Here’s What the Real Estate Gurus Aren’t Telling You
The Amplified Impact Podcast
August 22nd, 2023
Today’s episode is all about the unfiltered truths of real estate that you don’t typically hear on social media.
I’m a firm believer in the power of real estate, but it might not make you rich as quickly as you think.
First things first, real estate is a long game.
It won’t shower you with riches overnight.
Real estate’s strength is its ability to accumulate wealth steadily over time. Remember, patience is the secret ingredient.
Now, let’s talk about syndications. Many aspire to jump into these to build big real estate portfolios.
But here’s the thing…becoming a General Partner (GP) in syndications takes time before meaningful cash flow kicks in.
Embrace this truth…problems are a constant in real estate.
But don’t be afraid because bigger problems come with bigger rewards.
Finally, remember that the most complex factor in real estate – and life – is people.
They’re unpredictable, unique, and sometimes just plain difficult.
Dealing with residents, employees, partners, and others requires patience and adaptability.
People management is the heart of real estate success.
TWEETABLE QUOTE:
“Real estate probably won’t make you rich on the timeline that you think it will.”- Anthony Vicino
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Episode Transcript:
Anthony Vicino:
So I’m a big fan of real estate. You guys know that this has been, you know, it’s it’s a core part of my belief that if you want to win the money game, the best way, the best strategy that I found, I’ve seen, you know, executed countless times by other people is build a business or a cash generating machine. And it doesn’t specifically have to be a business, but ideally, it is a way that you are generating a goodly amount of cash, and you take that money and then you invest it into real estate state. So that one two punch of build a business, invest in real estate has been very, very helpful for me. But there are parts of this story that I think get glossed over when it comes to how it’s presented on social media. And so I just wanted to take this episode to walk through some of the things that you don’t hear about when it comes to real estate on social media, specifically from the gurus like myself. The highlight of the story for me has been that over the past five years, we’ve acquired around 80 $85 million of real estate, which is really cool. That’s awesome.
Anthony Vicino:
But you hear those numbers sometimes, and you might get a conflated expectation of the timeline in which these things are possible or what that really ultimately equates to in terms of, like, net worth or wealth and all these things. So I want to break some of this down. Number one, the number one thing I want everybody that’s interested in real estate to really walk away from this episode with is that real estate probably won’t make you rich on the timeline that you think it will. Okay, let’s repeat that. Real estate probably will not make you rich on the timeline that you think it will. When I tell people we’ve acquired all this real estate over the last five years, tens of millions of dollars, it’s a huge portfolio. You would think like, oh, you got really, really wealthy from that. And the truth is, that’s not really how I generated my wealth.
Anthony Vicino:
It is what I’ve done now to manage and continue growing my wealth. But my wealth came before that. It came through building those cash generating machines. And it was important, because the thing with real estate is it takes a long time to really see the fruits of your labor. It’s, in my opinion, the best get rich, slowly but surely strategy in the world. And for it to work, and it will work, it requires a lot of time, like having a long time horizon. And one of my core investment thesis is that we let time do the heavy lifting. So we buy real estate, and then we just hold it for extremely long periods of time so that the market and appreciation can do its thing.
Anthony Vicino:
Because if you hold a piece of real estate for 30 plus years, it’s really hard to lose money on it. Truly, it’s really, really difficult. But the truth is that it’s hard to make it those 30 years if you don’t have other means of making money coming in. And with real estate, what I see a lot of people doing that are trying to emulate my path, let’s say, is they jump straight into syndications, and syndications for the listeners out there who may be newer to real estate. It’s a way for us to pool resources between operators and investors. What that means is we get together like an operator, like myself, we’ll get together, we’ll bring some investors into a deal and we’ll go out and we’ll buy a building together. The investors bring the capital, we bring the experience and the maintenance, the management, and we will run the asset. We’ll do everything associated with it.
Anthony Vicino:
And our investors, they just get the benefits of having owned the real estate without having to do any of the work. And a lot of people will look at that path and think that’s a great way to get into really big real estate deals without having to bring much of your own capital, right? Like, if I wanted to go and buy $80 million of real estate with my own money, I would have needed to bring around $30 million to the closing table just to acquire that. The truth is, about 25, 30 of that or 25 to 28 million of that has been investor capital. Okay? So it’s allowed us to go out and buy these really large assets that might not have been able to finance entirely on our own. And so people see that and they think, oh, I should do that. But here’s the truth is that if you’re going that route of being a GP, it’s going to take a really long time to start seeing the meaningful cash flow coming in from your side of the promote. And there’s a lot of reasons for that. But generally speaking, what I see people getting into trouble here is when they start raising capital too soon and they don’t have other means of supporting their life coming in, they don’t have those cash flowing machines, and so they start chasing deals so that they can get the fees associated with that.
