When Investing, It’s Better to Waste Your Time Than Waste Your Money
When Investing, It’s Better to Waste Your Time Than Waste Your Money By: Nicholas A. Dunlap, CPM
Underwriting a potential investment takes time, attention to detail, research and expertise. With that, we look at two potential investment opportunities available: one in Texas, the other in Southern California. Essentially it takes the same amount of work to build each cash flow model, evaluate and compare the analysis, and yet we arrive at two drastically different outcomes. Reason being: the old adage, tired as it might be, is true. In Real Estate, it’s about location, location, location.
However, location doesn’t necessarily guarantee you a greater return on your money. Sometimes, you put $1.7 million dollars down on an apartment building and earn 0.7% on your investment. Yeah, that makes great sense. Cough up close to $2 million dollars to earn 0.7%. If this appeals to you, be advised, you have more money than brains. And while you’re at it, take a look at the bridge for sale in Brooklyn.
Back to my point, and that is: why do it? Any decent bank can beat that with a Money Market or Interest Earning Savings Account at a whopping 1%. So what to do? Don’t look in Southern California. Look to invest in emerging markets with strong fundamentals. Invest in bourgeoning areas like Phoenix, Las Vegas & Dallas. With the exception of Dallas, properties in these areas soared almost overnight in value and then deflated even quicker. Now, with attractive pricing, many of these same properties are being placed back in play, ripe for the picking. Of course, Texas did much better over the past decade than either of the other areas mentioned. In fact, we are looking at a potential acquisition right now in Texas with a guaranteed 8% Cash on Cash Return and short term potential to increase cash flow another 5-8% on top of that.
8% on your money? Can your bank top that? Can your mutual fund? The answer is no to both. The idea behind investing is to put your money to work for you. Therefore, you want to place it wisely and generate the greatest possible return for yourself. Investing in an asset class like Real Estate that requires more activity should generate greater returns. It’s commonsensical: more work, more risk, greater reward.
Do your homework and position yourself to succeed in today’s market. As you look around and see nobody else is buying, you know you are doing something right.