The title may sound counterintuitive. However, as real estate investors we invest, we do NOT speculate. We know when we go into a transaction what the business plan is, what we will spend, and what value we will be creating. Real estate is a beautiful tool for being able to accomplish that task – probably one of the only investments that has that ability.
You make money when you buy real estate, and you capture that profit when you sell. It is similar to finding that antique worth thousands that you find at a garage sale for hundreds. You know you will make money on it, therefore, you must buy it. You now have an asset worth much more than you paid for it. You then capture the profit when you sell it!
Real estate is a little more involved, which is where the business plan comes in to play. Like the antique example, there may be some cleaning up or repairs needed to capture the highest profit, the same in real estate. We identify properties that we know will have a higher value after we put some work into them. The work that we put in takes time, energy, knowledge, and capital. However, like I said, we know what the value will be after we make those investments.
They key to the equation is investment in time, money, experience, and a plan. We are investing in what we are confident will, through our systems, have a higher value. We do NOT buy something and hope it goes up in value – that is speculation. The buy, hold, and pray it goes up method is not investing, it is gambling.
Speaking of gambling – slot machines, blackjack, roulette, craps, the lottery, bingo, and many more, are all games of chance. Similar to speculating, you are hoping that you will be lucky and your bet (investment) will pay off. I used to like blackjack. I followed a system that caused me to generally win more than I lost. However, I was still gambling on a game of chance and the system made the game boring. Then I discovered poker.
Poker players do not consider poker as gambling. Gambling on games of chance is for suckers. Poker is a game where you have control over your own destiny. You can study and learn how to become better. With experience, study, education, and practice, you can turn the odds in your favor to make money when you play poker. It is not speculating, it is investing. Like all investments though, some things are still out of your control and you can lose.
Real estate is still much better than poker. You still have much more control over your investment and can direct it to create value. Over the last 30 years of real estate investing experience, I have seen many things happen that are out of your control. Over those same 30 years of experience I have developed many tools to successfully navigate the challenges of those items which are out of your control. I say that you make money when you buy real estate because you can see the challenges and how to overcome them to create value.
Our motto, tagline, catch-phrase, or whatever term you want to use is… “We make money for our investors by improving apartment communities.” We improve apartment communities and increase their value because we know going into a transaction, what we will do, how we will do it, and the outcome we will achieve. We know that we make money when we buy real estate!