All Forum Posts by: David Nolan

Not understanding what drives the market. Consequently not knowing if they are buying in a high market that is about to have a downturn or missing a low priced market that is about to rise. Understanding market forces helps when it comes time to plan your exit strategy and when and how you will make money on any individual deal. These activities are done at the front end of a deal not at the back end. The old saying, "you make your money when you buy" is based on this fact, among other things. So understand your market and what drives it.

@Nicholas B. One other way to consider leverage is to consider what you could do with cash if it costs you 4.5% per annum. How much can you earn on the money? Could you earn 6% per annum, 10% per annum, 20% per annum? The way you leverage assets is about being able to borrow as much money as your risk profile will permit you and then use it to make as much money as you can.

Given the vast number of alternative ways to make money in RE the key becomes how much can I borrow and can I earn more than the cost of the money. If you could earn a solid 10% on a deal, whatever that deal looks like and the money costs you 4.5% then you would, in simple terms, make 5.5% on other people's money. Long term wealth is not made just by holding property for ever and a day. It is by making money work for you, especially if it is other people's money. Why do you think HML's lend money instead of doing their own projects? Because they can buy money for 4.5% or less and put it to work for 10%, 11% or 12% all within a risk profile that suits them. They are not relying on the market growing to make money, they lock it in at the beginning of their deals.

If you find a good deal then use leverage to optimise your return, but always stay within your personal risk profile to reduce the risk of stress.

@Kyle Bigger Your challenge is coming from something you perceive that is making you feel unworthy. It is not how you run your business that is the problem here. You appear to be running it as an honorable, ethical individual. The problem is one that is common to many people when they start to enjoy a level of success beyond their comfort zone. Or more importantly, why many fail to have success and that problem is called guilt.

When some individuals get near to a point of success in their lives that they are not accustomed they can be prone to self sabotage out of a guilt complex that stems from some time earlier in their life. This is a common event and one that can be dealt with when professional help is sought. This is what may be happening to you. You do not feel worthy of your success. It has nothing really to do with the deals or if people could get more money from some other buyer. It has to do with how you feel about your own success and why you have this underlying guilt complex that is causing you this angst.

My wife works as a personal coach and deals a lot of the time with this kind of thing. Successful business people wanting to disengage from their businesses for one apparent reason or another. On investigation they usually find, with help, that they are carrying some past guilt that sits in their subconscious mind and affects their current actions. These hidden feelings do not surface until we reach a point where we are moving beyond what is our normal comfort level. 

There is nothing wrong with you that cannot be readily fixed. Nothing is ever wrong, it is just that sometimes we are not aware of why we are doing the things we do and unless you have been exposed to these sorts of events and situations you would flounder, as you are , to find an answer. You have the power to change your thoughts around this matter and empower yourself to find the inspiration you appear to have lost, which has not really gone anywhere, it is just struggling with this hidden feeling of guilt.

Over the past 30 years or so I have met many individuals that should have been financially successful. People with great talents and what some might say great opportunities, yet they have failed to create financial independence. Not because they were not skilled enough or in the right place at the right time, but because their real values in life, what we call their highest life priorities, are not being met. I don't mean integrity, honesty, etc as values. I mean what really matters to them as individuals. What is it that gets you out of bed in the morning without any prompting from any outside source. The thing that inspires us as individuals.

Let me give an example. Imagine two people, one who has family as their highest life priority and another person who has money as their highest life priority. These two people work for the same company and do the same job. The boss walks into the workplace and asks who wants to work on Sunday to get a job done and the pay will be double the normal rate. Now, what will likely happen is that the family person will probably decline because Sunday is family time. The money minded person will probably grasp the opportunity with both hands because making money is highest on their values, their highest life priority. 

But doesn't the family person need the money also? Probably yes, but spending time with their family is more important to them than the money. However, the money driven employee may well have a family too. So why are they prepared to give up their family time to make money? Because they probably see how more money can provide a better life for their family. Neither of these situations is wrong nor right. They just are!

Every person on the planet is living by their highest life priorities and the decisions we all make are based on these priorities. If someone wants to sell their property for less than someone else thinks it is worth they are doing so because that action satisfies their highest life priorities, whatever they may be. It is not for you or I to judge that. We need only respect their decision to do what they choose to do for their reasons. Just as we are free to do what we do for our reasons. If you feel that you are taking advantage of them you may in fact be denying them the opportunity to do what they want to do. For their reasons.

Are they ignorant of the real value of the property? Who knows? Are you ignorant of what the sale really means to them in their life with their highest life priorities? Absolutely! We cannot know what other people's highest life priorities are if we do not know them intimately. We can only work to our own set of highest life priorities and trust that the universe will deliver to us whatever we need to meet them. If, as you appear to be doing, you are having a conflict with your inner thoughts about your highest life priorities then the answer may be to seek help from someone who can help you identify what those highest life priorities are now and then you can adjust your thinking to rid yourself of the hidden guilt that is causing you this distress. The guilt comes from doing things that are not in harmony with our innermost highest life priorities and it is our body's mechanism to tell us that we are not in sync.You have the power to change your thinking, no one can do this for you.

I hope you can find the answer. I know it is out there, but it is not giving away your money to those who value it less. Good luck on your journey!

@KJ Miller Real estate investing is a business and as such MUST be treated like one to be successful. Operating a charity is also a business and also must be treated like one. Trying to blend the two together is fraught with so much danger, even for experienced business people and professional real estate investors.

