Originally posted by @Will Karstetter :
Originally posted by @Jay Hinrichs:Originally posted by @Cody L.:
Originally posted by @Will Karstetter:
Setting artificial goals based on the number of doors a person owns is a recipe for unfulfillment. Goals should be based on cashflow or net worth. I hate the idea of romanticizing the idea of someone owning a large number of units or doors when someone else could own half as much, make more money, and have a less demanding workweek.
To address your point, no I do not fault investors for exploiting their full potential. Instead we should applaud and study these companies / investors who have managed to build such great portfolios (again going back to number of doors). We can learn a lot from them and one day become like them - if that is your goal. If not, reach your goal and be happy with what you have accomplished.
I used to focus on doors as that's what I feel comfortable talking about when people ask what I do, or how many properties I have. I don't want to get into cash flow with people as that's a bit personal. I'll tell someone I have 1000 doors but I'm not going to tell them how that manifests to income.
well we can put two and two together that's probably at least 10k a month :)
@Cody L I certainly understand your point. Income can be private; however, from my experience when you tell someone who does not understand RE investing that you own 20 homes, they will assume you're making way more than you really are. Think we are circling around the fact that it will entirely depend on who you're talking with.
Fair enough. But I'm still okay with telling people how many units I have but not how much I make.
I guess I'd be curious to know what are the thoughts of someone who is just getting into real estate? I can only speak for myself, but getting obscenely rich is not the end goal for me. Having security outside of a job is more important. Pensions are a thing of the past and real estate seems like one of the last avenues where average people can get tax and equity advantages. As Grant Cardone said in his last podcast, we have a much bigger chance at being successful in real estate than being a rockstar or famous athlete.
I don't really know how my thought process will evolve on this journey. But I wouldn't be surprised to learn the majority of investors started in real estate for the same reason: looking for financial security in an increasingly insecure world.
I agree Courtney M- financial security in an ever-changing world economy and a hedge for my kids' futures is my motivation. And we hope in the end our efforts and success also revitalize a neighborhood, give someone a good place to live at a fair market price and allows us to be generous outside of real estate.
If that is your goal and dream by all means chase it. Have as many as you wish and achieve to attain. Not everyone has the same goals or wish. I personally think there is plenty to be had for everyone. I don't quite line up with your understanding or concerns on this subject but I do wish you well!
"Honestly, that’s 20,500 families who could otherwise gain substantial financial stability through owning four rental properties each"
What about changing it to:
Honestly, that’s 82,000 families who could otherwise have their own home if the government took over Invitation homes' 82,000 units! that's better.
That is what is happening in Venezuela right now, I certainly don't want to live in a place like that.
Thank god for capitalism!
Greed is coveting what another has built through his own intelligence, wit, labor, risk, affort, and (yes) good fortune. The ultimate "greed" is telling the other guy he has too many doors or he doesn't spend his income on the right priorities. I have 3 SFR's. I know I'd like at least 40 so I could replace most of my W-2 income. But if I could do it, I'd like to have 4,000 or 40,000. Do I have the guts, stamina, drive, and luck to do it? I don't know, but I'll tell you if I get there. In a market economy (absent the thumb of government or other bad actors on the scale), you gain income and wealth through serving others and creating more than the sum of your inputs.
I bought a 1963 house on a short sale from the bank and cleaned it up, rehabbed it, and rented it out to a couple in their 50's that were tired of living in an apartment with no garage and no spare room for their grandchildren to visit. Do I feel guilty that the previous owner lost his house to the bank because he was 2 years behind on the mortgage? No! The house was kind of run down and the yard unkept and filled with junk. When I started showing it all the neighbors came by and recommended to their relatives. The first couple that came to see it ended up renting it at a very advantageous (to me) rent, and they are very happy so far.
Another one I bought a guy out who was 5 months behind on his mortgage and leased it right back to him for one year, so he could stay and move out on his own time frame and with breathing room to get his income back on track. I bought it at about 25% below "market", but he still got a check at closing and 1 year rent paid (to me) in advance. I just fixed his (now my) air conditioner for $1100 last week. He wouldn't have/didn't have the cash, if he was even still in there 6 months later. When he moves out I'm going to rehab, rent, refi, and repeat. My cash on cash return will be infinity since I'll be $0 out of pocket after refi.
