A couple of days ago, I posted a picture on Facebook of a closing table and mentioned that Katherine and I had just added two doors to our real estate investing business. I then noted that I believed that more agents should be investors (I wish all of them were). That post got a lot of action very quickly and I promised to rehash an old idea I posted in a previous iteration of this blog.
This is not that post.
Sorry to disappoint, but before I get to the meat and potatoes of how we invest, there are things to talk about. Let’s begin.
Realtor Rhetoric
Realtors love to talk about the safety of real estate invest as an investment. They throw stats about more millionaires being created by real estate than anything else. Yet, so few are actually investors. I think it is high time that changes and am writing this series of posts to help agents put their money where their mouth is.
It’s a Business
Just like my real estate company and just like my personal production, this is a business. It is a Series LLC with each property in its own series. More than just the formality of it, we treat it like a business. We invest time into finding the properties that make sense. We budget and project cashflow and strategically plan just like in our other business. We hire professionals, particularly accountants and property managers, to make sure that our investment is cared for and producing the maximum shareholder benefit.
We are Specific About The Goal
This is not a get rich quick thing for us. This is a get and stay rich slowly thing for us. If, at some point, the opportunity to run a quick flip comes up or an alternative investment (we recently did very well in a marijuana real estate syndication in Colorado) comes up, great. It is not the specific way we plan to reach our goal, though, and so we stay focused on that goal. For the record, the proceeds of the investment I mentioned in Colorado went back into the company for investment in more real estate.
Our goal is to create enough cashflow from owned assets to fund a very comfortable retirement, whenever that happens. That cashflow needs, on an inflation-adjusted basis, to be a minimum of $25,000 a month for our plan to work. The owned part means that I do not have debt associated with these properties at the time I retire. This is a retirement plan, not a cashflow plan for today. That will be important to understand when I show the plan.
Also, to take the specificity to one more level, this company exists to purchase and long-term hold residential real estate properties, primarily single-family homes. We’ll get into that in more detail later.
This is One Pillar
I am not a “put all your eggs in one basket and spend your life protecting the basket” type of guy when it comes to my retirement. So, yes, we invest in real estate to set ourselves up for retirement, but it is not all that we invest in. We have traditional retirement planning also and then some other stuff that isn’t relevant. The point is, retirement planning should be holistic and not dependent on one thing to be successful.
I Have Issues
For this to work for me, I have to be really honest about a few things about me that could interrupt my plan.
- I am one of the more debt-averse humans you will ever meet. Other than my primary residence, I have no personal debt. My real estate brokerage has no debt and never has. I have no credit cards. I understand that leverage is cool and powerful. I am not dumb. This real estate investment company has debt, but it is minimal and constantly being paid down in large chunks. One day, it will not need debt or investment and will be able to self-fund using the leverage of other people paying the rent.
- I am super impulsive and very impatient. This is not a good combination for a real estate investor. So, I have systems and processes in place that ensure I buy what makes sense in a way that achieves the long-term goal.
- I am a terrible landlord. I know this from experience. The first house we bought was a learning experience on so many fronts. One of those was that I am not a great landlord. My wife would be an awesome landlord. However, because we have other interests and kids and all the other shit that life throws at you, we hire professional property management. Yes, it eats at my margin, but I don’t care. It is worth it.
I Don’t Know the Finish Line
I call this retirement planning, but the truth is I don’t have a crystal ball. This could be my retirement plan. It could also be the legacy I leave my kids after I die at my desk early answering questions about paragraph 12 of the 1-4 contract for the 854,567th time. So, it is always evolving. Sometimes you can’t find a damn thing to buy and then a week later two drop in your lap. You just have to work it the best you can for what you are trying to accomplish.
One Last Thing
What I write about in the posts that follow is what works for me. It may not work for you. It may not take as long or it might take longer for you than me. You might take on debt differently than I do. You may have a totally different goal than mine.
There is no right or wrong here. This is just going to be me sharing my experience and plan. I hope it helps.
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