Aug 11
22
It’s Not Buy and Hope Real Estate Investing
40 years ago last week Richard Nixon cut the ties the US Dollar held to Gold.
Interestingly the anniversary of such an enormous event fell so closely to the other enormous US economic event that happened this year – the devaluation of their debt followed by a stock market plunge.
All that turmoil had a few folks poking their heads up out of the sand to realize that it’s not just the US that’s struggling. There is some serious economic chaos taking place in Europe too. The world is in rough shape economically right now. As Canadians we don’t feel it as much – especially with all the housing bubble talk in Toronto and Vancouver this year – but the reality is that it’s a troubling time economically right now.
The headlines reflected that in the last few weeks and were pretty gloomy.
We had a lot of conversations with fellow investors in the past few weeks who are definitely taking a hard look at their strategy and their plans for the future. And we’ve been doing the same. But most of us have been doing that for a few years now.
We’ve been carefully reviewing the economics of the area where we’re buying and we’ve also been looking at our own portfolio. We continue to make adjustments and carefully add properties to our portfolio. We’re more bullish today than we were two years ago but we’re still highly cautious.
So maybe you’re wondering:
Is now the time to sit on a pile of cash? Or is now the time to invest in real estate (or some other hard asset for that matter)?
I can’t really answer that question for you. I do believe there is an element of personal risk tolerance and life plans that has to come into the answer of that question. I can only tell you what we’re doing.
We’ve sold about $1.5 million worth of our real estate this year.
The dispositions have been driven in part to orchestrate our own move (and the purchase of a mixed use commercial property where we’ve set up our office and home). The other part was the opportunity to move some cash out of under-performing properties into ones that will generate more cash flow and be less work for us.
Would we have been better off in the long run to keep them all? Possibly – but some of our properties take a lot of effort to own.
The most dramatic stories we share with you are from just a select few of the properties in our portfolio. Most properties are boring money makers – thankfully!
As we grow our investment business and dedicate more time to helping new investors with Rev N You, we don’t have time or energy to dedicate to troublesome properties in the hope that they will be better in the future.
We’ve kept holding some of our properties hoping things would get easier; hoping they would continue to go up in value. And that leads me to the point of my post today:
It’s called buy and hold investing – not buy and hope.
Our goal is to hold our buy and hold properties until they are paid off (with rent to own being different obviously).
That means we generally don’t want to sell them.
However, to buy and hold for the sake of holding does ignore the fact that your properties need to be facilitating the creation of a life you want to live. Some of our properties have been close to full time jobs to oversee – even with property managers in place. It also ignores the fact that market conditions change and what was a good holding property 8 years ago may no longer be appropriate for you.
So today, as we’re finally getting ourselves settled into our new home and office space and we’re prepping the latest investment property we’ve purchased, I wanted to give you a thought to chew on as more headlines inevitably have you questioning what you’re doing. And I wanted to share a new book you’ll want to check out to help you muddle through the uncertainty you’ll likely be feeling for the rest of the year.
As the headlines and world continues to shake around you, I want to challenge you to look at what you’re doing today. If you’re already an investor, are the properties in your portfolio serving you? Or, are you holding them hoping for a better day?
If you’re not investing yet, I would encourage you to get rolling with that market research. We are aggressively pursuing opportunities right now. I told you that we sold 7 figures worth of real estate this year which is true. What I didn’t mention yet is that we’ve bought even more than we’ve sold. This month alone we closed on $750,000 worth of real estate (granted a chunk of that is our new home & office but we still opted to buy versus rent and we closed on yet another investment property this month as well). We aren’t divesting ourselves of real estate, we’re reallocating our funds to properties that are a better fit for us.
Buy and HOPE investing is getting a property because you think it’s going to go up. It’s buying because everyone else is. Or buying the first property you find that will give you cash flow with no regard for whether it’s actually a good fit for your overall goals. It’s also holding onto a property because you hope it will go up or you hope it will become a better property to own in the future.
My personal opinion is that carefully selecting buy and hold opportunities right now is going to pay huge dividends for you in 7 – 10 years.
That means you’re looking for markets with economic strength and a growing population. You’re looking for investment opportunities where you can make money on a monthly basis, attract great tenants easily and comfortably hold that property through good times and bad.
And if you’re feeling shaky or unsure about how to approach this and interpret the headlines right now, I would highly recommend you pick up any book by Kieran Trass. I’ve recommended his books dozens of times. And … for the Canadians, I am really excited to share with you a brand new book just for us and our market cycles!! I’m honoured to have contributed to the book (check out page 221 and 222 for my section!) but that isn’t the reason I’m suggesting you check it out. This book will help you navigate the ups and downs of the market around you. It’ll share the strategies you need to be a STRATEGIC investor not a speculator.
This book is going to help ensure you’re using a solid Buy & Hold strategy not a Buy and Hope strategy to make money in real estate.
Check it out … and think carefully about your existing portfolio or the one you’re about to create.
Image 1: © Ciska76 Image 2: © Oksana Duboshina Image 3: Amazon.ca
