5 Properties Rich Investors Never Buy – And Poor Ones Always Do

So there are five property types that most wealthy investors avoid at all costs while new or broke investors consume. And it leaves them staying broke. But this one thing will determine whether or not you actually build real wealth, generational wealth, or even just replace your income versus wasting years of your life locking up capital and deals that never actually make you any money. While everyone else breaks in the profits, of course. Okay. My partners and I have built a real estate portfolio of over 500 million in assets under management. We've been investing a combined total of over 50 or 60 years. Now. We've done everything from Airbnbs fix and flips, new construction, single family homes, large multifamily, RV parks, mobile homes, all kind of different things. And we've also helped over 600 other investors. So I've seen it all. And in this video, I'm going to show you those exact properties. Plus I'm going to share with you the property types that changed everything, everything for me. And in just one deal added over $2.6 million in equity within 15 months of owning the property. Okay. And it's the same asset that smart investors acquire when they want to build real wealth in real estate. So let's get into it. Property number one is Airbnb. So Airbnbs are short term rental only properties. Airbnbs look great on paper. I own them. Okay. I understand the intrigue about Airbnbs. There's more revenue that you can create through short term rentals. And there's a hack. Everyone talks about Airbnb arbitrage. You know, you go to the landlord and you say, I'll pay you this much in long term rent, lock it up for 6 month, 12 month lease, whatever that may be. And then you, you say, I'm going to, I'm going to rent it out for short term. And you make the spread between the short term revenue and the long term. Okay, well, first off, yeah, you could probably get two or three times the amount of income that you could on long term rent. But your actual profit margins or are not always there. And it's going to be determined by the market. Which most markets in today's, in today's situation is it's either overregulated or oversaturated. And there's very few markets where you can put an Airbnb in there and it stay over 90% occupied. Okay. Unless it's just overregulated. And then, and then you have higher taxes. You have, like in my market, they even make it so hard just to renew the business license. You Got to reapply for a brand new business license, brand new certificate of occupancy, all kind of different things just to maintain your Airbnb. So it can end up becoming a disaster. And if you really do the math on your profit, you end up making either the same or potentially even less. Especially if you're including a management company that you're paying 10% to or 15%. I've even seen, seen some as high as 20% management. But you can jump in there too. But you're going to be managing cleanings, you're going to be managing all kind of stuff. So that's Airbnb. I mean, again, I've seen people buy a property, just give you an example for $400,000 and then, and the property is actually worth probably $325,000 Six months later, Citi changes short term rental rules, income drops 60% overnight, and then try selling it, lose 75k. You know, so I've definitely seen some bad situations or, you know, just worse. Like can, if you have it at 80% occupied, do the math. Can you really see a profit margin that justifies the extra work and attention that you have to that property? So property number two is single family homes. Look, we talk about this a lot, but, and we have a lot of single, we have hundreds of single families. But that was before we really saw the opportunity in the next vehicle that I'll be sharing about. But the reality is single family looks appealing. You get in at a much lower price point. You get in, it seems easier to, to take on, you know, you understand it a little more. If I can just charge rent, this is my mortgage, I'll be able to make this spread and over 10 years I'll be able to replace my income. But that's assuming everything goes right. You have every deal and you're doing all this work, you're buying the property, you're renoing the property, you're leasing it up, you're dealing with issues, fixing it up, all kind of different things, and then you got to turn it over. So single family, the biggest thing about that is it only is valued at what the property down the street valued at all, right? So you can't perform better on the property and get a higher valuation on the property, or you can't exponentially increase the value based off the income of the property. It's just based off comparables in the area. And then the reality is if you have one vacancy, guess what, you're 100% vacant. You have nobody paying the bills. You have, you know, very, you know, no income coming in and you're losing money. So in my opinion, single families are actually very risky. It takes a lot more work, a lot more deals, and it's a lot longer, slower, more painful play to actually be able to reach the income goals that you have. You know, you buy a $200,000 property, you get say, $2,000 a month in rent, you know, and then after all expenses, you end up walking away with what, three, $400, you know, after your mortgage, after everything like that, three or 400 bucks in your pocket, you got to do that 15 times to make any kind of considerable income and dent to your portfolio or your goals. Property number three is new construction or a class properties. Now, a lot of people, you know, big hedge funds, big guys in the market, you know, they like to do it. And I'll say there's some pros to class A properties, new construction, all that kind of stuff. You're typically going to get really quality tenants. You're typically going to have less maintenance, less upkeep, right? In terms of, you know, your expenses, you have better tenants, so you're going to be able to keep up the property for much less and run it more efficiently or more profitably. However, class A properties is typically where investors go to save money on taxes, not create cash flow. Right now, maybe cash flow comes 10, 20 years later. But if you are someone who wants to build your portfolio quickly and wants to actually see give your investors or be able to see a higher return on your investment within two, three years, you cannot be in class A properties. The people making money on class A properties, guess where they make their money right off fees, right? Fees at the closing table, fees on the property, you know, asset management, all kind of different things, right? So there's class A properties are going to be much harder for you to create cash flow and be able to force appreciate because there is not much room to appreciate. It's depending on market evaluation or market valuation. So if your market declines, your portfolio's declining, right? If your market doesn't increase, your portfolio is not increasing, right? Obviously, over 10, 20 years, it should increase, right? With real estate, if you give a long enough time horizon, it will increase. But if you're somebody like me who wants to build a portfolio quickly and want to, you know, go to just say 100 units within the