How I Decide What I Buy

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A few days ago, I had a telephone conversation with a colleague and a fellow BP-er.  Among other topics, the conversation veered into a discussion of the basis upon which investors make decisions relative to what they buy and what they pass on.  Upon explaining to him my perspective, which took exactly 1 sentence, he said to me “…your next article should be about this, because so many people miss this.”

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So, How Do I Decide What to Buy?

There are an enormous number of strategies within the realm of real estate investing.  Indeed, it can be a difficult task to define criteria for action.  A new investor looking into this world for the first time is akin to a kid entering a candy store – their eyes grow big and their mouth starts to water.  However, while making the “wrong” decision in a candy store can result in a relatively painless sugar rush, making a wrong decision around real estate can, and often does, cause ULCERS – those nagging open wounds inside the digestive tract that can make life quite unbearable for a long time…


My Decision to Act is Teed by Two Simple Overriding Precepts:

Precept 1:        Don’t lose money!

Precept 2:        Only buy property that you will be happy holding forevermore!

In my experience, placing emphasis on these two precepts dramatically improves chances of long-term success.  Let us discuss this a bit further and itemize some of the subheadings under both categories…

Don’t Lose Money

As I see it, Don’t Lose Money is a function of three elements – presence of multiple exists, time, and cash flow.

Multiple Exits

I will not get into any deal, no matter how sexy the numbers look on the up-side, if I can not clearly identify three exit strategies – period!  This is why I don’t flip houses, since by design flipping is intended as a 1-exit strategy.

Neither am I enamored with assignment, subject to existing financing, or any other strategy which carries with it the possibility of triggering the acceleration and Due on Sale clauses in the underlying financing.  Why?  Because as a scrupulous investor, these strategies require that I put my capital at risk in that I must be prepared to satisfy the existing liens should the lender knock on my seller’s door.  If I put it on the table – I could lose it; I will pass…

To me, all of the above represents danger – too much danger for me to handle.  I don’t like to gamble.  Making money begins with not losing money, and multiple exits are a must in this regard.


I will not get into a deal that does not allow for at least 3 years.  In my market, this is just too dangerous.  If contractually, or by design, the deal necessitates a 6-month time frame – I pass.  Most trading activities, such as flipping, are like this, and I chose to stay away.

Day 1 Cash Flow

There is a difference between speculating and investing, and often this difference is reflected in the presence or lack of cash flow.  Presence of cash flow guarantees that we get paid; may be not much, but we get paid.  Cash flow can allow us the luxury of time – the greatest asset in the world of real estate investing; more valuable than money!  As such, anything that puts money in thy pocket is an investment, while anything that looks like it might in the future but does not currently is a speculation.

I don’t speculate.  I only buy deals which make money on day 1.  This is why I don’t buy raw land, up and coming gulf course residential developments, high-rise building projects in Panama, and all the rest of it.  I only buy if the deal makes money today and makes even more tomorrow!  In saying this, however, it is important to understand that the deal does not have to make a profit on day 1 – just to break even with room to grow in the future.

Related: BP Podcast 014 : Cash Flow, Creative Finance, and Life with Ben Leybovich

I know what you are thinking – mismanaged properties with vacant units which need remodeled and re-rented can not possibly make money on day one.  Very true, and with this we’ve arrived at the Creative Finance lesson for the day:

Most people are so focused on the income column, that they can not see the magic that happens in the expense column!

While it is true that there may not be enough income on day 1, isn’t it also true that we can achieve an income statement equilibrium by lowering expenses for a period of time long enough to fix the problems on the income side?

The answer is YES, although with this we venture into the world of creative finance. It takes a special deal with a special financing package attached to it.  There aren’t many of them out there, and this, my friends, is why I average only 1 deal per year 🙂

Buy Only Those Properties That You Will be Happy Holding Forever More.

I don’t like the idea of being forced into a decision, and while everything I own is for sale at the right price (exorbitant), I will not do anything whereby in order for the investment to make sense, it needs to be sold on a certain timeline.  I am afraid of the market – it is a healthy fear in my opinion.  The deal has to make sense today, tomorrow, and forever!


We can and should get very creative in the world of investing, but we should not convolute the basic principals.  At times, in the heat of chasing that bird we forget the simple things – this can be costly.  Building wealth begins with not losing, which is a matter of basic principals – remember this!

Photo: Laenulfean

About Author

Ben Leybovich

Ben Leybovich has been investing in multifamily real estate since 2006. His area of expertise is creative finance. Ben works extensively with private as well as institutional financing. Ben the author of the Cash Flow Freedom University and creator of a cash flow analysis software CFFU Cash Flow Analyzer.


