They purposely make things too complicated.
When you do this for a while you can tell if a property is worth buying with a napkin and 30 seconds.
There is a lot of bad advice floating around online when it comes to real estate investing.
Time for a stiff drink and some stuff you might not want to hear.
A thread 👇
They purposely make things too complicated.
When you do this for a while you can tell if a property is worth buying with a napkin and 30 seconds.
You need to do good deals year after year and deploy 10s or 100s of millions in capital.
It’s a hamster wheel making others wealthy.
The advantage of being you:
One building like this can change your life.
I don’t care how long your interest rate is “fixed” for.
Markets are cyclical. Trends change. Bankruptcy is real.
Even a $500k property (like the one pictured above) requires $150k down and another $100k in cash reserves.
Meet people with money and convince them to invest with you.
Period.
If you can’t do that this isn’t the space for you.
When it comes to raising money from passive investors, securing loans from banks and even buying property from owners and brokers.
You are selling yourself, your vision, and your competency 24/7.
Big money investors will encourage you to do MORE AND BIGGER projects vs. smaller more profitable projects.
Can you guess why?
More money for them from your work.
The other 50 factors everyone tells you to pay attention to are noise.
Nail the big ones (operations, cashflow, tailwinds) and the outcomes take care of themselves (profitability).
No two deals are alike. There will be thousands of questions.
If you can’t make decisions with incomplete information you’ll never even get started.
But true generational wealth is created when you hold great assets for a really long time.
Figure out a way to structure your deals accordingly.
OPM (other people’s money) is expensive.
If you can get to the point where you do your best deals with your own money, you’ll get wealthy fast.
Cast a wide net. Don’t put all your eggs in one basket.
Get a lot of LPs in early deals and knock it out of the park.
The more investors you have access to, the better terms for you.
It is not passive.
If you can’t manage revenue and expenses you will lose.
Real estate is a small business with tax efficiency. Treat it as such and focus on the operations.
Things you can’t control:
Interest rates
Debt accessibility
What someone else will pay for your property
Depending on these things less to lower risk.
More from Nick Huber
Don’t have much cash but want to invest in real estate?
Want to get SBA loans and special loan programs so you can buy real estate investments with only 5-10% down?
One word for you:
Don’t.
Here’s why
👇👇👇
Leverage can be a beautiful thing.
Appreciation takes over and all that value you bought with debt grows and you amplify your returns.
But there is another, darker side of debt.
Values drop 5 or 10% and you’re underwater. You have zero equity or negative equity.
Ask the folks who were over-levered in 2007 what happened on 2011?
Real estate is a frothy space right now. Money flying everywhere and values higher than they’ve ever been.
Debt is cheaper and easier to get than ever.
Will it continue?
Probably.
Money could stay cheap for a long time. There is a ton of negative yielding debt abroad and liquidity ready to flood our market at the drop of a hat.
Rates will likely stay low. Gov will probably keep subsidizing these loans. You’ll probably be okay.
Want to get SBA loans and special loan programs so you can buy real estate investments with only 5-10% down?
One word for you:
Don’t.
Here’s why
👇👇👇
Leverage can be a beautiful thing.
Appreciation takes over and all that value you bought with debt grows and you amplify your returns.
But there is another, darker side of debt.
Everybody I know loves LEVERAGE when it comes to real estate.
— Nick Huber (@sweatystartup) October 18, 2020
It\u2019s a beautiful and scary tool, kicking appreciation, depreciation, and cashflow into overdrive.
It amplifies everything. You can make a lot of money really fast and go broke in months.
Here\u2019s how it works\U0001f447\U0001f447\U0001f447
Values drop 5 or 10% and you’re underwater. You have zero equity or negative equity.
Ask the folks who were over-levered in 2007 what happened on 2011?
Real estate is a frothy space right now. Money flying everywhere and values higher than they’ve ever been.
Debt is cheaper and easier to get than ever.
Will it continue?
Probably.
