Can Real Estate Investing Really Lead to the Good Life?

[JustAskBenWhy]

Great point, Steve...

That's why there are so many people out there who want to be successful with real estate but can't seem to figure it out. Too many people -- for some reason -- don't look at real estate as a business venture. They somehow think real estate is different -- EASIER! -- than owning a business. That's ridiculous. Real estate is a business, no different than any other business. Instead of selling shoes or widgets, your product is land and buildings. To be successful, you need to understand procurement, supply chain, finance, marketing, sales, cash flow management, margins, etc. Just like any other business.

I've been relatively successful in real estate even though I started without *ANY* real estate background or knowledge (hadn't even purchased my own personal residence and could barely change a lightbulb when I started). But, I knew about running/managing a business. And, now that I know both sides (business and real estate), I can honestly say that someone with business knowledge and no real estate knowledge is far more likely to be successful than someone with real estate knowledge but no business knowledge.

In fact, sometimes knowing the industry can be a HINDRANCE. People think that having contractor skills gives them an advantage in the real estate business, but all it does is provide false confidence that they can handle the business side as well. Again, to use the restaurant analogy, the best chefs in the world will rarely open their own restaurants without a BUSINESS partner -- someone who knows the all the other parts of the business that are not about making great food. Making great food is a requirement of a successful restaurant, but no restaurant will be successful without all the other pieces as well.

I have people all the time ask me, "Hey, I want to get into real estate -- what should I study in college to prepare myself." My response is always that they should study business and finance, because that way, they aren't stuck in real estate for the rest of their lives. Once they know how to run a business in general, they'll be able to transfer those skills to many other types of businesses as well. Additionally, when people ask me, "What niche of real estate should I get into?" My response is generally along the lines of, if you understand the business side of things, you'll come to realize that most real estate niches aren't that different. It may be different inventory, assets, finance products, marketing, etc. -- but the business basics behind nearly every type of real estate business (from wholesaling houses to being a hard money lender to repositioning apartment buildings) are practically the same.

I think you should tell them, when they ask what to study, that they shoul study music performance - violin in particular. This way when the doctors tell them they have MS and should plan on spending life unable to move, they can rely on their music skills to enter RE business...

Was that too much...?! lol

 

[jon.a]

Ignore thread function please.

 

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[GuestUser450]

I guess I'm not typical.

Well, no you're not...

But I read @JScott 's "typical" as meaning "stereotypical/slowlane", not what's reasonably attainable for most.

 

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[LTL]

if you can source properties/raise capital

then you won't need to invest in real estate

just facilitate deals and collect a cut....

Even better when this done in commercial RE but that's another story

 

[TheGrind]

Once you reach a point when you have 100 rentals and a property manager, then I'd consider it to be fastlane.

 

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[LTL]

Who is going to give you money to use if you don't have a track record?

I mean raising capital for developers/real estate groups....

 

[csalvato]

That part is all anecdotal based on your personal experience.
I've seen it in real life...not in theory.

Most wholesalers are focused on selling a deal not building a relationship with their investor list
Most wholesalers don't have a reserve requirement to weed out tire kickers
Most wholesalers aren't partnering with charities, law enforcement or even universities/institutes to source deals...
Most wholesalers aren't moving other income vehicles such as Pre-IPOs, financing deals etc....
Most wholesalers don't have former SEC attorneys working with them for maximum compliance....

You get the picture....

Sophisticated buyers and sellers in commercial RE...

It's easy to scale a real estate business and have it run autonomously when you have the proper items in place.
The problem is most people focus on the real estate not the transactions or business itself.
You are right about it being difficult for most people...but most people are linear thinkers with a degree of solipsism



Sounds slow with a high criteria for profit/long liquidation periods

I'll pass but I'm sure those who value security over geometric growth will find it useful

What's your experience in Real Estate?

I know @JScott's, and since you're on the opposite end of the discussion, I am wondering what experiences brought you to this contrarian conclusion...mostly because your opinions fly in the face of the opinion of several other successful real estate investors and wholesalers I have been studying.

Not saying it's wrong, just trying to understand the reasoning and where it's coming from?

 

[csalvato]

All in all I'd rather flip companies than residential homes

What companies have you flipped?

EDIT: Didn't see the brilliant replies posted before this one. @snowbank and @JScott reflet my sentiments a lot better

 

[TonyStark]

Can you make a ton of money in RE? Yes.

Is RE slower than business? Usually much slower, yes. But it's all relative.

