Some Advise From a Very Experienced Investor

[Don Konipol]

Advice  from an experienced investor to those starting out 

1. Stop chasing guru/mentor “education”, tactics, strategies.  Concentrate your education on real estate principles, real estate law, and real estate finance

2. Decide how much time, effort, dedication you want to commit to your real estate endeavor.  Are you aiming for part time / passive investment or full time immersion?   How about a  job in the real estate industry both to accumulate capital and gain experience? 

3. Evaluate your financial position and obligations.  How much capital can you commit to investing?  How much income do you need to quit your job and “go full time”. 

4. Evaluate the business, financial, analytical, and “people” skills you bring to the game.  Fill in with education what you lack.

5. Do NOT consider a partnership unless it’s for the VERY few right reasons.  Most people enter partnerships because of FEAR, or want of COMPANIONSHIP not any real benefit.  These always result in lost money, wasted time, and broken friendships. 

6. Take a realistic view of what can be accomplished.  Do you really believe  that someone with no capital, no experience, and limited education provided by 2 weekends at a guru boot camp is really going to be able to earn $100k annually by finding properties experienced investors spending $10k monthly on marketing to find have somehow missed, and then negotiating prices 50% below real value and flipping the properties to seasoned investors?  

7. Get your personal financial life in order if need be.  Commit to spending less, paying off high interest credit cards, maintaining positive cash flow in your personal finances, and cleaning up your personal balance sheet.  So you’ll be at least presentable when you apply for mortgage financing. 

8. Don’t get tied to any one tactic or strategy.  Opportunities in real property investment need to be evaluated individually on their own merits.  

[Marcus Auerbach]

If you are a new investor, print this and read it once a day. You may not realize the full weight of it, but this is what decades of experience boil down to. It is funny to look back and evaluate some of my own ideas and believes I had 15 years ago when I bought my first investment. 

I'll add one more: buy the best quality you can afford at the time. 

We are just turning over a property that is worth about 260k that I bought for 64k at the time. Nice house, but it sits on a corner lot and lacks an ideal backyard. I found a few other MLS sheets in the folder, one was the property almost next to it, a little more square footage and a perfect backyard. It would have been 10k more and at the time I did not see the point, in hindsight I should have.

Today I think of my portfolio more of a collection and when I look at a property my main question is if this is something I will be happy that I bought it ten years from now?

My other tip is this: don't look at real estate (primarily) as a source of cash flow. It is called in-vesting for a reason. Real estate is as a concept much more geared towards equity than cash flow. If you don't believe me, head over to the BP rental calculator, plug in a $1 million property with very average appreciation and see what happens over 30 years.

Instead, look at buying or starting a business. As a concept a business is the opposite of real estate, it primarily generates cash flow. Equity is a bonus. Take that cash and then buy real estate with it. There are so many options to buy/start a business - and run it on the side. 

A young guy I know bought a cute vintage camper, sprayed it black, cut a window in the side and built it out as a mobile coffee shop, which is now parked outside of events and staffed with college girls. Do you think that has cost as much as a duplex? And which one do you think cashflows better?