Our Real Estate Invesment Philosophy
Our investment philosophy is to find the best real estate opportunities in markets with attractive economics. Our philosophy is distilled from Ben Graham's Intrinsic Value principles first published in the 1930s in "The Intelligent Investor", and it is our experience that his classic investment philosophy can be effectively applied to real estate investment. We look for the following characteritics in any investment opportunity:
Intrinsic Value: We Make Money On The Purchase - Each investment has an inherent intrinsic value and we seek to purchase properties at a discount to intrinsic value. In so doing, we achieve a Margin of Safety in our purchases which positions us for low risk, high potential return investing.
Leverage Incentives, Cashback and Purchase at Discount to Market - Our guiding principles is to make the money on the purchase, by leveraging the power of our purchasing syndicate to get bulk discounts and cash back incentives.
Positive or Breakeven Cashflow - In the past couple of years, the concept of negative carrying costs has gained acceptance amongst real estate buyers. Not so with us. We will ONLY purchase properties where the present value of future cash flows offers an acceptable return on investment AND the monthly revenues plus incentives are greater than monthly expenses creating positive cash flow scenarios.
Our guiding principle is that any investment, whether it be real estate, stocks, bonds or a business, is valued according to the present value of its future cashflows. And a real estate investment must be able to generate enough revenue on a monthly basis to pay off expenses.
Minimal Downside Risk - First do no harm. Preservation of capital is priority number one. Most advisors pay lip service to this concept and then go out and buy risky investments for their clients. We achieve it for our clients by purchasing at significant discount to market value using the bulk purchasing power of our investment syndicate.
We break down every project into it's component inflows and outflows. Our analysis is performed using conservative projections and assumptions. If the analysis suggests an acceptable return, we then consider the project for additional analysis.
Exit Strategy & What If - When entering an investment, we define our exit strategy points. But we also have a What if scenario that ensures that if we can't achieve our defined exit timeline, we are able to continue to hold the property without suffering negative cash flow or negative carrying costs.
Avoid The Herd - If the public is rushing to purchase day 1 preconstruction and there is a frenzy to purchase, our Mastermind Wealth Builder group is likely considering selling opportunities. One of our group's founding principles is a somewhat contrarian approach to investment. Using this approach, our clients were able to avoid the frenzied purchasing environment of 2005.
Steady Upside & Positive Leverage - No, we're honestly not looking to hit the home run. We're happy with hitting solid doubles and hitting for a very high average. As you'll see, even an investment property that appreciates at 7% a year translates to a 70% cash on cash return through the use of positive leverage at 10% down.
We Are Rational Longer Term Investors, Not Emotional Greed Driven Short Term Flippers
Our philosophy is driven by minimum holding periods of 2 years and ideally, 3 to 5 years, not 2 to 3 months.
Our expectation is to earn solid consistent appreciation, incentives and consistent cashflow accumulation, not $30,000 in 3 weeks.
Our exit strategy profit scenario involves making 5 times to 15 times our initial cash investment, not $15,000 net after transaction fees.
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