Why location and time in the market are so valuable and often overlooked

[Alan Asriants]

In today's day and age of social media, the Internet and super catchy reels and videos, attracting your attention to higher returns, promising life changing strategies and tips on how to quit your 9 to 5 job; A lot of people really neglect what real Real Estate investing is all about. 

a lot of successful investors I know and have spoken with have not done incredibly sexy strategies that seem to blow me away. In fact, many of their stories, just relied on, picking up a few investments in solid areas, taking care of them, and holding onto them for a long time. 

It's really easy to fall to the trap of social media and Instagram gurus screenshot Ing their so-called returns on their stories and making posts about how much money they made, and wearing crazy Rolex watches and recording podcasts on yachts to believe that all that hype is true. Trust me, a lot of these people are fools that are fooling you into taking your money, claiming their riches when in reality everything is overleveraged.

Like many things in life if it's too good to be true, it's likely too good to be true. Not many people want to believe in holding onto something for a long time and seeing the benefit of it only 10-15 maybe 20 years down the line. Why do you think people still invest into the Roth IRAs or retirement accounts? It's because it works. It has worked for a long time, but there's nothing sexy about it and you have to wait until you're over the age of 64 (maybe I'm wrong here) to see the benefit of compounded interest investing. 

The same thing applies to Real Estate. 

1. Buy in the right location

2. Take care of your property

3. Wait and spend time in the market

Yes, this won't make you rich quick, but it will make you wealthy overtime. If you want to get rich, then you'll have to take bigger risks and go into things that can give you solid returns right away. But you might have to be more creative than investing in 50 doors of section 8 rentals. 

Here are some properties I have analyzed from investors I know and some other properties on the market

1. Class A/B Property - Duplex

2bed 2 bath each unit with garages. Bought in 1999 for 120k. 7.5% interest rate with points

Rents when purcashed: 500 and 600 - Total 1100/m

80% of 120k at 7.5% = $671/m (Just mortgage payment - no Insurance and taxes included)

Today:

Property is worth 560k

Rents are 2000 and 2200 - Total 4200/m

4 years left of payments.

Rent increased almost 4x and value almost 5x

2. Class A Quadplex

2 bed 1 bath each unit. Bought in 2005 for 450k - assuming 20% down and 6.5% rate

Rent at that time - 750/unit - total 3000

80% if 450k at 6.5% = 2275/m (just P&I)

Today:

Property is worth $1.1M

Rent is $2000/unit - Total $8000k

AS you can see there is nothing crazy, sexy, or mind blowing with the returns for the those properties at that time. In fact if you start discounting vacancy, cap ex, insurance, taxes, etc. They might have even been cash flow negative! But they were in solid areas and the investors held on and are now benefiting greatly!

This is the value of location and holding on to real estate for a long time^

Everybody wants to do the next sexy BRRRR deal and invest with zero money and do a flip and make 200 grand. Sure it can be possible but it's not the basis of all real estate investing and the end all be all strategy. Sometimes the less sexy route of just investing in a solid area, taking care of it and having solid tenant is going to put you ahead then people trying to chase cash flow and things that might not exist.

Truth is in today's market it is tough to make BRRRR work. It is tough to find a flip. But there are still solid investments out there for long term. You might need more capital and a larger down payment to make your numbers work, but that is what is working in todays market. And 10 years down the line you will have a solid rental that has appreciated with higher rents. And trust me, you'll be way ahead of that guru promising sick returns with out of state rentals using section 8.

Happy investing!