next two, three, five years, whatever that is, Class A properties is going to lock up your capital and it's going to constrain you if you don't Figure out how to, how to bring in more capital or you know, to be able to actually pay off your investors, you're going to have to go to a higher level type of investor anyway. You're probably not looking at your just high net worth investors. You're probably trying to attract institutional guys, which you need a strong reputation to attract institutional capital. So new construction is going to be a hard thing for you to get into. And most wealthy investors that are actually investing in real estate are typically not buying those. Okay. Property number four is going to be the opposite. D class properties. What do I mean by D class properties? Well, we call it war zones. Your war zone properties are typically the lowest end of the totem pole. And as properties that are typically going to be in rough neighborhoods and whether it's single family, multifamily, whatever types of properties it is, you just don't want to be in D class. You want to avoid those at all costs. Okay, and the appeal to D class properties, I'll say the pros and cons to each one of these because the appeal is and you probably, if you've looked on LoopNet or Crexi, you're looking for commercial real estate, you've probably seen these deals that have a 15% cap rate. You know, it's, it's high cash flow day one. Typically if you see a deal that's high cash flow day one, when you buy it and it's got a 15% cap rate on your money that you invest, it is going to be a nightmare. It's going to be high cash flow. But a full time job, first off, they don't appreciate with the market, typically there's very little appreciation based off your, your. If you're depending on market appreciation, class D is going to attract lower end tenants. So that means tenants that are tearing up your property, that means your expenses are way high. That means the valuation of your property is going to be really hard to create any kind of appreciation, any kind of value add in that property because no one wants to take it. Right. The higher the market cap rate, if it's 8% cap rate, 10% cap rate, that means the lower demand it is to sell your property. So it's going to be much harder to sell that property. That's why you see a lot of publicly advertised on LoopNet and Crexy and all these public platforms. Right? Because it sounds good, but people actually don't want to invest in those areas. So you're going to attract a lower end client, you're going to have higher expenses. And it's going to be hard to get property management companies to want to manage your property because it is crappy tenants and it's typically people who don't take care of your property. So that's a nightmare. I know from experience having somebody run your property at a high level is going to be much harder in a class D area. Property number five is high HOA condos. Okay, so obviously condos is similar to short term rentals, so I'm not going to get back into that. But obviously there's condos that you can rent out long term, that's fine. But if they have a high hoa, our homeowners association, so typically they charge a lot of fees and then a lot of people don't take into account is the fact that HOA typically increases, right? You go in there, it looks okay after you factor it in, but then a year, two years, three years later, they increase it and then all of a sudden you're underwater, you're negative. Okay, I see it time and time again, not only the problems with short term rentals, but also HOA fees can just crush investors and it's just not a smart play. So that's just five. There's many out there. But the main thing, okay, when you and is that buying one property at a time, you know, you create one bad decision, it traps your capital. One bad location, one bad hoa, one property that doesn't appreciate your stock. You know, we've been buying single family homes for a long time and we realize after jumping into multifamily properties where we could do light to moderate value add properties that it 10 it took 10 years for my partner to get to a million dollars in revenue a year. Okay, within one year, we 10x the income, we 10x the revenue after switching vehicles. Warren Buffett says it's not about how hard you row, it's about what boat you are in. All right, so that's one thing we have realized is so important. But value add light to moderate multi family apartments do 10 to 100 unit deals. Now this may sound daunting hunting to a lot of people and it's the reason it's so great, because a lot of people, we call it no man's land. A lot of people think they've got to have a lot of capital, they've got to have a lot of credibility in the market. They've got to have a big brand or you know, they've got to be a big dog in the, in the room. But the Reality is that in value add light to moderate value add apartments. If you go after B and C class properties that have room to grow, have demand in that, in that market and you have the ability to increase rents, you're going to be able to force appreciate the deal in similar ways. We've had several properties, I'll link below and give you some examples of some of the properties we've done. But we just had an 88 unit deal, a purchase for about $4 million. It's class C plus. And you know, we were able to increase the rents about 150, 200 bucks within about 15 months. Okay, within 15 months increased over $2.5 million in equity just on that one deal. And we've done it with a 96 unit deal in Macon, Georgia. We've done it with a 48 unit deal, a 49 unit deal in Columbus, Georgia. We've done it with several deals all over the Southeast and then our members have done it all over the US We've got a deal in New Hampshire, we've got a deal in Michigan, we've got a deal all over the place in the US and we've seen it time and time again. If you learn the skill of acquiring deals, finding off market deals not going on LoopNet and Craigslist, you learn the skill of acquiring off market deals, you learn the skill of creating capital, attracting capital partners, you are going to be able to not only get in with zero money, but you're going to be able to create safe long term wealth that can actually grow your net worth very quickly, grow your portfolio very quickly. And ultimately yeah, we do typically take an acquisition fee at the closing table of just say 2 to 3% somewhere around there depending on how big the property is, could be as low as 1%, could be as high as 5% depending on the size and type of property. Okay. And so that alone I think is a massive advantage for if you're syndicating a property or you're taking a big multifamily portfolio down. So look, if you want to learn how to buy multifamily properties, if you want to learn how to get into these deals, not be intimidated thinking the big guys are going to take it all, or thinking you've got to have a lot of capital and you want to network and find the right deals to partner on, click link below. I'll drop a link in the description to book a call with my team. We'd love to see if partnering with us would be a value to you or you would be a good fit for our program. Okay, so click link below. Thanks for watching the video. I hope it helped. God bless.