real estate fastlane?

[onmyway]

what are some examples of an investor in the fastlane vs slowlane in real estate? I dont really know to much about the whole real estate ordeal, but I know I'm going to get in it.

 

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[BuffaloBill]

As a start: Knowledge

I used to spend my time evaluating properties, any properties. I would gather as much info on any investment property listed. If i did not have all the info I would just make some of it up. It did not matter. Then I would run the numbers. Cash flow, return, cap rates, return on equity, etc. This would give me a valu, as well as a target purchase price. Real estate is a numbers game, and the numbers don't lie.

My first properties were slowlane. I purchased with emotion, confusion, fear, etc.

Now my properties are fastlane. I purchase with knowledge!

 

[LondonLife]

I consider real estate to be slow lane the majority of the time.

Most peoples opinion of real estate:
Mortgage a property to the hilt, rent it out for 25 years, hope to just about cover the mortgage and getting a 'free' house at the end of it. Or even worst, paying interest only mortgage payments and expecting the value to rise significantly above the mortgage level, and expecting to cash out. This isn't fastlane, especially not since 2007. Given in the UK buy-to-let mortgage market is suffering and owners are bleeding money away... it's certainly not fastlane to most hoping for a return on their investment. And getting mortgages on multiple properties is practically impossible these days. The days of 10% per annum growth on property has been desimated over the past couple of years.

Now I'm not saying it's bad. If you get into property development returns can be good, and more of a fastlane ideal. Especially if you can combine it with expected gentrification of an area and/or bulk buying for a discount. This is where the knowledge BuffaloBill mentioned comes in, and can get you out of the slowlane.

Personally I own an apartment block which I own outright. It follows all the rules above, apart from the area which was already good. I got the whole building in bulk and am currently refurbing it. I still don't consider it massively fastlane though. I purchased them as a safe investment and as a source of consistant passive income (paper assets are great, but don't pay for things). £400,000 a year passive income will be better than any savings account (Plus banks aren't indestructable and have lost billions when they've gone bust, which can't be recovered... my RE is part of my spread to minimise the risks of such things). Any incease in value above inflation in the long term is pure speculation, but should never be assumed... it's nice if it happens, but if you are counting on it, you could be disappointed, or find yourself in serious debt.

 

[andviv]

Now my properties are fastlane. I purchase with knowledge!

OK, we MUST hear more about this....

I consider real estate to be slow lane the majority of the time.

Personally I own an apartment block which I own outright.

And we also MUST hear more about this...

 

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[LondonLife]

And we also MUST hear more about this...

Check out my success story for the ongoing tribulation of me blowing a £5.4m wad on a knackered old apartment building.

Live updates as it happens.

 

[sswift]

blowing a £5.4m wad on a knackered old apartment

ouch! :shruggie:

 

[Cat Man Du]

ouch! :shruggie:

Ahhhhhhhhhhhhhhh, but don't you know that we are artesians. A sows ear into a silk purse..........that's OUR FUN! :smx6:

 

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[LondonLife]

ouch! :shruggie:

The whole building of 12 apartments, not just one apartment!

Though £5.4m can get you surprisingly little with places like this on the market: 3 Bedroom Apartment For Sale

 

[Smooth]

Not familiar with real estate, but if I had to guess, it'd be the difference between decisiveness, leverage and a bit of luck.

 

[BuffaloBill]

Ok andviv, here goes. To me Fastlane is a state of mind, not how many millions I have (although I can see million #1 in sight!) I have only had this mindset for the past 4 years or so. I had a good job, nice house and did everything like I was supposed to, which was everything everyone else did. Not fastlane. Then I found myself divorced and not really knowing what to do. I still had a good job, but realized this was my opportunity to make the change in my life that I needed.

I was always interested in real estate but was married to someone who was not. The typical "its to risky" . Now I had some cash in hand from the divorce and went out and purchased 4 duplex homes as a package deal. This was when financing was easy so that was no problem. This was the start of Fastlane to me because now I had to learn how to manage them, I had to learn leases and marketing, I had to do repairs (easy for me, I'm a maintenance manager). Every mistake I made was now multiplied by 4! But I was learning, gaining knowledge to think fastlane.

Then 2 years ago the bottom fell out of the auto industry and I found myself walking a picket line. My plant eventually closed and again I found myself with an opportunity to make a change in my life. One of the keys to success seems to be realizing when a bad situation is really an opportunity. I had a chunk of cash from a severence from the auto company which I plowed right back into real estate. I do have a J O B, but I also have written down on a piece of paper the exact date for which I will be a full time real estate investor.