  1. Ben: I absolutely agree! I love this article and you’re speaking our language.

    I was reading along, smiling and nodding, until I came to the line where you say you average only one deal per year?!?!

    We, too, buy only deals that are profitable from day one (even if they don’t make money today because we’re going to renovate and flip, the potential to make a significant profit after renovation is there). We don’t buy land (I consider that burying our money in the ground). We never speculate. We too use creative financing. One of our current favorites is marketing heavily to free and clear properties to buy with zero percent owner financing.

    For us, like for you, “It takes a special deal with a special financing package attached to it.” But I would argue with your next line: “There aren’t many of them out there.” I think there are plenty of them out there. We buy multiple properties every month creatively. The main focus to accomplish this (in my humble opinion) is marketing. If you’re talking to enough sellers, you can find enough deals.

    Perhaps one deal a year is all you’re after? We have students who only want to grow their portfolio by 2-3 properties per year which is certainly plenty. But it’s not because the deals aren’t there. How many deals do you look at to find that one? I find that statement fascinating.

    Thanks so much for your post. It’s loaded with great information and instruction.

    • Karen,

      You rock and you roll 🙂

      Here is the difference I think between what I do what you do – I do not flip. My creative financing (100% financing) has to stay with the deal, if not the property, for a long period of time. 4-6 months won’t do it for me. This can get tricky and it definitely requires the right deal to achieve.

      Another thing I’ll mention is that I am running a passive cash flow business. I’ll take $700 of monthly CF on a multi-unit over 10k of cap gains on a flip any day of the week. It’s a personal preference based on my belief that long-term wealth is a function of controlling a very large asset base. Therefore I buy, but don’t sell. I make CF today, expand CF tomorrow, hedge inflation 5 years from now, and become very wealthy in 20 years.

      This is just my view of RE, possibly because a really good flip in my market is 10k-15k pre-tax, hardly worth the effort it takes. But, you guys seem to be crushing it – really happy for you!!! There is more than 1 way to get there.

      Thank you so much for your comment!


      • Hi Ben:
        We didn’t sell a single property for the first 4 years of acquisition. Up until this year, we held most of what we bought – only about 8 flips per year. Now that we have our portfolio complete, we flip, wholesale, or buy to manage for investors only. Our entire focus is paying off our properties. There is definitely an evolution to this business and no two years are the same.

        To infinity and beyond!

  2. Great write up. I flow many of the same principles, but I also flip to earn extra money for long term purchases. I plan to hold my properties for a long time as well, but what is your plan after that long time is up? When you are no longer able to depreciate them are you looking to sell or do 1031 exchange or continue to hold?


    • Mark,
      I understand the issues of depreciation basis running out. I don’t worry about it – this must sound weird because I worry about so many things, but it’s true

      Sell on contract and cash flow the paper – long term, with huge pre-pay penalty 🙂 Sell to my kids, without the pre-pay of course, or someone else to the benefit of my kids when I am gone. No cap gains – just on the recovered portion plus interest.

      It’s worked for investors for ages and I don’t see why it won’t work for me

      Thanks very much for reading Mark!

      • That sounds good to me. People keep asking me what my exit strategy is and they don’t seem very satisfied when my exit strategy is to own my properties for as long as possible and keep the cash flow coming in. It sounds like you aren’t too worried about it either!

        • My view may change in the future Mark, but for now it seems simple enough. I am buying CF. I want to retire with CF. If I have to pay more tax then be it – I’ll just buy a few more units to compensate…

  3. Jeff Brown

    “It’s a personal preference based on my belief that long-term wealth is a function of controlling a very large asset base.” Possibly the most valuable, profound sentence you’ve yet written here.

    A discussion I’d love to have with you sometime, Ben, is taking advantage of the cycles as they allow.

    • Mr. Jeff Brown,

      Besides the safety of diversification of revenue streams and focus of throwing “big” punches instead of little ones, both of which act in tandem in RE market more so than any other market, I deem it reasonable that 3% annual price inflation acting upon 1 mil for 20 years is a lot better than the same inflation acting upon 200k. Rate is the same, destination points are worlds apart. Once I figured this out, it opened my vision very considerably. This is one of the main reasons why I am a fan of leverage.


      I would LOVE to discuss thing with you! When and how?

  4. Thank you for such a clear and concise post. The number one thing I run into when buying properties is “but the seller won’t make any money with those terms.” That’s unfortunate, but it’s not my problem that the seller didn’t make a good buy to begin with and/or has mismanaged the property for the past 10+ years.