I've watched my brother build a real estate empire much faster than I would have thought it could be done. HOWEVER- it's more of a business than just "real estate". + he's busting his a$$ it's not the passive stuff you read about from 'get rich' stuff. He's got systems, teams, a huge network now and is basically hustling 24/7(his phone is blowing up all the time- bankers, wholesalers, employees, contractors, other leads, etc) He's getting the returns he's getting because he couldn't just "outsource" to someone to get the type of deals he's getting. He's not just clicking "buy it now" on houses and collecting checks like a lot of people would want you to believe.

I know of an RE investor in Austin who raised a massive amount of capital, bought up a chunk of prime real estate in Austin, and got filthy rich in his 20s. Like, big money rich. He's one of the only ones I know of that became that level rich through real estate so fast, most other RE guys can get rich, but it's more of a grind it out and the math works out long term so you get rich game. There's nothing wrong with that game at all, it's just usually slower than business success.

I know a lot of guys who start businesses and have made a ton of money very fast, and after the start up phase it's often significantly more passive than RE(referring to biz vs RE as 'wealth growth' not preservation). For example several friends I caught up with recently who raised money and did well with their businesses, are 4-5 years into their business and are basically passive, and are already worth a LOT of money. They already reached the stage where they brought in a CEO to replace them and they can either live the 4 hour workweek, or they can go start another biz and try to build even more wealth. Don't know many RE guys who do it in anywhere near that timeframe.

You're young so it's important you understand that the goal isn't to just make the most amount of money the fastest though. I can tell you from experience that the 4 hour workweek is boring as hell. You can only travel and 'hang out' for so long before you'll want to go back to actually doing something with your life. This is important:



I can't stress this enough. You HAVE to have passion either for what you're doing, OR the end result of what it will bring you. It has to be legit value you're adding, but if you just do something because it supposedly makes more money than something else you'll eat up your life.

The more you like something, the longer you'll stick it out and the better you get. The better you get the better results you'll get, and the cycle continues. Where, if something else could have made more money but you didn't like it as much, you would have made more at the thing that would normally make less.

Why does my brother do well at RE? Because he REALLY likes the stuff he does. He's also really good at it but he's really good at it only because he was in the game long enough to get good at it, and he was only in long enough to get so good at it because he liked it a lot.

If I tried the same style of RE my brother does I wouldn't like it, so I wouldn't make the money he makes from that style of business/RE investing.

And vice versa if he tried some of the stuff I'm into he might not do as well because he wouldn't like it as much, so he wouldn't stick it out to rise above others in the space, and that's where you reap the rewards in any market, not from dabbling in what's theoretically better money than something else, but in rising to the top of a market, which can't be done without sticking it out to be better than others in that market, which usually can't be done without really enjoying what you're doing, or at minimum enjoying the end result of that(usually the former though).

You're 16, so besides that here's what I would tell you:

Find out what you want out of life. It will change in time because you don't know yourself well yet, and even if you don't intend for it to happen you'll subconsciously think you want things because of what you believe others will think of you if you do them, but if you're always as true to yourself as you can be, and you pick a certain route that gives you a chance to have those results that you want in life, and you're doing something you enjoy, you'll be on a good path. A good way to do that is to find people who have been where it is that you want to go. Ignore EVERYONE else.

Example:

If your goal was to become a successful multi family investor, find someone like SteveO and read everything he has ever written, take action and find someone like that who could help guide you along the way.

Someone else may want to teach you RE- have they been where you want to go? Doesn't matter what their website says- have they? If not, IGNORE, and stick to the plan.

The game only gets hard when you complicate things like this- chasing money, taking advice from those who talk about the game but haven't played, doing things you don't like because that's supposedly where the money is, quitting too soon if you're following these rules, etc...

Keep the game simple.

Great post! And hey another fellow Austinite!

 

[Envision]

Sounds like if someone could help solve that problem they would do pretty well for themselves.

When I was in Oklahoma for @Boom s real estate investor weekend there was a speaker who had created and automated a wholesaling business through a web of VA's he spent 3-5 hours per week on his business (signing documents) and he was doing 3-8 deals per month I believe.

The dude was insanely smart and had really nailed down his systems and processes. Its absolutely not easy but was probably one of the most impressive things Ive ever seen someone do/explain.

Edit: just saw @Sauce in the thread - he can vouch for it

 

[Dougema]

Hello @Dbbuzbee I'm sorry i'm not able to give yourself anything on Real Estate now because like you, I'm still trying to figure it all out. However, I think you asked some good questions so I'll be following your thread to check on the replies. Best of luck!

