Expectations of Real Estate changed post REIN or big realizations about investing in Real Estate that really pushed your limits?

[johnsu]

I'm just curious if anyone else expectation of investing in Real Estate was different from what they originally thought before joining REIN.



What really changed for me is that the real skill is about "managing" the asset, not just buying. I found buying properties easy, but managing it over extended periods of time really pushed me and engaged my skills to the max or crushed me and taught me to become a more sophisticated investor.



Do anyone else have any big realizations postive or negative?

 

[Thomas Beyer]

[quote user=johnsu]Do anyone else have any big realizations postive or negative?


making money in real estate is a lot of work, especially in the first year or 2 of an asset .. making a lot of money is a lot more work .. until it becomes a bit easier. Like an airplane: it takes 70% of energy to get a plane off the ground to cruising altitude .. and 25% to get to the destination 2 to 3h away and 5% to land (and not crash).



After 25+ years of hard work I was an overnight success [I joined REIN in 2002 after having purchased 2 houses, 4 condos and 3 multi-family buildings for some knowledge .. and today the asset base under (co)ownership has probably gone up 40-fold from $2M to over $80M with over 2000 units (co)owned and/or managed in our affiliated property management company .. more in some of my blog posts from 2009 .. and of course not all that success is attributable to REIN but to luck, faith, appropriate risk taking, a bouyant market, many other books, seminars, listening to other like Ozzie Jurrock, Raymond Aaron, Tim Johnson, Donald Trump, Robert Kyasaki, hard work, talent, upbringing, university education, perseverance .. etc.]!!



Buying is (indeed) easy .. although buying at the right price in a good location with good term is very hard and takes a while to master, say 4+ years to be real good in one market niche.



networking & motivated people around you helps .. and REIN provides this in spades both online as well as 4 cities on a monthly basis.



Many capably people in REIN membership and management ! Many many multi-millionaires today .. and many more in a few years !



Occasionally a tad too much hype .. especially 2007 .. as

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[*]as cash-flow is critical and markets do not always go up in a straight line .. and the reserve/cash-flow emphasis has changed in 2008 or so .. many folks were way too overlevered with to little cash cushion in 2007/2008 .. and had to sell in 2009 or 2010 at a loss .. but I think this lesson now is re-emphasized by many (including REIN and me and others), and
[*]it is a lot of work: don't expect quick results just because you have $50,000 to invest and attend 12 REIN meetings .. and expect to have a property drop in your lap. It takes many many hours of research in a specific niche until you write the first offer .. and probably 10 offers until one good deal is found after exhaustive due diligence.
Access to cash (via mortgage or JV) is somewhat harder today than 4 or 7 years ago .. but still very doable and plentiful today
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REIN is THE BEST group around for real estate investing education !!



If you are serious about single family investing it is really the only game in town today !!!!



Great content and motivation !



and yes, managing is also VERY hard .. but it can be purchased for a fee !!!



The only two aspects you, as an investor, should focus on is:

a) find the right asset (as this is hard to delegate)

b) find money (as a mortgage) or via investors for JVs once your own cash is tied up in 3 or 4 properties



REIN is tremendously helpful in educating you in those two critical aspects, but also in property management should you chose to do it yourself !



Feel free to drop me an email for further questions or post them here !

 

[Rickson9]

[quote user=johnsu]Do anyone else have any big realizations postive or negative?





Speaking for myself although I never joined REIN, from what I had read before investing, buying real estate was what I expected.



With both real estate and stocks, the ease of "managing" the asset was correlated with my purchase price. The lower the price, the easier it was to manage.



So far, in my limited investing experience, it has been very easy.



Best regards.

 

[bizaro86]

[quote user=Rickson9]With both real estate and stocks, the ease of "managing" the asset was correlated with my purchase price. The lower the price, the easier it was to manage



Really? Why is that, do you think? To me, it seems like the amount of work required to manage a property is mainly determined by the size/# of doors/location/neighbourhood, and has very little to do with the value.



For example, I could buy two units in a townhouse complex here in Calgary right now, one that's listed at 175k and one that's listed at 225k. They're exactly the same, and would present the same amount of work to manage. The cheaper one is most definitely a better investment, but once they were owned it seems like they would present exactly the same amount of work.



In your situation, whether you pay 20k or 60k for a condo in Phoenix, it will require the same amount of paperwork/phone calls to the property manager.



This is similar to stock market investments. It doesn't take any more time to follow a company (read their financial statements, etc) if you own 100,000 shares than if you own 100 shares. That's what allows an investor with a concentrated portfolio to spend more time on each position. The old Buffetesque "Keep your eggs in one basket, then watch that basket closely."



