and their acquisition price has little regard to do with the cost of rehab . In many cases , they pay over retail for the properties . It would be crazy for midsized operations like me to do that because we are in the market to buy and sell in today ’ s marketplace .
The funds have a huge advantage over small operations because their cost of money is so low and in some cases backed by the government at 1 % interest . When the cost of money is that low , you can afford to overpay and you ’ re going to make a profit on cash flow and you have a giant potential for upside returns in an appreciating market . That ’ s why the funds are still buying .
So , were back to the basics in marketing in every which way possible for distressed owners that need to sell now .
Since the real estate market has risen so much across the US , it ’ s been more profitable for us to sell houses retail to wannabe homeowners . Part of this reason is because the price points have moved up on many of the house we acquire and get sold for over $ 200,000 . We could look at other markets in the US , but I am bullish on Atlanta due to the growth in the area , job creation and moderate climate .
We do acquire less expensive properties in the Atlanta market but they ’ re not the kind that you would want to own for long-term appreciation and cash flow . These are the types of houses we wholesale to other investors because lower income properties are much more management and maintenance intensive .
In some areas the skillset required to manage these types of properties includes a gun and a Doberman Pincher . But there is a market for these types of properties and we tie them up on a contract and wholesale them to other investors who have mastered this niche . Not for me . I lived that life in Buffalo , New York in the 1980s and 90s and even though I bought the upper end of the low income properties , it ’ s a thankless job and I got kicked in the teeth .
Many of you heard me speak of my adventures in New York while on my first tour of the cities in South Africa in 2013 . If not , the videos are still on the BuyCashFlowProperties . com website under education . Scroll down to additional education labeled “ Money Talks ”, the song written by AC / DC . That was one of my favourite presentations in Johannesburg as the energy in the room was so high that day when I came out to the music of that song .
The question is : Should you buy more or sell now ?
The simple answer is , it all depends . The real question you have to ask yourself is why did you buy houses in the first place ? If you bought houses for cash flow and upside appreciation , along with getting your foot into a safer economy , a safer currency then why would you sell ? The only reason I can think of for people to sell now is that you have a greater need or opportunity for the money . It really all starts out with the goals you created for yourself and your family . And everybody ’ s goals are different .
Another consideration is that the US dollar is weakening against other currencies , which makes it a good time to invest in the US .
Last year I sold approximately 1 / 3 of my portfolio of houses to a hedge fund . But there ’ s more to that story . You see , most of my houses were held in retirement accounts and upon the sale of those properties there was no income taxes . And in some case I did a 1031 exchange into other properties so that I wouldn ’ t have to recognise any income tax on that sale as well . For most of you reading this , if you sell your properties , you will pay income taxes and you would dilute your working capital .
When I spoke at the IMN conference in Scottsdale Arizona in December , I was on a shark tank panel and I was presenting one of our investors portfolio of approximately 50 houses . A lot of interest was generated by my presentation and in the end the sellers raised the price of their houses and never concluded a sale .
I ’ ve seen this over and over with investors now . They say they want to sell their house and then all of a sudden they get sellers ’ remorse , or they ’ re just testing the market . Or , they go back to their original reasons and goals for buying the houses and realise there ’ s no point in selling when they ' re making cash flow and the properties are going up in value .
I was listening to one of the other speakers at that same event and he said that 60 % of all investors that outsource their property management don ’ t like the property manager . Property management is the foundation of holding rentals . If that foundation cracks or breaks all bets are off . There have been times when my own properties suddenly needed a new HVAC unit or a septic tank .
When the temperature dipped below 20 ° for extended periods of time
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in Atlanta this winter , I had a couple of HVAC units that had to be replaced because they were working so hard to heat the house and they burned out . It ’ s a fluke , and it happened , and it ’ s no one ’ s fault . Just like it ’ s hard to fix blame when the stock market goes down , you really can ’ t blame it on the stockbroker that sold you the stock . One thing I do know , and I know for sure is the management company we all use never marks up a fee for repairs , turnovers or maintenance of any kind and every other property management company does .
One of my closest friends teaches property management companies how to mark up their fees so I know this is an industry standard . And that ’ s probably why 60 % of all investors that outsource their property management don ’ t like their property management company . My business is strictly buying and selling houses to investors and to homeowners . For our investors , I give a one-year warranty and I have to tell you , I ' ve paid in excess of $ 100,000 to keep those warranties in place over the last six years .
During the first 4 years , we never even told the investors about the repairs made to their houses and I ' ve come to realise that that ’ s ridiculous . You need to know that I ' ve honoured our agreement and always will no matter the financial impact on me .
To sell or not to sell ? It ’ s really a personal choice based on your goals . My goal was to have a certain number of houses without debt that provided for my family ’ s lifestyle . Once I reached that benchmark , I created new goals that allowed me to be more , so I could make more , so I could give more . And guess what ? I ’ ve gone back into the market and bought some more houses . I ’ m holding and I plan to add more .
If I can help you obtain more properties or liquidate the ones you have simply contact me directly at RJP @ 5cashflowproperties . com or call me at 813-495-3006 .
We have investors that tell us what they are looking for : if we don ' t have it , we keep an eye out for the investment that fits their needs .
" Anything worth doing , is worth doing to excellence !”
RJ Palano Director of Acquisitions www . BuyCashFlowProperties . com ( 813 ) 495.3006
RJP @ BuyCashFlowProperties . com
SA Real Estate Investor Magazine MARCH 2018 53