I am working on my Real Estate Handbook to be published in 2015.
Here’s my dedication so far–
I dedicate this Real Estate Handbook to everyone on this planet who does not have a government-sponsored, defined benefit pension plan. It is written for those people who have to provide for themselves and their families, and have found no better way to do that than through real estate.
If you are fed up with the stock market, mutual funds, tech bubbles, option trades, day trading, fund and financial advisers, t-bills, money market funds, savings account interest, bank fees, life insurance investments and pretty much every other type of investing save and except your own small or medium sized enterprise, one you own and control and real estate, then this handbook is for you.
What is the number one source of startup capital for entrepreneurs worldwide? It is the equity in their homes. What do 61 of the top 100 richest Canadian families share in common? Most of their wealth is concentrated in real estate. What is the first step up the ladder of success? It’s finding a job or owning your own business. What’s the second? It’s owing your own home. What is the easiest way to disenfranchise a person or take away their human rights? Make him or her homeless. What is the common denominator for the Holy Roman Catholic Church, the Emperor of Japan, the House of Windsor and the Hudson Bay Company other than they are all long lived institutions? Their key assets are real estate based.
I have found you cannot save your way to wealth; you can only invest your way there. This is true for most people on this planet. But invest in what?
Well education is one thing that pays off for most people. A personal business for life—I call them PB4Ls—is another. And finally, real estate provides inflation protection, cashflow, wealth effects via forced savings, value increase via positive externalities like a city growing around you without you having to lift a finger, and unearned rent. It’s a business model for dummies like me. By definition, if you own a location, no one else can locate there without your agreement. So you have created a franchise or concession for yourself without having to have, say, the skills of Apple’s Steve Jobs or Subway’s Fred DeLuca or Starbucks’ Howard Schultz.
It’s the one asset class that does not run away from you when the going gets tough unlike, say, a typical consulting business where its prime assets go home every night. It’s the only thing I’ve every made any money at. It’s the only thing a lot of tech executives have told me they’ve ever made any money at.
Having said this, in real estate, you make money when you buy not when you sell so there are some simple rules to follow—
If you follow these six rules, you are almost certainly going to successfully, “Buy low/sell high.” This is easy to say, but hard to do since humans tend to move in herds—we want to do what everyone else is doing/wearing/listening to/going to. Resisting a herd mentality is really difficult.
People often ask me if I can help them get rich quick. They’ve read somewhere about some guy who sketched out a biz model on a napkin and flipped his tech startup for a few hundred million a year and a half later. Or they are watching those real estate pros on TV flipping barely renovated homes for unconscionable amounts of money in a few weeks. This is not realistic. At any one time, there are probably 25 to 30 million smart Americans in their basements dreaming up the next big thing. And there are just as many or more smart Euros, Canucks, Chinese, Indians, Vietnamese trying to do the same thing. I believe the odds of selling a startup for a few hundred million in less than two years is actually less than the odds of winning a major lottery like Powerball so if this is your “plan”, buy a lottery ticket instead.
Oh, and as far as those real estate pros are concerned, many of them stack the deck in their favor—this is scripted “reality” television—reno costs are ridiculously low, transaction costs (like realtor fees, legal fees, land transfer taxes…) are ignored and prices manipulated. Pollyanna would approve such a sunny approach to investing, but your hard-headed mentor will not. The only investments that are fun are the ones you make money with.
You can’t plan on getting rich via a lottery win or by flipping real estate or tech assets or, for that matter, anything else. There is a rule about that. It goes like this, “Flippers, like gamblers, flip ‘til they flop.” But if you are disciplined and work hard to build and hold a decent-sized real estate portfolio by following my simple recipes, you too get can rich, for real.