Hipster thinks real estate investment is the height of cool. Why? We approach investing as a way to connect with the things we love most – the things we really want to do. It’s an amazing feeling – owning property, letting it appreciate it, and getting real cash-flow from your work. Turnkey real estate investing has legs that take you from where you to be to where you want to go. That being said, it’s not always the easiest market to break into. The real estate investing world is flooded by gurus who promise you the world and who, in all actuality, deliver very little. The truth is simple: there is no simple, sure-fire way to become a millionaire tomorrow. If there was, Hipster would tell you allllll about it. The only way to get reliable cash-flow is to focus on it, to do what it takes to get it – not to find short cuts that leave you stranded. Consider today’s Hipster post a warning on what to avoid as you navigate investing’s choppy waters and hit some turbulence from time to time!

If It’s Not Cash Flow, It’s Not Worth It

There’s no point in having ten or twenty homes if you can’t make them work for you. Don’t get caught up in deals that don’t generate cash. Simple, but so important.

If It’s Too Good To Be True, It’s Too Good To Be True

Another simple one but don’t forget it. For example, Hipster loves turnkeys that come fully renovated – often with tenants in place. The catch? These amazing deals don’t go for amazing prices – they go for really, really good prices, but they aren’t too good to be true.

Pay Attention To Your Margins

If you can’t afford some loss – whether it’s a tenant suddenly moving out or a new repair that pops up – you’re not ready. You need to have some ‘margins for error’ to keep you afloat when things don’t go as planned (and sometimes they don’t). For example, at Hipster we use a very precise method for calculating costs on a property (check out some of our WAW posts to get an idea). We factor in the margins to ensure your estimated ROI is right on.

What Are You Standing On?

How’s the ground look? Is it firm? If it’s not, that’s a problem. Don’t balance on anything – be sure you have a firm stance. If you can’t comfortably move about with ease, you need to reevaluate. You shouldn’t get into a deal that makes things so tight you can’t move. Deals help you grow – they don’t squeeze you in or put you in a box!

Key Takeaway
Real estate investing is exciting. It’s glamorous. Best of all – there’s the potential to bring home some serious cash. Hipster says this: the hip way to invest is to focus on what’s most important : sustainable cash-flow. Forget the glitz. Ditch the glitter. Invest in a calculator, not a guru.

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Comments
  • Shane
    Reply

    Hi Ali, I had just a general comment in regards to expenses for single-family homes used as rental property. I noticed the expenses that you typically calculate in your WAW is very similar to those from the “ABC’s Of Property Management” book, and was wondering what you typically use for things like Accounting, Legal, Marketing/Advertising, Lawn/Snow, Trash Removal, etc. Obviously, some of these don’t always apply, for instance you may do all of your Accounting/Bookkeeping yourself, and since you don’t use entities then maybe your Accounting costs are minimal, so I wanted to get your approach to all this. It makes sense that the greater your margins, the more you mitigate your risk and exposure to negative cash flow. That being said, aside from trying to achieve a certain ROI %, is there a minimum monthly Cash Flow you are looking for to try and throw off some of these uncertain expenses? Also, I noticed in some of your previous posts that you like to structure your deals through creative financing, and so I was wondering if you could share some of your strategies and successes. Thanks again for the good advice and look forward to your reply!

    • Ali
      Reply

      Hi Shane, good questions. I don’t technically have any of those expenses on my properties. If for some reason I have to cover lawn and snow or anything like that, I just factor those in the expenses list. But accounting, while I have an accountant, I would have that without the properties anyway so I don’t count that as an expense against the houses. The others you mention I don’t have. But in general, there is no way to calculate for certain any return on any property. The best thing you can do is be as conservative as you can (and as makes sense) and have margin for any unexpected expenses.

      For creative financing, I have used an investor partner on some deals. He put up the cash, I took the mortgage and did the work, and we split the net 50/50.

  • Tracy
    Reply

    Short, sweet, poignant. Sound advice, Ali!!

    • Ali
      Reply

      Thanks Tracy!

  • Eric Menefee
    Reply

    This is very good advice. Thank you for posting.

    • Ali
      Reply

      Thanks for commenting Eric and you are very welcome.

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