D
DeletedUser2
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NOTE: I originally was going to post this on another thread, but after writing it, I decided it needed to live in this thread, and a link to the other post was a better Idea.
Here is the orginal qoute by sean
look, there are dozens of strategies in real estate, Im going to list a couple below.
the most successful guys usually pick 1 or 2 maybe 3 strategies and employ them relentlessly, over and over.
the secret is to not do every type of deal out there. its to pick your deal style, and goal, and go after that.
each one requires different skill sets, focus and temperament.
an example Rickson buys and holds for pretty much forever. I am WAY to ADHD to do that. (the forever bit)
but I will lay out some of the ones I know, and ones I have Done, as well as ones I have not done.
basically there are 2 main schools of thought.
cashflow
and capital gains (there are others but for now, let me speak to these)
1. in the cash flow model, you buy with the focus of keeping properties bringing in cash flow over and over for a long period of time.
2. capital gains, you buy with the intention to creating as much mass cash as possible
as for timing the markets, well that's one way, but it may mean if you use that strategy exclusively, then you may have to wait a decade or more for another crash. so while it sounds great, its a 1 legged stool. best to not rely on it.
so about cashflow.
1. in 1996 I started buying apartment complexes. I would buy 15-50 units at a time. the goal was to get at least 100/month per apartment in net take home profit. (im not going to explain the financial mechanics here im going over the concept first)
if i bought a 15 unit apt complex.
I would sometime get to take home between 1,000 and 2,000 a month. if you look at it that way, doesn't seem very attractive at first. lots of work, risk ect for just 1000. ugh.
HOWEVER after a year, it was closer to 2000 consistently (kicking out bad tenets ect helps.) but 24K a year in income, not really able to retire on. I know people do 300-500 a month on some houses they buy but apartments are different.
after getting 1 under control I went shopping for more. I bought another 16 unit 6 months after teh first on. suddenly I added another 1500 a moth to my income. 6 months later I bought a 44 unit apartment, adding another 3500-4500 to My income.
fast forward to 2 1/2 yrs later I had 250 apartments and I was doing between 30-40K a month. NOW it seemed worth it.
The income was also used to improve the apartments, increasing the rent, over time, and to pay down debt. so eventually they could be debt free, and if done right, you could be pretty close to debt free in about 8-12 yrs depending on your strategy.
this is an example of a cashflow model. other cash flow models include
buying mobile homes, renting them
buying and selling mobile homes on contract (notes) and keeping the cash flow with no landlord issues
buying land, renting it to ranchers, or farmers,
buying mobile home pads renting them to mobile home owners
renting commercial buildings to businesses
lending money on real estate
buying notes, or holding notes (installment contracts for sale) on real estate
these are just some examples. there are alot more.
The Advantages: keeps money coming for Years or even decades after your initial transaction.
disadvantages: it can require money up front to start (not always) it can take a couple years to build it to the point of making enough money to kill off a job.
Capital Gains
many people believe you need cash to buy the properties (you dont) but if you wanted to make money fast to be able to buy cash flow properties, then it requires a different type of thinking.
you become transaction focused. buying and selling a property (flip) or wholesale ect, are examples of this. the whole idea is to acquire something at a lower price and sell it for a higher price in a short period of time. since you mentioned the crash, i will just say, this can work in any market. what alot of people dont realize is the market crash happens every day, someplace.
let me say that 1 more time. markets crash every day. it may not be the wider market, it may just be someones personal market.
here is an example of what I mean.
Death,
Divorce
Debt
Distress (the 4 horseman of personal crashes) or the 4D's
these are when people may have an asset but loses its value TO THEM. time becomes their enemy and you can make money in the "crash" that happens. an example is someone came to me with a house that was worth 170K.
they only owed about 90K on it. BUT the 4 horseman came calling, in the form of a divorce. the wife owned the house, and she was devastated when her husband asked for a divorce.
she sold it to me for 5K in cash (provided I could pay that day. She then moved out, and left.) a personal housing crash, left me with an 70K+ profit because of a market crash (it was in 2005 when the markets were still booming) and yet crashes can still happen
examples of transaction based capital gains strategies
1. buy fix sell (flip)
2. Whole Sale to other investors
3. subject to, then sell,
4. develop land build house and sell
5. foreclosure and sell.
ect ect ect.
