Brooksville, FL · Member since 2012 · 11 posts · 3 votes
As the title says, for those that have been doing this for at least 10+ years what would you do differently if you could go back and start over? I have a successful business I own that makes a $250k+ a year, cash stashed away, and no debt (personal). I plan to buy and hold forever for cash flow then someday give to my kids (if/when I have them).
I have been what I consider a serious real estate investor for just 4 years, but I've had a few rentals and done a few flips going back 20 years.
Looking back, I would have started working on my core portfolio earlier. Instead of just buying good/great deals, I would have asked, how does this property fit into my long term plan? I would have researched location more. I wouldn't have hesitated to pay more for what was, or could be a great location.
I would have skipped my 2 decades investing in stocks. I would have used that money to buy properties.
I would have started seriously in my 20s instead of my 40s.
I would have joined BiggerPockets the day it launched.
All that said, I have no regrets. And I'm still learning all I can.
I would not have purchased a personal residence until after I had enough cash flow coming in from rentals to support it. Buying a home was a huge personal & financial liability. While it is no longer an issue, in the beginning years, the cash required to acquire and maintain the home could have been allocated to investments that would have given me financial freedom much sooner.
Great advice for our area Aaron, although in many areas where houses sell for under 200k it may not be as important.
Looking back I would make sure I had a plan to buy and hold a certain amount of properties. I would still flip but my plan would definitely include properties to keep. At a certain time I would consider a1031 exchange on a few of these but it would only be to upgrade some older properties, buy something in a better area or just buy something at a great price. I would also make sure I financed no more than 50-60 percent LTV on the new properties.
Ann Bellamy can you elaborate more on your advice? You've succinctly described my intuition/core belief, but it would be nice to hear that it has some basis in experience.
First, I have to compliment you on a GREAT post. What a great question to ask.
Next, from what you said, it's my belief that you're already on the right track.
Ann Bellamy pretty much shares my view - I have experienced that it's best to pretty much never sell anything, although there are a few properties that after years, just didn't fit the long term plan, so an occasional sale maaaaaaaaaaay be ok.
Next, she said "buy more properties faster." On that, I fundamentally agree, but buying too fast, like eating too fast (both which I'm experienced in) can hurt you.
John Chapman - you asked Ann to elaborate and she hasn't yet, so I'll put in my 3 cents worth:
Here goes:
I started investing in residential property in 1975. Due to the "mentorship" of someone who had more money then, but ultimately failed and became poor, I "churned," bought, sold, traded, oh boy. Lots of activity, but after the downturn of the early 90's, I had lost a lot of property for the SECOND time, and was darn (is it ok to say darn here?) discouraged that I was working my _ _ _ off but not getting anywhere.
Then, I looked at a buddy of mine, same age, same middle class background, but he had simply trudged away on a buy and hold basis.
Now, my buddy has 4 residences. (No, not rentals, we'll get to that - these are NICE houses sitting there empty and furnished in case he wants to go to the beach, the suburb, the desert or downtown San Fran.) Plus, he's got another nice goodie - 35 almost paid for rental houses and a 10 unit.
Needless to say, I'm glad I adopted his program about 18 years ago, and it's been all good since. Not quite as flush as my pal, but no complaints.
Hope that helps. Sorry for the long post, but it's certainly been a LONG road.
Good luck, and my compliments again on a very fine question. No doubt why you're able to pull down 250k a year in whatever you're doing.
I would buy smarter early on. My first buy was perfect by today's' standards, but my second and third I overpaid for. I was young and listened to my real estate agent about what properties were a good buy. Looking back they were very amateurish buys, but that's just the expensive learning curve in this game. Each property after that was a better deal than the last. So, I guess it all boils down to not letting your excitement about wanting to buy a property cloud your judgement on what constitutes a good deal.
"Never sell anything" is probably subject to modification. Properties that are too small to pay a manager and too far away to manage yourself probably would be ok to sell. Properties that don't turn a profit because of management costs and/or tenant problems would be ok to sell, if there is no viable way to solve the problem.
There are 4 ways to make money in buy and hold:
Cash flow
Appreciation
Depreciation (tax savings)
Equity build up (paying down the mortgage)
But mortgages on properties I bought 15 years ago are laughably small now. My tenants have been paying my mortgage and taxes for years. (Equity Build up) And rents have gone up significantly in that time. (Cash Flow) So far, tax savings from depreciation seems to still be available. (Depreciation). And in spite of the downturn, the value of my properties is significantly higher than it was when I bought them. (Appreciation)
Even properties that were probably mistakes (overpaid) have become viable and time has compensated for that error.
Buy faster does not mean overleverage. I was always able to ride out a rough time by having funds available to unexpectedly replace a roof or ride out a few vacancies.
In my area, multi families go quickly, because savvy investors know that with low rates and low prices, there has never been a better time to buy than now.
What Ann and others have said about "never selling anything" is a phrase that I often hear repeated from experienced investors. Specifically,, "My biggest regrets as an investor revolve around every property I've ever sold."
While I haven't gotten to the point where I regret all the properties I've sold, I certainly can start to understand that attitude. While making a big chunk of cash at once is nice, looking back a few years later and realizing that you could still be generating income month after month from that same property can be quite eye opening.
Ann Bellamy, yes that was perfect. That's precisely how I view real estate. I've only been investing about five years but I feel like I'm on the cusp of starting to see the results of buy and hold investing. It's excruciatingly slow in the beginning but it feels like the results are starting to accelerate. I've got a few sfrs that are on 15 year notes and that are really starting to build equity and rents are going up increasing cash flow. Even my "mistake" properties where I paid too much or missed my repair numbers are starting to look pretty good as investments. (I guess time can forgive most errors).
I've got friends and colleagues always trying to get me to sell a property or two, but every time I think about it, all I can see is the missed opportunity down the road. Even in terms of trading up to larger multifamily, I would much prefer to simply tap equity through refinancing rather than selling. Thank you for sharing your views and experience.
Those of you that say never (or almost never) sell, what do you think of William Nickerson's trade up strategy? If you are really old school, you shouldn't have to look up Nickerson ; )
I also wonder about the trade up strategy. I'm buying in gentrifying areas that have a big upside in appreciation but are still cash flowing really well. If the area gentrifies as I am projecting, I plan to sell earlier than most and invest that money into other gentrifying areas. Rinse and repeat..
I wouldn't mind keeping these properties and its something I will consider when I get to that point but there has to be merit in my current plan/strategy.
There is no one rule. The largest property holder in Portland OR never sold a property, although he does sell condominiums he develops and builds.
Rich Weese says everything is for sale and he as a few places.
The people I learned from bought and sold but bought more than they sold. They also kept at it almost to the very end, 80s.
Looking back we have to say we made the best decisions we could at the time. Whenever I think about the possibility of having more property early on I have to think about my reasoning for not doing so. It made sense then and it still makes sense now.
I have been what I consider a serious real estate investor for just 4 years, but I've had a few rentals and done a few flips going back 20 years.
Looking back, I would have started working on my core portfolio earlier. Instead of just buying good/great deals, I would have asked, how does this property fit into my long term plan? I would have researched location more. I wouldn't have hesitated to pay more for what was, or could be a great location.
I would have skipped my 2 decades investing in stocks. I would have used that money to buy properties.
I would have started seriously in my 20s instead of my 40s.
I would have joined BiggerPockets the day it launched.
All that said, I have no regrets. And I'm still learning all I can.
I agree with Rich, except that you can have my Ex.....LOL, really,I will admit, there was one property I wish I had not sold, a second home, barn, tennis court and pasture along a river, I miss that one!
I agree with Ann, that if it ain't eat'n any hay keep it! Under normal circumstances you're always buying in today's cheaper dollars for a good property. Let others buy it for you.
As to the making money angle, I view depreciation as an interest free loan from my tax liability, I don't really "make" new money and some day I have to repay it in a way when it is sold or passed on. Depreciation is the nature of the tax beast, not really making money, but to each his (her) own.
Trading up is a good strategy as well as opposed to selling, so long as you're in like kind properties.
Things I would have done earlier? I should have purchased notes a few years earlier, I actually said no when I should have said yes.
I would screen tenants better from the start. I started investing in the mid 90's before I had internet access. It is WAY easier to get information on people now. You can get credit reports right at your desk, check criminal records online, look up court case info, etc.
I wouldn't buy any houses that don't meet my current criteria. I used to buy anything. Now I look for three bedrooms, built after 1940, no additions or major modifications, no flat roofs, and no heat other than gas forced air. I learned a lot from buying junk.
I don't regret any of the houses that I sold. I either sold to my tenants for top dollar, sold in bad neighborhoods to re-buy in nicer ones, and I sold some at the top of the market. (I wish I had sold more at that time). I plan to sell all of them when I retire at 55. Hopefully, I can sell them all on land contracts and reap the interest. We will see how this Safe Act nightmare pans out.
Bill- When you "pass" you won't be having to pay the taxes-YOU'RE DEAD!!!!!!! You can have all the benefits during your lifetime, and as you know, I truly value the depreciation and hate paying any taxes-during my lifetime. Rich
Jon Klaus that is an awesome analysis. I asked this of Ann Bellamy, but was wondering if you could also elaborate on your lessons, particularly your statement that you would have focused more on your core portfolio. Since we are both in the same area and you have been doing this a lot longer than I have, I would love to hear your observations.
I hear lots of 'seasoned' investors also say they would never sell anything if they had to do it all over again. What I have found though, is that the majority, if not all of them, were working full time doing something else and investing as a side or part time business. The idea of doing nothing but real estate is a relatively new concept. If you go back to the 70s, 80s, you won't find nearly as many full time house buyers like you do today. People make careers out of flipping properties. I derive 100% of my income from real estate. I could not possibly buy and keep everything even at this point of my investing.
There are ways to structure deals where the property can be sold and an interest retained, and I have done that in several different ways mostly with options and equity participation agreements, but every once in a while, a huge cash infusion to the business from a retail flip puts the conscious at a whole new level of 'piece of mind.' There is no price, no matter how much that sold house appreciated up to, that can ever replace 'piece of mind.'