I am building my portfolio and also partnership on some larger deals. My main contribution to those deals is the maintenance/facilities end of it because that is my specialty. But I am also learning how the larger complexes run.

So for me, fastlane is knowledge. It is knowing I have the confidence and clear understanding of what I am trying to do. It is knowing how to sift through a set back and find the opportunity.

 

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[LagunaLauren]

More power to you, BuffaloBill! I love how you turn a perceived "adversity" into an "opportunity"! That's exactly what it takes to become a millionaire. I'm impressed. Rep Speed +++

 

[BuffaloBill]

Thanks L Lauren! I am truly not afraid of anything!

 

[andviv]

Thanks a lot for sharing. Rep++'

I think you should start a thread with your story, a lot of knowledge in here that could be used by many others.

Thanks again for sharing.

 

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[Cat Man Du]

More power to you, BuffaloBill! I love how you turn a perceived "adversity" into an "opportunity"! That's exactly what it takes to become a millionaire. I'm impressed. Rep Speed +++

Yeah............I gave him speed for the same reason.....that's WHAT it takes!

 

[LagunaLauren]

In my opinion, slowlane is spending more time trying to save money rather than spending time making money. (I am NOT a coupon-clipper! Nor do I pay attention to the price of gas or food.) Slowlane is being too conservative financially, like paying off your primary residence early, (yes, in the longterm you save money over the life of the loan, but...)

Fastane is calcualted risk, leverage, returns and reinvestment. I remodeled my personal high-end homes and refinanced or sold them every 2-3 years to take the profits and buy even more expensive homes that would yield even greater returns. I did interest-only loans to keep as much cash available and invested in rental income properties on the side. I leveraged the profits from those properties into apartment buildings. I always move up to bigger and better properties and bigger profits. I also use my investment returns for my philanthropic endeavors and my luxuries.

 

[Cat Man Du]

In my opinion, slowlane is spending more time trying to save money rather than spending time making money. (I am NOT a coupon-clipper! Nor do I pay attention to the price of gas or food.) Slowlane is being too conservative financially, like paying off your primary residence early, (yes, in the longterm you save money over the life of the loan, but...)

Fastane is calcualted risk, leverage, returns and reinvestment. I remodeled my personal high-end homes and refinanced or sold them every 2-3 years to take the profits and buy even more expensive homes that would yield even greater returns. I did interest-only loans to keep as much cash available and invested in rental income properties on the side. I leveraged the profits from those properties into apartment buildings. I always move up to bigger and better properties and bigger profits. I also use my investment returns for my philanthropic endeavors and my luxuries.

AMEN.......Bro !

 

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[hatterasguy]

Real estate is a solid way to build up wealth, its just not going to happen in 6 months.

 

[Bilgefisher]

So for me, fastlane is knowledge. It is knowing I have the confidence and clear understanding of what I am trying to do. It is knowing how to sift through a set back and find the opportunity.

You have the right philosophy. The fastlane topic has emerged several times on this forum. Most people believe its wealth or building wealth. They have a lot to learn. The fastlane is providing yourself the life you want to lead in a more efficient manner than society has mandated.

Real Estate is simply one tool, if used correctly, that can provide that life. Many folks in real estate have turned it into a mind numbing, time consuming job that they gain no satisfaction from and which draws them away from what they truly want and what is truly important in life.

Btw: BuffaloBill, you have some good insight, I hope you will continue to post more frequently.

 

[andviv]

Well, the way I see it, there is RE and there is RE.

1. Having one or two SFHs will probably not make you rich in the mid term. Heck, probably not either in the long term.

Having 5 or 10 apartment building complexes generating $50K a month in cashflow is a whole another story.

2. Same idea... rehabbing 2 or 3 properties a year will be a realtively decent income (i.e. job). Controlling an investment group that buys 100 REOs a year to flip them would probably have a great acceleration and will make millions fast if done correctly.

3. Doing a loonie deal a month will give you some extra income.

Owning 5 mobile home parks will probably be a decent cash cow.

4. Owning a 5-bedroom house in Napa valley may give you some equity in the long run.
Owning a 5-bedroom B&B and then buy another with 12-rooms and then another one with 10 rooms being paid by the first one you bought will probably give you a few millions in equity in a few years.

In all cases we were discussing RE, but using the tools differently will provide different results. Leverage of resources and working in different orders of magnitude will provide a huge difference in results in the mid and long term.