Anthony Vicino:
One of the smartest things that I ever did, that I didn’t do intentionally, was I had built my cash generating businesses and I had owned my own real estate before I started raising capital. I didn’t do this by intention, it just happened that way. But what it allowed me to do is to go out there confidently and acquire good real estate deals and not chase them because I need to close the deal to put food on my table. I have that already coming in from other means. And so doing the real estate deals, we can afford to be picky, we can afford to be patient on it. And that’s really key when it comes to becoming a good investor is like being super patient and waiting for the great opportunities rather than going and chasing them because you have to do the deal. All right. Now, the two things here that I would strongly encourage everybody to think about when they’re looking at real estate and like, how do I stay in this game for long periods of time is two things in particular, cash flow and reserves.
Anthony Vicino:
The cash flow coming from the building, that’s critical. But the other aspect of this to think about is the cash flow just coming into your own life, ideally from other areas before you go all in, specifically on the GP syndication route of real estate. If you go into real estate, you own it with your own money, and you have the cash flow coming from that asset every month, that’s fine. That’s cash flow, that’s great. The other side of this is make sure that you have enough in reserves to be able to weather the rough times. When I bought my first triplex all those years ago, I used an FHA loan which allowed me to buy the building, which was valued at $246,500. I only needed to bring about 3% of that to the closing table, so I only needed $7,500 out of pocket to buy that building. But that’s not all the money I had, right? I had more in reserves.
Anthony Vicino:
I had about $20,000 in reserve, so that if something went wrong with the roof, the plumbing, the electrical, I had an Eviction, whatever, I was going to be okay and able to weather those rough patches. So it’s just really important that when you get into real estate, it’s not just about the money you need to close the asset. It’s about having money in reserve. Because it’s not a matter of if things will go wrong, it’s just a matter of when. Which is an important thing to remember, because as an investor, you are paid for solving problems. That’s what we do. And as you’re playing this game, the problems never go away. You never solve them.
Anthony Vicino:
All the problems, in fact, they just get bigger, they get harder to solve. But as a result, you also make more money for having solved them. And this goes back to something Elon Musk said, which is that you’re paid in proportion to the magnitude of the problems that you solve. So just accept that the problems are never going to go away. They’re just going to get bigger. They’re going to get harder and harder to solve over time. But if you can manage to do it, you’re going to do very, very well. Now, the biggest problem that I see in real estate and in just business in general, and maybe you could extrapolate this out to life, broadly speaking, is that people are always the hardest part.
Anthony Vicino:
People, whether it’s your customers, it’s your employees, your partners, your vendors, your suppliers, your brokers, your lenders. People are always the hardest part of business because people are weird, they’re illogical, they’re irrational, they don’t always know what they even want. And every single human is a little bit different. And so how you deal with this employee is probably slightly different than you’re going to have to deal with this employee over here. And that is going to cause a lot of headache and a lot of frustration. But just understand that this is the most important part of real estate. It’s not the bricks and the sticks, it’s not the buildings, the numbers, the spreadsheets. It’s the people behind all of that.
Anthony Vicino:
It’s the residents, it’s your employees, it’s your investors, it’s all of that. And so just go into it with eyes wide open, knowing that people are going to be the hard part. So those are some things that you just don’t hear much about on social media when it comes to acquiring big real estate portfolios and what all that means. I just wanted to shed a little bit of light on this. I don’t want it to deter you. I don’t want it to scare you off and say, real estate is not for me. It’s not about that. It’s about going in with correctly calibrated expectations.
Anthony Vicino:
That’s all I want for you guys. So if you got some value out of this, make sure that you do something, I don’t know what, maybe you go over to YouTube, you find the channel amplified impact. You hit the subscribe button. If you’re listening on itunes or Spotify, leave a review or a rating. If you think there’s somebody else out there that would get some value out of this, then share it with them. That’d be really rad. And if none of that, that’s cool. I appreciate you taking some time to be here with me today.
Anthony Vicino:
I’ll catch you back around these parts tomorrow. But until then, stay hyper focused, my friend. Bye.
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