 

[goodguude]

I have accumulated millions through real estate. All it takes is a good plan. There are books that can help.

I started with a 4-plex and a plan...

Hey SteveO,
could you recommend some books about this topics? I planned to read "The Real Estate Game" next.

Thank you.

 

[csalvato]

.

 

[The-J]

[HASHTAG]#notable[/HASHTAG]?

 

[JustAskBenWhy]

Ironically, my poker playing paid for a lot of my real estate!

Hahahah! Tou-che'

 

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[goodguude]

!!!
It took me a few years to develop the business skills that I needed. The initial efforts of calculating cash-on-cash and cap rates gave way to a simple model of estimated cost of purchase and sale. Micro-managing expenses went away and maximizing income moved into the focus. That income was not important to me but the value it added to the property was. The focus went laser sharp on maximizing value for sale.

Everything needed for my business became much more clear once the model was determined.

It seemed that most people coming into the apartment game were very focused on cap rates. All the people making money were buying zero cap rate deals.

May I ask another question?
Did you write about how you got started in this business somewhere? Already searching through your old posts, feeling like some kind of stalker hahaha, but until I've searched through all of them a lot of time will have gone by.

 

[SteveO]

May I ask another question?
Did you write about how you got started in this business somewhere? Already searching through your old posts, feeling like some kind of stalker hahaha, but until I've searched through all of them a lot of time will have gone by.

Yes, it should be in the history about ten times. I can't remember which posts though

 

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[LTL]

This is the equivalent of someone saying "I do internet stuff".

Great insight

I understand what you're saying...I meant, what is your experience? What have you done?

Just curious.

The earlier posts relate to my experience and are pretty self evident, no ?

Again this is all anecdotal ... so it won't apply to residential "real estate investors"
who run around ambulance chasing foreclosures, negotiating with BPO agents,
viewing properties, borrowing hard money only to wait for appreciation to turn a profit.

A lot of these dilettantes got wiped out during the great correction of 2008
when the bubble burst.......

There's nothing fastlane about it due to lack of scale and being so time/capital-intensive


Perhaps if I was a private equity firm buying up entire states of single family homes
with property management in place netting 8 figures plus tax incentives
like Blackstone Group then I'd go for it.

but I'm not that opulent yet and certainly not passionate enough
about real estate development to deal with the assemblage below

• Financing costs
• Holding costs
• Transaction costs
• Transportation costs
• Opportunity costs
• Lost wages
• Price Fluctuations
• Vacancies
• Marketing costs
• Unforeseen costs

My skill/time can yield better returns through other vehicles (see earlier posts)


All in all I'd rather flip companies than residential homes

 

[LTL]

My only guess right now is that you're writing an ebook titled:

How To Write a lot of Words Without Saying Anything

because being passive aggressive has worked so well for thus far ?

Keep going, don't give up on yourself

No.

Feel free to highlight where in your earlier posts where you discussed your experience, but I didn't see it...

If you can't then that's not my fault.... perhaps the poster I responded to will see it

Ahhhh...so, you're talking about things you *think* you know, but you don't really.

That's what I suspected based on the lack of substance in your previous posts in this thread...but, thanks for the verification.

Admittedly I can be recalcitrant but I certainly don't need or require the approval
of any jaded house flipper at this point... but if it restores your self esteem then feel free
to think so.....

Cool, you should start a thread on that...I'm curious about your anecdotal experience in that area as well...

Why ? From your previous posts..it's obvious that with your experience in residential real estate
you'd know absolutely everything...and have verified I have no substance

So maybe there's a thread you can start on commercial Real estate, Pre-IPOs, licensing, client
acquisition and achieving human sigma etc....

 

[LTL]

What companies have you flipped?

EDIT: Didn't see the brilliant replies posted before this one. @snowbank and @JScott reflet my sentiments a lot better

High Value PPC/SEO Services

Remember this post ?

 

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[LTL]

Actually, I'm a relative novice at real estate -- I've only been doing it for a few years. The bulk of my expertise lies in M&A, so I'd love to hear more about the businesses you've (supposedly) flipped. Lemonade stands don't count, btw...



I believe that's the only thing you've said in this thread that we can agree on...

Now you can go back to watching Shark Tank and pretending you know all about business...

Most wholesalers are focused on selling a deal not building a relationship with their investor list
Most wholesalers don't have a reserve requirement to weed out tire kickers
Most wholesalers aren't partnering with charities, law enforcement or even universities/institutes to source deals...
Most wholesalers aren't moving other income vehicles such as Pre-IPOs, financing deals etc....
Most wholesalers don't have former SEC attorneys working with them for maximum compliance....

