Is it just me or does it seem like everyone is waiting for the next shoe to drop? The stock market took a tumble last week, crypto got obliterated, and the term layoffs seems to be the latest bug startups are looking to fix in their next sprint.
As newer real estate investors I feel that we’re all waiting with baited breathe. Waiting for a sign that the real estate market will bottom out. But in conversations with seasoned investors – real estate operates on a much slower pace. We need to be prepared for a long downward walk rather than a cliff. Many people are saying it will likely be 2 years of downward pressure (heavily market dependent).
Meaning that we need to be patient and resilient. Which leads me to this week’s investor. It is my pleasure to introduce you to Berry Long.
How many doors do you have?
Right now I have 6 doors
What got you into real estate investing?
Observing family investors and looking for a way to supplement what at the time was a low paying position with a non-profit organization.
What market(s) do you operate in?
How would you describe your portfolio?
My wife and I own 3 duplexes held in an LLC.
What are you currently buying?
Not much currently for two reasons. First, the market is overheated in my area and deals that come through the MLS don’t align with my goals (cash flow positive after debt service and capex escrows).
Secondly, my children are in the last years under our roof and I haven’t wanted to spend all my time outside of my day job hunting off-market deals.
So I am investing the proceeds from our current RE investments passively (mostly index funds) to keep the money working through this stage of life and market cycle. It seems the market is shifting though so we’ll see what the future holds.
Biggest mistake in real estate?
Our first investment property was a triplex in a college town and one of the residents we inherited at purchase was in law school. She was unhappy with her electric bill and someone at the utility company told her that when she canceled her account it would automatically rollover into our landlord account.
She did that and when we got the notice we assumed she had skipped town. We received some bad advice from a friend who was a property manager and instructed the utility company to take the power back out of our name (which effectively cut off her power). The resident sued us in small claims court for emotional distress and the contents of her refrigerator that were spoiled.
The judge was sympathetic to our case but ultimately awarded her a small judgment against us. (~$1,000) I lost a lot of sleep through the process but learned a lot about landlord/tenant law as well as who not to listen to in the future.
Tell us about your biggest win in real estate?
Probably that same property. We borrowed $5K from a family member to use with $5K of our own savings (most of what we had at the time) to put a down payment of $10K on the seller-financed purchase price of $85K. Three years later we sold it for $200K when we relocated for work, paid off the seller-note and the family loan with interest and rolled the rest into our 3 duplexes here.
Outside of real estate what else do you invest in?
Outside of real estate we mostly invest in index funds. We do have some shares in a private start-up bank, and I use the cash rewards from credit cards as money to play around with in a Robinhood account picking individual stocks.
Books people should read before investing
The only book I read before/during my first property was “Investing in Fixer Uppers” by Jay DeCima. As I continued on my journey, I got a lot of value out of real estate investing podcasts. Motivation to take steps forward is what you need at the beginning. You learn what you need along the way.
What advice would you give to a new investor?
The money is made at the time of purchase. Learn how to evaluate deals. A decent spreadsheet, public records, and some internet research is all you need for that. Make sure that you set aside money for Capital Expenditures (I use $100-$200 per unit per month) so that when those things come (roof, A/C, septic, etc.) you have the money set aside for it.
Last week the wife and I spent some time in Florida for a long awaited vacation. Sitting on the beach, drinking Pina Coladas, watching Pelicans dive into the ocean – Florida stuff. As nice as it was being in Florida I couldn’t shake the feeling that this is what people dream of. People dream of passive income that allows them to retire their office life to one lived off a beach somewhere.
While laying out on that beach all I wanted to do was talk about real estate. I wanted to work on the podcast (launching on August 1st). Network with people off Twitter and find who that next Friday profile should be. In essence I wanted to work – not do nothing.
I couldn’t help but think how boring it would be to just sit in the sun getting hammered – all day and every day? Not that those Pina Coladas were not delicious (highly recommend regardless of beach proximity).
Made me think that choosing to go down the hard path of financial freedom to then retire and do nothing on a beach is well… weak thinking. If the goal is to do nothing – it’s a lot easier to spend that down payment on a vacation instead of investing. That $30,0000 would make for an amazing vacation or $300 / month in cash flow. The person who’s end goal is to do nothing will have an easy out to just splurge instead of investing.
Maybe the kind of people who conquer the mountain of financial freedom are the same kind of people who look for that next taller mountain. While the people who turn around half way up said mountain are the same kind of people who say financial freedom is all based on luck.
See you on Tuesday