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To Sell or Not to Sell…That is the Question!

Being in the Real Estate industry, the number one question I am asked most frequently is, “Is this a good time to buy/sell?”  Being the guy that wants to be your trusted resource and one you can lean on to make your Real Estate decisions, I struggle with giving this question an answer a lot!

So here is the mantra I constantly refer to when it comes to questions and/or scenarios like this:  “Don’t try to time the market, let the market time you!”  Its that simple.  If it makes financial sense to buy, then buy.  If it makes financial sense to sell, then sell!  But for those that want more from me than this high-level advise, let’s dive in further…

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Let’s talk about the market today.  As you can tell from the table to the left, we’ve had some pretty great growth over the last handful of years!  So if you bought property locally in 2011, the market’s timing was in your favor.  In fact, if you purchased anytime in the last six years you’re sitting in a great position!  But where are we headed?  That’s the million dollar question, and the truth is, nobody knows for sure.  The only thing we can do is to study the past and present and make our best educated guesses.  Which is where I am currently sitting with a few of my properties within my portfolio today.  They have appreciated along with the rest of the properties locally, and I am now looking at unrealized substantial equity gains that could be captured and re-purposed should I decide to sell them in today’s market.  And so, the question I keep pondering is, “Are we near the top?”

Real Estate is on a continuous cycle.  Its almost always moving up or down, just seems to do so at different speeds in different portions of its cycle.  I’m sure most everyone remembers how fast it moved through 2002-2009.  It moved very fast in both directions up, and then down!  And although I say it moved fast, the reality is that it moved up for roughly five years, leveled off, and then down for roughly 3 years.  So fast is a relative term here.  But using the last cycle as a reference to the present cycle, we’ve had growth years from 2012-2016, five years.  And from the table referenced above, the median home price seems to be appreciating at a slower percentage than previous years.

Could this mean its starting to level off at the top?  roller-coasters-intimidator-carowinds-nc-today-150526_5a2f266f1e8e3a60b46e81ecaae8db9b-today-inline-largeDoes this mean we’re looking at another big drop?  My gut tells me that we’re not going to see the same kind of drop as last time, much like this last rise.  It has been slower and less dramatic than the previous up-cycle.  But I do feel like the market is showing me that its starting to level off.

 

So back to the questions at hand.  Do I buy now?  My short answer is no.  Not unless the deal cash-flows and makes financial sense to buy and hold for the long run.  This is not a time for speculation and trying to time the market to make a quick profit.

Do I sell now?  If you have a place to put the cash from the sale that will safely generate a decent return, I say yes.  That’s my plan with a few of my properties I currently hold in my portfolio.  In fact, I’ve just closed escrow on a condo that I purchased in 2012 for $150,000.00 and sold last month for $232,000.00.  I’ve taken the cash and placed it into another escrow to purchase a four-plex that should be closing within the next 30 days or so.  It gives me four doors for the price of one, creates monthly cashflow for my family, and provides better leverage with bank financing than the condo had.  This is the win-win scenario I’m constantly looking for.

I hope this post helps you progress in your Real Estate Investing journey!  Remember, one step at a time…

 

How much money do I need to get started?

Don’t you wish there was a button that you could just press to get started?  Would you believe me if I told you we have one?  In fact, here’s the button, just click on it, read about our Realtor Chloe, and then give her a call!  That’s the first step, and I promise it’ll be easy to go from there!

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If you’re not clicking on the button just yet but want to learn more about what it takes, I’m going to try and lay out more of the roadmap for you.  One of the main questions I get asked by those that have the desire to get started investing in Real Estate, is how much money do they need to buy their first property.  This is an excellent question and probably one of the most important!  The answer to this question really depends on where you are in life such as where you live now, whether you currently rent or own, and if you have a desire to move residences or not.

Where you live matters quite a bit since a house in Long Beach, California will cost you roughly six times the amount that same house will cost you in Rising Sun, Indiana!  But if you live in Rising Sun, then this is great news for you!  It means you will probably need six times less money to get started down your Real Estate Investing career!  For the context of this article, I’m going to speak as though you live in Long Beach, Ca since its where Beach Cities Management resides.

