Wall Street your real estate

One of the best tips I’ve ever gotten in real estate was from my real estate agent in Boston, Annette Givens.  At the time I was a full time commercial real estate attorney with little time on my hands and even less patience.  To her, it was probably a throwaway comment from an annoyed agent dealing with a young, argumentative client but to me it was a life changer. 

It was in 2006, right before the market crashed, and she was selling a house for me that I had gut renovated.  I had moved from Boston to Park City and it was getting to be a hassle to manage the property long distance.  There had been a fire in the rowhouse next door, mice kept invading, the tenants had a lot of needs, and I was practicing law with no time or patience for long distance tenants and property problems.  

During our conversation, I was debating on whether to lower the price or hold firm.  I’ll never forget when she responded, “you’ll own a lot of real estate in your life and you have to look at it like your stock portfolio.  Over a lifetime of investing, some properties will be losers and some will be winners.  Some even big winners or losers.  Overall, if you’ve got more winners than losers, you’re doing well.”  I lowered the price, she sold the house, and the advice stayed with me:  analyze your real estate investments the way investment advisors analyze stock portfolios.  

This approach can work for you whether you own only one solid blue-chip stock in your lifetime, such as your home or if you own an investment portfolio with high turnover and dozens of properties.  

In this series of blog posts, I’m going to teach you how to put this approach into action.  You’ll learn how to become an investment advisor for your own real estate portfolio so you can make more money with less risk and more time for fun.  

Whether you’re just starting out or a seasoned investor, you can make more money in real estate just by treating your investments the way Wall Street would.  Anyone can figure out how to “run the numbers” to see if a rental property is going to generate income but most people don’t buy and sell strategically based on what’s best for their life goals and their overall real estate portfolio.  If I had more time, patience, or help my property in Boston should have been a hold.  Given my situation, it became a high maintenance property that needed to move out of my portfolio and be replaced with something more suited to my needs.  If you treat your real estate investing the way investment advisors treat their client’s stock portfolios, you can make sound decisions no matter where you are in the market.  

Measuring rental income only tells part of the story when you’re buying real estate.  Most people figure they’ll make money on rent and don’t bother taking their analysis much further than that.  You typically make the most money on real estate, not from rental income, but from selling.  To be successful, you have to know how to buy the right property at the right time in the right market.  It also has to be right for your growing real estate portfolio and your age and life goals at that time.  Just as the stock market has blue chips, unicorns, tech stocks, large cap, small growth and all kinds of investment categories, so should your real estate investments over a lifetime of investing.  You can likely afford to make riskier investments when you’re younger and need safer returns as you head to retirement and your real estate investments should reflect that level of risk.  

In this blog series, you’ll learn the ten rules of Wall Street investing and how to apply those to your real estate assets.  Stocks don’t need the shower leak fixed or the locksmith to meet tenants and they don’t have outdated kitchens that need attention, so I put a twist on these rules by adding special considerations for properties.  You don’t want ten high risk, low liquidity, high maintenance properties in your portfolio or ten easy low performing assets either, so this blog will teach you how to balance your purchases and manage your sales to work for your life situation, stage of life, goals, and temperament.  

Next month we’ll talk about how avoiding the herd mentality in your real estate purchases can help you buy smart.  Understanding that same mentality can help you sell for more when your sector of the market is hot.  With so many types of real estate investments out there from land to short term rental condos to warehouses to Real Estate Investment Trusts, you’ll have much more success if you Wall Street your real estate.

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