Investor Blog

Financial Education 101.....

Thinking Like a Real Estate Investor

March 4, 2019

Speaking to you as somebody who loves Real Estate, it often shocks investors when I suggest they learn about Warren Buffet. But Warren Buffet is the champion of all investing.  And he understands the principles of successful investing like no other.

First off, Warren Buffet knows that money is made on the buy.  That's why he often refers to seeking out a "Margin of Safety" in his acquisitions.  Seeking a margin of safety simultaneously allows you to reduce risk, and increase your potential profit.  We as Real Estate Investors need a mechanical way of valuing properties.  But we must also make sure to acquire the property at a discount as to increase our probability of profit.

Secondly, Warren knows that markets aren't truly efficient. He knows that from time to time, markets have mood swings which put assets on sale.  That's why he's "Greedy when others are fearful, and fearful when others are greedy."  It's during these times that other people (including investors) are highly motivated to sell their assets at a significant discount.

Lastly, Warren Buffet understands the importance of stockpiling assets which produce cash flow for the long term.  In fact, Warren is able to objectively value businesses because he focuses so much at understanding a business's financials.  We as real estate investors should also strive to acquire more and more cash-flow properties.  We want to take ourselves to the point where our money starts working for us, rather than us constantly having to man our business.

Make sure you check out our upcoming Long Island Real Estate Networking Events here.....

Improve Your Odds In Real Estate

March 10, 2019

Over 90% of millionaires have made their fortunes through one asset above all others....real estate.  But that doesn't mean real estate is automatically a good investment.  There's a serious strategic process required for making sure you generate consistent profits.  Here are a few key concepts the real estate investor needs to tip the scale in their favor.

The first concept is called Margin of Safety.  Whether you're an E-Bay entrepreneur, or a value investor like Warren Buffet, a successful investor knows to avoid paying full price at all costs.  Part of the reason so many investors get burned is because they assume they're brilliant enough, or innovative enough to transform $1 into $2.  The problem is, sometimes the market doesn't agree with your predictions, or your opinion of what you think you're asset is worth.  So we make sure to practice a little humility by identifying assets selling at a discount.  Of course, the presumption is should already know how to value an asset. Otherwise you won't know what kind of discount you're getting (If any).  

The next concept is known as Cost Basis Reduction. Let's say you totally mess up the prior step, and you pay too much for a property. And the result of that mistake is you can't sell it for any kind of profit. One way to salvage the deal is to rent it out.  Even if you overpaid for the property, if rental income is passively building equity, and covering your holding costs, you're still getting richer.  Cost Basis Reduction is what allows an investor to make money even when they're wrong.  By investing in assets that produce Cash Flow or Passive Income, you slowly take your money back off the table.  Once your original investment amount is paid back, you essentially own a cash flow asset for free.

The last concept is Leverage.  I always mention Leverage last, because it should come last in your game plan.  Leverage is a double edged sword that magnifies the effects of your decisions making.  If you haven't found a bargain on an asset, or at least a cash flow producing asset, then amplifying the deal with leverage is just playing with fire. However, when you have the prior two concepts under your belt, borrowing money will actually help you manage risk.  Real Estate is the ideal asset for applying Leverage because the property acts as collateral.  Lenders are more willing to lend you money because they're promised a lien position on the title of the property.  This allows the investor to tie up less capital on one deal, and transfers most of the risk to the lender.

I just want to point out how all of these concepts come back to having humble mind set.  A wise investor takes steps to build a wide margin of error, get their capital back off the table as quickly as possible, and transfer risk.  Although these concepts add to our profits when we're right, they more importantly rescue us when we're wrong.  They also act as our criteria for knowing when to walk away from a bad deal.

Disclaimer of Investment Risk

Investing in financial and real estate markets involves a substantial degree of risk. There can be no assurance that the investment objectives or returns described herein will be achieved. Past performance is no guarantee of future performance or that such investment opportunities will become available.

These materials are intended only for discussion purposes and should not be relied upon in evaluating the merits of investing in any securities. Potential investors who express an interest in investing will be provided with additional materials.

These materials contain certain forward-looking statements regarding the investment objectives and strategies. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, political and competitive market conditions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Surreal Property Solutions, LLC.

 Although Surreal Property Solutions, LLC. believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in these materials will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by Surreal Property Solutions LLC and/or its affiliates, any placement agent, or any other person, that the objectives and strategies of the Surreal Property Solutions, LLC will be achieved.