What Fireworks Teaches Us About Real Estate Investing

Happy 4th of July! I want to take a moment to reflect on fireworks. Not the little ones, but the big fireworks we all love to watch. Isn't it fun to sit back and admire the explosions? To marvel at the bright lights and loud booms? To delight in the grand finale and wish for more when it's done? It's a great time for everyone. It's a 20 minute show that fills you with wonderment. 20 minutes. That's it. But of course, like most great things there's a ton of hard work leading up to...

What’s the Best Legal Structure for Owning Real Estate?

Nested Legal Structure
For my next real estate purchase, I'm investigating partnering with a couple dudes. Their construction experience and my property management experience should make for a solid team. Together, we want to buy distressed multi-family properties, fix them up and rent them out. These partnership discussions naturally brought up questions on the best legal structure we should use for owning these properties. To help figure out what to do, we met with a lawyer, an insurance agent, and an accountant...

Find The Wedge When Buying Rental Real Estate

Find The Wedge
In business school, a strategy professor of mine, Rob Wiltbank, shared the secret to successful acquisitions. He drew a line on the board and said, "This is a company's current value over time. When you buy it, this is what you're paying for." Then he drew another line above it (much like the picture above). "This is what you want the company's value to be after you buy it. See this gap? (As he runs his finger between the two lines) That's the wedge. This is where you add value to the com...

Responsible Tenants Are the Drummers of Rental Real Estate

Have you ever heard a music band that was just off? Sure, each musician was probably great, but for some reason it wasn't coming together? I experienced that once, but the reason was obvious: the drummer was missing. Because of this, the band sounded disjointed and off-beat. You could also see the concentration on their faces as they all strained to keep the beat. Nobody, include me, was enjoying themselves. When he finally showed up, they were in the middle of a song and kept playing. He...

Seek Unity With Your Spouse Before Investing In Real Estate

Let's set the scene: I'm in college on the first date with my future wife. We're walking outside; still very much trying to get to know each other. She asks the question, "What do you want to do with your life?" Me: "I want to invest in real estate. I want to buy a fixer upper for $300K to $400K, fix it and sell it. Or refinance it based on the repaired value and rent it out to collect passive income." I was so proud of myself for articulating such a clear, and profitable, vision of my...

My Disillusionment With The Stock Market

Stock Market Returns
I grew up in an interesting household. My dad owned and operated a construction business and my mom helped people plan and save for retirement. Whether on purpose or not they both instilled a couple of beliefs: Owning your own business is harder work than having a job, but the control and flexibility are worth it. Think way ahead into the future and plan for it. Here's an example: When I was 16, I was able to work for my dad because he owned the business and could decide to hire me....

Real Estate Investing Produces Gyroscopic Cash Flow

Most people start investing in real estate to earn "passive income". The idea is simple: buy a home, rent it out, collect checks in your mailbox each month. Boom! Passive income! That's one of the reasons I invested in real estate in the first place. However, this isn't completely true for the DIYer. Here's how my first month went as a landlord.... We bought a property that needed some serious TLC. Since we were just getting started, we couldn't afford to hire someone else to mak...

Tenants Don’t Talk To You Because They Fear Retribution

Seth Godin posted an interesting thought piece on professionalism called "Retribution" that talks about the difference between reacting and responding. Retribution is when you react by punishing someone for a wrong or criminal act. An example of a wrongful act might be a tenant not paying their rent or breaking something at your property. Your punishment might be to NOT fix a cracked window or help them get rid of an ant problem. After all, they didn't pay their rent. They deserve it! "T...