And, again, this is simply how I see it.

 

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[kwerner]

I have to agree with Andviv. Other than the second example he used, the underlying theme is that it's possible for commercial RE to be fastlane; residential RE, not.

I'm not sure what MJ's actual definition of fastlane is, but to me fastlane means SCALABILITY and TIME. After reading MJ's old thread on 10 Million in 10 Years, reading the book "What Rich People Know...", and chatting with Bill and others recently, I've come to the conclusion that flipping houses (residential RE) is never going to be fastlane - because it's not scalable. There's never going to be a point in your house flipping career where you can invest $20,000 and earn $300,000+ within a year; a business that's scalable has that potential. If I'm wrong here, and someone can provide an example of how to do this with residential RE, please open my eyes to it.

Now, sure, you can build up chunks of cash by flipping residential houses, but you have to convert that into something that is more scalable / expandable in order to achieve fastlane, in my opinion. That's where I notice most investors moving to commercial at some point.

 

[LesG]

KWerner,

My friend did nothing but SFR. He was buying properties at the "steps".
He was so successful that he had about 15 people + working for him.

About 5 years ago he built his empire I believe to about 25-50 million of OPM.

 

[andviv]

LesG... interest point.

So, how did your friend do it?

Hired 15+ employees and have them go there on behalf of his company and buy the properties? Then what? repair/rehab/fix them and then sell them? Wholesale them as-is?

Did he use private money/hard money lenders to finance his deals?

I am looking for ways to escalate this model into a system that can do tens of thousands per month in profit...

It has been my limiting belief that SFHs were not a decent vehicle to accomplish this...

 

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[phlgirl]

I know a few people who have built serious cash-flow machines (and equity mountains) using single family homes. It is certainly not as common as commercial RE but it may be more common than you think. The people I know are all in their 30s or early 40's - owning anywhere between 150 - 300+ single family homes. They travel the world and the properties are managed (for weeks on end) in their absence.

Financing is key. You must be extremely creative (good market or bad) and move at an accelerated pace.

It's not 'get rich overnight' but it can build significant wealth and cash-flow in less than 10 years - which is fastlane in my mind.

You would need 67 properties, cash-flowing 150 each to reach a net (pre-tax) income of 10,000 per month. Good news is, thanks to your friend depreciation, it is likely taxes won't apply.

 

[snowbank]

It's not 'get rich overnight' but it can build significant wealth and cash-flow in less than 10 years - which is fastlane in my mind.

You would need 67 properties, cash-flowing 150 each to reach a net (pre-tax) income of 10,000 per month.

This is an absolutely insane amount of work in comparison to other avenues that will bring you $10k/month. I could not imagine having a 10 year, 67 house plan.

I'm not saying people shouldn't do real estate if you like real estate. I'm saying that in comparison to other alternatives out there that would be a lot of freaking work/time just to hit $10k/month cashflow.

Something being fastlane or not is all relative. In comparison to a job, a plan like this would be fastlane. In comparison to other opportunities, a 10 year, 67 house plan would be very slow/grueling.

 

[andviv]

I remember looking at the numbers a few years back...

The amount of work to get 50 SFHs cashflowing $200 per unit or, worse, 100 SFHs with $100 per unit, and that looked like crazy.

Back then I decided to look into the multi-family approach. Around that time I met SteveO.

I saw first-hand the amount of work he put into finding and getting a good apartment building and then what it took to made them perform. But still that crazy amount of work seemed less than the other approach and could get you a similar return on your time invested.

Now, what LesG mentioned is very interesting and made me think about a different model... what if you find 25 people that find 4 SFHs for you, manage them, split the cashflow with you, and you end up making $100 per unit for those 100 units?

That model sounds to me very attractive and then can be escalated by simply finding more people that get the properties for you, or the same people simply get you and manage one or two more properties per year. If you can make this work then this system sounds very fastlane to me. [I need to stop defining what fastlane is, that is MJ's job, but let's pretend I know what I am talking about here for a minute]

 

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[phlgirl]

This is an absolutely insane amount of work in comparison to other avenues that will bring you $10k/month. I could not imagine having a 10 year, 67 house plan.

I'm not saying people shouldn't do real estate if you like real estate. I'm saying that in comparison to other alternatives out there that would be a lot of freaking work/time just to hit $10k/month cashflow.

Something being fastlane or not is all relative. In comparison to a job, a plan like this would be fastlane. In comparison to other opportunities, a 10 year, 67 house plan would be very slow/grueling.