Regards,



Michael

 

[johnsu]

Hi Rickson,



I'd almost agree because your advice on purchase price does correlate to the "complexity of the deal" but also when the other guy said buying 2 properties for a higher GROSS amount your advice doesn't ring true. But if you look at the value of the individual units, you are right.



What i say is give take everything with a GRAIN OF SALT, because one person also learns much over time where things "FEEL EASIER" but in reality "The are MORE COMPLEX" but because we've LEARNED MORE we become wiser!

 

[johnsu]

The only two aspects you, as an investor, should focus on is:

a) find the right asset (as this is hard to delegate)

b) find money (as a mortgage) or via investors for JVs once your own cash is tied up in 3 or 4 properties



The above quote about 2 aspects an investor should focus on.



Do you believe there are other aspects that must be mastered PRIOR to becoming a master of the 2 above aspects?



Because when you really look at the FUNCTION of an INVESTOR, it's very similiar to that of an entrepreneur.



1) Activities that facilitate growth

2) Ability to ID competent team members and bring them together in a harmonious working web





So a competency of "self managing" where you know how to ID a great property manager from a crappy one. I think the ability for "most" investors to manage their own property if ever required is an absolute must before handing off the work to PM.



What are your thoughts Thomas? As you're much further down the path from where I am now.

 

[Rickson9]

[quote user=bizaro86][quote user=Rickson9]With both real estate and stocks, the ease of "managing" the asset was correlated with my purchase price. The lower the price, the easier it was to manage



Really? Why is that, do you think? To me, it seems like the amount of work required to manage a property is mainly determined by the size/# of doors/location/neighbourhood, and has very little to do with the value.



Good questions Michael. My meaning was that I have a larger margin of safety so it's 'easier' to manage financially and psychologically.



Some margins of safety allow for a PM, others do not. Since I have difficulty screwing in a lightbulb, a PM makes things easier to manage for me. Some margins of safety allow for a some vacancy, others less so. I can sustain 5 months of vacancy per year and still make a profit so that becomes easier to manage financially. Also, psychologically it has been easier to manage when I have no leverage involved.



With regards to stock, I don't know how much easier to manage that it can get. It's true that I read, but most of my colleagues are loathe to call that 'hard'. The cheaper the price I pay, the 'easier' it is to manage psychologically is probably more accurate.



Hopefully that made sense!



Best regards.

 

[Rickson9]

[quote user=johnsu] Hi Rickson,



I'd almost agree because your advice on purchase price does correlate to the "complexity of the deal" but also when the other guy said buying 2 properties for a higher GROSS amount your advice doesn't ring true. But if you look at the value of the individual units, you are right.



What i say is give take everything with a GRAIN OF SALT, because one person also learns much over time where things "FEEL EASIER" but in reality "The are MORE COMPLEX" but because we've LEARNED MORE we become wiser!





You give me too much credit. My level of understanding of investing hasn't changed in a long time unfortunately.
I might be using a different definition of 'easy to manage'. Psychologically, the prices that I pay make decisions very easy to manage. Less moving parts is also easier (I employ almost no borrowed money). With regards to my real estate, for better or worse, the hardest that I have had to work was listening to my PM as she described two tenant candidates and then asked "So, do you want tenant A or B or neither?" One another occasion she asked me to pick carpet. I think I have been lucky. Although I haven't had to, I can also sustain long stretches of vacancy and still book a profit. That's about as 'hard' to manage as it has gotten so far.



Stocks have also been pretty "easy" to manage because of the price paid. I know I'm getting alot of profit per dollar spent. As I mentioned in the previous post, I do read the financials, but it's mostly skimming now and most people wouldn't consider that really 'hard' despite my poor reading skills.



If I had paid a higher price for my stock or real estate, it would have been less 'easy'to manage psychologically. Starting out, I had never planned to personally manage my own properties or trade stock. I just don't have the ability and energy for that. I wanted prices so low that I could just hand them off or park them and do something else.



With regards to the skill that has been most useful, it would be the ability to read and interpret financial statements. For me, everything else has been secondary to that.



I don't believe that being an investor and an entrepreneur are the same. They are similar. I am an investor. Being an entrepreneur is far more difficult IMHO.



I hope that made sense!



Best regards.

 

[johnsu]

You're right, being an investor for self would be easier but being a business of investing other people's money is what I was comparing it. Thanks for the contrast!