Editor’s Note: Dennis Fassett is a former corporate finance executive turned real estate investing “Cash Flow Mercenary.” Dennis specializes in single-family and multi-family cash flow properties and thoroughly enjoys assisting his fellow investors with their own strategies, including how to buy your first apartment building.
As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Fassett provides us with his own unique, lively, and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out his other super-helpful Market News Updates. For now, enjoy...
From Dennis Fassett, Cash Flow Mercenary...
Ah, The New York Times. Or more accurately, The New York Slimes…
If there was ever a shining example of a publication where the right move is to do exactly the opposite of what they say, it’s them.
Hell they put Zillow to shame when it comes to the frequency of being completely and absolutely wrong. Like a bad clock, Zillow is right by accident, like twice per century.
Not so for The Slimes.
Case in point – an article I read by them recently. The title?
Real Estate Investing Offers Only One Likely Outcome: A Low Return
As soon as I saw the headline I excitedly clicked the link to read it. And it did not disappoint.
The writer bafflingly started his piece discussing the past real estate crash in Ireland. And then Australia. Then from that he stated his opinion that "Gambling on — sorry — investing in residential real estate is generally not a good idea."
His words. Not mine. But wait, it gets better!
The Talking Heads Speak
He begins the defense of his “theory” by quoting a study by Robert Shiller, of the Case-Shiller index that’s widely used by the chattering class of real estate writers who have no clue how real estate works.
He writes:
“Robert Shiller, a winner of the Nobel in economic science, has studied this topic. His research shows that from 1890-2014, after accounting for inflation, home prices have risen 0.3 percent. And no, that’s not a typo. The data is clear. So while you may love living in your home, it doesn’t make a very good investment.”
When I read this my question was, who ever said that owing a home was considered “real estate investing?”
And his second huge mistake was inferring that all real estate investing profit is due to appreciation.
He goes on to write that:
“…it becomes very easy to convince ourselves that we’ll find the perfect real estate deal and time both our entry and exit into the investment perfectly.”
And if that’s not enough, he continues:
“If you ever find yourself having this mental conversation, I strongly suggest you hit the pause button for at least a minute. Then, before you can make the investment, pretend you have to state your case to a panel of judges, sort of a mix of “Shark Tank” and a therapy session. Yes, the deal sounds good, but can you prove it in an oral argument?”
This clown is seriously suggesting that each time we consider a property, we should submit it to a “shark-tank” type of analysis.
See what I mean about the chattering class?
His “Three Keys” to Successful Real Estate Investing
He then went on to give us his three keys to being a successful real estate investor. I mean, because he writes for the Slimes means he’s qualified to give us advice, right?
His first point is actually partially right. Shocking I know. But even a blind squirrel finds a nut once in a while.
He says that all the successful real estate investors that he knows have developed the unique skill of identifying undervalued properties.
Spot on Sparky.
But then he completely invalidates himself (again) by writing that to do that “requires many years of painful trial and error. A three-day course on “How to Become a Successful Real Estate Investor” won’t cut it. “
Many years? Trial and error? Hardly. The same with a “three day course.” As many of you know, you can actually learn how to find undervalued properties in one afternoon. It certainly doesn’t take THREE DAYS to learn it.
His second point is that the investors that he knows invested the time to understand the category.
And that:
“Their experience includes connecting and often working with other established real estate investors. And again, the time required to develop that knowledge and translate it into positive returns is measured in terms of years, not days or months.”
Years? I’ve completely analyzed residential neighborhoods in ONE WEEKEND.
I do agree though that it does help to plug into networks of experienced real estate investors, just like you’re doing know. It can certainly help shorten the time to do your first deal.
His third key though really cracks me up.
He says:
“With real estate, it can come down to connections. Who you know matters a lot in real estate, and it can be the difference between getting the deal or leaving empty-handed.”
What a bunch of crap. It certainly CAN help to know people, but I know plenty of real estate investors who are wildly successful due to their own hard work, analysis skills, and persistence.
This ain’t exclusively a “who you know” business.
The crazy thing is that this guy is a “financial planner.” He wrote a book on it, and he’s – get this – the Director of Investor Education at an organization of “Independent Financial Advisors.”
Can you imagine paying cash money to learn from someone like this?
Remember – be careful who you listen to. And feel free to cry all the way to the bank when you get your next rent check or profit check from the deal you just closed.
Whatcha Think?
Agree with my take on what this looney tune had to say? I wanna hear from you in the comments section below.