Earlier this week I was at a meeting and ran into an old investor friend of mine. He’s now retired, and every time I see him he likes to give me some fatherly advice.
This time he shared with me the many lessons he learned over his 40 years of investing and what he believed was the most important “secret” to success. He said it wasn’t wholesaling because you constantly have to find buyers and sellers and you’ll run yourself ragged if you do it forever.
He said it wasn’t lease options, because again, you’re constantly finding sellers and tenants and you’ll be extremely lucky if even 50% of your tenants end up purchasing the property.
So what’s the secret?
The one that isn’t sexy. And the one most people ignore for too long. It’s that whatever you’re currently doing in real estate (wholesaling, lease options, etc.) your goal should be to eventually own several properties free and clear, which you will never, ever sell.
In short, it’s that buying and holding properties is the only real way to accumulate wealth in the real estate business. Today, my friend owns 5 properties free and clear. He told me that they throw off about $40,000 in cash flow every year after expenses.
Considering that most people these days won’t get a pension (unless you’re a government employee) $40,000 a year is a lot of money. Especially, because all it requires is for you to own 5 properties free and clear.
I’ve owned dozens of properties over the years…
And I’ve known investors who owned hundreds. Acquiring just 5 is a piece of cake and you could do that in just a couple of months. Of course, make sure that the 5 you pick up and put in your buy and hold portfolio, are in good neighborhoods and that you’re prepared to hold onto them for the next 30 years – this means stay out of marginal and run down neighborhoods.
And if you want to make more than $40,000 a year, just pick up more properties. My investor friend mentioned that he used to have 5 more, but that his wife convinced him to sell them, and selling those 5 properties is the only regret he’s ever had in his real estate career.
If you’ve got a business plan and a set of goals for this year (which you should have) write down how you’re going to quickly acquire 5 or more properties that you’ll never sell and eventually own free and clear.