Balancing Acquisitions and Capitalization

Thanks again to everyone who responded and read my first blog post. I have not posted in a while, but I remain actively involved in BP through the website, youtube, and podcasts. This website continues to be a wonderful resource. Since my last post I decided to take the advice of @NedCarey and @AlWilliamson and recapitalize. 

Taking time to recapitalize has driven me to examine the issue of capitalization as a whole, and in turn evaluate my philosophy regarding real estate investing on a deeper level. I mentioned that at the time we were at the end of a once in a lifetime opportunity to invest in real estate - and I am extremely grateful to have had to opportunity to participate in that market. Deciding to step away and recapitalize has resulted in having to miss some good deals (and one really good deal) along the way. But doing so has made me feel more disciplined than ever before. I realize that it is not just your place in the market cycle that matters, but also your place in your own capitalization cycle. The acquisition of multiple properties can drain an investor’s access to capital quickly, and leave them vulnerable to events that take place in the market. By maintaining a healthy level of capital (cash), and not just access to capital (credit), an investor can minimize their risk and establish a cycle of property acquisition that can be maintained over a long period of time.

During this time I have been reading about financial well being and living below your means. I find this topic to be essential to how I have grown philosophically as a real estate investor. As someone who works full-time, and plans to continue to do so, I seek to establish a portfolio that will benefit my family later and while I work in education now doing something I love. Because I can rely on income from a full-time employer I have realized that it is OK to take my time as a real estate investor. The core principle that I have adopted is to maximize my income and minimize my expenses, which is much harder than it sounds. The resulting difference allows me to increase the amount of available capital for real estate investing, with the hopes that the extra amount will bring me even closer to reaching my investing goals.

I also realize, as you can probably tell by the length of this post, that simple lessons can take long periods of time to deeply grasp. It is important to be patient during this process. If I hadn’t listened to the advice of fellow BP’ers, I could be writing a blog post about a much worse experience than simply missing out on a few deals.

As I move onto the next phase of my real estate investing journey I hope to be more vocal on the site with wishes that my experiences may benefit others along the way.