This is all about the act of buying for the purpose of selling.
advantages? big chunks of cash all at once
the disadvantages? the cash stops the moment you stop doing transactions.
Skills, Focus and temperament needed
as you pick and work your fastlane you will find that you either have the skills, and temperament for it. or you dont. lacking the skills can be fixed, (see below) by skill acquisition. lacking the temperament, is much much harder, and more likely to end in failure.
Ask rickson to start flipping properties, evaluate hundreds of properties a month, buy and flip them.
You will most likely find him to abandon the whole project before breakfast. ask someone who is highly active, and believes that they are not really working unless they put in 18 hrs a day. So the idea of sitting, buy 1 property at a time, and then sit on it for years? "
You will find that person failing in that particular strategy, before they even get started.
for cashflow
Skills,
understand the time value of money, TVM calculations, and TVM evaluation
I picked up a book called calculator power, and after spending 2 weeks with a financial calculator, and the book I had a good understanding of how TVM worked. how it affected buying decisions, valuation and profit of cashflow property. once you have acquired this skill (about 2 weeks +/-) then you can confidently asses your options, and decisions, and make money here.
Temperament:
more patient, analytical, willing to put in the time on the computer to asses a property, or deal, slower to act. willing to revisit the deal several times before its structured the way you want. willing to put in the work, understanding that its 6 months to 6 yrs before you realize your goals. can see the future, and understand it a process. not in a hurry. typically will take time to aim to shoot 1 good bullet to get 1 good deal rather than spray and pray.
Focus activity: They scan the landscape understanding the market as a whole. and look for the right deal that "pops up" from time to time.
consistent actions in small amounts every day. say 1 hr in the morning looking over deals, waiting for the right ones.
for Capital Gains
Skills: They have a understanding of the current market. what others are willing to pay for the product, what others are willing to do to buy. constant updating of market information. finding out what others are doing, what the market speed is (how fast things are selling) what the market pitch is, (uptrend or down trend) how fevered is the pitch, how market pressures are affecting prices in in the next 30-90-180 days. mostly ignores the market past 180 days.
can BUY quickly, asses the property quickly due to market knowledge, sell quickly because they network with other buyers. or future buyers.
Sales Skills, People Skills, Networking Skills. a hustler. making it happen.
Temperament: this person is usually high activity. Right now is barely soon enough, a hustler. kinda pushy. which is perfect for this market.
always looking for a deal.
Focus activity: while scanning for deals, instead of looking for 1 perfect deal right now, they want to do 10 ok deals right now.willing to settle for smaller profit margins on larger volume. 10 deals at 10K a profit each per month is better than waiting 3 months to find a 100K profit deal. churn and burn activities.
depending on where you are at in your life, you will tend to gravitate towards one or the other. once you master 1 you will see that while markets go up and down, you can do what Sam Zell Does if you have that temperament and focus. or, you can still achieve huge wealth regardless what the market does. if your strategy is not market dependent, then the market fluctuation are just gravy on a otherwise solid strategy.
so picking your strategy is more about deciding where you are on the temperament scale, adding the skills needed and training your focus for the most effective and profitable process. NOT what the markets may be doing.
so while there are LOTS of strategies out there. they still focus on 1 of the 2 basics. cashflow or capital gains.
so if you hear about;
mobile homes,
paper buying
notes,
flipping
renting
rehabbing
subject to
lease options
commercial
shortsales
land
development
tax liens
storage units
land contracts
land trusts
apartments
hardmoney lending
rent to own
ect,
you will know these are all strategies that follow one of the 2 basic formats, and are usually responses to where the larger markets are in the cycle of ups and downs.
