Low Double Digit Returns are Very Sustainable: High Double Digit Returns Are Bait & Switch

Wow! I find myself in a weird mood today… I am the eternal optimist only positive things to say and yet I find myself writing this second post of the day that has its share of negative tones. Low Double Digit Returns are Very Sustainable: High Double Digit Returns are Bait & Switch

I guess I am just bothered by all I see happening to the new investors. There are so many properties being disguised as great investments that I have to vent a little.

I figure if I educate just one person from the bait of a large capital outlay or a reduced cash flow disguised as the investment of a lifetime then I can sleep better at night.

Things to consider: If an investment can produce and sustain a 20 to 40% return then why do they not all do that? The answer of course is they cannot. High returns are needed to generate interest to properties that may be awaiting capital outlay such as:

  • Deferred maintenance
  • A failing infrastructure to the immediate area such as roads or well and septic
  • A failing infrastructure to a community
  • Rises in un-employment and vacancies
  • Locations losing values due to path of progress within a community going the other direction
  • Overvalued markets

Today’s awesome real estate market generates plenty of great opportunities and double digit returns are very possible. Low double digit returns are very sustainable. High double digit returns are bait and switch.

Stop being a price shopper and be a value shopper.

Establish your list of goals (if you fall prey to a deal that cannot sustain its returns, you probably did not have a planned real estate investing goal in the first place).

I learned this valuable lesson as a young boy. I loved woodworking and used the money I made mowing lawns to buy tools. Because I had very little money I bought the cheapest tool money could buy. My big brother (who was then a young adult) said to me , “you are always are complaining about these tools breaking down and falling apart, you get what you pay for. Save your money and get a quality brand tool when it is on sale and that tool (when taken care of properly) will last you a lifetime." He was right. I started buying quality tools and still have them thirty years later.

I learned that by shopping only the price, I bought the same tool over and over again. Ultimately I spent more doing that then spending a little more to get a quality product that can sustain the test of time. The value was in the product that can generate a useful tool for the longest period of time. Value will beat out price every day.