Short Term Mindset = Would Coulda Shoulda

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It’s the end of another year, one most would agree could be legitimately included in what the Chinese (so it’s believed) have called ‘interesting times’. It’s something they wish those they may not be particularly fond of, as in — “May you live in interesting times”.  This has often been referred to as a curse, which, at least to my knowledge has never been truly verified as having Chinese origin. In any case, regardless of its origin, in that context most of us would agree the last several years have indeed been interesting times.

I bring this up so as to keep in context the general real estate investment environment. We have some pretty smart contributors writin’ here, and I’d bet a pretty penny if 10 of us were put into a room and each were asked to describe their long term real estate investment strategy the last few years, and for the next few, you might get 11 responses.

I’ve seen every ‘down’ time in real estate as an active participant since the 1969 recession. Every single one of ’em offered genuine opportunity for atypically positive real estate returns in one form or another. I won’t enumerate them here, but it’s been a common denominator — economic down times offer golden opportunities. Captain Obvious lives.

That’s the good news.

The not so good news is that they’re not nuggets waitin’ on the ground for us to recognize and snatch up. For most it’s a case of 20/20 hindsight. I know, I’m the hindsight middleweight champ. 🙂 If we ever find ourselves in conversation, it’s a subject about which I love to talk, as some of the opportunities have been truly epic.

What’s the gold hidden in plain sight during this turbo charged economic spin cycle?

The ability to acquire low priced, relatively high rent property in areas in which you’d put Grandma to live alone without a second thought. All made real by interest rates very few thought possible.

It gets better.

These acquisitions can be accomplished with decent leverage, interest rates we haven’t seen since freakin’ Eisenhower was in office, and at a time when the demand for well located, quality residential rental property is exploding.

Who is gonna lose in this market in the long run?

The answer to that one, at least in my opinion, is paradoxical in nature. That is, they’ll lose in the long run, but will have literally cleaned up in the short haul. It’s what I’ve called the ‘Turn ‘n Burn’ crowd.

Include me as one of those who personally know many who’ve almost literally been printin’ hundred dollar bills the last few years. Yet, when this ends, and it will, they’ll have had a truly ‘E-Ticket’ ride, but not much else. The profits will have been used to buy stuff, improve lifestyle, maybe even eliminate a buncha previously acquired debt. Yet it won’t have done squat for their retirement.

But, but…what about all the profits they made? All the success they experienced? That was real, right? Absolutely. And it’ll make for great stories years later as they admit what they coulda, shoulda, woulda been doin’ instead, if they’d only known at the time.

Real opportunity has legs.

Pay close attention — we may not have this opportunity again in our lifetimes. It’s the first such chance I’ve seen of its kind in my 40 plus years in real estate.

It’s the ability to control long term investments, with relatively little capital outlay, while borrowing at cartoonishly low rates. Add to this the availability of astoundingly well located property, and you have the recipe for long term real estate investment success not seen for over half a century.

I was in the business for over three decades before I saw an interest rate, fixed for 30 years, that started with a number less than seven (7). I now have access to capital that will cost me and clients 4.875% to 5.25% fixed for 30 years. Some of it can be had when putting less than 20% down.

Let me boil this down to a straight talkin’ bottom line.

If your plan doesn’t include long term investing in this environment you’re gonna be spinnin’ some great stories with not so happy endings. Though it’s sexy to talk about all those properties that were bought low and sold high in six minutes flat, you won’t have much steak to show for all that sizzle when you’re retired — or more realistically — when your older and NOT retired.

High Rent + Low Price + Solid God Location + (possibly) Once-In-A-Lifetime LOW Long Term Fixed Interest Rates = A Retirement Of Which Most Can’t Even Dream.

This isn’t an indictment of flippin’, as those who do it successfully are truly skilled folk.  It’s a warning to those who are now in that mode successfully: You can use your incredible talent to massively improve what’s very possibly gonna be a disappointing retirement.

Without knowing it, many are becoming lifetime members of the Should-Woulda-Coulda Club. Meanwhile, there are thousands of folks doing some pretty boring investing, who’ll be tellin’ their grandchildren an entirely different kinda story. The one about how Grandpa and Grandma get to do whatever they want, whenever they wanna do it, pretty much however they wanna do it.

You can invest long term, taking advantage of this perfect storm of positive real estate factors, while never doing one flip, and enjoy a magnificently abundant retirement. But those who insist on the turn ‘n burn approach exclusively will eventually learn it was a mortally flawed strategy.

It’s not too late. If you’re a flipper, use that skill set to blow the doors off of a long term plan. You have an incredible advantage if you’d only harness it. You can literally do what long term investors are doing, just faster and with an ultimately much higher retirement income than could ever produce.

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.

7 Comments

  1. There you go again, Jeff, telling us the things that we don’t want to hear . . . you couldn’t be any more right with this one. Most people live their lives in the coulda-shoulda mindset . . . hopefully you converted one or two with your article.

  2. Absolutely agree. Just picked up an owner finance deal last week with 0% financing and a 7.5 year payoff peroid. Focus on cash flow first; however, investing for tomorrow is essential for easier days toward retirement.

  3. That’s me; doing the “pretty boring investing”. I sometimes pout that I am not doing those glamorous flips and making out like a bandit. But when I look at this slow and steady snowball of cash flow that just keeps growing every year I feel somewhat mollified. In fact, the cash flow I can pick up on deals today is even better than it was during the 0% down days.

  4. You hit the nail on the head Jeff. There are too many investors who are just focusing on a quick ROI and “get rich quick”. We are in the business of educating investors on why, for ALL the reasons you mentioned above, this is the opportunity to create a long term investment strategy and actually “see” retirement!

    With record-breaking foreclosures, echo boomers, baby boomers, strong immigration levels and low new construction – an estimated 93 million renters will be added to the market over the coming years! This will put a major strain on supply and demand and will position apartment owners to reap the benefits of an economic recovery and maintain an abundant retirement.

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