Really? Compared to what, for example? Depends on your definition of 'insane amount of work', I suppose. My husband and I bought 40+ in a window of 2.5 years. It was hard work but it was also more fun (and flexible) than any corporate gig I ever had. We traveled a good bit and took the day off, when needed (or wanted). In the same exact period of time, a partnership (comprised of two close friends of ours), in the same city, acquired 125+. Our company had zero employees and theirs had 1 or 2 throughout.

Over a 10 year window, this would be a part-time operation. (roughly one property every other month)

Now, what LesG mentioned is very interesting and made me think about a different model... what if you find 25 people that find 4 SFHs for you, manage them, split the cashflow with you, and you end up making $100 per unit for those 100 units?

This is the KEY. You absolutely MUST have people (or banks) bringing you deals. This business is ALL about relationships. It is not necessary that these people are your employees but they must have incentive to perform for you. The same goes for contractors, property managers, insurance companies, etc. Figure out what motivates each of the key members of your team and make sure you keep them focused. You must be able to manage people and relationships. You must have a SYSTEM/PROCESS. It should be somewhat like an assembly line and all the moving parts know what comes next.

If you can find FINANCING in the current market, this scenario is absolutely doable. We have deals coming across our desk weekly that cash-flow like crazy.

Clearly, it's not the road to wealth for everyone but it is absolutely feasible.

 

[snowbank]

what if you find 25 people that find 4 SFHs for you, manage them, split the cashflow with you, and you end up making $100 per unit for those 100 units?

That model sounds to me very attractive and then can be escalated by simply finding more people that get the properties for you, or the same people simply get you and manage one or two more properties per year. If you can make this work then this system sounds very fastlane to me.

In theory this seems like it saves you a lot of work, but in reality the % of time/effort saved by using a method such as this is not equal to the % of money you lose or give up to scale your business more quickly. It can be +EV obviously if done right, but not as much as it might seem on the surface, at least in regards to getting on the fasttrack initially. I'll explain:

If you have 25 guys finding you 4 properties each, it doesn't mean you are saving the time you would have spent looking for properties. Maybe you will save 10% of that time. Maybe you will save 20% of that time. But you are definitely not going to save anywhere near 50% of that time as you start out with this plan, and I wouldn't be surprised if you are in the negative for time saved.(aka, spending extra time) You would be spending extra time training people to look for deals, finding these people to train to look for deals. It is a scalable process, but it's still a pretty long/grueling process nonetheless.


The plan you mention is also flawed in the sense that you wouldn't have guys agreeing to take 50% of cashflow. These guys need to eat. If you found guys with money to do their own deals and they found the deals too, they would have 0 need for you. So, you would be talking more of a hybrid deal- giving them a fee + % of cashflow, or just a fee.

When dealing with bird dogs or wholesalers your goals are definitely not aligned, so the checks and balances have to be extra thorough. Something I have learned is that a lot of the guys in the business of finding deals, are not in the business of finding great deals, they are in the business of convincing people they have found great deals.

To get to the point where you have 25 guys you know can bring you good deals is not something that will happen quickly. So while I agree this plan is a more scalable model than trying to do 100% of deals yourself, to get to the point where it becomes a scalable model is still a long and grueling process in my opinion. Hiring 25 guys isn't going to multiply the speed of your plan by 25x, or anything close to it. It may even slow your plan down in the initial stages.

 

[snowbank]

Really? Compared to what, for example?

Well, for example a business that solves the needs or wants of a lot of people. With single family houses you are serving needs or wants of people 1 customer at a time, every other month or so, and what you are providing them isn't unique, which means they can get it a lot of other places; which means your margins are always going to be relatively low because someone can always offer cheaper rent to get their property filled, etc... With a business you can serve hundreds, if not thousands of people every day(millions if you are a crazy baller), and if your business is good enough you can have great margins because you can make your business that much better than the competition.

Depends on your definition of 'insane amount of work', I suppose. My husband and I bought 40+ in a window of 2.5 years.

Yes, I would consider that an insane amount of work to build $6kish of monthly cashflow.

Over a 10 year window, this would be a part-time operation. (roughly one property every other month)

The opportunities I'm talking about can be done over a 1 year window, with 1 deal.


Don't get me wrong, I'm not saying real estate is wrong. I think everyone should do what they like doing. A 9-5 isn't wrong if people like doing it. There's just more optimal ways to build money quickly.

