Which is better? To be lucky in real estate investing? Or to be good at real estate investing?
We have heard about Anthony’s first real estate investment, the house-hacking triplex. It appreciated about $125,000 in just 9 months.
He’s a genius real estate investor, right?
Well, I asked him… did you just get lucky? What if the furnace kicked? Or the roof caved in? Did you have the reserves to fix any major projects?
While he did have some reserves ready to go, he also got lucky. The neighborhood was appreciating, and therefore his property was growing in value. So…
When it comes to real estate investing, especially in your first few deals… how much luck is involved?
What can you do to mitigate your risks so you’re not relying on all of that good luck?
Find out on this week’s bonus episode of Multifamily Investing Made Simple!
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“I didn’t really do anything with the building to improve it from an operational standpoint.I got lucky and it could have just as easily gone the other way.” – Anthony Vicino
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[00:00:00] Anthony: So I’ve shared the story countless times about my very first investment property, which was a tripex that I bought for 246. Thousand dollars. I used an FHA loan, which is a first time home buyer’s loan that allowed me to get into this thing by only putting $7,500 down. So that’s a really good deal and I share the story about how this went really, really well for me in the first nine months alone.
That building it appreciated by $125,000. When I went back to the bank, nine months later, they valued it at $375,000, which allowed me to take out a refinanced loan to pay back the original and pull out some equity. And this was a really, Fortuitous event. To be honest, I just happened to be in the right market at the right time.
I didn’t really do anything with the building to improve it from an operational standpoint. I didn’t make it prett or I didn’t really do [00:01:00] anything. It just happened to be in the right place at the right time. I got lucky and it could have just as easily have gone the other way. But the reality is like, On that property, I share the story about the big win and how it appreciated like gangbusters over nine months.
And that sounds like you know, the greatest thing ever. In those nine months, a whole lot went wrong and it could have easily just gone the complete opposite direction and been an absolute money pit of a deal. And I could have been absolutely broke. And this is the side of real estate that a lot of people don’t talk about is like the really hairy, ugly side.
So here’s the truth, I got into that first property with $7,500 of my own. But I had $15,000 in the savings account put aside just for reserves so that if the roof caved in or a window or something happened, the foundation or the plumbing. And here’s the thing, I was like, a lot of that stuff actually did end up happening.
My, my HVAC system was crap. I, my plumbing issue, I had leaks. I had busted pipes in the winter. I had a tenant who refused to move out. And so I wasn’t getting rent as I thought I was going to. And if I hadn’t had those reserves, I would’ve been in a really. [00:02:00] Situation. So on the one hand you could look at it and say, Wow, Anthony, you’re a really brilliant investor.
No, not really. I just, I knew I needed to have some reserves because I know that being on the right side of luck is often just about being at the right place at the right time. The key is not just to go moving around to all these different places and hope that you just. Luckily intersect luck. No. You just pick a spot and you stay there long enough and the chances are luck will eventually hit you.
And that’s the key with real estate investing is if you can just pick your. And stay there long enough, luck will eventually hit you. It’s just how it goes. And the way I think about this is that real estate on a long enough timeframe almost always appreciates. So I know Detroit got hit real hard over the last 20 years, but if you look over it over a 50, 6,000 year span, it’s only ever been appreciating, right?
So generally, if you’re not forced to sell, you’re probably gonna be able to make money in real. But that’s the really important thing that people don’t talk about is often you don’t [00:03:00] think, You don’t go into the deal thinking, I’m gonna sell this thing. I’m like, Something’s gonna go wrong. I’m gonna run out of money.
And so you find yourself having to sell unexpectedly. So the key is that you have to have reserves, you have to be prepared for worse case contingency. Now the question is, how much do you really need to keep in reserve? Like what’s the right healthy amount? I don’t know. I don’t know. I don’t have an answer for you.
There’s plenty of formulas out there. It’s gonna be dependent on your asset, your. Comfort level, like how much risk and reward you’re willing to to tolerate? What I would say is that when you’re young, you can take on more risk because you have time on your side, right? You can afford to make back any losses, and so you can tend to take more risk.
And make bigger swings at bat, and maybe you get that home run as you get older. You know, I’m 38 now. I, I, I’m more risk averse and I don’t have as much time to make back the money if I lose it now, so I have to be a little bit more guarded. Same when you’re 60, if you’re nearing retirement, you really don’t want to take on any risk.
You want to be sure that your money is gonna be there for you. So it’s all about gauging your context of [00:04:00] where you are in life and how much risk you’re really willing to take on. Because at the end of the. Risk is just another word for lock. And when it comes to investing, every investment is inherently risky.
There is an inherent amount of luck involved, whether that’s a stock market, crypto, or real estate. So just know that going in, it’s not all gonna be rainbows and sunshine. A lot’s gonna go wrong. The key to getting lucky into eventually looking like a genius investor is to make sure that you have enough reserves so that you can stay in the.
And I can almost guarantee if you stay in the game long enough, you’ll win.