Experienced 10+ Year Investor Advice Needed: What Would You Do Differently If You Could Go Back & Start Over?

Question

As the title says, for those that have been doing this for at least 10+ years what would you do differently if you could go back and start over? I have a successful business I own that makes a $250k+ a year, cash stashed away, and no debt (personal). I plan to buy and hold forever for cash flow then someday give to my kids (if/when I have them).

Thanks!

Jon Klaus · Answer

I have been what I consider a serious real estate investor for just 4 years, but I've had a few rentals and done a few flips going back 20 years.

Looking back, I would have started working on my core portfolio earlier.  Instead of just buying good/great deals, I would have asked, how does this property fit into my long term plan?  I would have researched location more.  I wouldn't have hesitated to pay more for what was, or could be a great location.

I would have skipped my 2 decades investing in stocks.  I would have used that money to buy properties.

I would have started seriously in my 20s instead of my 40s.

I would have joined BiggerPockets the day it launched.

All that said, I have no regrets.  And I'm still learning all I can.

Ann Bellamy · Answer

"Never sell anything" is probably subject to modification.  Properties that are too small to pay a manager and too far away to manage yourself probably would be ok to sell.  Properties that don't turn a profit because of management costs and/or tenant problems would be ok to sell, if there is no viable way to solve the problem.

There are 4 ways to make money in buy and hold:
Cash flow
Appreciation
Depreciation (tax savings)
Equity build up (paying down the mortgage)

But mortgages on properties I bought 15 years ago are laughably small now.  My tenants have been paying my mortgage and taxes for years.  (Equity Build up) And rents have gone up significantly in that time.  (Cash Flow)  So far, tax savings from depreciation seems to still be available. (Depreciation).  And in spite of the downturn, the value of my properties is significantly higher than it was when I bought them.  (Appreciation)

Even properties that were probably mistakes (overpaid) have become viable and time has compensated for that error.

Buy faster does not mean overleverage.  I was always able to ride out a rough time by having funds available to unexpectedly replace a roof or ride out a few vacancies.

In my area, multi families go quickly, because savvy investors know that with low rates and low prices, there has never been a better time to buy than now.

Is this what you were looking for John Chapman?

J Scott · Answer

What Ann and others have said about "never selling anything" is a phrase that I often hear repeated from experienced investors.  Specifically,, "My biggest regrets as an investor revolve around every property I've ever sold."

While I haven't gotten to the point where I regret all the properties I've sold, I certainly can start to understand that attitude.  While making a big chunk of cash at once is nice, looking back a few years later and realizing that you could still be generating income month after month from that same property can be quite eye opening.

Ann Bellamy · Answer

Buy more properties faster, and never sell anything.

Aaron Mazzrillo · Answer

I hear lots of 'seasoned' investors also say they would never sell anything if they had to do it all over again. What I have found though, is that the majority, if not all of them, were working full time doing something else and investing as a side or part time business. The idea of doing nothing but real estate is a relatively new concept. If you go back to the 70s, 80s, you won't find nearly as many full time house buyers like you do today. People make careers out of flipping properties. I derive 100% of my income from real estate. I could not possibly buy and keep everything even at this point of my investing.

There are ways to structure deals where the property can be sold and an interest retained, and I have done that in several different ways mostly with options and equity participation agreements, but every once in a while, a huge cash infusion to the business from a retail flip puts the conscious at a whole new level of 'piece of mind.' There is no price, no matter how much that sold house appreciated up to, that can ever replace 'piece of mind.'

Aaron Mazzrillo · Answer

I would not have purchased a personal residence until after I had enough cash flow coming in from rentals to support it. Buying a home was a huge personal & financial liability. While it is no longer an issue, in the beginning years, the cash required to acquire and maintain the home could have been allocated to investments that would have given me financial freedom much sooner.

John Chapman · Answer

Jon Klaus that is an awesome analysis.  I asked this of Ann Bellamy, but was wondering if you could also elaborate on your lessons, particularly your statement that you would have focused more on your core portfolio.  Since we are both in the same area and you have been doing this a lot longer than I have, I would love to hear your observations.

Rich Weese · Answer

Bill- When you "pass" you won't be having to pay the taxes-YOU'RE DEAD!!!!!!! You can have all the benefits during your lifetime, and as you know, I truly value the depreciation and hate paying any taxes-during my lifetime. Rich

Rob K. · Answer

There are a few things I would do differently:

I would screen tenants better from the start. I started investing in the mid 90's before I had internet access. It is WAY easier to get information on people now. You can get credit reports right at your desk, check criminal records online, look up court case info, etc.

I wouldn't buy any houses that don't meet my current criteria. I used to buy anything. Now I look for three bedrooms, built after 1940, no additions or major modifications, no flat roofs, and no heat other than gas forced air. I learned a lot from buying junk.

I don't regret any of the houses that I sold. I either sold to my tenants for top dollar, sold in bad neighborhoods to re-buy in nicer ones, and I sold some at the top of the market. (I wish I had sold more at that time). I plan to sell all of them when I retire at 55. Hopefully, I can sell them all on land contracts and reap the interest. We will see how this Safe Act nightmare pans out.

Bill Gulley · Answer

I agree with Rich, except that you can have my Ex.....LOL, really,I will admit, there was one property I wish I had not sold, a second home, barn, tennis court and pasture along a river, I miss that one!

I agree with Ann, that if it ain't eat'n any hay keep it! Under normal circumstances you're always buying in today's cheaper dollars for a good property. Let others buy it for you.

As to the making money angle, I view depreciation as an interest free loan from my tax liability, I don't really "make" new money and some day I have to repay it in a way when it is sold or passed on. Depreciation is the nature of the tax beast, not really making money, but to each his (her) own.

Trading up is a good strategy as well as opposed to selling, so long as you're in like kind properties.

Things I would have done earlier? I should have purchased notes a few years earlier, I actually said no when I should have said yes.

Experienced 10+ Year Investor Advice Needed: What Would You Do Differently If You Could Go Back & Start Over?

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