Having a dream to help those that appear less fortunate is admirable and one that I hope you can realise in the future, assuming this is your real passion and not just a fad. People who do great charity work are committed and focused on that. They do whatever they need to do to succeed, just like any successful business person would. In fact @Jay Hinrichs has even mentioned how he dealt with some very tough decisions to stay afloat and he is one of the most experienced real estate investors you are ever likely to come across. His business acumen and experience helped him survive what was one of the most difficult periods in real estate investing history. Based on your lack of knowledge and experience at the present time your dream is just that, a dream.

Start by learning how to make real estate investing a profitable business and make money for you and your family, Do this in markets that afford you the opportunity of a greater potential for succeeding. The lower end of the market is not the place to start. Start where any mistakes you make will not kill off your business, or your desire to learn.

Once you have mastered the real estate business and are making lots of money then you can choose how to best help those less fortunate than you. You may find that housing is not the best way to help. In fact, in many low socioeconomic societies the greatest challenge is lack of education, not poor quality housing. 

Caring for and maintaining a level of cleanliness and having consideration for other people's property is not limited by how much money one earns, but by one's attitude. You can be poor and still be clean and mindful. However, many tenants in poor areas do not care very much about the property or its appearance. Hence the problems with trying to make money form these types of properties. There are many stories here on BP of people who do succeed in these markets, but one thing most of them have in common is the owner/investor hand picks the tenant. They want people who care. @Bill Thompson suggests he chooses people like teachers, court officers, landscapers etc. People who have some form of decent education and responsible employment. He is on the right track.

Ghettos are not caused by the buildings within them, they are caused by the people and their life choices. Buildings become derelict through neglect and vandalism, not from caring and maintenance. It's the people neglecting them and mistreating them that causes the problem, not the building itself. When gentrification occurs in areas that were once ghettos it was not the buildings that changed, it was the people and their attitudes towards their environment. Until the people in an area change their attitude to their environment the area will struggle to have any meaningful change. If that means new people moving in, how does that help those who have to move out? Do you want to help the people or change the neighbourhood?

You may one day be able to help revitalise an area and that would be great but until then go out and learn all you can about making money and creating wealth and then do something awesome!

@Dan D. Investing in real estate is a business and as such you would be wise to write a business plan with emphasis on the SWOT analysis part. If you do this you will discover what, where, how and when to buy investments that suit your business plan. Most people who fail in business do not plan to fail, they fail to plan.

Your questions can all be answered by you learning more about what real estate investing really is. The financial aspects, the taxation aspects, the capital value aspects, the market demand aspects and how markets function. Where in the property cycle are your potential properties located for example?

You can get all the answers you need here on BP, so spend more time learning and you will discover more than you might think.

Following the plans of someone else is not necessarily a good thing. If your friend is making money doing low cash deals then it should mean that they are investing in line with their business plan, which may not look anything like your business plan. What is it you are investing for? Why are you going to do it? What are your goals and objectives?

Starting out with $200,000.00 in cash is a great way to start, provided you get more knowledge and access some support from more experienced operators. That amount of capital can go a long way to helping you create financial independence, but it can also go a long way away from you if you choose the wrong deals.

Listen to some of the wise words already mentioned in this thread, especially from people like @Jay Hinrichs who have done more deals than most. He knows what he is talking about.

Good luck on your journey!

Change...what change?

The site is still full of great advice, open comments, valuable information and a good smattering of talented individuals...and others.

Oh, you mean the look and feel of the site. Nice work!

@Greg Pagh you are never too old to live life. I am 60 and just about to expand my investing from Australia into the USA. Heading for my third visit in January to do more deals. I love it!

Also get to share my knowledge and experience with some younger investors.

Lots of fun ahead.

Go and do it and enjoy the journey!

@Danielle Cage I would suggest that when you negotiate your operating agreement imagine, if you can, that it has all gone wrong and you need to break up the pieces of the business. Just like a divorce situation in a marriage. From my experience as an ex financial planner, having dealt with many family related partnerships and business ventures, it is better to work out the divorce process before the event when you are all still friends than after the event when you are potential enemies. Especially if it is family involved.

When we have family involved in business we tend to be less demanding of our own rights because they would not take advantage of us, they are family and we love each other...right! However, that's what many divorced people said before their spouse tried to take them to the cleaners.

You will  also need to consider the events of death or permanent disability of one or more of the owners/partners. What is going to happen, when will it happen, who is going to manage it and what will it cost? These are all questions your advisers should be able to help you all understand and to then develop a plan to deal with these types of events in your operating agreement.

Take your time and do not skimp on the set up costs. It is important to all of you that you get it right.

Good luck with your venture and I wish you well in your endeavours.

Happy investing!

Does BP now stand for Better Pecks?

@Derek Parsons Hi Derek and welcome to BP. Starting out is a challenge and is best done by doing some joint ventures with experienced operators who can guide you and teach you whilst keeping you out of trouble. There are many experienced investors here on BP who will do a joint venture with you. They would be the best place to start learning.

One of the main reasons for doing this is to help you learn the business with a minimum of risk. That does not mean no risk, but if you select a joint venture partner who has a record of success who is prepared to help teach you along the way you get the best of it all. You get to invest in better quality deals, because they will  be more valuable, or at least they should be, you get to learn in real time from a professional and you get to make money in the process.

You mentioned you had student loans that were being paid off. That is great for you, but imagine being a student and getting paid! If you choose the right partner you can in effect get paid to learn. At least you will mitigate some of the risks associated with investing in property and all along the way you can keep learning from all the great content here on BP.

Lots of newbies make the mistake of thinking that just because they can read a book or watch a video or podcast that they can comprehend what is really involved in property investing. The better solution is to partner up on individual deals with people who know what they are doing.

Good luck on your journey and happy investing!