If I can do this or some other version of this, 39,999 more times, I'm going to. Every one of my deals is a win for me and a win for the seller, lessee, buyer, etc. If it wasn't, they wouldn't do it. I am ADDING value every deal and SERVING others with every deal. That's why they pay me. If someone else wanted to buy those homes to live in or rent, they can make an offer, but they didn't, I did. I didn't cheat or steal anything from anybody.
In the zero sum, Marxist, planned economy version of the world, there is a big "pile of gold" and if someone gets there first and takes too much of it, then there's less for everyone else and that's not "fair". So we need a Lenin or Stalin to take it away from the first guy, and give it out to everyone else. Of course, there is a governing class that gets to decide who is worthy of what stuff and who is too greedy. And this class has the force of arms (i.e. Kalashnakovs) to make sure what they say goes. 4 apartments is too many for you Kulak, off to the gulag!!
You think me owning 1000 SFR's is too greedy? I should sell them to other people 4 at a time so as not to "hoard" them? OK why didn't all the nice fellows wanting only 4 rentals offer more than me when they were on the market? What about the people renting them? Why should anyone have 4 houses of his own, just to live off the backs of his tenants? He should use his good fortune to give the renters the houses, especially if they're poor.
How much is "too much" and what is worthy for to you choose to spend your money (i.e. limited lifespan) on? Well that, sir, is a moral judgement. And I posit that it is one best made by free people on their own and guided by their own morals or their own God. And that is (I believe) the framework of our Constitutional Republic. It depends on the consent of the governed and gives the maximum freedom to the individual to choose their destiny and pursue their own goals.
You say someone has "too much" because you don't approve of their use of their property(ies) and you feel that someone else, perhaps yourself, would derive greater benefit from the property. Well what gives you the moral authority or intelligence to decide this, in the context of everyone elses alternate opinions on the matter? In China....well because you're the Communist Party and you have the Kalashnakovs (or Chinese version thereof).
In a market economy, it is the sum of everyone's judgement based on their activities in the marketplace and their voluntary, mutually beneficial exchange. And of course, for almost 300 years this has proved to provide the greatest material (and even arguably spiritual) benefit to the greatest number of people in human history.
The premise of someone having too much or being greedy because they aspire to, or attain, great wealth (thousands of doors) is based on numerous logical fallacies.
- If you have something, it is at the expense of someone else having it, or it is taken from them.
- There's a limited amount of "stuff" and whoever takes too much of it is "greedy".
- There exists an elite class of people who can decide for "the masses" the proper allocation of resources to result in the maximum prosperity.
Absent tyranny, the correct decision about when someone has accumulated "too much" is made by that person who accumulated it. Markets have very strong self correcting mechanisms. Those who create the most resources are usually the ones who make the best use of them. Once they don't, they are generally rapidly overtaken by someone else who does.
You want to cure cancer or solve world hunger, you can arguably do so better by being a Bill Gates than a Mother Theresa. That's not to denigrate St. Theresa or Gates, they just have different talents.... :-)
One can only eat, drink, drive, smoke, snort :-0 , or build a certain amount in a lifetime. If keep my 40,000 houses to myself...I can't take them with me, so my kids can sell them to somebody or many others to BRRRR...and build their empires. But no one in my opinion has the moral authority to tell me what to do with them in the meantime.
Originally posted by @David Smit :
Perhaps I have an inner socialist I’m not aware of, but I have to ask the community, when is enough enough as it pertains to number of units owned?At some point I’d think that there’s a reasonable (high) standard of living and anything beyond that is just sheer excess. It’s as if we as a society don’t want a solid middle class. Why not step aside at some point and let the next guy have a little easier time of it? Seems the right mentality.
Is it just me???
Your premise is understandable, but its not applicable based on the context you’re presupposing, and “ceteris parabus” doesn’t apply here because there are too many variables involved.
The principle at play regarding the framework of your position is what’s called Pareto Distribution, also known as the Matthew Principle, and its very much a natural law that’s not necessarily based on greed. Every society has a Pareto distribution of wealth – we see it every day around us and we all unknowingly participate in it supposed inequality. However, in truth it’s not inequality.