Another assumption I’m going to make with this is that you currently rent and will be a first time buyer.  This just helps give everyone a starting platform and we can jump off from there!  So you’re paying rent and being an excellent tenant in all ways for another landlord.  That’s great!  (For that landlord 🙂  But consider this:  What if you were your landlord from now on?  I bet you’ll be your best tenant and always pay your rent on-time and take good care of your own place, right?  So that would be step number two:  Buy an affordable residence that you can live in and the monthly costs are close to what you currently pay in rent!

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Notice I didn’t say to buy your dream house!  This purchase is a stepping stone and the goals is to replace your current rental.  In fact, the best advise I can give you on this is to let your Realtor Chloe pick out her top 3 choices for you based on the wants and needs list she’ll ask of you, and to choose from these three which one will be best for you!  We want to keep this process simple, so having an experienced Realtor that works closely with investors and specializes on buying and selling investment properties, it’ll guarantee you it’ll make your first purchase a great property to convert into a rental down the road!

 

17121923990_ba6b3b8fe6_b17121923990_ba6b3b8fe6_bBut how much money do I need to get started???         In a definitive answer, $6,000.00.  This amount gives you the ability to purchase a property that sells for $150,000.00.

 

So if you’re serious about starting your Real Estate Investing career and working towards creating enough passive income to not have to go to a J-O-B anymore, take the first step and let us help you get there!  Every step after the first gets easier and easier.

To Your Success!!

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How it All Started…

Well now you know and understand why I started my Real Estate Investment career, and soon you’ll know how.  My goal in this post is to give you some ideas on how and why to start your own Real Estate buy-and-hold career and a way to start working on your first step, if you haven’t already.

 

Meeting the man with the crappy Honda that changed everything

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It was a day at work much like any other day.  I was the assistant manager at the time and covering the sales floor for a sales associate for their lunch hour.  A guy walks in and starts browsing our stereos on the wall.  I walk over to introduce myself and see if he needs any help or any questions answered regarding the stereos.  He tells me “I’m looking for a cheap and basic radio, all I need is for it to make sounds and play songs so I have something to listen to while I’m working.”  I go through some options that fit his needs and he quickly picks one of them out without much thought.  He then proceeds to say “I guess I need a couple of speakers too so the radio will play.”  I show him our speaker selection, he asks which one’s I would choose, and I point to the Kenwood speakers we had in stock.  He immediately says ok, and I direct him over to the computer to start tendering his purchase.  I ask him what kind of car he has, a Honda Civic hatchback, and if he would like us to install his equipment.  He tells me “Absolutely but I need to show you the car so you know what you’re up against!”  This perks my interest with the way he smiles when he says this and I follow him to his car parked in the parking lot.  He opens the door and gives me a look inside.  And that was when I first believed this guy was crazy.

 

When l looked inside the car, I immediately notice there’s NO center console!  Its completely missing.  I ask him if he has it at home?  He smiles and proudly responds “Nope, I bought the car without it!”  I continue looking around in the car and see that this vehicle has better days.  It’s littered with stains on the carpets and seats, the dash is all scratched up, and the hatchback area is full of paint spills and splotches.  I pull my head out of the car feeling a little annoyed that I didn’t see this sooner.  This had to be a joke.  

 

I had to stay professional, after all I was at work employed by a company that demanded it, so I simply told the gentleman that I thought the install of the stereo equipment was going to cost him more than his car was worth unfortunately and that I recommended against moving forward with it.  But to my surprise he told me that didn’t matter to him and that the car was essential for work but he needed tunes so price wasn’t an issue.  He clarified for me that he didn’t care about the look of the install, but only that it worked.  I told him it would cost him roughly $800.00 for the work to be completed, and just in case something was off here which I suspected there was, I had him pay in advance and in full.  He did without batting his eye!

