The old man and the young investor - Posted by ScottS(NC)

Posted by Tony Colella on March 18, 2006 at 10:39:54:

Full time job?

Dan, does this mean that you worked on these properties 40 hours per week, each week for say 50 weeks a year?

I simply do not find that to be the case with my properties nor do I see it the case with others who do this “full time.”

I find “full time” landlording for me means I work part time, including looking for new acquisitions. I love this game and perhaps spend too much time in it all totalled. But even then it is not 40 hours per week.

I do most if not all of my own property maintenance (hiring our some work occassionally). I collect all rents myself, do the bookkeeping, meet with the accountants, evict tenants, buy new properties, coordinate financing and closings, meet with bankers and attorneys, and more importantly I meet with other investors (can’t miss my 3 hour lunches) and spend a good deal of time co-hosting this forum. I along with Scott put on a Boot Camp or two here and there etc.

Yet I still find I am too lazy and do not work anywhere near a 40 hour week. My cell phone runs the business and training the tenants helps a great deal. Although I am not much of a traveller, I took a number of long distance trips last year and received only a couple of phone calls, most were tenants telling me they would be a day late on mailing the rent (which would have happended if I were there or not). What was noted by those who were with me on those trips was that I was always the one who could arrive early, stay longer and not worry about missing a plane. Everyone else either flew in late because of work or had to leave early to get back to work. They also stressed that if they missed a plane, they would miss work.

Lonnie and Joanne travelled the world while landlording (and I argue because of it).

Landlording is not fun or always clean but if approached professionally (like a job) it is NOT a 40 hour a week, 50 week a year job.

We are programmed to believe landlording is not for us. Atleast you have tried it and can rightfully be burned out. But it is important to try for oneself and not forget just how important property ownership was to making so many folks wealthy.


The old man and the young investor - Posted by ScottS(NC)

Posted by ScottS(NC) on March 17, 2006 at 22:11:10:

Their was an old man in a certain neighborhood, who was buyin up every home that came up for sale. Their was also at the same time a young investor who had read “all the books” and was convinced that Landlording was way to much trouble. The young investor wanted to see the world and didn’t have time to contend with a bunch of pesky tenants.

The young investor watched the old man buy up homes for 80 to 90k each and thought to himself doesn’t seem worth the effort. The young man was convinced he had a system that would allow him to just “collect the checks”.

So the young man started investing using the system. He had great yields to talk about but very little wealth and needed most of what he earned to reinvest and pay his taxes.

Meanwhile the old man plodded along buying/renting, buying/renting on and on it went. The old man did get “burned out” but he found it wasn’t permanent and he new something the young man failed to see. Property does not loose value it climbs, and rapidly at times. Each property he bought was a new savings account for him and his family. He would often think on his worst days this is bad but not as bad as working for someone else. He new he could hire people to do repairs when he didn’t want to. He also remembered the days on his 9-5 he had No freedom then.

The young man continued buying/selling and buying and selling on and on it went. He often felt like a high paid salesman. He also realized one day that if he stopped after a year or two so would his income. He began to think maybe the old man had something going for him. So the youngster decided he should have lunch with old timer.

They met one afternoon for lunch. The old timer, wearing dirty overalls, greeted the young man warmly. The young man was hesitant to accept the hug from the old grimmy man, he was in khakis and a dress shirt and was working after all. The old timmer didn’t care and wrapped him up in a suprisingly strong bear hug. The old man asked how business was and the young man explained how busy he was. The young man described his business model and how it was far superior to the old mans archaic rental strategy.

The old man sat back with a knowing grin and let the young man explain how his yields were infinite and how he should be a millionaire in no time. The young man continued explaining that he had learned this system from a genius who had thought it up. The old man loved the idea, only he asked how the genius had started out. The young man quickly explained the genius had gained his start by renting and owner financing properties that he had fixed up himself.

At this the old man interjected for the first time. He said so this genius had built up a substantial amount of wealth and then began using the system to keep the wealth growing? Does that sound correct to you? The young man agreed that is what he did exactly. So the old man pondered, you have decided to start with the system and skip the first part?

The young man said he doesn’t have time to be fixing things himself, he just needs to “write checks” and do deals after all thats where the money’s at right? The old man smiled and told the young man he owns hundreds of homes in the area and has for years. Each home has quadrupled in value in the last 20 years. The young man thought to himself he has also done hundereds of deals, using the system and he is doing well but after doing some math in his head he realized what this old overall wearin’ pickup drivin’ man is worth.

The young man quickly realized he had gotten the cart before the horse, if he was trying to build wealth. He kept his money moving but was having a hard time building it. He also new in twenty years no matter how hard he worked he would never reach the wealth the old man had. How was he going to “Travel the world” if he had to continue doing deals because each time he sold one it had to be replaced! When would that end!!! UH-OH.

