A Helpful Lesson From Experience
Hindsight is a powerful thing, many of life's lessons take a lifetime to learn and we all have these nuggets of experience. We can look back and clearly see what was important and what was not. What we might do different and what was rather meaningless. A career in real estate investing is the antithesis of this. The market cycle and day-to-day facts on ground are changing constantly and hour by hour if your fixated to the financial news. There are so many factors to consider if you want to get it "Just Right". Many would-be investors never feel fully prepared because market conditions are always changing.
Mom and pop investors like myself tend to look for 3 things generally.
Positive Cashflow, Getting A Great Deal, and Positive Buying Outlook
The problem with this concept it's not how it works. The market will occasionally swing into this goldilocks territory, however in general it gyrates between positive and negative sentiment, rising and falling prices, buyers’, or sellers’ market. If you are TRADING or FLIPPING, these conditions matter a great deal. For Get Rich Slowly investors it simply doesn't factor in when the game is fully played out and you own real estate free and clear that you put 20% down 20 years ago and is now fully paid off giving you a significant cash flow monthly. If you own a few of these you can consider yourself financially free where your life's expenses are paid for and your nest egg is growing and compounding, benefiting and potentially changing your life and those you love including the next generation. Most successful investors tell me they continue to invest for their children or grandchildren because they see it working.
So Why Do We Want It All Now ?
I spoke to an investor recently who loved a house we were selling at a genuinely massive discount from verifiable prices today, taking advantage of some market fear however because interest rates are circa 6% to 6.5% his cashflow was limited. Even though there was 60K equity in it. What if I said you must choose between “Getting a Deal” and Cash Flow? Would you prefer $350 per month cash flow on a $250,000 home or a $60,000 discount but minimal cash flow? The answer is we take them both.
For the Past Few Years, We Got the Cash Flow But Not the Deal. Today You Can get the Discount But Not the Elevated Cashflow.
The truth is, different market cycles will give you different opportunities. The market cycle right now in my view is a "discount opportunity" so when your favorite podcast host tells you it’s a good time to buy that’s why. They can get a deal right now but the cash flow is lower. In time cashflow will self-correct with inflation and increased rental payments. This is what committed investors are doing right now. Getting deals done today with nice discounts with the knowledge that higher cash flow will follow. We are focused right now on getting discounts and cash flow opportunity to our investors in equal measure.
Finally Let me Share an Observation About Owning a Real Estate Portfolio.
The overall value and equity will fluctuate. Your net worth / equity will go up and down and for most investors this is somewhat academic as they are not selling, it’s nice to see a higher net worth but doesn't change much for most experienced investors. They anticipate this.
Rents and passive income are much more “sticky”; they rarely decrease, and this is the most important and impactful component and the holy grail of Real Estate Investing. Cashflow funds your life and annual expenses and is the essence of freedom. Financial freedom gives us options and relieves financial anxiety. It takes years of ownership before cashflow can exceed your expenses so buy now, buy enough, and nurture your portfolio. One day in the future you will be glad you did.
Few Long-Term Investors in Hindsight Regretted Buying.
They Do However Regret What They Have Not Bought.
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