Hope this helps
Z
Here is the orginal qoute by sean
Sean
look, there are dozens of strategies in real estate, Im going to list a couple below.
the most successful guys usually pick 1 or 2 maybe 3 strategies and employ them relentlessly, over and over.
the secret is to not do every type of deal out there. its to pick your deal style, and goal, and go after that.
each one requires different skill sets, focus and temperament.
an example Rickson buys and holds for pretty much forever. I am WAY to ADHD to do that. (the forever bit)
but I will lay out some of the ones I know, and ones I have Done, as well as ones I have not done.
basically there are 2 main schools of thought.
cashflow
and capital gains (there are others but for now, let me speak to these)
1. in the cash flow model, you buy with the focus of keeping properties bringing in cash flow over and over for a long period of time.
2. capital gains, you buy with the intention to creating as much mass cash as possible
as for timing the markets, well that's one way, but it may mean if you use that strategy exclusively, then you may have to wait a decade or more for another crash. so while it sounds great, its a 1 legged stool. best to not rely on it.
so about cashflow.
1. in 1996 I started buying apartment complexes. I would buy 15-50 units at a time. the goal was to get at least 100/month per apartment in net take home profit. (im not going to explain the financial mechanics here im going over the concept first)
if i bought a 15 unit apt complex.
I would sometime get to take home between 1,000 and 2,000 a month. if you look at it that way, doesn't seem very attractive at first. lots of work, risk ect for just 1000. ugh.
HOWEVER after a year, it was closer to 2000 consistently (kicking out bad tenets ect helps.) but 24K a year in income, not really able to retire on. I know people do 300-500 a month on some houses they buy but apartments are different.
after getting 1 under control I went shopping for more. I bought another 16 unit 6 months after teh first on. suddenly I added another 1500 a moth to my income. 6 months later I bought a 44 unit apartment, adding another 3500-4500 to My income.
fast forward to 2 1/2 yrs later I had 250 apartments and I was doing between 30-40K a month. NOW it seemed worth it.
The income was also used to improve the apartments, increasing the rent, over time, and to pay down debt. so eventually they could be debt free, and if done right, you could be pretty close to debt free in about 8-12 yrs depending on your strategy.
this is an example of a cashflow model. other cash flow models include
buying mobile homes, renting them
buying and selling mobile homes on contract (notes) and keeping the cash flow with no landlord issues
buying land, renting it to ranchers, or farmers,
buying mobile home pads renting them to mobile home owners
renting commercial buildings to businesses
lending money on real estate
buying notes, or holding notes (installment contracts for sale) on real estate
these are just some examples. there are alot more.
The Advantages: keeps money coming for Years or even decades after your initial transaction.
disadvantages: it can require money up front to start (not always) it can take a couple years to build it to the point of making enough money to kill off a job.
Capital Gains
many people believe you need cash to buy the properties (you dont) but if you wanted to make money fast to be able to buy cash flow properties, then it requires a different type of thinking.
you become transaction focused. buying and selling a property (flip) or wholesale ect, are examples of this. the whole idea is to acquire something at a lower price and sell it for a higher price in a short period of time. since you mentioned the crash, i will just say, this can work in any market. what alot of people dont realize is the market crash happens every day, someplace.
let me say that 1 more time. markets crash every day. it may not be the wider market, it may just be someones personal market.
here is an example of what I mean.
Death,
Divorce
Debt
Distress (the 4 horseman of personal crashes) or the 4D's
these are when people may have an asset but loses its value TO THEM. time becomes their enemy and you can make money in the "crash" that happens. an example is someone came to me with a house that was worth 170K.
they only owed about 90K on it. BUT the 4 horseman came calling, in the form of a divorce. the wife owned the house, and she was devastated when her husband asked for a divorce.
she sold it to me for 5K in cash (provided I could pay that day. She then moved out, and left.) a personal housing crash, left me with an 70K+ profit because of a market crash (it was in 2005 when the markets were still booming) and yet crashes can still happen
examples of transaction based capital gains strategies
1. buy fix sell (flip)
2. Whole Sale to other investors
3. subject to, then sell,
4. develop land build house and sell
5. foreclosure and sell.
ect ect ect.