The young man began investing in some rentals for longterm wealth building. The bad days he smiled and thought of the old man and they weren’t as bad as “everybody” had told them they would be. He often called the old man for advice. The old fella gladly helped in anyway he could. Soon the young man decided with 25 rentals paying he could take that first vacation he had always dreamed of. Take Care, ScottS(NC)

Can’t we just all get along (and get rich)? - Posted by patsears

Posted by patsears on March 19, 2006 at 12:14:22:

I think it is pretty safe to say that you can get rich buying and selling OR by buying and holding. If you don’t believe me, just ask Donald Trump-he’s done both very successfully.

I agree with Tony C. on how much better a landlording job would be compared to a full-time job working for the Man. I make over a $100,000/yr in my JOB and would quit in a heartbeat if I had a portfolio of rentals that could equal my gross income, and leave me enough to keep expanding my portfolio as well (not as easy as it sounds.)

However, making the assumption that buying and selling is an inferior plan because you have to buy again to replace your income is ridiculous. Is searching for and making new deals any more difficult or time consuming than making repair calls to tenants? Trump loves looking for and doing deals- “…that’s how I get my kicks.”

Regarding the cute little story that we read here, the only way that the young man wouldn’t be as rich (or richer) than the old man would be if he had spent his ever-increasing bankroll, rather than reinvesting it in bigger and bigger projects. The only downside to flipping is the tax hit (which could be mitigated by doing 1031 exchanges, or waiting to sell after a year to qualify for the 15% long-term cap gains rate)

Both investors, if doing this full-time, would have the problem of collecting enough money to not only live on, but to do more investing as well.

I also noticed in the story how the idea of building a rental portfolio first, then eventually going to selling much later in your career is suggested as the way to do it. I would put forth that the exact opposite might be true.

By flipping a few properties to start with, you can build up your bankroll-and your credibilty with the local banks-much faster than buying and holding. Then, once you get a bankroll, you can start looking at developing and holding land-home deals, buying apartments, multi-families, etc… This happens to be what I am currently doing, by the way.

Whichever route someone decides to go, we should all try to raise up, and not knock down, our fellow investors. And in the end, the financial calculator will always have the last say as to what is profitable, or not.



Re: The old man and the young investor - Posted by goober

Posted by goober on March 19, 2006 at 02:48:13:

Scott,great post, good moral. People take it for what it is, Scott 's perspective. I think he is doing great and he is just shedding his experience and outlook to be helpful.I do the same as Scott and Tony and it works and is worth it to (now get this point)FOR ME.I was doing it before I ever saw this site and just come here once in a while for reenforcement.Tony and Scott are right on and sharing good advice (get this) IN MY Opinion). On top of it all it is free.

Just a story as i see things folks, not meant - Posted by ScottS(NC)

Posted by ScottS(NC) on March 18, 2006 at 14:59:38:

in any way as a slight to any ones business plan. Anne I was not trying to comment on your posts earlier please forgive me if you took it that way. I have heard many folks use that argument against landlording and I just wanted to argue from my position it does work. I also appoligize, but I have a hard time writing from the female perspective. Sandra often tells me I just don’t get it? I’m convinced she’s right.

Dan, i’m sorry your 23 rentals didn’t work out, and that you worked full time on so few units. I believe Jeffery Taylor (Mr.LandLord) says if you are spending excessive amounts of time on your rental units the wrong person is being trained. I agree 100% with him. Like any job if done inefficently it can be much harder than need be. I currently manage and repair a good bit more than 23 units and have plenty of extra time. So we can both agree it is not for you and thats ok, I couldn’t be a EMT or Doctor, such is life. Folks this was just a story to get people thinking no offenses were meant. Take Care ScottS(NC)

Re: The old man and the young investor - Posted by Gary

Posted by Gary on March 18, 2006 at 13:18:55:

You have to do what suits you. I have days I disappear to work on a property,not up to dealing with people. Others I’m in the mood to do a deal and spend the time on the phone,etc. It’s nice to do something different as the mood calls for,you can’t do that on a job. I’ve been burned out,had 25 junker stick builts with about 20 problem tenants,but they were great deals when I bought them. In truth when all were sold I only lost money on 2 and they saved me some long term capital gains taxes on the others. Mobiles are entirely different. I look at them as a throw away item. I will sell before repairing if I can. If I fix up,once will probally do it as the contracts are short and my RTOs generally go all the way. If one is trashed too bad to repair, I can scrap and replace with another good deal. Try that with an apt. unit! I do deals only on my own land because as growing up a farm boy I believe the only true wealth is in the land. I know if your young and broke you must start where you can. How about buying a lot you can put a single wide or two or three on or has them, live in one,flipping mobiles and moving until you don’t have to do that any more. Look for opportunity and act. You will never make what you calculated on paper on any deal,and some you will do for a lesson learned. Do not wait for a better time, it is now. If this is not for you leave this website now an find what does interest you enough to give you the drive to succeed. Like they say here, GOTC.