 

Since this job was “custom” and I had the most experience, the job was mine to complete.  It took me almost four hours to get it done, but it was done.  That early afternoon, I called and let the customer know I had finished his car and that it was ready for pickup.  He told me he would be right there and that he’d see me soon.  When he pulled up in a truck that looked to be an exact replica of the monster truck “Bigfoot”, I have to tell you I was awe struck!  I mean, a truck like that had to have at least $150,000.00 into it.  The tires were taller than me and the paint, suspension, and every other detail was flawless!  It was the kind of truck you dream of owning as a boy, but when you get old enough to drive you quickly realize how far off that reality is.  He jumped down from the cab and asked if I could follow him to his house around the corner and he could drive me back.  My first thought was that I may get to ride in this beautiful truck, so I agreed, jumped into the Civic, and followed him to his house.

 

When we pulled up to his house, I noticed two things:  It was pretty big looking just from the curb, and he also had contractors actively working on it.  They were dragging supplies in the front door that looked like they were working in the kitchen.  All I could wonder was “How does this guy afford to spend all of this money?”  I mean, between the truck and the house, he’s gotta have one amazing job that pays him REALLY well to be able to spend money like this!

 

I placed the Civic in Park, locked the doors, and jumped into another car he started up to drive me back to the shop.  That’s when my curiosity got the best of me.  I had to ask the obvious question because it was really driving me nuts at this point.  This guy obviously had more than enough money to do what he wanted with it, driving his dream cars, building his dream house, and living what most of us would consider to live his dream life.  Think about it:  He couldn’t have that hard of a job considering he’s available to get stereo equipment installed in a car in the middle of the day on a weekday.  In fact, he seemed to be really relaxed with his day, not seeming to be in any hurry, and dressed very casually in a t-shirt and jeans.  So I asked, “What do you do for work?”  This is where the story really starts to get interesting.

 

He looks at me thoughtfully for a moment, then replies “Open the glove box and see what’s inside.”  Now picture this scenario for a moment:  A stranger that doesn’t seem to have a job and looks to have a lot of money to spend from an unknown source just asked me to open his glove box to see what’s inside.  Sound like a typical start to a murder novel to you?  Needless to say, I was keeping a very close eye on him while I was doing as he asked me expecting him to try and surprise me at any minute with an attack of some sort!  But when I opened the glove box, there were no guns or drugs to be found, (Thank God!) but what I did find were several checks.

 

I pulled them out and looked at each one.  They were all made payable to him and they were each for several hundred dollars, and some for a couple thousand dollars.  There must’ve been 15-20 of them!  He asked me if I knew what they were for and I honestly had no clue.  My guess was as good as anybody’s, but I still was guessing it was something completely foreign and probably out of my realm of comprehension based on how much money these checks represented in my hands.  How and why does somebody receive so much money from different people like this?  I told him I had no idea and asked him to let me in on how he gets these.

 

“They’re all rent checks from properties I own! People send me these checks every month to pay me rent to live at my properties.  And some people don’t mail their rent to me but need me to pick-up their monthly rent they pay in cash, which is what I use the Honda Civic for, because nobody likes to give money to a guy who drives up in a fancy vehicle that looks rich.”

 

My immediate thought was, oh great, I thought I might be able to learn how to replicate his process to earn more money, but he must come from a family with money because I certainly couldn’t afford to buy a bunch of properties to rent out.  I mean, I believe I had roughly $300.00 in my bank account!  He saw the hope leave my face when he was explaining this to me and divulged more of his story to me:

 

“I didn’t have a lot of money to start with.  It has been about 10 years since I first started this journey.  You can do it too.  You just have to start with one, and then go from there.  If you stick to it, you’ll be where I’m at before you know it.”

 

His advice was very inspirational to me, but left me with nothing more than a hope and a seed of a dream to start growing within me.  His current living situation was definitely within the scope of what I was wanting to accomplish of not having to have a job, but the details of how to start were extremely fuzzy.  “How would you suggest I start my journey?” I asked.  His reply was simple and rhetorical, “Just work on getting your first property to live in that you could rent out when you buy your second.  Once you do that, buy number two, then repeat!”  Uh, yeah, he sure makes it sound easy…

 

