about control...and control costs you "nothing". What you need to have control is the mindset that money is a verb not a noun. It must keep moving. The more it moves, the more it touches. The more things it touches, the more you can control.
Equity, bought by the investor, is dead money...mainly, because it stops moving. Equity, bought by the tenant in a property you control, is free money...to be accessed later.
Concept #2: When Einstein was asked, "What was the greatest invention of the 20th century"... he answered, "Compound Interest". What he said after that was more important. He said, "Those that understand it, will live off of those that don't". This concept is the secret to great wealth...and infinite control.
Love your posts! and always appreciate you sharing your thought!
1) So concept number 1: so when you say money needs moving, are you in favor of never selling (or almost never selling) and keeping leveraging?
2) Concept number 2: I always though that Einstein meant stock market, and never in my mind applied that quote to real estate. But I guess it does make sense to apply it to real estate...I bought one of my little rentals for 25K and now its probably worth 70-80K.... But even then, tenant practically paid my mortgage for me....
Unfortunately, I think you missed the point on both concepts...but you are one of many...actually most.
Concept #1: If you never sell, how is the money moving? It's not. It's standing still...and what's worse, it's dead.
Concept #2: Einstein meant "compound interest in general". The proof is a very simple equation. To show you just how powerful the compounding effect is, answer this question: If you took one penny, just 1 simple cent, and doubled the previous day's total for the next 30 days (i.e...day 1 = 2c, day 2 = 4c, day 3 = 8c, day 4 = 16c. and so on...), how much money would you have?
As far as that little rental you mentioned, for every month you had positive cash flow, you tenant WAS paying your mortgage for you. Also, the fact that the original value was $25k (notice I didn't say you paid $25k), and it's now worth $70-80k, isn't an example of compounding. That's just a straight line appreciation. Profitable, but a timid comparison to the impact compounding would have had on the original money you did pay for that little house.
- 8yJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
Ultimately if you don't sell and someone (family, friends, siblings, etc) inherits property, and they decide to sell later, they pay capital gains tax based only on the value of the property as of the date of death. It's called a "stepped-up basis".
- 8yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
there are RICH and then there are RICH... big difference one may be RICH but have TONS of debt..
another maybe RICH and have very little debt.
most of the wealthiest folks I personally know have VERY LITTLE debt and own everything out right from
10 million dollar apartment complex's to big estates and other investments..
but both are rich..
as we get older most of us want to more to the paid off version of rich with not a lot of debt..
you still have the asset your cash flow is that much higher though
- Investor · San Diego, CA · Member since 2014 · 592 posts · 765 votes8y
I would suggest basing your investment decisions off of analysis, thoughtful consideration, and hard work. I would not suggest basing your strategy on catchphrases, general sayings that everyone says (if everyone says them, why isn't everyone rich?) and flippant remarks whose origin can't be verified
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes8y
I wonder if when 'rich' people leverage, if they do in ways that they aren't personally responsible for the debt (e.g. non-recourse). But then, I don't really know any really 'rich' people to personally know what they do or do not do.
- 8yMary JayGlendale, AZ · Member since 2017 · 1k+ posts · 236 votesOP
Originally posted by @Joe Villeneuve:
Originally posted by @Mary Jay:
Originally posted by @Joe Villeneuve:
What you're missing are the 2 most important concepts of all...and they trump the rest.
Concept #1: "The Wealthy own nothing, but control everything".
It's not about being rich, or about ownership, it's about control...and control costs you "nothing". What you need to have control is the mindset that money is a verb not a noun. It must keep moving. The more it moves, the more it touches. The more things it touches, the more you can control.
Equity, bought by the investor, is dead money...mainly, because it stops moving. Equity, bought by the tenant in a property you control, is free money...to be accessed later.
Concept #2: When Einstein was asked, "What was the greatest invention of the 20th century"... he answered, "Compound Interest". What he said after that was more important. He said, "Those that understand it, will live off of those that don't". This concept is the secret to great wealth...and infinite control.
Love your posts! and always appreciate you sharing your thought!
