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REAL ESTATE I was going into real estate, but...

sveegaard

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I'm currently reading MJs second book, UNSCRIPTED, and I'm working really hard to change my way of thinking.

So...I have until now been very focused on starting with real estate investing - more specifically, buy and rent. A lot of thinking and rationalizing have me come to the conclusion that we could reach financial freedom in 10 years if we invested in RE, buying a new property as frequently as possible. Buildings don't lose all their value overnight, and it really cannot get any lower than the plot itself. And risks can be significantly reduced with proper research of the area, tenant screening, and buying well below market value. I'm a researcher, so I figured I could do better research than most.

But I'm having second thoughts, despite I have a really good property on hand. I'm not sure about my WHY - single-family homes with a garden are hot on the renting market in my area right now, and there are few out there for rent. Recent laws have made it more difficult to buy a home, so many would choose to rent. At least until they have the payout.
I do realize that I could be in a position to help families to live in single-family homes with a garden. But man, it's a difficult feeling when I have a passion to become free and help pay off my sister's debt when I'm not sure if I am passionate about fixing up properties for rent. But hey, "Love what you do" does not necessarily mean I have to love it.

Does anyone recognize my position? Perhaps it doesn't help that I suffer from imposter syndrome :happy:
 

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JAJT

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Ever consider rent to own?

It's a more difficult and involved process but you'd be helping people out and making more profit at the same time. It also gives you an active role instead of a passive role since you're constantly turning over properties. If you ever wanted out - just let the current deal expire.

Helping people get back on their feet while also being paid properly for this, in addition to offloading 100% of the maintenance of the property to the new owner sounds like a perfect mix of a strong "why" (helping others) and entrepreneurship (active role, higher profits).

I'm no expert but I was seriously considering this strategy before I picked up a buy and hold rental that was too good to pass up.
 
OP
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sveegaard

New Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Jul 21, 2019
13
6
15
Ever consider rent to own?

It's a more difficult and involved process but you'd be helping people out and making more profit at the same time. It also gives you an active role instead of a passive role since you're constantly turning over properties. If you ever wanted out - just let the current deal expire.

Helping people get back on their feet while also being paid properly for this, in addition to offloading 100% of the maintenance of the property to the new owner sounds like a perfect mix of a strong "why" (helping others) and entrepreneurship (active role, higher profits).

I'm no expert but I was seriously considering this strategy before I picked up a buy and hold rental that was too good to pass up.
I've thought about it. It might be an option to do that.

I've given it a little thought, and it might be viable to buy properties to rent, then sell them as an investment property to investors. The market seems hot right now, so I might as well sell shovels...

Anyhow, I think my greatest hurdle is that I change focus all the time. I know that rental properties can be very passive, and that I could make it as my fastlane (though it may be better for maintaining wealth rather than create it?).

Do you have any have any experience about exactly how passive it is when a property is up and running? Rental property may be a way to maintain the value of my money (and give a little cash flow), while I get to work on another project.
 

fluffhead

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I've ran into this issue time and time again. My why has consistently not been strong enough to overcome the excuses that came up in my mind.

That all changed when I got married. Taking of for my Honeymoon was a PAIN IN MY A*S. My Honeymoon was beyond amazing and made me really realize just how much I value my time with my significant other, and in the future my children. I found my why. My why is to have the flexibility to do as I please and be able to spend time with those that I care about most without having to give up earnings potential.

The way for me to accomplish that is REAL ESTATE. The skills that I've developed at work as well as my interests lie in valuing assets and forming key relationships, and these skills can be directly applied to buy-and-hold real estate.

I know @MJ DeMarco isn't ecstatic about Real Estate (to be honest, I don't remember his reasoning), but for me its my Fastlane. I can easily outsource Property Management, rehab work, etc. for a cost and be SOMEWHAT hands off. Its scalable if you follow certain strategies.

You just have to be careful, run your numbers 1000 different ways to "stress" the model and buy right. Assuming you can do all of these things, you should be able to scale and reach your goal. I just started this year and can tell you that I'm eyeing 5-years from now to be financially free.
 

MJ DeMarco

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I know @MJ DeMarco isn't ecstatic about Real Estate (to be honest, I don't remember his reasoning), but for me its my Fastlane.
I don't have an issue with RE, it just isn't my cup of tea as a I prefer more control and scale. Because I don't have interest in multi-family RE, the scale aspect is somewhat diminished. And yes, I've owned rental real estate . During that period, I found the returns and supposed passivity more hassle than it was worth, and that was with cash flowing property for years. This was just my experience, other folks on this board have done extremely well with RE and made it their Fastlane.
 

fluffhead

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Wow! That was the @MJ DeMarco endorsement that I needed :smile2:.

I don't have an issue with RE, it just isn't my cup of tea as a I prefer more control and scale. Because I don't have interest in multi-family RE, the scale aspect is somewhat diminished. And yes, I've owned rental real estate . During that period, I found the returns and supposed passivity more hassle than it was worth, and that was with cash flowing property for years. This was just my experience, other folks on this board have done extremely well with RE and made it their Fastlane.
 

Michael Burgess

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I'm slowly chipping away at using real estate as my Fastlane - I'm pretty involved with a strong network of people in Ontario that focus on real estate (flips, multi-family rentals, new development, etc) and I've seen a good number of people *absolutely kill it* in relatively short periods of time. I mean massive net worth improvements, and strong cash flow in the process.