He drove me back to my job and dropped me off.  While we were saying our good-byes, I thanked him for sharing everything he did with me and promised I would do my best to start my journey as soon as possible.  His last piece of advice to me still echoes within me today, “To start is only a decision, and once you make that decision, the next steps to continue along the path always become easier and clearer.”  Now that its been 16 years since meeting this gentleman, I can tell you with extreme certainty that this is true in every sense of the statement.  The first step in any journey is always the hardest!
This meeting and interaction with this gentleman was extremely pivotal in my life and I know for sure that if we never crossed paths, we wouldn’t have started down the amazing journey that it has led us down.  Marla and I will always be grateful for the free advice and inspiration this individual was willing to share with me.  It truly changed our lives for the better.  Not only financially, but because Marla was able to be a stay-at-home mom and wife for your entire lives from birth, and I was able to not work any more time than I wanted to, it gave us an amazing balance in our lives that enriched all aspects of our daily lives!  We thank this nameless individual (we wish we could remember his name!) from the bottom of our hearts!

The Why not the How

Hi there!  My name is Dustin Edwards and I am the owner and CEO of Beach Cities Management.  One of the most common questions I get asked in life is how I got started owning rental properties.  I love the opportunity to share my story of how I got started and will share it with you soon as well, but I think the best way to start to get to know me is the why behind the how!  So here it is, my story of origin for Real Estate Investing…

I was eighteen, living at home with my dad, working as a cashier at Sam’s Club.  For anyone not familiar with this mega retail warehouse, it’s a store that you can visit to buy almost anything in large quantities.  It’s a perfect store to grab 200 rolls of toilet paper, 100 pounds of dog food, or an entire case of soda.  

My job consisted of 3 different activities, depending on the need of the store for the day.  The first was cashier:  to tender sales for shoppers and ensure everything on the customer’s carts and flatbeds are scanned and paid for.  As the cashier, my job would be to take everything out of the customer’s cart, scan it, and place it into another cart.  Easy enough, but tougher on you physically than it sounds!  Everything is sold in multiple quantity, which means that everything was big, bulky, and heavy.  Eight solid hours of this repetitive task and I was physically drained and mentally bored.

The second activity was gathering carts and flatbeds in the parking lot.  This was my favorite of the three.  You were outside rounding up carts, helping customers load their cars and trucks, and virtually un-supervised.  Things could be worse.  You could be a door greeter…

Now my third and least favorite activity in the entire world:  Being the door greeter.  The job was to say “Hello” to incoming customers (who almost never replied) and to check to make sure they had a membership card.  The reality of what this looked like was a semi-constant flow of people walking in with their membership cards held out for you to see (they knew the drill) and looking past you pre-planning their route in the store.  It’s kind of like watching  the movie “The Scrooge” when he’s in one of his visions of the past, present, or future where he sees everybody but they can’t see him.  It gave me a feeling of complete unimportance and a real contemplation of “What am I doing with my life?”

One day, standing at the front entrance doors and bored out of my mind, I thought:  I CANNOT do this for the next 50 years of my life!  I didn’t know the solution, but I absolutely knew the problem.  So I started to think of possible answers.  The first thing that came to mind and probably one of the most common was that I would just apply for a different job.  It didn’t matter if it was at Sam’s Club or anywhere else, just something different than standing for all to ignore!  But this solution just led me to the next question, “Is it the activity of the job that was the only burden, or was it having to work at any job that was the real underlying problem?  And that was it.  It was the fact that I HAD to work in order to live.  I had to work in order to afford to play, to do the things I wanted to do.  And that’s when the epiphany hit me:  I am not free…

What a crushing blow!  I mean, isn’t freedom the first thing every American is entitled to?  Shouldn’t everybody in the world have freedom?  But that simply isn’t the truth of my then current situation and a high majority of the rest of the “working age” population.  If you don’t believe what I’m writing is the truth, then try quitting your job and continue living life the way you do now.  How long would you last?  A week, maybe two?  Or possibly you’re better off than the average person and could last almost six months?  But when your savings account runs dry and the next month’s worth of bills roll in, what happens?  Well, unless you’ve discovered the treasure at the end of a rainbow or a sunken pirate ship full of treasure, I’d say you’re forced to find a job and work a large part of most days that fill your week.  This very common scenario isn’t freedom.