1) So concept number 1: so when you say money needs moving, are you in favor of never selling (or almost never selling) and keeping leveraging?
2) Concept number 2: I always though that Einstein meant stock market, and never in my mind applied that quote to real estate. But I guess it does make sense to apply it to real estate...I bought one of my little rentals for 25K and now its probably worth 70-80K.... But even then, tenant practically paid my mortgage for me....
Unfortunately, I think you missed the point on both concepts...but you are one of many...actually most.
Concept #1: If you never sell, how is the money moving? It's not. It's standing still...and what's worse, it's dead.
Concept #2: Einstein meant "compound interest in general". The proof is a very simple equation. To show you just how powerful the compounding effect is, answer this question: If you took one penny, just 1 simple cent, and doubled the previous day's total for the next 30 days (i.e...day 1 = 2c, day 2 = 4c, day 3 = 8c, day 4 = 16c. and so on...), how much money would you have?
As far as that little rental you mentioned, for every month you had positive cash flow, you tenant WAS paying your mortgage for you. Also, the fact that the original value was $25k (notice I didn't say you paid $25k), and it's now worth $70-80k, isn't an example of compounding. That's just a straight line appreciation. Profitable, but a timid comparison to the impact compounding would have had on the original money you did pay for that little house.
Gotcha..., so in concept #1, if you paid for the house 25k, now its worth 70-80K, lets say u refinance and get 50K cash and go buy 4 houses with that as a downpayment...That is money movement, right? You still have control over your property plus 4 more houses, right?
You dont have to sell to make money move, right?
- Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes8y
Originally posted by @Eric James:
I wonder if when 'rich' people leverage, if they do in ways that they aren't personally responsible for the debt (e.g. non-recourse). But then, I don't really know any really 'rich' people to personally know what they do or do not do.
I know many rich people use corporations, which shields them from personal liability when debts go bad. But people starting out often have to cosign any loan made to their corporation because banks aren't stupid.
When the tide is coming in, high debt works. Appreciated real estate can be refinanced to pull out equity for down payments on additional real estate purchases. Appreciated stock can be used to borrow money from the brokerage firm to buy more stock.
When the tide is going out, high debt hurts. The interest payments are still due, but get harder to make when rental units go vacant. Brokerages have to issue margin calls (Federal Reserve rule) when the value of the stocks declines. Some banks call in commercial loans and freeze HELOCs when the value of the real estate declines.
From reading stories in the business press, many "rich people" in 2007 were not so rich in 2009 after being forced to sell their illiquid holdings at fire-sale prices during the 2008 meltdown. The people on the sidelines with cash in 2009 were able to buy quality assets for pennies on the dollar.
- 8yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Originally posted by @Mary Jay:
Originally posted by @Joe Villeneuve:
Originally posted by @Mary Jay:
Originally posted by @Joe Villeneuve:
What you're missing are the 2 most important concepts of all...and they trump the rest.
Concept #1: "The Wealthy own nothing, but control everything".
It's not about being rich, or about ownership, it's about control...and control costs you "nothing". What you need to have control is the mindset that money is a verb not a noun. It must keep moving. The more it moves, the more it touches. The more things it touches, the more you can control.
Equity, bought by the investor, is dead money...mainly, because it stops moving. Equity, bought by the tenant in a property you control, is free money...to be accessed later.
Concept #2: When Einstein was asked, "What was the greatest invention of the 20th century"... he answered, "Compound Interest". What he said after that was more important. He said, "Those that understand it, will live off of those that don't". This concept is the secret to great wealth...and infinite control.
Love your posts! and always appreciate you sharing your thought!
1) So concept number 1: so when you say money needs moving, are you in favor of never selling (or almost never selling) and keeping leveraging?
2) Concept number 2: I always though that Einstein meant stock market, and never in my mind applied that quote to real estate. But I guess it does make sense to apply it to real estate...I bought one of my little rentals for 25K and now its probably worth 70-80K.... But even then, tenant practically paid my mortgage for me....
Unfortunately, I think you missed the point on both concepts...but you are one of many...actually most.
