Think and Grow Rich
Think and Grow Rich
The Science of Getting Rich
The Science of Getting Rich

Matt Napier's Real Estate Warning to InvestorsSince the beginning of the Great Recession, there has been a debate on cash flow between real estate investors, many of whom learned some tough lessons when the Recession began (including myself). Specifically, the debate is: What kind of deals should you focus on and how is your money best used!? Should you focus on creating equity or focus on creating solid income and cash flow?

You may be saying that they don’t have to be mutually exclusive. While that is correct, many investors tend to focus on either building equity OR cash flow. To me, the decision of what kind of deals to focus on is made easy if you boil it down to one thing- how much money do you need right now to live the lifestyle that you are already living (provided it’s already a decent standard of living) and do you already have enough cash flow to live off of on a monthly basis? If you do not have enough to live off of, do NOT focus your efforts too heavily on equity build up. Instead, focus on cash flow (quick flips, wholesaling, and only rentals that will generate strong cash flow); investments that will put cash in your pockets within 1-9 months.

One of my mentors when I got into real estate investing nearly a decade ago, Del Hinds, who headed the SCREIA, made a point of continually telling me not to focus too much on gaining long-term equity, until I had enough to live on today. His famous words still haunt me- YOU CAN’T EAT EQUITY! I also had another mentor that swore to me, you better have a sure fire exit plan and back up strategy if it doesn’t work. I will explain that more in a minute, but for now, let’s talk about Del’s words. At the time, I thought that he just had a different approach to investing, but he was 100% correct. Although I’d built up a significant pile of equity in properties, that was slowly being squeezed out each month when the Recession hit and since I didn’t focus on strong cash flow from the beginning, the $100 to $150 I was making per property on gross rents (before expenses) barely covered basic maintenance and vacancies, meaning my true profit per month on rentals was close to zero.

This serves as a warning. If the economy goes into another recession (which is certainly possible given the lack of fundamental improvement in the economy and massive spending by our government) and you do not have more than enough cash flow to live on already and are focusing too heavily on equity, change your focus… FAST. Focus on wholesaling, rehabbing, and flipping properties, or if you do buy rental properties, ensure that you have at least 30 to 35% cash flow after PITI payments plus a 10% allowance for vacancies and a 10% allowance for repairs (I actually look for 50% net cash flow now). Just because there are enough properties with potential equity that we can buy all day long right now, don’t buy too many properties too quickly if the strong cash flow isn’t there, and if you’re choosing not to re-sell them right away. Your equity may get squeezed out and you may be stuck with a property that you can’t sell for what you thought, and then you’re holding onto properties that aren’t cash flowing well enough to make it worth your time. You’re one of the smart ones though; you know to focus on cash flow, and thus, you will be a successful investor.

Matt Napier

With nearly a decade of experience in specialized niches of real estate, Matt is considered a highly knowledgeable real estate investor in the Charleston, South Carolina area. Matt has dedicated himself to learning highly specialized skills which allow him to find high-return real estate investments for his clients and his investment company, The Napier Organization. His company offers high-return investment opportunities to select individuals and funds, secured by real estate. In his free time, he enjoys coaching new real estate investors on the technical details of real estate investing.


Download The Profit Newsletter for November 2014 (PDF)

The Profit Newsletter - November 2014The November 2014 Edition of The Profit Newsletter is available for download just in time for our Atlanta REIA Main Meeting on November 3rd. The Profit is an digital, interactive newsletter for new and seasoned real estate investors delivered as an Adobe PDF file to read on your PC, Mac, Smart Phone, iPad or other mobile ready devices with a PDF reader. Many of the articles and ads in The Profit contain many hyperlinks you can click or tap to visit websites, watch videos, listen to audios, download content, send emails, comment on articles, share socially and much more! The high res version of The Profit is “print ready” for those who want to print the newsletter on their home or business printer. Also, be sure to Subscribe to The Profit Here so you don’t miss a single monthly issue.

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This month you can enjoy a variety of real estate investing articles from Tony Pearl, Matt Larsen, Mark Jackson, Larry Harbolt, Kimberlee Frank, Jim Hitt, Kathy Kennebrook, Karen Bershad, Ron LeGrand, Michael Vazquez, Bill Cook, Bill Ham, Don DeRosa, Russ Hiner and Bob Massey. Atlanta REIA Silver and Gold Members can advertise in The Profit at some new deeply discounted rates. Just call us at 678-701-7160 to discuss a special plan to promote your business to our members, friends and followers throughout the year.

“It doesn’t make a difference what temperature a room is, it’s always room temperature.” ~ Steven Wright

There are certain people who should never touch anything mechanical. My Aunt Effy is like that. She didn’t get her brakes fixed until one of the brake pads actually fell out of her car. She bought a sewing machine and ended up sewing her pants to the wall. And who knew you could do that much property damage with a weed whacker?

So you can imagine our reaction when Aunt Effy decided to buy a programmable thermostat for her home. Heck, we were all afraid she would melt the dog.

Luckily, she got some good advice at the mega-hardware store, and bought a “smart” thermostat called the Nest. Have you seen one of these things? I have, and now I’m a big fan.

Even though the Nest is a programmable thermostat, you don’t really have to program it. Instead, just adjust the temperature the way you like it. Make it warmer, make it cooler, keep yourself comfortable. Turn it down when you leave the house. The Nest will “learn” what you like, and pretty soon, it will adjust itself for you automatically. Nest’s website says this can save you 20% of your energy bill. And since it kind of runs itself, it’s easy enough even for my Aunt Effy.

One of the great things about this thermostat is that it’s compatible with wireless Internet. Once you set up an account online, and load the app on your phone, you can control your HVAC from anywhere. So, for example, if it’s especially cold one night, you can turn the heat up a half-hour before you get home.

Here’s something else that’s pretty neat: Nest has started to partner with other products, and the partnerships make this smart thermostat even more useful. For example, Nest can interface with your Jawbone UP24 band (it’s one of the new motion-sensing fitness bracelets) to know when you’ve gotten up in the morning and provide hot or cold air accordingly – even if you got up much earlier than usual. It can also interface with your car and estimate when you’re going to be home. When they say “smart,” they’re not kidding!

And if all that wasn’t enough, the Nest is one sharp-looking thermostat. Very sleek and modern.

Now, is this something you would want to install in a house you’re renovating to sell? In most cases, no. The Nest isn’t cheap – it costs around $250 – so it’s not a sensible addition to most houses. At the same time, sometimes you can make a house really “pop” by adding one or two small, but visible, luxury items. And if you’ve got a house in a very high-end neighborhood, it might be something to consider.

I’m continually amazed by this kind of sophisticated new technology. Remember seeing those “houses of the future” when you were a kid? You could control everything from one central computer in the den: the stove, the heat, the television. I’ve always wondered when I’ll have a house like that.

Well, it’s not going to be long now, and I can’t wait! But heaven help Aunt Effy.

Don DeRosaDon DeRosa is recognized as one of the nation’s top 21 real estate investors in the New York Times bestseller “The Millionaire Real Estate Investor”. Don, who is a full-time investor, trainer, and mentor, is the first to offer his complete investing system on a mobile platform. Don teaches investors how to Make More and Work Less by being more efficient, productive and competitive, leveraging mobile technology and apps on the iPad, iPhone, Android and other mobile devices.

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