If you are in M&A then ask me to violate NDAs ?

You deliberately avoided this post..... so humor me and tell me how many "wholesalers"
you know have these items in place ? My guess is none..but I'll give you the benefit of the doubt

I don't know everything actually... nor do I have the desire to especially if it doesn't meet my best interests


No need to pretend, I'm not the one tying his experience to his self esteem and getting emotional over it.....

It's not that serious. What you think certainly doesn't affect or change my lifestyle/viewpoint

 

[csalvato]

High Value PPC/SEO Services

Remember this post ?

I didn't because it was over a year ago that you posted it. And I still didn't know what you did and didn't get much practical advice.

Maybe there is some advice and experience in ya. In fact, I am sure there is because there's usually something to learn from everyone.

All I know is I haven't seen it yet, aside from high level strategies that I haven't personally been able to make sense of.

Even in the post you referenced, there was not one thing on there that I could take action on.

 

[LTL]

I just read that post. There is absolutely nothing in there that gives me any indication that you have any real world experience whatsoever "flipping businesses"...in fact, my impression from that thread is that you have no idea what you're talking about.

In fact, you even said in that thread that, "...i hate giving outlines because id have get into deeper more in depth explanations..."

Funny how you hate giving any details...I wonder why that is?

Again context is very important, I'm reminding that poster about an earlier situation.
Which has nothing to do with you or "flipping businesses".... so why care ?

You are welcome to look at things through a vacuum and post emotionally charged retorts
or draw conclusions... It doesn't affect me, my partners, my interns or investors at all.

If you really want to know...

Fact is if he wanted to resolve that... he could sponsor interviews on this topic
whether through a charity or institute and get the solutions that he needs from
attorney generals, big law firms and a myriad of alphabet agencies at little to no cost.

There's always a work round ...some people give up. I don't.

 

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[LTL]

Huh? That statement right there tells me that you have absolutely no idea what you're talking about...

Piece of advice -- if you're going to try to "fake it until you make," at least do a little research first. And no, watching Shark Tank is not research...

Classic deflection.

Now tell me which "wholesalers" you know that have these items in place....

Most wholesalers are focused on selling a deal not building a relationship with their investor list
Most wholesalers don't have a reserve requirement to weed out tire kickers
Most wholesalers aren't partnering with charities, law enforcement or even universities/institutes to source deals...
Most wholesalers aren't moving other income vehicles such as Pre-IPOs, financing deals etc....
Most wholesalers don't have former SEC attorneys working with them for maximum compliance....

 

[LTL]

I don't know any full-time wholesalers. I'm pretty sure not too many of them actually exist.

Hmmm...

Wholesaling real estate is a tough job. What you say above is great in theory, but I don't know many people who do it successfully over long periods of time. Most people I know who try end up never seeing a first payday...

A bit contradictory here but I won't hold that against you. I got the answer I needed.

Regardless, I don't actively participate in my real estate business anymore. I lend to other investors, I partner and I occasionally take on my own deals that are managed by my team. My active participation in real estate is very limited these days...

I hope not. After 200 homes flipped, I'd certainly hope your business at this point
is autonomous and your income is divorced from time.

And to answer your question about me not delving into details ...I'm certain
in your experience you've had people ask what you did to garner success
and laid out the blueprint, exact scripts/dialogue and strategies. Only, for that
person to invalidate without trying it/make excuses/do nothing with that knowledge

I've done it too many times now... and figure someone whose genuinely serious
will not rest until they find a solution like I did. My aversion to flipping is based on
my own cost/benefit analysis ...It doesn't mean sh!t to you since you are one of the
rare ones who hasn't gone bankrupt...but it's not for me

 

[csalvato]

Actually, no, I don't believe it's realistic to ever have a completely autonomous flipping business.

Sounds like if someone could help solve that problem they would do pretty well for themselves.

 

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[LTL]

Actually, no, I don't believe it's realistic to ever have a completely autonomous flipping business. I could spend pages writing about why I believe that to be the case, but anyone who has been entrenched in this business already understands it and anyone who hasn't been entrenched in this business probably wouldn't believe me. I've been very successful automating business processes in different aspects of my businesses and career, but I still don't believe that flipping is something that can be automated like other, more traditional, businesses. And I know people who are doing much higher volume than I've ever done (hundreds of houses per year), and don't know anyone who has ever completely automated their business.

