It’s Hard To Lose Money In Real Estate If You Do These 2 Things
The Amplified Impact Podcast
April 21st, 2023
Today, we’re diving deep into the world of real estate because it has played such a significant role in transforming my life.
Building a business and investing in real estate has been the backbone of everything I’ve done over the past decade. But I know that for many of you… real estate can be a big, scary, overwhelming, and complex thing. Don’t worry, I’ve been there.
So let me share with you these two principles (you read that right—just two) that have served me incredibly well which I’m confident will serve you too.
TWEETABLE QUOTE:
“So just make sure that you’re buying buildings that you want to own for 10 years and that you have the ability to own for 10 years. You do that and you’re gonna be doing pretty.” – Anthony Vicino
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Episode Transcript:
What’s up, all you beautiful people. Welcome back to the podcast. Today we’re going into the weeds of real estate because if you guys know my story, real estate has, was a pivotal part in really transforming my life. It was really the result of two, uh, two-part strategy, build a business, invest in real estate, and that’s been the backbone.
That’s been the core of everything that I’ve done over the last decade. That has, you know, led me to this. Now, for a lot of you, real estate is a big, big, scary, overwhelming, complex thing. I know. It was for me, right? Like actually, for those that don’t know, like my very first experiences with real estate came in college.
This was like, would’ve been about 18, 19 years ago. And at the time I was living with my, my room. And him and his dad would go buy these single family homes. I would live with them for real, real world cheap, and we would do construction. We would just live in a construction zone as we’d fix and flip these single family homes.
We did that three times and my experience through that process was, man, I freaking hate r I hate real estate mainly cuz I hate construction. I’m the guy who can swing the hammer, but I cannot hit a nail. I’m just really bad with my hands. Like really? And so coming off that experience, I was like, if this is real estate, I don’t have any interest in it.
And honestly, I never even considered real estate as being something I was remotely interested in at that point. And I think for a lot of people, that’s their first experience because they watch HGTV where there’s so many fix and flip shows where it’s like, go buy this house. It should make it fancy and then sell it, right?
But that’s only just one aspect of real estate, and it’s the one that I actually find the least interesting, and it’s the one that I, I consider it to be. I don’t consider it to be investing. I think I had a conversation with somebody the other day that I, I was like, fix and flip is not investing. It’s a job.
Like you’re going in, in there, you’re doing the work, you’re flipping your, your only purpose is to do the work, add the value so you can then sell it. And I was like, that’s if you’re, if you’re buying something with the intent of selling it, you’re a trader, not an investor. And. With that in mind, then I wanna share two ideas that will serve you regardless of which aspect of real estate you explore and whether you’re moving into a recessionary period, into a bear market, or into a bull market.
I think these two principles will serve you incredibly well. Number one is that it is very hard to lose money in real estate if you don’t buy a building that you don’t want to own for a decade. So if you go in and you buy buildings that you’re like, I love this building, I love this neighborhood, and I, I’m excited to own this.
In a decade, if I look back in a decade and I still own this building in this neighborhood, I’m gonna be pumped. Okay? It’s really hard to lose money if you only buy buildings that you want to own for at least a decade. That’s number one, because. Real estate on a long enough timeframe generally appreciates, it becomes more valuable.
And so the longer you can go holding that real estate, the the more you’re likely to make, or at least you’re gonna mitigate the potential to lose money. I think the people who tend to lose money in real estate are the ones that get in and get out quickly or think that they can get in and out quickly.
So like for fix and flippers, they’re always trying to get in and out, like in four to five, six months. That’s really. But even in big multi-family commercial real estate, the type that we do at Invictus, a lot of operators out. I try to get in and out in like a two to three year window, and I’m like, no, like that.
Too much can go wrong in that period of time. And so time is an investor’s best friend. The more time you have, the better because you can then wait for the right moment to sell. Right? And in my experience of talking with really experienced old school investors in the real estate game who’ve been doing this for way longer than me, like 30, 40, 50 years, the thing that they always regret is selling.
Selling too soon or just selling it. And so we took this strategy to heart when we started buying real estate at Invictus, and we said, okay, we’re only gonna buy things that if we owned it for at least a decade, we would be psyched. And just, just that one thing alone. That one, uh, principle has served us incredibly well.
The second one. Is that it is very hard to lose money in real estate if you don’t buy a building that you cannot afford to own for 10 years. There’s a big difference here, right? Like there’s, there’s a lot of buildings out there that I would love to own for 10 years, but they do not cash flow. They do not, they do not spit off enough money in the short term for me to be able to say, this is gonna be a good long-term investment because I’m gonna be bleeding money out of the wazo to, to be able to.
So the idea here is that you need two things. You need cash flow and you need reserves. And if you have sufficient cash flow and you have sufficient reserves, then you can own that building for the 10 years that will then allow you to look back and, and exit it profitably or, you know, extract equity in all sorts of different ways.
And to that end, A lot of the buildings that you want to own for like 10, 20, 30 years are probably pretty new and fancy and beautiful right now, right? Like you’re probably not gonna go and buy a building that’s a hundred years old, like it’s already really old. So you’re probably gonna try and find the newer buildings, and they typically don’t have a ton of cash flow in them.
Because they are so new and so expensive, it’s hard to get them at a, at a number that makes sense for you to be able to cash flow into, into the. And so what people have been doing in recent years is they’ll get buy on thinner and thinner margins. They’ll buy deals where they’re not cash flowing very much at all.
And the big problem is that when the market turns, say, into a recessionary period, and like renters are maybe moving out, or you’re not getting the top rent that you thought you could anymore, or expenses are creeping up because of inflation, suddenly it’s cutting into your cash flow. And you might find yourself in a position where you can no longer service the debt or it just doesn’t make economic sense to continue holding the building because it’s bleeding you so dry.
And then you have to sell well before those 10 years. Right? And so if you can withstand those temporary storms, those, um, those fluctuations in the short term market, or you know, those, those times when cash flow might shift and change a little bit. You’re going to be able to ride it out and get to that point where you get to benefit from the long term overall appreciation that real estate typically goes through, I’m not saying always, but typically goes through so.
Those are just two concepts that as you start to get into real estate, I really want them to influence how you move in this industry because real estate is the best. Get rich slowly but surely plan out there. The longer you play the game on the longest time horizon that you can give yourself, the more likely you are to make money.
So just make sure that you’re buying buildings that you want to own for 10 years and that you have the ability to own for 10 years. You do that and you’re gonna be doing pretty. So that’s gonna do it for me guys. I am psyched. I am pumped to have you here. Can’t wait to see you back here tomorrow. But until then, my friends stay hyper-focused.
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