Fwiw, with me personally right now I won't consider starting a business unless I think I can have it making 67+ houses worth of cashflow/month within 1 year.($10k+/month) It's just the type of business I'd rather focus on, since it's the best use of my time.

Also, remember with single family houses as opposed to something like a business, or a product, you have 0% chance of hitting a homerun. With a business or product the potential for a homerun is not only factored into your EV, but also gives you an even higher % chance of getting where you want to quickly.

 

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[phlgirl]

In theory this seems like it saves you a lot of work, but in reality the % of time/effort saved by using a method such as this is not equal to the % of money you lose or give up to scale your business more quickly. It can be +EV obviously if done right, but not as much as it might seem on the surface, at least in regards to getting on the fasttrack initially. I'll explain:

If you have 25 guys finding you 4 properties each, it doesn't mean you are saving the time you would have spent looking for properties. Maybe you will save 10% of that time. Maybe you will save 20% of that time. But you are definitely not going to save anywhere near 50% of that time as you start out with this plan, and I wouldn't be surprised if you are in the negative for time saved.(aka, spending extra time) You would be spending extra time training people to look for deals, finding these people to train to look for deals. It is a scalable process, but it's still a pretty long/grueling process nonetheless.

Snowbank - I mean no offense. I think you are a smart guy but is any of this logic based on experience or are we talking pure theory here? How do you know it's 'long and grueling', unless you have done it? Even if you have done it, does that mean that someone else, with good management skills, is not capable of implementing such a solution?

The plan you mention is also flawed in the sense that you wouldn't have guys agreeing to take 50% of cashflow. These guys need to eat. If you found guys with money to do their own deals and they found the deals too, they would have 0 need for you. So, you would be talking more of a hybrid deal- giving them a fee + % of cashflow, or just a fee.

When dealing with bird dogs or wholesalers your goals are definitely not aligned, so the checks and balances have to be extra thorough. Something I have learned is that a lot of the guys in the business of finding deals, are not in the business of finding great deals, they are in the business of convincing people they have found great deals.

To get to the point where you have 25 guys you know can bring you good deals is not something that will happen quickly. So while I agree this plan is a more scalable model than trying to do 100% of deals yourself, to get to the point where it becomes a scalable model is still a long and grueling process in my opinion. Hiring 25 guys isn't going to multiply the speed of your plan by 25x, or anything close to it. It may even slow your plan down in the initial stages.

I certainly would not recommend using 25 resources (too many for one person to manage effectively, in my opinion) but identifying people to scout deals is not that difficult. In some cases, you might be talking about a bank (who desperately wants this stuff off their books)! In another case, you might be working with a sharp wholesaler, who has NO interest in 'buy & hold'. A third scenario is an REO agent - who gets the listing straight from the bank. Most realtors just want to turn as many deals as they can to make a commission.

These people are simply NOT in the same 'MINDSET'. Not everyone wants to be a real estate investor. Not everyone wants a cut of your deal. 95% of people want to make a buck and go home. You will encounter some bad seeds (people trying to sell you crap) - after one or two attempts to clearly reset expectations, if they still don't 'get it', drop them and MOVE ON.

Again, this strategy is not for everyone but it is extremely effective for some. You must be creative, you must build relationships and have the ability to effectively manage people.

 

[phlgirl]

Well, for example a business that solves the needs or wants of a lot of people. With single family houses you are serving needs or wants of people 1 customer at a time, every other month or so, and what you are providing them isn't unique, which means they can get it a lot of other places; which means your margins are always going to be relatively low because someone can always offer cheaper rent to get their property filled, etc... With a business you can serve hundreds, if not thousands of people every day(millions if you are a crazy baller), and if your business is good enough you can have great margins because you can make your business that much better than the competition.

And this does not require a lot of work? Just comes together, presto? 4 hour work week?

Yes, I would consider that an insane amount of work to build $6kish of monthly cashflow.

Fair enough - decent income, not to mention ~ a significant (and growing) equity base. 2.5 years of real effort, which now requires 3-4 hours/wk of our time. It was worth it, to me.

Have you executed any of these businesses which require little work and less that one year to provide 120k+ cash flow? Not being smart..... would just love to hear more about it. Perhaps the poker site does this for you. If so, AWESOME!

Our focus, for building additional cash-flow (fairly quickly), has been on buying an existing business. Seems like the most logical next step for us.

I agree - there are absolutely limitations as to growth, in residential real estate. It depends on what is enough - different for everyone.