Like I said in my post above, my of my real estate these days is done through lending and partnering -- both of which can be done almost completely passively. The few deals I do through my own business is done with employees, but it's not completely automated. It requires some of my time, which is why I only do a few deals a year that way -- I don't want to devote the time and I'm not smart enough to figure out how to completely automate it.

You've flipped 200 houses... you can't talk about being realistic anymore
Well if sourcing properties is automated* and raising capital is automated**.
The only hindrance would be finding competent contractors
but then again , I figure you could partner with several of them at once
for a split of the proceeds.

I guess the only part left to automate is sales of the houses
which can be automated too through your own employees or
partnerships with agencies and mortgage lenders.

Just curious here, you have employees already so what part of your business
takes that time ...or rather what part are you unwilling to let them take over ?

Shot in the dark here but I'll say it's the financing /due diligence to avoid
acquiring a property with all kinds of zoning problems/back taxes/liens

*You won't get a better discount than charities, institutes and law enforcement (I got a few honorary police badges from doing this)
** I know how to do this but I guess you can get commission based guys for this so it's no cost to you.

 

[LTL]

See my post above.

The problem isn't that any part of the business can't be automated (every piece of the business can be automated)...it's that flipping businesses generally have no competitive advantage and can too easily be replicated. So, you'll never find a competent manager. Given market forces, any reasonable and competent manager can start a competing business and make more money with equal work/risk.

That threat does exist and to minimize this I have used behavioral modification/psych profiling
to ensure it's in everyone on my teams best interests to remain with us and to also weed
out those who aren't congruent with what I do.... That's automated at this point as well
but some obviously leave once they "get-the-scoop"

I wish them well since I believe in abundance...and have other things going on to be
that bitter

I do, want to thank you again for this insight as you've indirectly added yet another reason to
avoid residential development though

 

[LTL]

There's some genuine gold shared in this little thread already and you're detracting from it on purpose; that's trolling. Disagree with it, fine; but to dismiss valued members with posturing babble is disrespectful of their shared time and experience as well as the OP.

I'm not... instead of making arbitrary comments about me. Just ask for clarity...

@JScott said any reasonable manager will leave and start their own enterprise

Which is true .....

All top talent eventually tries to leave but are they leaving because you suck as a
boss, shoot down their ideas and give them no equity/ don't pro-actively make provisions for their passions ?

I don't know. I'm not him.

I like to trap my team in their own success.....I entrust them to run the business and
reward them with the ability to implement their ideas ONLY after achieving certain
benchmarks ...same applies with an equity stake and charitable ventures....


Off course if you are a complete tyrant who views them as clogs in your wheel
and you are the grand master know it all who doesn't trust them one iota...
then brace yourself for low productivity, insubordination, employee turn over
and mediocre sales

Which can impact your health and personal life

I've dealt with these issues already.....

The major difference is I looked into not only how to solve it but pre-empt it
from happening.

Others don't.

They throw their hands in the air and delegate blame on their employees.

No situational awareness. No self examination. No effort.

Just....

"i'm the boss...I know everything...why can't these lazy F*ckers just do what I say"

( This solipsism is why employees end up spending more time on social media
bitching about you than doing the actual work. )

If your operations suck... then either your hiring process sucks or
you are sabotaging good talent by being a bad leader

Humans are still humans. I just like using their motivations/fears to align with my goals.
Thus creating a situation where they stand to lose more
by leaving in terms of income/equity/fulfillment.... the perfect trap.


but hey nevermind that. It's "disrespectful posturing bubble" and i'm trolling right

 

[LTL]

Based on your statement above and previous statements you've made in this thread, I'd have to say that you have absolutely no real-world experience and are just making things up because you believe (or hope) them to be true.

Perhaps one day you'll get some real world experience and you'll come back here, reread your posts and have a good laugh...

If you base your opinion on snippets rather than the full picture you'll make assertions such as this

How convenient you purposely overlooked this part to suit your narrative....

Off course if you are a complete tyrant who views them as clogs in your wheel
and you are the grand master know it all who doesn't trust them one iota...
then brace yourself for low productivity, insubordination, employee turn over
and mediocre sales

I'm laughing already!

Mr I don't know how to hire a general manager that won't leave me and compete
against me. I've never heard of it or tried looking into it but I'll invalidate it anyway
because I know everything....


You certainly have a talent for flipping because my sides hurt from this solipsism.

It's okay. If market comps ever crumble your residential empire you can always look up
your posts in this thread for stand up material ...

what a bloody riot hahaha

 

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