Finding my Real Estate Investor Voice

In writing classes they talk about "finding your voice." Once you settle into your groove in writing from a certain perspective, your writing process will come more easily (or so they say).

Since beginning this journey in May 2016, less than six short months ago, I've discovered what I think is my Real Estate Investor "Voice."  For me this means narrowing down what I am focusing on, and what my goals are, trusting my gut and ultimately, sleeping better at night.   

Like most investors, the factors that shape my approach existed before I even started:

Age and Career position: I'm 46, mid-career as an Attorney.  I'm looking for ways to supplement my retirement income at minimum, and if I'm dreaming big I'll retire a little earlier than planned.  I am not looking to quit my job so I am not searching for the 2% deals with crazy cash flow right away.   I have a long range plan to get good returns (15%+ Cash on Cash is my current goal), while building equity, snowball the investments so that in 15 years many will be paid off and I can retire comfortably.  

Time:  See above - I have a full time job.   Plus I have 3 small kids. I don't have time to be rehabbing houses myself or doing much work on properties.  I can manage a property or two myself right now.  Maybe more if I am efficient.  

Cash to Invest:  This whole real estate adventure began when I started looking for a smart place to invest about 200k.     Little did I know at the time how awesome the power of the cash offer is.  This is how I won my first great deal - a 3 unit with 18% Cash on Cash.   This is what led me to biggerpockets.com, which led me to refinancing my all cash 3 unit and looking for the next 2-3 deals, and ultimately starting this real estate investing adventure.

All of this taken together, plus viewing and analyzing dozens of deals over this first six month period has focused the market for me considerably in the following ways:

1.   Crazy good cash on cash happens for a reason - know which reasons are good for you.    For me, if a deal looks too good to be true, it probably is (but not all of the time).   I've viewed a dozen properties with 30 to 80% cash on cash, but once I stepped foot in the door I knew it was not for me.   Bad neighborhoods, extreme deferred maintenance, problem tenants.   As mentioned, I'm a 40-something Mom, with a full time job.  As cool as it sounds, I'm not into rolling up my sleeves for anything other than a school project or a bake sale at this point in my life.   If I were 25 or 30? I'd be all over that.   But now, not so much.      So although I may some day be interesting in rehabs on some rough properties, I can never see myself doing walk-throughs or tenant interviews in bad neighborhoods.  So I quickly ruled out bad neighborhoods, trouble buildings, rehabs etc. Even if it meant "crazy good cash on cash."    Those 2% deals Brendan talks about?  Not for me.  This lawyer-mom is not playing in that arena.   My arena is turn key, fully rented, immediate cash flow properties in the Class B or higher building category.   This usually looks like a 1% deal in my region.

2.   I want to make at least 15% cash on cash.   After recovering from the shock and depression from touring the 80% cash on cash deals, I overcompensated by looking in higher end markets.   I viewed some safe investments that would break even.  I viewed some very nice properties that would make 4 or 6%.   But I am a conservative investor - I need to sleep at night.   My husband wrote me a program to quickly calculate COC, cash flow, ROI, etc.   I conservatively factored in everything, and I mean EVERYTHING.  No hand-waving around CapEx, repairs or vacancy.  I even factored in Management fees.   But in the end, when I looked at a 4% Cash on Cash for a "nice safe property" it just didn't feel worth it.  AND, if something went wrong, that margin was not enough of a buffer for me.   If I put that same cash in the stock market I might do as well or better, for doing absolutely nothing.  Sure there's building equity, maybe appreciation, but for 4% I would actually rather click refresh on a brokerage account than deal with the work of an investment property and the headaches and sleepless nights a money losing property would provide.    

And my first deal always taunted me - the one making 18% COC.  How can I take 4% COC if there's another 18% deal out there? 

Low and behold, a 16%+ COC deal popped up on the MLS, in a nice area, with solid tenants:  In my comfort zone.   I knew it was a rare event so I had to pounce on that deal.   The seller was moving out of state, priced it right and there were competitive bids.  At this point I had lost on a few previous deals.  We did not want to get into a bidding war so we waived the inspection to sweeten the offer. I don't recommend this to anyone, but we've owned a 100 year old home for years, we've seen many similar structures and we knew an inspection waiver just might trump a cash deal or a better offer.  And it did.     

3.  No Single Family Homes - I'm looking for Multis only - preferably 3 or more units.  Although I am not living on my cash flow, I don't want to lose money.  I need to sleep at night.   This is meant to earn money, not create a headache or lose us money.   Something about vacancies scares the heck out of me. So for me, I need it to be 3 units or more.  This way, with the numbers I'm aiming for, a vacancy will hurt but it won't mean I'm going negative.  

4.  Finding my Unicorns on the MLS.    Ultimately in the last six months I've narrowed down my hunt to 3+ Multis, Good rentable location, Turnkey, 15% or more COC.    This sounds like a Unicorn but I've found 2 unicorns in six months so there's hope of more.   They are properties being sold by smart real estate investors who have run good properties, and are ready to sell and they price them accordingly.    The only downside is that if you are in a competitive area, other investors will see the deal and you'll likely end up in a competitive bidding situation.   I am not ready to do mailings, cold calling etc.  For the time being that is outside my comfort zone.  My first property closed in July, the second will close in December.   (And one unmentionable 2 Unit we purchased in August, but I'll save for another blog post).   The Unicorn MLS Hunt approach is a good pace for me so I'll stick to it for now.