Folks, I’m gonna let you in on a little secret: “You’re not a tree; you can move.” These are the words of one of my greatest mentors, Jimmy Napier from Chipley, Florida.
In the 1980s I attended several of Jimmy’s seminars, often combined with appearances by John Schwaub, Pete Fortunato and the late, great Jack Miller. These guys were on the forefront of educating investors—such as you who are reading this now—about the benefits of single-family houses for business and, more importantly, long-term rentals.
What Jimmy meant by the statement above is that if business isn’t good where you are –then go somewhere else! That’s not easy to stomach when you like where you live and are surrounded by family, friends and all the memories of growing up.
It took 25 years from the first time I heard Jimmy say that (around 1985) for it to really hit home for me. On a personal note: I invested the first 25 years of this business building my portfolio in the wrong area, with the wrong tenants, the wrong government and I lost a huge amount of money before it was over. And by the way, I was the largest owner of single-family houses in this area with more than 350 houses before I got caught in a series of situations in which everything that could go wrong did go wrong. I escaped with enough real estate experience to fill the Old Testament. The upside is that the knowledge and the wisdom I learned with blood, sweat and tears has prepared me to face other adversities in life.
Challenges are great—and they keep on coming
Let’s face it: Life is a series of challenges that need to be met. Once you step up and meet your challenges, there will be more that you need to overcome. And without challenges, life would be a bore, and there would be no sense of self-accomplishment and no personal growth.
Here’s one of the most important things I have learned from my 35+ years in the real estate business and that I want to share with you: “Where you buy is more important than what you buy.”
Just look at this country—or any country. Some areas prosper while other areas languish. Do you really think it’s prudent to buy houses in Detroit? I did—30 of them—and I escaped as fast as I could. What a terrible mistake. Then Ohio … another blunder. And Indiana ….
Prosperity requires job creation
My point is, many of these areas up North and in the Midwest have had real reversals of fortune. The factories aren’t manufacturing like they used to, and jobs have evaporated. An area can only prosper if there is job creation, and I’m not talking about fast-food jobs.
As jobs are lost, the tax base in these areas erodes and local governments impose new fees or raise existing taxes to compensate. In some cities, they license landlords, have forced inspections, create new trash pick-up fees, raise water rates and a mileage rate that determines your property taxes. Just use your eyes to see what is going on.
Baby Boomers are still retiring at a clip of 10,000 per day, and many pack up and move south for better weather and quality of life and a lower cost of living.
What do you think happened in North Dakota when oil dipped lower than $40 a barrel? Real simple—they stopped drilling for oil, workers were laid off in masses and rents plummeted from $3500 a house to $1800 for the same house. This was not what investors expected when promoters were selling these houses to their clients.
I much prefer to buy in areas where people are moving and jobs are being created. The most important factor when buying houses for the long-term production of income is to buy in areas of the country where people are moving to—not the region of the country they’re leaving.
Here’s something you should know: You can make money in almost any region with single-family houses. You can buy for cash flow and still make money, even in the areas I poo-pooed. My question is: why would you want to?
People do become wealthy by negotiating good terms for seller-held financing in almost all areas, but the real wealth created in real estate has historically been from appreciation.
What you buy is important, and as a rule we omit townhouses, mobile homes, two-bedroom/one-bath houses, low-income housing, subsidized housing, poorly built houses, dumb floor plans and properties poorly located in neighborhoods close to commercial real estate.
Here’s what we look for when deciding where to buy
We like three-bedroom/two-bath houses with two-car garages—or homes with even more bedrooms, not less. We like subdivisions in areas with good schools close to shopping. And you can find these houses in growth areas of the United States, and they will provide the greatest benefit of owning real estate: appreciation in value.
Finally, I live in Tampa, Florida. We bought three houses in the last three weeks—all for retail to future homeowners. We primarily acquire properties for long-term holding for ourselves and other investors to the tune of over 750 houses under management. In the last three weeks we acquired 16 houses for long-term hold for our investors, all in the Atlanta Metropolitan area. Follow the jobs, and you will follow where the people are moving.
Remember: You’re not a tree; you can move—and at the very least—just move your money and invest in areas of growth and stay where you are.
After all, isn’t that what the Chinese, the Europeans, South Africans and South Americans have been doing for years? You bet it is, and we sell to them. They realize our country is much safer then their own, and they also understand that America is where people move to, not from.
About the Author
RJ Palano is the acquisition director of BuyCashFlowProperties.com, a Tampa, Florida-based company that primarily provides turnkey houses for investors in the metropolitan Atlanta and Tampa Bay areas. His property management experience spans more than 35 years, and he has been involved in more than 3,000 real estate transactions in 12 states and more than 50 cities. Contact him at 813-495-3006 or rjp@buycashflowproperties.com.
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