Realty411 Magazine Feautring Memphis Invest | Seite 33

T
his is an amazing time
to invest in real estate.
You can invest almost
anywhere, in almost any
kind of property, and
profit handsomely. Yet
many people will jump
into the market, lose considerable cash, and
drop out of the market, only to miss out on
the greatest opportunity of their lifetime.
Others, with significantly fewer resources,
will amass considerable wealth. What’s the time sets a trap at both ends of the transac-
tion. If you buy too high, you cannot wait
for value appreciation and the cash flow to
bail you out. So, with a short-time horizon
you must focus on a single variable —
your purchase price. If your purchase price
is low enough, you will profit in the short
term. If you pay too much, it’s difficult to
profit in a short term.
Time sets an emotional trap when you
get ready to flip your property. As a rehab-
ber your business is flipping. If the project long-term investor, so the purchase price is
not as critical, although buying low is al-
ways an advantage. Time sets a homework
trap with an infinity of choices. You can
look at any type of property, from single-
family to multi-unit to commercial or even
industrial and raw land. You can look at
property everywhere, from North Dakota
to New York City, from El Salvador to
Thailand. How do you narrow the choices?
Get lost in the analysis and you never buy
any property at all. Don’t do the homework
difference? Persistence, patience and thor-
ough homework are critical deciding fac-
tors. Successful investors develop a plan,
research diligently, and persist. In addition,
successful investors understand the impact
of a single variable — TIME. Do you un-
derstand how time impacts your real estate
activities? Understanding this single vari-
able can increase your focus, extend your
patience, and give you the confidence to
persist. Let’s explore how time is the criti-
cal linkage between fix/flip, buy/hold, cash
flow/appreciation and success in real estate
investing. went wrong somehow, you cannot cure it
by setting a high sale price and waiting for
an unsuspecting buyer to bail you out. Your
business is fixing and flipping, not holding.
The cash you tied up in the project is not an
investment; it is truly working capital that
you use to run your business. If you bor-
rowed “hard money” to do the project, you
probably have a time-bomb ticking. When
you have fixed the property, you must flip
it, at the market price, or even at a discount
to make sure it moves quickly. and you end up with a condo in Detroit or
Miami that you cannot rent and you cannot
afford the HOA fees. You need a strategy to
identify locations and properties that will
hold value and grow for at least a decade.
What’s your plan? Probably you cannot
afford negative cash flow for ten years, or
even longer, while the beach-front property
in Paraguay increases in value. Oh, wait.
Does Paraguay even have a beach-front?
Long-term property investment requires
positive cash flow.
A little plug here for RBS Homes: we
have analyzed over 500 major metro ar-
eas to identify the very few cities that will
show long-term growth in property value
and rental income for the next ten years.
Call me (925-858-9017) to find out how.
What is Your Real Estate Time?
How do you make money in real estate?
Appreciation or cash flow?
Both response are true, so what’s the dif-
ference? One word — TIME. For example.
suppose you buy a property at 95% of mar-
ket value, that produces a cash flow of 25%
cash-on-cash. The cash-on-cash return is
also called the internal rate of return (IRR).
Note this is not the total return on invest-
ment (ROI). The ROI depends upon how
long you hold the investment — time.
Are you satisfied with a property that
cost you 95% of market value and produces
25% IRR? That depends upon your TIME
horizon. If you work at the business of fix/
flip and expect to sell the property in 3-6
months, then you may not be satisfied with
a 5% bump in price and a total cash flow
of 6% on your investment. It gets worse.
Perhaps you needed three months to get
the property rehabbed and rented, you may
have lost money on the cash flow because
the property was vacant and you have some
interest cost on your invested funds.
Time offers different rewards and sets dif-
ferent traps for each type of real estate
investor.
Time for Fix/Flippers
For the short-time horizon of a fix/flipper,
Realty411Guide.com

Time traps awaiting short-term
investors (fix and flippers):
Homework time trap: Time cannot cure
a high purchase price. To succeed, you
must buy low or walk away.
Emotional Time Trap: Time cannot cure a
busted project. If the project went wrong,
take the loss and flip it anyway. If you
don’t, you are out of business.
Time rewards the fix/flipper who moves
swiftly. If you make many offers swiftly,
eventually some seller will take your low-
ball offer. The faster you make many of-
fers, the faster you get one accepted. Go
fast on the buying end of the project. The
same goes for the fixing. The faster you fix
the property, the faster you can sell it. The
same goes for selling. Cut the price and
offer some sweeteners to the buyer who
can move quickly. Make your profit on the
purchase, take your profit on the sale, and
move on to the next one.
Speed is one secret for fix/flippers.
Time rewards the fast fix/flipper with more
projects, lower holding costs, and more to-
tal profit.
Time for Buy/Hold Real Estate Investors
For a long-term buy/hold real estate inves-
tor, time works differently, setting two dif-
ferent traps, both at the front end. Both ap-
preciation and cash flow can work for the
PAGE 33 • 2011

The Final Time Trap: Is now the
right time to buy?
A few points may be helpful if you are sit-
ting on the fence just waiting to jump into
real estate “when the time is right.”
•Mortgage rates are at all time lows.
•Property values have dropped 20% - 35%
nationwide, and more in some areas.
•New construction has dropped to the low-
est rate since World War II.
•Real estate investments are producing
cash returns of 12% -35%, depending upon
the region you choose.
•Have you checked your stock portfolio
lately? How’s that working for you?
In closing, I’ll answer the question of the
final time trap with another question:
If not now, when?
With my very best wishes for your success
in real estate investing,
Richard Barrett, Partner
RBS Homes, www.RBSHomes.com
ph: 925-858-9017

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