The 80/20 principle is based mostly the Pareto and there’s a ton of information out there as it relates to distribution of land and houses. Connecting this or framing it by using the word “wealth distribution” lends to a false interpretation. 20% of people in society will look for opportunity and most importantly exercise the personal sacrifices necessary to grow their portfolio one step at a time, while 80% won’t and they need a place to live.
didn’t have time to read the entire thread so sorry if this was already said. Its all relative. For a homeless guy sleeping on a street corner, the guy in the next block with a nice box to sleep in might have too much.
I’m comparison to a large % of people, owning one house is extravagant.
If you were buying 1000 houses as art and not letting people live in them, well, that would be a problem.
So I googled Biggerpockets and "enough" and this showed up...
I want to thank everyone for their responses this has been an interesting read.
I owner occupy a duplex I knew since I was a teenager that I wanted to do that. growing up the old couple next door to me owned a number of duplexes and fourplex's around town they built them in 1970's and still own them to this day. He passed away a few years ago (but lived to be almost 100) and his widow has a property management company take care of them now.
I looked at properties for years before I bought my duplex most went sale pending BEFORE the MLS listing email went out. I have individual stocks 401k and a pension fund at work. I have found real estate to be the most involved and hands on I like the tax breaks and its nice to own the roof over your head. But all the cost involved and the effort that it takes I think a lot of people down play the amount of their own time they have to spend in real estate investing. When does It switch over from being a fun profitable activity to just being a pain in the ***?
I do think their is a point of diminishing returns with almost all activities
and investments. I like what I have now and my duplex should be paid off in the next year or so. Iowa has unlimited dollar amount for homestead bankruptcy exemption so I would be able to keep my place even if I had more health problems or went broke.
I only have one other family member (they are a couple) who invest in real estate they have a mansion and a Cadillac. I like them a lot we respect each other we are both child free by choice and around the same age. Its interesting to me to see how much harder they work to take care of their real estate rental properties and their mansion they each make over 100k a year with their day jobs and we live in a LCOL area.
The street I live on is all duplexes and multifamily converted housing in a lower income area about four families own the whole block. Some have been held by the same family since they were built. My duplex was owned by the same family for over 40 years before I bought it they owner occupied it and even had kids and grand kids live in it at some points its the nicest place on the block.
I may buy another duplex or two but just not sure its worth it for me. I feel like my current duplex is my forever home!
To talk about greed and market concentration I want to talk about Mr. Miell who at one time was the largest landlord in Cedar Rapids, was convicted by a jury in 2009 of two counts of tax fraud. The charges stem from his fraudulent reports to American Family Insurance of more than $336,000 in storm damage at 145 properties he owned. He also pleaded guilty to 18 counts of mail fraud and two counts of perjury.
Cedar Rapids Landlord Sentenced To 20 Years For Mail Fraud, Tax Fraud, And Perjury
Two building of his are across the street from me and they were sold by court older they are still totally dumps that drive down the value of the neighborhood. The garage for one of the building has a huge hole in the roof that never got fixed. For the longest time one of the tenants was a drug dealer who would pick fights with neighbors it was not fun to walk past his unit. But I bet the return on investment for that investor was really great since he got the property at court order rock bottom prices.
Here is what a friend of mine thought about my duplex wealth and how that came about.
The Four Highly Conditional and Nearly Irreproducible Steps to Duplex Wealth:
Come of age in a buyer's market (which you did)-Live in an area where there are lots of duplexes to go around (which you did)-Live in an area where the real estate market is not too aggressive (which you did)-Have enough personal resources that you are considered low risk (which you do)*Subject to addition
If you meet these descriptions, and eat about ten million chocolate bars - you too can win your Wealth golden ticket.
Wealth happens when knowledge and action meet opportunity. Anthony Dooley & David Smit
What happens if you work for years and the opportunity never happens? I think someone has to be fairly lucky too.
I like the reply from ladders11 on the link below.
Anybody with a decent head on their shoulders can do it and a lot more would if it wasn’t hyper competitive the way it is.... Yes because a lot of people can who own a fair amount of the market already can just pay cash and buy others out or have such dumps on the street that they can buy out the other landlords for low prices because they dove down the value.
The truth is, for every dollar you corner, another dollar is created. There isn't a "fixed pie." I think some people never get a cut of the pie!
I have found that only the strong can help the weak. I dig the Übermensch Friedrich Nietzsche :)
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