Concept #1: If you never sell, how is the money moving? It's not. It's standing still...and what's worse, it's dead.
Concept #2: Einstein meant "compound interest in general". The proof is a very simple equation. To show you just how powerful the compounding effect is, answer this question: If you took one penny, just 1 simple cent, and doubled the previous day's total for the next 30 days (i.e...day 1 = 2c, day 2 = 4c, day 3 = 8c, day 4 = 16c. and so on...), how much money would you have?
As far as that little rental you mentioned, for every month you had positive cash flow, you tenant WAS paying your mortgage for you. Also, the fact that the original value was $25k (notice I didn't say you paid $25k), and it's now worth $70-80k, isn't an example of compounding. That's just a straight line appreciation. Profitable, but a timid comparison to the impact compounding would have had on the original money you did pay for that little house.
Gotcha..., so in concept #1, if you paid for the house 25k, now its worth 70-80K, lets say u refinance and get 50K cash and go buy 4 houses with that as a downpayment...That is money movement, right? You still have control over your property plus 4 more houses, right?
You dont have to sell to make money move, right?
That's one of the many ways to keep money moving, and picking up friends along the way...and flipping is also one.
- Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes8y
Originally posted by @Frank Jiang:
I would suggest basing your investment decisions off of analysis, thoughtful consideration, and hard work. I would not suggest basing your strategy on catchphrases, general sayings that everyone says (if everyone says them, why isn't everyone rich?) and flippant remarks whose origin can't be verified
Thank you
Thank you
Thank you
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes8y
Originally posted by @Joe Villeneuve:
Originally posted by @Mary Jay:
Originally posted by @Joe Villeneuve:
What you're missing are the 2 most important concepts of all...and they trump the rest.
Concept #1: "The Wealthy own nothing, but control everything".
It's not about being rich, or about ownership, it's about control...and control costs you "nothing". What you need to have control is the mindset that money is a verb not a noun. It must keep moving. The more it moves, the more it touches. The more things it touches, the more you can control.
Equity, bought by the investor, is dead money...mainly, because it stops moving. Equity, bought by the tenant in a property you control, is free money...to be accessed later.
Concept #2: When Einstein was asked, "What was the greatest invention of the 20th century"... he answered, "Compound Interest". What he said after that was more important. He said, "Those that understand it, will live off of those that don't". This concept is the secret to great wealth...and infinite control.
Love your posts! and always appreciate you sharing your thought!
1) So concept number 1: so when you say money needs moving, are you in favor of never selling (or almost never selling) and keeping leveraging?
2) Concept number 2: I always though that Einstein meant stock market, and never in my mind applied that quote to real estate. But I guess it does make sense to apply it to real estate...I bought one of my little rentals for 25K and now its probably worth 70-80K.... But even then, tenant practically paid my mortgage for me....
Unfortunately, I think you missed the point on both concepts...but you are one of many...actually most.
Concept #1: If you never sell, how is the money moving? It's not. It's standing still...and what's worse, it's dead.
Concept #2: Einstein meant "compound interest in general". The proof is a very simple equation. To show you just how powerful the compounding effect is, answer this question: If you took one penny, just 1 simple cent, and doubled the previous day's total for the next 30 days (i.e...day 1 = 2c, day 2 = 4c, day 3 = 8c, day 4 = 16c. and so on...), how much money would you have?
As far as that little rental you mentioned, for every month you had positive cash flow, you tenant WAS paying your mortgage for you. Also, the fact that the original value was $25k (notice I didn't say you paid $25k), and it's now worth $70-80k, isn't an example of compounding. That's just a straight line appreciation. Profitable, but a timid comparison to the impact compounding would have had on the original money you did pay for that little house.
The money isn't dead if you never sell. That was the intent of the original post. If you leverage, then the money can be spread to another investment.
Another alternative is to "trade" investments. You could take your old house and do a 1031 exchange with it and essentially "trade" it in for a couple other similar investments. So, in that way you could take the equity in 1 property and purchase 2 and again keep the money moving.