But what could I do about it?  I certainly didn’t have the answer that day.  In fact, over the next few months I thought about this problem just about every minute of every day.  It would be fair to say it consumed me.  The best answer I could come up with was this one:  If I saved one million dollars and placed it into a high-yield savings account I could live off of the interest.  Alright, I’ve come up with a solution!  Only one problem:  how long would I need to work in order to save this much money?  Well, based on my current income and financial obligations, I would be able to save a thousand dollars per month.  So in 1,000 months, or roughly 83 years, I’d be financially free!  Yeah, not the best plan.  But with no real savings, two hard-working parents that live paycheck-to-paycheck, and anyone I knew telling me working hard is the only way to get anywhere in this life, I continued to show up, clock in, work hard, and save what little I could.

Eventually I couldn’t take another day of the monotony that Sam’s Club so generously offered, and I took up a job at Circuit City learning how to install audio and security equipment into vehicles.  With the big question still consuming me daily, I dove into this new job and found it interesting to learn a new skillset in a different environment.  It was fun to meet new clients looking for something that would make their car emit more bass, radiate neon lighting from their car’s undercarriage, or start their engine from the push of a button on their remote attached to their keychain.  I think I enjoyed the camaraderie of my fellow colleagues the most about this job.  It was common to have friendly banter between each other and to “quality control” each other’s work criticizing the other’s soldering job on the wire kit we were installing.  But even more often you would find the guy who finished their install job first climbing into the other vehicle their buddy was working on and helping complete the job.  It was truly a team environment and nobody was left behind.  We learned from each other, laughed with each, and ultimately looked out for each other.

After learning the skills necessary to install anything Circuit City offered to install in your vehicle, I was promoted to assistant manager.  This was great!  I received a new title that came with some authority and a pay raise!  It was a slap on the back and a “that a boy” kind of reward for my hard work.  I was very appreciative for the promotion and thanked the boss immediately, but somewhere deep inside me I heard a voice telling me this is just the kind of steps that lead somebody down the road of a 40 year career.  One more thing that keeps you showing up every day and clocking in.  This would definitely be one of the better “jobs” I’ve had.  But in the end, it was still a job.  Back to the problem at hand.  How to stop having to show up for work!

It was at this time that I really sat back and started to ponder a few more things.  I thought about the examples I had in life closest to me to mimic and learn from.  The first was my father.  First thing I can tell you is that he is an amazing father to me, and always seemed to put my brother and I first in his priorities.  I learned that it is important for a child to be able to count on their parents for support and to be there for them.  But I also looked at his career that he’s led and how he “brought home the bacon” (the money) to support himself and his family.  During his working career he was a guy that always worked hard and wanted to do the job well.  He showed up on time or early, did the job he was hired to do, and clocked out at the end of the day ready to do it again tomorrow.  He really focused on security.  He never wanted to have something that would risk his family’s future.  And being part of the family that counted on his ability to bring money home to the family to use to live, I definitely appreciated that!  

With this example I learned I too wanted security for my future family as well as myself.  I didn’t want to go through life worrying about how next month’s bills were going to be paid.  I also learned that I wanted to spend as much time as possible with my kids and to be involved with them.  I can’t tell you how much I appreciated the times I had playing baseball with my dad as one of the coaches on my team!  This kind of memory is priceless and can’t be bought.  The only thing I wanted to do was to be there more often for my kids without a work schedule prohibiting this.  I also didn’t want to have to work as hard as he did!  I remember hearing stories of him washing buses all day to get some hours in.  This doesn’t sound like a fun day at the office to me!

The other thing I thought about was the idea of security.  When people think of a job, they often tie it to the idea that it brings security.  But is it really?  In the example of my father, everything felt secure until it suddenly wasn’t!  One day he showed up to clock in, and he was laid off!  Not to any fault of his own, the company was just “going a different direction” and decided to lay off all union workers that they employed.  This decision left my father without a job.  Now without the job, things were certainly not secure anymore.  He worked diligently looking for another job to start the process of receiving paychecks again asap, but it was a long time until he found a job to replace the one he lost.  And during that time “off”, he had a lot of time, but not anywhere close to enough money to keep the same life style.  Financial sacrifices were made.  This experience gave me the desire to figure out a way to really create the security of monthly income coming into my family every month, whether I had a job or not.  I wanted to control my destiny, not a company that offered me a job!

