3 Invaluable Lessons Learned From 30 Years of Investing

by | BiggerPockets.com

As mentioned in my last article, “How to Invest Your Money When You’re NOT a High Net Worth Investor,” saving money to invest and then investing it strategically can be tough when you’re just starting out. It was tough for me, too.

Looking back now, after 30 years of investing in real estate, there are plenty of things I’d tell my younger self to do—and not to do—if I were ever given the chance. Even so, I’ve learned many lessons throughout the years that I wouldn’t trade for anything.

Before I get into what those lessons are, I should say that not every path is the same. Just because certain financial and investing strategies worked for me doesn’t necessarily mean that they’re right for you. It may be wise to consider your strengths, weaknesses, goals, time commitment, risk tolerance, etc. before making any decisions.

So, what areas did I gain knowledge in, and how can those lessons be applied in your overall wealth building strategy?

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3 Invaluable Lessons Learned From 30 Years of Investing

1. Find tax-savings opportunities.

Back in college, I took a taxation course on a whim. The professor had previously taught my economics class, and I liked his teaching style, but I had little to no interest in the subject. Looking back, learning the basics helped me eventually implement strategies to save on taxes that have made all the difference.

I realized that the government rewards (through tax deductions and by taxing profit distributions at a lower rate than earned income) those who create jobs by starting businesses or those who provide shelter via investing in real estate. The government also encourages philanthropy and home ownership through tax deductions and tax-savings opportunities.

Related: The Surprising Lesson a Six-Figure Salary in My 20s Taught Me About Wealth

So what did I do? I started a real estate business.

The specific strategies I’ve used throughout the years have changed, but as I mentioned in a previous article, it usually pays to call up your accountant and talk strategy. Are you getting all of the deductions you could be?

entrepreneur-life

2. Leverage what you can.

My first time using other people’s money (OPM) to invest was through credit cards (i.e. the bank’s money). I would use a credit card to purchase and fix up the property, then refinance it to pay back the credit card and make a generous return.

Today, instead of using credit cards, I’d recommend what I did next, and that is to use private money (or even hard money) to invest in real estate. Looking back, I should have borrowed more hard money. I was afraid of the high interest rates, but before I had a track record, I was turning down deals left and right due to the lack of capital.

Next, I decided to leverage my properties. This decision was a game changer for me.

For example, you could take out a HELOC (Home Equity Line of Credit) with an interest rate of approximately 4%, and then you could lend that capital via a hard money deal making about 15-18%. In other words, you could make 11-14% on the spread.

It seems that many investors are afraid to access their equity, but I’m afraid not to, as doing so has been instrumental to my success. I do prefer to invest that equity into short-term deals, though, as to avoid interest rate risk, i.e. the possibility that the interest rate adjusts on the HELOC between the time you access the capital and when you pay it all back.



Related: 3 Tales of Landlording Catastrophe—And the Invaluable Lessons They Teach Us

3. Buy intentionally.

When you’re just starting out with limited capital to invest, you may think that your buying power is also limited.

A good strategy for building your real estate portfolio is to buy intentionally, even with your primary residences. For example, I kept every house I ever lived in and turned each of them into a rental.

These strategies, among others, helped me build wealth through 30 years of investing, and I absolutely recommend considering them as part of your overall plan.

So, what are some of your favorite strategies for building wealth? Or, if you’re a seasoned investor, what strategies can you share with those who are just starting out?

Comment below!

About Author

Dave Van Horn

Dave Van Horn is President at PPR The Note Co. – an operating entity that manages several funds that buy/sell/hold residential mortgages, both performing and delinquent. Dave has been in the Real Estate business for over 25 years, starting out as a Realtor and contractor and moving onto everything from fix and flips to Raising Private Money.

17 Comments

  1. karen rittenhouse

    Hi Dave:
    I actually just wrote a blog post on this very topic – what I would do differently and what I would do the same.

    The list included knowing how difficult it was going to be and realizing that creating true wealth was going to take longer than the gurus say.

    Also, focus on long term rather than short term results. Running into difficulties can trip up your confidence and enthusiasm, but accept them as normal and passing opportunities for learning and growth.

    Probably the greatest thing we’ve done for our success is to always have coaches. We started out paying real estate coaches – those who were highly successful – then moved to business coaches and finally personal coaches. Without all the years of amazing leadership, we wouldn’t be nearly as far along in our wealth strategies as we are.

    Thanks for your post and for helping others.

    • Dave Van Horn

      That’s a good point Karen! I didn’t mention that in the article but if my list was larger I probably would have mentioned coaching as well.

      I (and my company) have also had many coaches over the years, and still do. I had mentors as an individual investor but professional coaching really came into my life when I formed and started operating a large company. They helped me and my partners work on our business rather than it – which is a definitely an invaluable strategy.