- 8yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
@Kevin Sobilo Very true regarding money not being dead if she never sells, based on your followup options. When I speak of selling though, I'm referring to "flipping the cash". not flipping the property. This can be done many ways, including the ones you mentioned here.
The key is to not leave your cash in equity. Equity built up from other means, such as appreciation and mortgage/principle contribution, is free money. Equity that you pay for, such as a down payment additional money paid towards the principle by the investor, is has the same value as if it were in your bank. The difference is, int is liquid in your bank, and thus it has more value based on the ability to keep it moving. When it's in your property it isn't moving, and is why I refer to it as being "dead".
- 8yMary JayGlendale, AZ · Member since 2017 · 1k+ posts · 236 votesOP
Originally posted by @Joe Villeneuve:
@Kevin Sobilo Very true regarding money not being dead if she never sells, based on your followup options. When I speak of selling though, I'm referring to "flipping the cash". not flipping the property. This can be done many ways, including the ones you mentioned here.
The key is to not leave your cash in equity. Equity built up from other means, such as appreciation and mortgage/principle contribution, is free money. Equity that you pay for, such as a down payment additional money paid towards the principle by the investor, is has the same value as if it were in your bank. The difference is, int is liquid in your bank, and thus it has more value based on the ability to keep it moving. When it's in your property it isn't moving, and is why I refer to it as being "dead".
I agree with you guys!
But nothing lasts forever, at one point your asset can become a liability, even if its mortgage free... For instance, I used to listen to DAve Ramsey who says to drive a beater...So I followed his advice and at one point I had to put 8K into that beater. (It was 500$ here, then 1K transmission, then it wont start, another 300, then something else. It was all over 18 months period. And every time I thought: well, I already put 2K /4k, etc, I guess I will fix this other thing too...) Anyway, that car became a huge liability, and it was very stupid of me to deal with it. But house can become a liability like that at one point too, right? When is it time to sell your asset, I guess? When its 80 year old? 100? 120? Or just keep it as long a its livable and I can get a rent cover the mortgage? But lets say house falls apart while I still have a mortgage on it, lets say 50K... With older homes you never know when it decides to fall apart, right? There are obvious signs of deterioration that are preventable. But nothing lasts forever...I guess, at what point do you sell you a house? I guess the correct question would be at what age of the house you sell it so it does not become a liabilty?
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes8y
@Mary Jay, you refi out money while you want to hold it and 1031 exchange it into more or different properties when you want to trade-in.
- Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes8yWhat’s wrong with 100 year old houses? As a carpenter I can tell you that newer houses aren’t always better. A house that has survived 100 years of neglect has probably got good bones, while modern construction is often all about slapping stuff together as quickly and cheaply as possible in order to maximize profit for the developer. As one extreme example of newer homes not being better, in Connecticut there are 15,000 houses less than 10 years old that were recently condemned because the builders used bad concrete on the foundations. Many brand new houses I see being built in Colorado are built so poorly I’d much rather own a 100 year old brick house instead. I’ve seen brand new patios slope back towards the house, joist hangers attached with deck screws instead of nails, brand new roofs that leak, etc. there are a ton of hack builders out there creating problems for whoever buys the houses they build that’s why it’s recommended to hire an independent 3rd party home inspector even for new construction. I love old houses with big moldings, cool original details and some character. Cookie cutter subdivisions and contemporary designs aren’t my thing. There were some periods of really bad construction over the years and some questionable materials used, just learn to avoid that and do due diligence on any home new or old, at least on the old ones it’s easy to see if the foundation is going to sink or not, if it was gonna sink it would have started by now. I feel like some of the new materials being used today like MDF which is basically glued together sawdust will be looked back on in the future like what were they thinking to use that stuff. Even the new automation and internet of things houses that are controlled by apps, I don’t want to use my phone to adjust my thermostat. I’d rather put another log in the wood stove. I’d much rather have a 100 year old brick building with good bones (and updated electrical, appliances and plumbing) that was built by true craftsmen than a new stick framed house covered in glued together sawdust built with poor workmanship and controlled by smart phones but maybe that’s just me.
