Where Is Paul?

Where Is Paul?

That’s a question my partner asked our over 400 members of the real estate club I founded- the largest real estate investment club in Chicago, and one of the largest in the country.  That was in December of 2006 shortly before our partnership ended. He then went on to drag my name through the mud, libeling me and slandering me to anyone who’d read or listen to what he had to say. The short version of events is rather simple: I wanted out and he filed a frivolous lawsuit against me in an effort to avoid the cost of buying my share of the business. I declined to respond to it publicly. Instead, I allowed him to talk, and I filed my response in court, demanded a very reasonable buy out figure. After resisting the requirement that he buy out my share for as long as possible, he did the only sensible thing left to do and entered into an agreed order to buy my share of the business. To this day I have heard tell he denies this outcome, but the truth is public record.

After nearly 10 years, I’ve decided to publicly answer the question: Where is Paul?

Short version- Florida.

The long version bores me, so I’m not going to tell it- not here at least. I’ll tell it around the fire pit, out fishing, or on the golf course, but not here.

I’m constantly surprised by how many people still know who I am, still find my material online, and who still ask me about real estate investing. In all humility, I’m a good person to ask. I’ve made about every mistake that can be made. And while I’m not offering advice per se, I have a thought about this a lot as we approach another new year, and I have some general thoughts on the topic for anyone considering investing in real estate:

• Get and keep a job. This is an increasingly radical notion as we find ourselves in a country where 98 million people are not working, but nobody is starving. Malnutrition used to be an indicator that you needed to get up off your butt and go to work, but no longer. So, yes- you can get by these days on the dole, living with mom and dad until you’re 50, but you’re never going to find fulfillment that way. If you want to achieve anything, get comfortable with the idea-- the fact-- that you're going to work most of your life. Find a way to earn more money- and steadily increase your income. I have found that though my profession-- property inspection, real estate consulting, and claims adjusting and appraisals-- is not ideally what I'd like to be doing-- it is rather like an arranged marriage: I got to a point where I make in three months twice what I used to make in a year- and I frequently do actually take a month or two off at a time. I'm a hunter in a world of farmers.  I go out, kill something, drag it home and it sustains us for awhile, and then I have to go out and do it again.  Some people like steady. We're OK with this.  Find something that works for you. Don't assume you can't massively increase your earning with your CURRENT skill set. Think of Chevy and Ferrari: They're both functionally the exact same thing, but one commands a much higher price. Jobs tend to be like that, too-- sticking with the car analogy-- if you're a mechanic, for example: maybe learn to work on the Ferrari. Same skill set. Different rate of pay. Or, perhaps don't work on cars-- work on boats. There're examples in every profession.
• Avoid partnerships. You will find many people willing to use your money, and only a handful that know how to get it back to you at all, let alone with profit. The fact is that when it comes to money, other people’s ideas and self-interest are too often at odds with your own. It complicates everything from the acquisition to the exit no matter how strongly all the partners believe they share the same expectations.
• Choose buy and hold over flipping. This is just my opinion, but leveraged wealth-building, positive cash flow and tax advantages are some of the best reasons to invest in real estate. You lose them when the IRS considers you a dealer instead of an investor.
• You already know “how to” invest in real estate. Get educated, but don't assume you don't already know what to do. The best education you're going to get is from DOING IT, not paying someone else for the secret of how to.
• Think about investing in real estate as a means to retire. Most people buy one house- the one they live in. However, there's another way to own property-- and that is to select it, and then let someone else get up every day and go to work and worry about paying for it. If you bought just four houses in the $150,000 to $200,000 price range, and they only appreciated 1% per year (average $175K purchase price), then in 30 years you will have collected close to a million dollars in rent, and you will have a million dollars worth of property and the income with the equivalent purchasing power of $60,000 per year in today’s dollars will still be coming in. If you do NOTHING ELSE.
• Be boring. I've tried exciting, and I'll take boring every day and twice on Sunday. I'll take conventional over creative. The bottom line is that much of the advice you get here is really good advice- it's not wrong. The stories are true. I've lived many of them. I've wholesaled houses-- collecting five figure assignment fees was not uncommon once upon a time. I've made money-- and I've lost it. I've been sued twice, audited once, and paid my fair share of dues. To me, the best rewards are from all the boring "slow and steady wins the race" things most people don't talk about on forums like this. You'll come to appreciate it when you're in your forties and financially secure while the dreamers and schemers are still broke, and being lured by the latest shiny object.
• Got credit issues? Fix your credit the only way you really can: pay what you owe, and pay it on time. Up to your eyeballs in debt, and can’t see a way out? Consider bankruptcy. It's not a dirty word in spite of what some hosts of financial radio shows who are steeped in religious legalism might say about it-- the concept of releasing debtors comes directly from the Bible. It isn’t that I don’t believe in personal responsibility, I just happen to think it extends to the lenders that let some people get buried in debt they knew or should have known those people would never get out of. Just don't get back in the soup again once you're out.
• Don't make retiring young, or getting rich your objective. Take risks, but take calculated risks and be absolutely concerned about losing money-- more so if it's an investor's or a partner's money. Again, my suggestion with regard to investors and partners is: don't.
• Have fun. Enjoy life. I'm not an "eat drink and be merry for tomorrow we die" kind of person. I throw up in my mouth a little bit at the suggestion that "YOLO" should motivate anything. That being said, work is about number four on my priority list. Your whole life cannot be lived in a fantasy world- in a future that isn't here, and isn't real. Planning is all well and good, but go buy steaks and grill them once in awhile. Go out to eat now and then. Travel. Grab your loved ones, grab a fishing poll, or your golf clubs, or a pair of skis, or just a good (fiction) book and soak it up.
• Be willing to walk away from any deal at any time. DO NOT WORRY ABOUT GOING SLOW. Every lousy decision I've ever made, I made in a hurry. The deal of a lifetime comes around about once a week. YOU DO NOT NEED any particular deal, and there is NO DEAL too good to pass up. And nobody has a crystal ball. Is the real estate market over-heated again? Yes. The market was prevented from properly correcting by stimulus, QE, and low interest rates. Will there be another crash? Maybe. Or maybe housing prices will increase as a result of inevitable inflation so it won’t seem like a crash, but inflation will have roughly the same effect. Will interest rates rise? Yes. What else could they do? My parents got a good rate in 1983 of 14%. Historically, 8% to 10% is normal market rate. When will any one or all of these things happen? Who knows? Make the best decision you can with the information you have and don’t try to time the market, and don’t speculate.