Yesterday I spoke with a real estate investor who was having trouble finding value in his region of the country that could support his business model. He renovates then either flips the properties or adds them to his rental inventory. His dilemma, he explained, was the fact that values are now at bubble levels again and he felt another correction can’t be that far away!
In talking with him I asked him to name a few reasons why he loved flipping homes and owning rentals. He replied… “That’s simple, I like making money.” I asked him to share with me what he considered a good deal. He said if he can flip a home and make 30% to 50% before taxes, or earn a 10% to 14% net rental income he’s as happy as can be. I asked what he didn’t like about his business, and he told me that sometimes you win and sometimes you lose, so in reality earning those numbers isn’t always possible.
He had come across agricultural investing after doing a Google search online. A video of ours popped up describing the profits in coconuts, so he gave us a call. I explained that my background had been traditional real estate for sometime, however, after I discovered agriculture I exited that space and replaced it where the profits are generated biologically rather than economically. He asked me to clarify that point.
In traditional real estate, and investing in general, profits come by way of buying something at one price, and selling that something hopefully to someone else at a higher price. In flipping homes that’s the driving profit generator. With income property the focus is on cash-flow, and so long as the tenant(s) can pay their rent or lease, and expenses are managed, the profits are generally stable. Obviously the economy has a lot to do with whether or not we have occupancy shrinkage.
After explaining to him that in specialty agriculture (especially non-perishables), Mother Nature provides a REAL advantage. Whether or not the economy is good or bad, coconut trees for example only know one thing – how to grow coconuts!
Yes, the price of a coconut may vary, but all-in-all there are no missed rent/lease payments, no up and down dizzying equity swings, no toilets or troubles, no remodeling or buying a new garage door opener, etc.
The trees produce coconuts for 60+ years, the land the trees grow on appreciates steadily (farmland values don’t often see major crashes like we saw in the 2008 crash), and we enjoy net annual cash-flow in the high teens. Obviously it isn’t possible to grow coconuts in Arizona, Washington, Michigan, or New York (and most of the U.S.), so one also has to think outside of the box and expand into international real estate and mimic the more sophisticated investor that has a global diversified portfolio.
If you would like to learn more about how you can earn profits in coconuts, go to: