Financially Free in just a Few Years - aka "get rich quick"

[Marcus Auerbach]

Apparently this is a new podcast title, and I don't think it's a good one. BP needs to stop setting unrealistic expectations. I get the fact that it is great click bait, everyone wants to dream, just a few years of "being an investor" and you never have to work again, travel the world. "From homeless to 200 units" and other inspirational stories. - Literally "GET RICH QUICK"!

I have seen portfolios of celebrated over-night-success investors and when you look under the hood it's not pretty. On paper they look very leveraged, but in reality it is worse: they carry a huge liability of deferred capex that is somehow being ignored, even by the lenders. If you have 200 doors and each one needs about $20,000 worth of roof/basement-repairs/kitchen/bathrooms/plumbing/driveway, I don't understand how you travel the world on 40k of cash flow with a $4 million dollar liability looming! What's the plan to recover?

I sincerely hope it works out for those investors, but I have two concerns.

If you have followed the topic over the last 10 years you have noticed that we are facing an increasing anti-landlord sentiment calling for more legislation. And when  you look what is behind the outrage, it's usually properties in dilapidated conditions and a completely overwhelmed PM, leading to city code violations, tenant complaints and local evening news. The term slum lord comes to mind.

The second concern is that we are raising totally unrealistic expectations with young investors. It has gotten tough in this market to pick up deals, let alone equity. IMO a responsible investor needs to aim to get leverage below 75% as quickly as possible, while getting property condition to a point where you would not have a home inspector ring the alarm bell over stuff failing left and right and major components being past their normal life expectation. 

And then finally the portfolio stress test: Can you sustain 30% vacancy, maybe combined with some move in incentives and still be able to replace a furnace when you have to?

I spend a lot of time helping new investors and one of the first things I try to instill in them is to think in decades, not months. When you buy a deal, think about owing it for at least 10 years, if not 30. Evaluate it from that perspective. REI is not a get rich quick thing!!