      Thanks for reading!

      Best,
      Dave

    • Karen,

      I find this to be a particularly eye opening point. I can imagine that a coach would provide invaluable information and advice that you as an investor may be lacking. There will inevitably be decisions that a person needs to make as a landlord where they need the feedback of a mentor who has been in their shoes before. I can definitely see myself hiring a coach in my investing career.

      • karen rittenhouse

        A coach is an absolute must, Ethan. What business can you profitably get into without training?

        Just make sure your coach is successfully doing what you want to do. There are plenty out there who coach but don’t actually do what they teach!

        Good luck to you!

        • Lais Lima

          Hi Karen! Thank you for sharing and for taking about coaching. Where can you find the legit coaches? I am in a situation where there is a coaching “opportunity” for 35k. What questions should I ask these Coaches before I commit? Any suggestions on how to find out if it’s going to work or if I’m going to be scammed? I’m at a point in my life where I’m past ready to begin, it would be horrible losing 35k.

        • karen rittenhouse

          @Lais Lima
          Referrals or asking people you know who are successful are 2 good places to find coaching.

          NO. Absolutely do not sign up with someone you know nothing about and certainly not for $35,000. For example, I charge by the hour or by the month. That way, the student and I can get to know each other and the needs and experience involved. It may be that you don’t work well with a particular coach or they don’t offer what you need. It will take time to discover that so never pay anyone such a huge sum up front. Over time, if you stick with a coach, you may end up paying that much which is fine. I’ve spent multiple 6 figures on coaching and it’s made me many times more than that in returns.

          Thanks for asking and good luck to you!

    • Dave Van Horn

      Hi Anup,

      That’s an article in and of itself. But to try simplify it. You have to get approved for a HELOC from a bank. Your first time around you might get a real estate attorney or a title company to assist you draw up the paperwork (a note, mortgage, confession of judgment, deed in lieu of foreclosure). These docs can be state specific and depending on your location you may need to be licensed to lend. Then when you find the borrower (preferably someone you know but they’re a dime a dozen at almost any REIA meeting) and work with a title company to record the mortgage and hold the closing.

      If you ask a hard money lender or someone who has borrowed hard money, they can give you more clarity on it as well.

      Best,
      Dave

  2. Jerry W.

    Dave,
    Excellent article as usual. I look forward to reading your posts. My main method of helping out my investing is to only buy value add properties. I simply cannot buy a house ready to rent that will make me money. Our market is too tight. Instead I find houses that need fixed up and buy and fix them up. The biggest problem is the time to fix them up as I have had to do most of it myself. Now I am getting where I can hire folks to do the fix up, but struggle getting competent and affordable contractors. Our local job market has been in a downward spiral from the oil price drop. It seems that real estate lagged behind in dropping, but now it appears to be hitting home. I have seen more properties on the MLS where the listed prices are dropping. For the first time is many years I am seeing an occasional property I could buy and break even on as a rental. On the other hand rents are dropping just a bit and it takes longer to rent houses now. It is tough to be both conservative and start buying up properties.

  3. David Krulac

    Thanks, Dave. Reads like my own story. Started with nothing, borrowed as much as I could for as long as I could. Had 13 credit cards at one point, and kept personal residences after moving out. The first residence kept for another 19 years after moving out and rented. The second residence, i kept for 23 years and turned it into a 17 home subdivision. Used refi, HELOCs and signature loans extensively to get the capital to continue purchasing, and 900 deals later…

  4. marc grama

    Dave,

    Great article. Any recommendation for a lender to finance the purchase of an existing building and construction money to convert into a 25 rental unit in NJ? There are two other properties that will be in this deal which will be phase 2 and 3. Thanks in advance.

    Marc

  5. Julie E H Kopf

    Just the article I needed to read. I value reading stories of experience on BP from those who have put their years in and been able to make investing a successful career so much – it’s like having a multitude of mentors! Not only do I constantly learn investing strategies, how-to’s and what-not-to-do’s, from my own backyard to Timbuktu, but I am so entirely grateful for the sense of community these articles and writers exhibit by this delivery.

    I am fortunate to have a mentor where I live, who has done everything from flipping foreclosures to building developments, furniture auction wholesaler to principle broker – and everything in between related to real estate. He also knows just about every builder, contractor, appraiser, title agent, broker and probably most tenants! 30 years of experience comes from one place: time. Every resource he has offered to me has been worth their weight in gold, every nugget of information priceless.

    It is to the mentors, like you Dave, who SHARE your years with all of us that keep this industry such an incredibly friendly and healthy community, that keeps this industry A COMMUNITY, with human interaction across all neighborhoods and state lines, encouraging the value and practice of helping others in infinite ways.
    Thanks again for your article!

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