    It’s also refreshing to hear you speak of your criteria and sticking to it. I too am in this for long-term stable cash flow, as you put it. Sometimes I wonder if I’ve selected the right strategy when I hear so many people say they do so many deals per month. That just doesn’t seem feasible in my market and still be making good buys. Maybe eventually I will have the network to do so, but for now I would rather own fewer, better properties than more not so good properties.

  5. I’ve seen so many buyers who only plan to keep the home for a few years – investors as well as first time home buyers who hope to move up in just a few short years. Often with these buyers, “life” happens, whether it’s a job loss, a career change, needing to care for a parent, having a baby, etc. And these life events are not always bad – for example, having a baby is one of the best things you can hope for. But regardless, it’s expensive. So these rules should apply not only to investors but also to anyone considering buying a home. Plan ahead, and leave room in your budget for “life” and whatever it throws your way!

  6. Mathew Wray on


    Thanks for a well thought out article. I’m new to real estate and learn more and more every day. Although my strategy is hold and cash flow I continually find myself fighting the urge to move, to acquire, to try a new strategy, to do something! But then I read an article like yours and it reminds me that I’m in this for the long haul and that patience and a plan are my biggest allies.

    My favorite sentence of the post: “Building wealth begins with not losing, which is a matter of basic principals – remember this!”

    My basic principals are sound so be patient and follow the plan. Thanks for the reminder/keep my eye on the prize moment!!


  7. Hi Ben,

    You mentioned multiple exit strategies and there should be at least 3. I know you are a buy and hold investor. Can you please name the 3. One is to sell or exchange? What’s the Helen.

    • 1. Sell
      2. Exchange
      3. Refi
      4. Pay-off organically
      5. Assign
      6. Incorporate and sell shares
      7. you get the point

      If the deal is really good, there will be more than 3 options 🙂

      Thank you so much for reading David!

  8. Thanks Ben. I’ve been looking at and reading your Just Ask Ben Why website and your blog is very informative. I do like your cash flow university and plan on signing up shortly. Also, your stable, cash flow video made tremendous sense. It made me think how important it is to have not just cash flow, but stable cash flow.

  9. Great article, Ben! Once again, you have given me so much to think about, I’ll be chewing on this for days! As a newbie I am still struggling to put together a business model, and yes, I am definitely that kid in the candy store! I am trying so hard to educate myself so that I DON’T lose money.
    It’s so interesting to see the different strategies different investors use and how some strategies morph over time. My initial plan was to jump right into buy & hold, then after throwing some figures down I’ve contemplated Karen’s business model in reverse, flipping to increase my available capital so that I could then acquire a larger income producing asset base.
    The hard part for me with my limited knowledge and experience is trying to figure out how best to get to the coveted stable passive income level I’d like to retire on within my projected ten year time frame. I’ve had a lifelong career in the thoroughbred industry, I am months away from turning 50, self-employed with no way to show reliable consistent income, basically paid cash for everything for years, so have zero debt but also limited personal credit. On the plus side I do have a bit of start up capital.
    I’m wondering, if I utilize the basic and sound criteria you’ve outlined here, does the rest really matter. If I have three legitimate and viable exit strategies, can I let the property, market and circumstance determine the best strategy to utilize, and so theoretically be prepared to flip or hold any given property I buy. Is it a bad idea to be this unstructured? And most importantly, and maybe this is in fact the catch 22, how would I come reasonably close to being able to reach a target figure for retirement using this strategy?
    (If this sounds totally stupid, forgive me, as we say in the horse world, I’m Green!) 🙂

    • Pam,

      First of all, I think that you need to give yourself more credit. You are a few months from 50 and NO CONSUMER DEBT – THAT’S HUGE! Do you realize how “right” you’ve done things? You are in a different league from 90% of Americans – Congrats!

      As to the answer to your question – it is anything but stupid. In fact it is so “right on” that in order to provide you with an intelligent answer I would have to ask you about 100 questions. The answer depends on You, the Property, the Market, the Circumstance, the Financing package, and a few other things 🙂

      Pam, I am sure that you can get to the bottom of it all on your own, but if you want to chat, call me at 888-508-9643 🙂

      Thanks very much for reading and for an honest comment Pam!

      • Ben, thank you so much for the kind words, encouragement and your very generous offer to chat! I would be grateful for the opportunity and mindful of the invaluable guidance you can provide. Of course, I absolutely will take you up on that! 🙂

        An unrelated thought, it would be really cool if you’d play us a brief intro on your next podcast. It wouldn’t have to be long, I think folks would give up a minute or two to hear you play. Even a busy man like Dr. Einstein acknowledged the importance of music!

        • Pam,

          LOL I suppose that for the right amount of incentive I’ll play again. But, your assumption that Josh will ask me to do another podcast is a bit optemistic – don’t you think?

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