I have one friend with 33 units in one city right now - he and his girlfriend have been travelling the States in their custom built camper van for a couple of months doing as they please, and he's probably grossing about $25K / month and clearing $10K+. He's not "100% passive" in the way you would be with a GIC - he still manages contractors and property managers from his phone while gone, but he has good systems and people in place to make it run pretty well without crazy involvement. He's probably in a position where he works 10-20 hours a week managing his portfolio, but makes 6 figures a year in cashflow (not to mention principal reduction on mortgages, or appreciation). I intend to follow a similar path to a point where I have ~$10K / month in "passive" cashflow, and then focus on the REALLY big stuff when I have time and money off of my mind.

The biggest successes I've personally seen in real estate utilize the "BRRRR" strategy as one of their primary tools - it stands for "Buy, Rehab, Rent, Refinance, Repeat"; you can find great articles and videos about it online, but the gist is this:

1) Buy a run-down multifamily property, ideally beneath fair market value
2) Perform strategic renovations (kitchen, flooring, paint, etc) to improve the building
3) Rent the units to better tenants, at a higher rate, increasing the total income for the building
4) Refinance your building through a financial institution that values it based on condition of the building and rental income - this can allow you to pay off the previous mortgage and renovation money (if borrowed), and potentially even give you a big paycheck. You could then use these funds as a down payment on another property, which leads to...
5) Repeat - maybe your first deal is a duplex, then a triplex, 4plex, and so forth and so on..

----

All of this isn't to paint real estate as the holy grail - I've personally cleaned out units with used heroin needles, human feces, dealt with fire issues, had lenders fall through at the last minute leaving me sleepless thinking I was going to get sued, and on and on - and I'm not even deep into the game! That said, I love how tangible real estate is, and I think there's a world of opportunity in the game if you're smart and work hard.

Good luck!
 
OP
OP
S

sveegaard

New Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Jul 21, 2019
13
6
15
I'm slowly chipping away at using real estate as my Fastlane - I'm pretty involved with a strong network of people in Ontario that focus on real estate (flips, multi-family rentals, new development, etc) and I've seen a good number of people *absolutely kill it* in relatively short periods of time. I mean massive net worth improvements, and strong cash flow in the process.

I have one friend with 33 units in one city right now - he and his girlfriend have been travelling the States in their custom built camper van for a couple of months doing as they please, and he's probably grossing about $25K / month and clearing $10K+. He's not "100% passive" in the way you would be with a GIC - he still manages contractors and property managers from his phone while gone, but he has good systems and people in place to make it run pretty well without crazy involvement. He's probably in a position where he works 10-20 hours a week managing his portfolio, but makes 6 figures a year in cashflow (not to mention principal reduction on mortgages, or appreciation). I intend to follow a similar path to a point where I have ~$10K / month in "passive" cashflow, and then focus on the REALLY big stuff when I have time and money off of my mind.

The biggest successes I've personally seen in real estate utilize the "BRRRR" strategy as one of their primary tools - it stands for "Buy, Rehab, Rent, Refinance, Repeat"; you can find great articles and videos about it online, but the gist is this:

1) Buy a run-down multifamily property, ideally beneath fair market value
2) Perform strategic renovations (kitchen, flooring, paint, etc) to improve the building
3) Rent the units to better tenants, at a higher rate, increasing the total income for the building
4) Refinance your building through a financial institution that values it based on condition of the building and rental income - this can allow you to pay off the previous mortgage and renovation money (if borrowed), and potentially even give you a big paycheck. You could then use these funds as a down payment on another property, which leads to...
5) Repeat - maybe your first deal is a duplex, then a triplex, 4plex, and so forth and so on..

----

All of this isn't to paint real estate as the holy grail - I've personally cleaned out units with used heroin needles, human feces, dealt with fire issues, had lenders fall through at the last minute leaving me sleepless thinking I was going to get sued, and on and on - and I'm not even deep into the game! That said, I love how tangible real estate is, and I think there's a world of opportunity in the game if you're smart and work hard.

Good luck!
Awesome thanks!

I'd definitely consider BRRRR. But maybe in these times where ("they" say) a new financial crisis is underway, I'd sell to investors with a profit instead of refinancing. With the first house I have in mind, I'd probably make 6-7 years worth of net rental income by selling to other real estate rental investors.

Also thanks @MJ DeMarco for chipping in!
 

Michael Burgess

Bronze Contributor
Speedway Pass
Sep 30, 2014
119
336
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Ontario, Canada
Awesome thanks!

I'd definitely consider BRRRR. But maybe in these times where ("they" say) a new financial crisis is underway, I'd sell to investors with a profit instead of refinancing. With the first house I have in mind, I'd probably make 6-7 years worth of net rental income by selling to other real estate rental investors.

Also thanks @MJ DeMarco for chipping in!
Flipping can be a good way to create short term cash to work with, but comes with disadvantages as well. Once you sell the asset, that's it - no more income. To continue building capital you have to repeat the flipping process many times. With BRRRR, everry month that passes you become a little bit wealthier with cashflow, mortgage principal paydown, and appreciation if you bought it right.

I know one investor that does 2-3 flips for every buy and hold he does, and he's happy with that strategy.

I've seen flipping go bad too though - buildings with huge problems that weren't anticipated, the town / city making permits a pain in the a$$, contractors that take money and don't deliver results, contractors that take much longer than agreed upon, or getting 70% of the way to your finish line and running out of cash. Problems like these can be pretty common, and even experienced flippers probably won't tell you things always run smoothly.

The reason buy and holds seem more attractive to me, is that there's more fudge room for things to go wrong. You tend to have stable income to help tackle problems, and can better estimate what issues might arise if you're familiar with your own building.

Remember - you only lose money when property values drop *IF* you sell! If you hang onto it because it's producing positive cashflow, and ride the storm out, recessions matter a lot less.
 

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