- 8yMary JayGlendale, AZ · Member since 2017 · 1k+ posts · 236 votesOP
Originally posted by @Steve K.:
What’s wrong with 100 year old houses? As a carpenter I can tell you that newer houses aren’t always better. A house that has survived 100 years of neglect has probably got good bones, while modern construction is often all about slapping stuff together as quickly and cheaply as possible in order to maximize profit for the developer. As one extreme example of newer homes not being better, in Connecticut there are 15,000 houses less than 10 years old that were recently condemned because the builders used bad concrete on the foundations. Many brand new houses I see being built in Colorado are built so poorly I’d much rather own a 100 year old brick house instead. I’ve seen brand new patios slope back towards the house, joist hangers attached with deck screws instead of nails, brand new roofs that leak, etc. there are a ton of hack builders out there creating problems for whoever buys the houses they build that’s why it’s recommended to hire an independent 3rd party home inspector even for new construction. I love old houses with big moldings, cool original details and some character. Cookie cutter subdivisions and contemporary designs aren’t my thing. There were some periods of really bad construction over the years and some questionable materials used, just learn to avoid that and do due diligence on any home new or old, at least on the old ones it’s easy to see if the foundation is going to sink or not, if it was gonna sink it would have started by now. I feel like some of the new materials being used today like MDF which is basically glued together sawdust will be looked back on in the future like what were they thinking to use that stuff. Even the new automation and internet of things houses that are controlled by apps, I don’t want to use my phone to adjust my thermostat. I’d rather put another log in the wood stove. I’d much rather have a 100 year old brick building with good bones (and updated electrical, appliances and plumbing) that was built by true craftsmen than a new stick framed house covered in glued together sawdust built with poor workmanship and controlled by smart phones but maybe that’s just me.
True...But there is usually some kind of smell in those...O dont know...
- All Over, USA · Member since 2017 · 689 posts · 756 votes8y
Originally posted by @Joe Villeneuve:
What you're missing are the 2 most important concepts of all...and they trump the rest.
Concept #1: "The Wealthy own nothing, but control everything".
It's not about being rich, or about ownership, it's about control...and control costs you "nothing". What you need to have control is the mindset that money is a verb not a noun. It must keep moving. The more it moves, the more it touches. The more things it touches, the more you can control.
Equity, bought by the investor, is dead money...mainly, because it stops moving. Equity, bought by the tenant in a property you control, is free money...to be accessed later.
Concept #2: When Einstein was asked, "What was the greatest invention of the 20th century"... he answered, "Compound Interest". What he said after that was more important. He said, "Those that understand it, will live off of those that don't". This concept is the secret to great wealth...and infinite control.
I'ma frame this sh*t.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes8y
I sold 3 rental houses over the last 11 months. They were not my favorites by any means, they became vacant and were facing cap ex- 3 new roofs, 2 old water heaters and 1 gasping HVAC system. The market is hot so I was able to sell by owner for less of a discount than it would have costed me to do the work. They were trifectas plus plus and no brainers. Any intelligent investor will not have a never sell or always sell mentality. We buy and homework. Know your market, your property, your tolerances and your exit points.
I'm also considering exchanging out of some commercial apts. The building replacement costs (per insurance policies) is about equal to market value. That has always been a lofty target I thought I'd never see. When the costs to build and the costs of existing align, get the he'll out! I'll diversify into a new asset type and or market altogether. It's been a good run, but the wealthy know when to stop by the cash cage on the way OUT the door.
Oh, and with beater cars. I just drove 2, gasping and wheezing to the scrap yard. I can usually get about 4 good years out of an $1800 vehicle. One of these I got 12. Don't sink real money into 'em. Cheers!
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes8y
I sell when the property strategy has been accomplished and when there are better alternatives for that capital. I recently sold a property (in an excellent location) because the market there was extremely hot, rentals were softening due to apartment construction, and there was lots of cap ex looming. Some investors follow a "buy and hold until the right time" strategy...and adding value is what accelerates the velocity of money the most.
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