Buy & Hold No! No! Part 2

Part 2:

After taking a mild amount of grief saying that I'm wrong in my approach, I have decided to set aside my initial approach of spouting my anti-rental for a more positive approach. I decided to give five reasons why I don't need to buy and hold rental properties to build cash flow, wealth, and financial security.

I do expect to get the same amount of grief for this list as my previous list, possibly more. But hey, I am willing to agree to disagree with everyone who say that I am wrong for my processes. Or at the very least the ones who say that I am misguided in how I approach investing.

First and foremost, I have established the fact that I am LAZY in my previous post. Really, really lazy! Investing in Real estate for me is a passion. I choose to follow my passion at my wildest and mildest whims. There are days when I eat, sleep, and breath property data; and days that it is a pariah. The question becomes, why do I call myself lazy?

Like the rest of the world, I want everything given to me on a silver platter, with seconds ready to go at the snap of my finger. But like the 99.99% of the inhabitants of the world, I realize this will never happen for me. My ultimate goal is to get as close to this accomplishment with as little effort as possible. It's like my wife on laundry day. Fresh, clean clothes are dumped on the bed. Her expectation is for the rest of the family to come sort, fold, and put away the clothes. Does it happen? No, almost 99.99% of the time never. She realizes this, and yet week in and week out she continues to do this in hopes the rest of the family will catch on.

Remember, I am LAZY! Physical labor and I have a mutually understood non-written agreement. We agree that I will make no attempt in engaging physical exertion, and in exchange; it agrees to not make me sweat. Besides who really wants to do "WORK?"

Okay, I have established, I really don't want to work, or be physically (labor) invested. So, ultimately, I will need to be creative in my strategies. Will I do physical labor? Sure, if it smakes me money overall; but I will complain the whole time! Back to creative strategies; what am I talking about?

Creative strategies are not the normal everyday run of the mill investment scenarios. I don't put money down, I don't rehab, and I definitely don't listen to excuses or problems from tenants. So how then, can I invest in sale ready properties, make a profit and generate cash flow?

RT (not naming names, initials yes), you caught me! There is no such thing as zero risk, but I can and have minimized my risks to the point that it takes me 30 years to suffer a loss. Given a 3% inflationary rate and an investment of x dollars on any properties that fall within my criteria; I don't hit negative until year 30. This also includes investing in a market that averages 2.65% property tax rates. This includes all routine maintenance as well. If we include insurance, it would knock it down by 5 years. But once again, I could care less if the property burns to the ground, gets flattened by tornados, or even experiences droughts.

Sorry to disappoint everyone, my strategies actually exclude properties with buildings on them. So for the five others who commented on my 5 reasons, hello! No buildings involved, not a single one to rent, repair, rehab, have managed, or keep in code. I can see the puzzled looks now. VACANT CLEARED RAW LAND.

This leads me to my reasons why I do not Buy & Hold REI Property.

1) I can get cash flow from OIL & GAS Royalties, Water, Air, Storage, Carbon Credits and Hunting Leases. No destruction of buildings equal no repairs. Oil, gas, and water you have to have large quantities to pay off. Over time, you will accrue a large enough quantity to negate the naysayers. Soon to come into play, carbon credits, thanks to the tree hugging hippies! There is a difference between stupidity and conservationism! (THH don't get it) I know what your thinking about storage; what about EPA regulations, zoning, and ordinances? Due diligence plays a big role in this area. If not done properly, it can cost you your potential cash flow, even more.

2) Appreciation, like all other real estate; over time property values increase. Even the sand dunes of Southern California are worth something to someone at some time. This is why it takes 30 years for me to hit zero profit. The average property doubles in value every twenty years. Besides, I have zero desire to hold a property that long.

3) Very low entry points. Single city lots can sell for as little as $100.00. I have said this before, I will say it again. Realistically, $1000.00 should be enough to start with if you can't find a deal for $100.00. Also, think outside the box in trying to acquiring property. Have you contacted a funeral home lately? In Texas, Funeral Home Liens take priority over Property Tax Liens; get the picture? Buy the lien, and offer to buy out the current owner or foreclose.

4) Creative Owner Financing: Like I have said before, I will do physical labor in order to make money overall, even though I am LAZY. And believe me when I tell you this. My idea of physical labor is sitting on a riding lawnmower listening to the latest a Pearl Jam or Eminem song, while mowing. Why not sell a property at full market value, and instead of a loan or contract for deed; use a contract for services.

Example, if I have a vacant lot that I paid $1000.00 for, and want to "owner finance" for $5000 at 9% APR. Give them the lot, and contract physical services! Why not calculate the down payment for services to be 20% ($1000, covers my costs of the lot) and show up every two weeks and collect $50 to mow under contract for five years. They fail to pay, file a mechanics lien and either foreclose on the lien or wait until they go to sell. Then you'll get paid by the title company to clear the title. Where in Dodd-Frank does it say anything about contracts for services? This is where a good attorney comes handy and worth the $400-$500 retainer fee, and they can protect you from bankruptcy.

5) High Returns on Investments: My atypical $1000 investment will return a cash on cash average of 200%. That means for every $1000 I put in, I am getting $3000 when the property is sold. So how fast can I do this, or better yet; how often? To date my longest holding period has been 18 months. Which averages the monthly rate of return to just over 12% per month. Investing in 1 property a month is like having a minimum wage job. Investing in one property a week (52 per year) is like having a 100k a year career.

6) Bonus: I Pay Taxes! Why wait, shuffle money and try and skirt paying income taxes? I actually like having nice roads to drive on, Police and Fire Fighters to call. I especially appreciate our under paid service men and women who voluntarily lay their lives on the line to protect us (investors) from those who wish to make it so we can no longer do what we do. I like having the ability to get/give help without putting my name down if I don't need to. I like having fresh running water. I think I'll stop because I could fill up a book on this topic.

Now my disclaimer:

I have set criteria I work by, month in and month out. None of my criteria involve land with a building on it at all. The properties I consider must meet the criteria I have set in place to even be considered. If a property does not meet all my criteria, the returns may not be atypical. I do practice due diligence during my selection process, in order to maximize my returns, and mitigate my risks. Creative financing strategies vary on a case by case basis, I have only give the one above as an example; consult a local attorney before employing this type of strategy, as there are tax and legal liabilities involved.