The other example I had close was my mom.  She was an escrow officer for many years, riding the cycles of Real Estate up and down throughout the years.  I can remember vividly going to a private Christian school throughout my 5th grade year, playing baseball in little league, and eating out quite often whenever I was with my mom.  She bought a new car that year as well, a Chrysler Lebaron, and it was sweet! (At least as a 10 year-old I thought so)  We moved to a nice house in Fullerton to be closer to her work and our school, and life seemed to be going pretty well for us!  But then by the time I was starting 6th grade, we had moved back to a less expensive house that was again farther away, went to public school because tuition bills just weren’t in the budget, and after a few more months my mom had lost her job.  By that Christmas, we were a family that “flipped” horses for a living!  This meant we attended the local auctions, bought low-cost horses that needed to be trained and usually brought back to health, and then we sold them to the public for a small profit.  I can tell you, for the amount of hours training, riding, brushing, washing, and cleaning up after these horses, this job has to be the lowest paying job that existed for all of us!  If I can remember correctly, it took roughly 3 months and probably 120 hours per horse to get them ready for sale and they would sell for usually $300-700 of profit.  So if you break this down to hours, it would average you $4.17 per hour!  And to top this off, this didn’t include the cost of food, brushes, tackle, soap and water, and anything else we had to buy to complete this process.  You’ve probably guessed, but this business wasn’t a sustainable one for us.  

My mom always seemed to be a hard worker as well.  She would spend a very heavy amount of hours at work each week.  She would usually leave each morning before we woke up for school, and not return until well after dinner time.  There was usually just enough time to say hi to her and that we loved her before she would climb into bed to rest up for the next day.  This schedule was usually done six out of the seven days each week while she worked for the escrow company.  So as a child, when she first lost her job and we would be working together after school on the horses, I was a pretty happy guy!  This was probably the most time I had spent with my mom that I could remember.  It was my silver-lining to her predicament!

A few things I learned from these experiences with my mom are that the most precious asset any of us possess on this planet is time.  There’s absolutely no substitute!  Not being able to spend time with my mom during the week was hard to deal with as a child, both for me and my younger brother.  We would do so many things (sorry, can’t tell my kids these details!) wrong out of boredom that it scares me to my core as a parent today.  I mean, we had so much alone time after school each day that we would just look for ways to either get upset with each other and fight, or become a team and do things we were absolutely not supposed to do!  But above all this, I missed opportunities growing up not being able to play team sports for these years she wasn’t home because there wasn’t anyone to take us or sign us up for them.  We also missed time with parents that other kids got to spend with their parents.  But its not all bad, and my goal in writing this isn’t to throw negative light on my mom.  I can tell you for certain that I know her desires were much different than the reality we experienced.  I know she wanted the best for my brother and I and she went to work every day trying her best in the best way she knew how to get ahead in life so she could give us more.  This is where I believe my conviction to succeed roots from.  I learned to not only desire more for my family, but through the reality of these years as a child, learned to accept nothing less than great results from my efforts so that the time put into work were meaningful so I could spend more time with my kids when they were home from school and I away from work.
I also learned that working this hard is best completed for a business that you own, and not work for.  All the long hours sacrificed by my mom were meaningless to her future as soon as her boss decided his business no longer needed her there.  I never want to give somebody that power over my family’s future.  Through her example, she taught me that employees are really considered assets or liabilities, and as soon as you stop being an asset to a business, you become a liability.  And like any good investment advice you’ll hear, businesses and individuals need to eliminate their liabilities!

So this is what I had and where I stood before I got started.  I knew I wanted to find a better way to receive monthly income without having to “go to work” for it everyday, needed it to be secure and something I could count on being there month-after-month, and I wanted it to take care of my family and I for many years into the future!  Is that too much to ask?  At that time I didn’t know the answer to this question, but I was ready and willing to start a journey to find out…

My next post will be my story on “how” I got started from ground zero.  You’ll walk down the path I took to acquiring my first property and what set me in motion to acquire so many more in the years to come.  Thank you for reading my blog.  I appreciate you and the time you’ve given it.  I can only hope you find it interesting and hopefully take something away from it that will help you get to your next step in Real Estate Investing!