Money could stay cheap for a long time. There is a ton of negative yielding debt abroad and liquidity ready to flood our market at the drop of a hat.
Rates will likely stay low. Gov will probably keep subsidizing these loans. You’ll probably be okay.
More from Business
So I'd recommend reading this thread from Dave, but I thought about some of these policies, and how they fit into the whole, a lot, and want to offer a different interpretation.
I think California is world leading on progressivism that doesn't ask anyone to give anything up, or accept any major change, right now.
That's what I mean by symbolically progressive, operationally conservative.
Take the 100% renewable energy standard. As @leahstokes has written, these policies often fail in practice. I note our leadership on renewable energy in the piece, but the kind of politics we see on housing and transportation are going foil that if they don't change.
Creating a statewide consumer financial protection agency is great! But again, you're not asking most voters to give anything up or accept any actual changes.
I don't see that as balancing the scales on, say, high-speed rail.
CA is willing to vote for higher taxes, new agencies, etc. It was impressive when LA passed Measure H, a new sales tax to fund homeless shelters. And depressing to watch those same communities pour into the streets to protest shelters being placed near them. That's the rub.
It's very in vogue to bash California and this doesn't even reach to some things that deserve scorn, like the continuing control of the Western States Petroleum Association and the state Chamber of Commerce in policymaking. And yet-https://t.co/vHZ6GM7QF8
— David Dayen (@ddayen) February 11, 2021
I think California is world leading on progressivism that doesn't ask anyone to give anything up, or accept any major change, right now.
That's what I mean by symbolically progressive, operationally conservative.
Take the 100% renewable energy standard. As @leahstokes has written, these policies often fail in practice. I note our leadership on renewable energy in the piece, but the kind of politics we see on housing and transportation are going foil that if they don't change.
Creating a statewide consumer financial protection agency is great! But again, you're not asking most voters to give anything up or accept any actual changes.
I don't see that as balancing the scales on, say, high-speed rail.
CA is willing to vote for higher taxes, new agencies, etc. It was impressive when LA passed Measure H, a new sales tax to fund homeless shelters. And depressing to watch those same communities pour into the streets to protest shelters being placed near them. That's the rub.
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I’m torn on how to approach the idea of luck. I’m the first to admit that I am one of the luckiest people on the planet. To be born into a prosperous American family in 1960 with smart parents is to start life on third base. The odds against my very existence are astronomical.
I’ve always felt that the luckiest people I know had a talent for recognizing circumstances, not of their own making, that were conducive to a favorable outcome and their ability to quickly take advantage of them.
In other words, dumb luck was just that, it required no awareness on the person’s part, whereas “smart” luck involved awareness followed by action before the circumstances changed.
So, was I “lucky” to be born when I was—nothing I had any control over—and that I came of age just as huge databases and computers were advancing to the point where I could use those tools to write “What Works on Wall Street?” Absolutely.
Was I lucky to start my stock market investments near the peak of interest rates which allowed me to spend the majority of my adult life in a falling rate environment? Yup.
Ironies of Luck https://t.co/5BPWGbAxFi
— Morgan Housel (@morganhousel) March 14, 2018
"Luck is the flip side of risk. They are mirrored cousins, driven by the same thing: You are one person in a 7 billion player game, and the accidental impact of other people\u2019s actions can be more consequential than your own."
I’ve always felt that the luckiest people I know had a talent for recognizing circumstances, not of their own making, that were conducive to a favorable outcome and their ability to quickly take advantage of them.
In other words, dumb luck was just that, it required no awareness on the person’s part, whereas “smart” luck involved awareness followed by action before the circumstances changed.
So, was I “lucky” to be born when I was—nothing I had any control over—and that I came of age just as huge databases and computers were advancing to the point where I could use those tools to write “What Works on Wall Street?” Absolutely.
Was I lucky to start my stock market investments near the peak of interest rates which allowed me to spend the majority of my adult life in a falling rate environment? Yup.