Re: The old man and the young investor - Posted by Anne_LLC

Posted by Anne_LLC on March 18, 2006 at 12:58:14:

…Funny how these allegories are always about men…

Assuming that in some sense this post is in response to an earlier post of mine, let me assure everyone that in no way did I mean to impugne the integrity or goals of anyone who is a landlord. Landlording allowed me to quit my full-time job, and I remain a landlord to this day.

Landlording is also why in January 2005 I had to cancel attendance at an investing meeting I very much wanted to attend in FL (and if you think someone in ND cancels plans to travel to FL in Jan. lightly, you underestimate the suckitude that is ND). It’s also why I’ve been sued (and won) twice. It’s also why whenever my cell phone rings at night I answer it (at least in the winter- last year four furnaces went down when it got to -40 degrees).

My preferred method of investing is the Lonnie version of the land/home deal: the condo lot where I Lonnie the home and rent the land. That’s income for life with zero investment of my time after a one-time negotiation. Also, most of my Lonnie deals last 60-80 months, and I’ve gotten about half of them back- sounds like pretty darn close to a long-term investment to me.

Why pick on an investor with the perfectly legitimate goal of traveling the world? As if that were a less noble goal than hanging out with family and friends?

All I did was answer Jad’s question.

I was a young investor about 50 deals ago, and I’m not an old man, maybe there’s a middle ground somewhere…


Re: The old man and the young investor - Posted by John

Posted by John on March 18, 2006 at 10:53:59:

I have the old beater truck and I am often times found in dirty work cloths, I am steadily building a monthly income thru lonnie deals, I additionally have a few site built homes that strangly keep appreciating, My first goal is 20 Lonnie deals at which point I will re-evaluate my position. I liked the story because it validates to me that I am going the right way.

Re: Not for me - Posted by Dan-fl

Posted by Dan-fl on March 18, 2006 at 08:59:30:

Tenants are a fulltime job also. I’ll take buying and selling over being a landlord anyday. Been there,done that. I’m much happier now and have a life not having to deal with tenants all the time. I had 23 SFR once and it was like having 23 kids. What a nightmare…Now buying,rehabing and selling is a dream. Do not kid yourself, landlording is a dirty fulltime job.

Re: The old man and the young investor - Posted by JeffB (MI)

Posted by JeffB (MI) on March 18, 2006 at 08:58:29:

So the young investor is a beginning Lonnie dealer, who followed the genius’s (Lonnie’s) footsteps except he did not first create wealth through renting and seller-financing? And the old investor could be someone that has a bunch of land bank deals?

I’ve been working hard for a while now trying to identify my first land/home deal and so far the numbers are not working. I’m not giving up, though. But even if I never do one of these, I still believe Lonnie deals hold a bright future for me, getting me to the point of amassing enough capital to leverage into a mobile home park or commercial/retail property. I believe the key to success here is very strict discipline with the payments that come in – making sure not to treat them as income or spending money, and reinvesting every penny back into more deals.

Good post, Scott.


Re: The old man and the young investor - Posted by Marty (MO)

Posted by Marty (MO) on March 18, 2006 at 08:21:08:

the bank that’s looking at financing our l/h wants us to rent the whole package vs. selling the home and renting the dirt. we’re about to become landlords for the first time…

I’ve already got the old pickup, I’ll go pick up my overalls today!

Re: The old man and the young investor - Posted by TeddyB_SC

Posted by TeddyB_SC on March 18, 2006 at 07:46:53:

Very nice post.

Rental income is the gift that keeps on giving and giving and giving.


Re: Can’t we just all get along (and get rich)? - Posted by jp(sc)

Posted by jp(sc) on March 19, 2006 at 13:02:32:

I was under the impression that 1031 exchanges can’t apply to flipper properties.

Re: The old man and the young investor - Posted by Mike/nc

Posted by Mike/nc on March 18, 2006 at 13:22:11:

Ann, Just wondering, how do you structure your L/H Lonnie deals. Say one costing about 45K.

Re: Not for me - Posted by Denise

Posted by Denise on March 22, 2006 at 09:30:07:

That’s what property managers are for Have you ever heard of Mike Sumney he’s owned properties for over twenty years and has nerver sold one his monthly income is in the six figure range.Now that’s what i call passive income.