This is all about the act of buying for the purpose of selling.
advantages? big chunks of cash all at once
the disadvantages? the cash stops the moment you stop doing transactions.
Skills, Focus and temperament needed
as you pick and work your fastlane you will find that you either have the skills, and temperament for it. or you dont. lacking the skills can be fixed, (see below) by skill acquisition. lacking the temperament, is much much harder, and more likely to end in failure.
Ask rickson to start flipping properties, evaluate hundreds of properties a month, buy and flip them.
You will most likely find him to abandon the whole project before breakfast. ask someone who is highly active, and believes that they are not really working unless they put in 18 hrs a day. So the idea of sitting, buy 1 property at a time, and then sit on it for years? "
You will find that person failing in that particular strategy, before they even get started.
for cashflow
Skills,
understand the time value of money, TVM calculations, and TVM evaluation
I picked up a book called calculator power, and after spending 2 weeks with a financial calculator, and the book I had a good understanding of how TVM worked. how it affected buying decisions, valuation and profit of cashflow property. once you have acquired this skill (about 2 weeks +/-) then you can confidently asses your options, and decisions, and make money here.
Temperament:
more patient, analytical, willing to put in the time on the computer to asses a property, or deal, slower to act. willing to revisit the deal several times before its structured the way you want. willing to put in the work, understanding that its 6 months to 6 yrs before you realize your goals. can see the future, and understand it a process. not in a hurry. typically will take time to aim to shoot 1 good bullet to get 1 good deal rather than spray and pray.
Focus activity: They scan the landscape understanding the market as a whole. and look for the right deal that "pops up" from time to time.
consistent actions in small amounts every day. say 1 hr in the morning looking over deals, waiting for the right ones.
for Capital Gains
Skills: They have a understanding of the current market. what others are willing to pay for the product, what others are willing to do to buy. constant updating of market information. finding out what others are doing, what the market speed is (how fast things are selling) what the market pitch is, (uptrend or down trend) how fevered is the pitch, how market pressures are affecting prices in in the next 30-90-180 days. mostly ignores the market past 180 days.
can BUY quickly, asses the property quickly due to market knowledge, sell quickly because they network with other buyers. or future buyers.
Sales Skills, People Skills, Networking Skills. a hustler. making it happen.
Temperament: this person is usually high activity. Right now is barely soon enough, a hustler. kinda pushy. which is perfect for this market.
always looking for a deal.
Focus activity: while scanning for deals, instead of looking for 1 perfect deal right now, they want to do 10 ok deals right now.willing to settle for smaller profit margins on larger volume. 10 deals at 10K a profit each per month is better than waiting 3 months to find a 100K profit deal. churn and burn activities.
depending on where you are at in your life, you will tend to gravitate towards one or the other. once you master 1 you will see that while markets go up and down, you can do what Sam Zell Does if you have that temperament and focus. or, you can still achieve huge wealth regardless what the market does. if your strategy is not market dependent, then the market fluctuation are just gravy on a otherwise solid strategy.
so picking your strategy is more about deciding where you are on the temperament scale, adding the skills needed and training your focus for the most effective and profitable process. NOT what the markets may be doing.
so while there are LOTS of strategies out there. they still focus on 1 of the 2 basics. cashflow or capital gains.
so if you hear about;
mobile homes,
paper buying
notes,
flipping
renting
rehabbing
subject to
lease options
commercial
shortsales
land
development
tax liens
storage units
land contracts
land trusts
apartments
hardmoney lending
rent to own
ect,
you will know these are all strategies that follow one of the 2 basic formats, and are usually responses to where the larger markets are in the cycle of ups and downs.
Hope this helps
Z
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