The “buy low, sell high” mentality in real estate is NOT the way to generate serious wealth.
Yes, you can get rich. And yes its SEXY and that exit IRR looks great on pitch decks and resumes.
But it’s a TERRIBLE way to build long term, low risk, passive wealth.
A thread:
Yes, you can get rich. And yes its SEXY and that exit IRR looks great on pitch decks and resumes.
But it’s a TERRIBLE way to build long term, low risk, passive wealth.
A thread:
https://twitter.com/tihobrkan/status/1318913064146751489
Sam Zell made bank. I know.
Chamath makes money investing in unicorns while the avg guy with “VC” in his twitter bio doesn’t.
Day traders make $ too. So do house flippers.
Until a lever gets pulled somewhere in the fragile system and something out of their control happens.
Chamath makes money investing in unicorns while the avg guy with “VC” in his twitter bio doesn’t.
Day traders make $ too. So do house flippers.
Until a lever gets pulled somewhere in the fragile system and something out of their control happens.
And taxes and transaction costs.
The gov takes 15% of your nut. The brokers take 5% of overall transaction which can be 10 or 15% or your nut. Closing costs, transfer taxes, the list goes on.
Every time you sell 30%+ of your nut is EVAPORATES.
The gov takes 15% of your nut. The brokers take 5% of overall transaction which can be 10 or 15% or your nut. Closing costs, transfer taxes, the list goes on.
Every time you sell 30%+ of your nut is EVAPORATES.
Plus all the work you did to put the deal together is just overhead to you now.
That’s water under the bridge.
The fruits of that labor have been harvested and eaten. The goose has been sold.
That’s water under the bridge.
The fruits of that labor have been harvested and eaten. The goose has been sold.
Idle capital is expensive.
As soon as you sell you better hustle on that 1031. Don’t buy anything stupid though!
What’s all your cash doing? Waiting for you to get back to work and deploy it again?
What are you doing? Working hard and spending time, money on underwriting?
As soon as you sell you better hustle on that 1031. Don’t buy anything stupid though!
What’s all your cash doing? Waiting for you to get back to work and deploy it again?
What are you doing? Working hard and spending time, money on underwriting?
When you buy low, sell high you are running a service biz, not a real estate portfolio.
When you stop doing deals, and stop working, you stop making money.
You are trading your time and effort for money.
You’re constantly risking your bankroll to make your next buck.
When you stop doing deals, and stop working, you stop making money.
You are trading your time and effort for money.
You’re constantly risking your bankroll to make your next buck.
The folks buying low and selling high count on appreciation.
They are speculators. Cardone is no different. He needs a sale to get a nut.
The cashflow is minimal. They NEED the sale. And they’re dependent on a ton of factors outside of their control.
They are speculators. Cardone is no different. He needs a sale to get a nut.
The cashflow is minimal. They NEED the sale. And they’re dependent on a ton of factors outside of their control.
Like what somebody else thinks their property is worth.
Like interest rates and LTV.
Like how bankers feel about a certain asset class.
Like the economy and politics and jobs and consumer confidence and how somebody else feels that day about tomorrow.
Like interest rates and LTV.
Like how bankers feel about a certain asset class.
Like the economy and politics and jobs and consumer confidence and how somebody else feels that day about tomorrow.
The folks trying to time markets and count on appreciation went broke in 2009.
All the sudden the “sell high” part of the equation they so desperately needed vanished out of thin air.
Do you think the folks with a moderately levered cashflowing portfolio lost sleep?
All the sudden the “sell high” part of the equation they so desperately needed vanished out of thin air.
Do you think the folks with a moderately levered cashflowing portfolio lost sleep?
The folks who hold real estate don’t pay cap gains taxes. They get write offs instead.
They don’t pay brokers and closing costs and transfer taxes.
They aren’t stuck with idle capital or doing 1031s that only because of the taxes they’re trying to avoid in the 1st place.
They don’t pay brokers and closing costs and transfer taxes.
They aren’t stuck with idle capital or doing 1031s that only because of the taxes they’re trying to avoid in the 1st place.
They refinance properties to get liquidity and fuel expansion.
They don’t pay taxes on this money. They don’t pay brokers. They don’t get stuck forcing 1031s.
They don’t pay taxes on this money. They don’t pay brokers. They don’t get stuck forcing 1031s.
They are operators or hire them. They have SYSTEMS to lease up or remodel their buildings and make them more valuable.
Instead of looking for smoking deals and worrying about the economy they are focusing on CASHFLOW and managing their revenue and expenses.
Instead of looking for smoking deals and worrying about the economy they are focusing on CASHFLOW and managing their revenue and expenses.
They are PASSIVE. When they sleep at night or spend 20 years doing nothing they keep MAKING MONEY.
The people with the great assets in great markets are enjoying long, slow, powerful appreciation.
The folks who bought buildings in NYC in the 80s and own them today are like the folks who bought AMZN and APPL and GOOGL in 2002 and still own it today.
The folks who bought buildings in NYC in the 80s and own them today are like the folks who bought AMZN and APPL and GOOGL in 2002 and still own it today.
They pay down the loan every month.
It appreciates every month.
In 20 yrs you own a building outright that’s worth 2 or 3 times what you paid for it.
And the CASHFLOW fuels their expansion and lifestyle.
It appreciates every month.
In 20 yrs you own a building outright that’s worth 2 or 3 times what you paid for it.
And the CASHFLOW fuels their expansion and lifestyle.
So why does everyone sell?
Because the modern real estate private equity model, with its back end promotes, encetivizes it.
You have to realize 100% of the value for the GP to get their fat slice.
And the exit leads to a larger fund with more money and then a bigger sale.
Because the modern real estate private equity model, with its back end promotes, encetivizes it.
You have to realize 100% of the value for the GP to get their fat slice.
And the exit leads to a larger fund with more money and then a bigger sale.
https://twitter.com/sweatystartup/status/1318935429723422720
The people who own the real estate in this country build and protect wealth.
The flippers are just doing them a favor.
As a smart man once said:
“99% of investing is simply waiting”
The flippers are just doing them a favor.
As a smart man once said:
“99% of investing is simply waiting”
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