The Buy-Low, Sell-High Myth
except from Building Wealth by Russ Whitney

Most people think the best real estate strategy is to buy in a down cycle and sell in an up cycle. Though that is a good strategy, it's limited, because those cycles come around only every 7 to 10 years. If your plan is to buy low and sell high, it can take you a long time to make any money.

When I began investing in real estate back in the early 1980s, I wasn't buying because we were in a recession and it was a good time to buy—though certainly that was true. I understand that now, but at the time I was buying because I'd learned a technique to buy run-down properties, fix them up, and rent them out to build a positive cash flow that would cover my debt. The theory was that as my equity increased, so would the value of the properties, and maybe in 20 years I'd be wealthy.

I have since learned how to make money right now on real estate, regardless of the cycle. I've personally made plenty of money in the up cycles—and plenty in the down cycles. I used techniques like seller financing, discount mortgages, assigning contracts, and several others that I'll explain as we go along.

People tell me I was lucky, and to a degree I was. I had accumulated quite a few properties, and when the economy picked up, I was able to quadruple my money on many of them. But let me make two very important points: First, I was “lucky” only because I took action. If I hadn't bought that first investment property, I would probably still be working at some menial job for slightly more than minimum wage. Second, I would have made money doing what I did at any point in the economic cycle because I bought run-down properties and fixed them up to create value. I also chose properties that could support themselves while they made money for me.

Once you understand economic cycles, and have either lived through one or two of them or studied their patterns, you'll see that they don't present obstacles to wealth building. Instead, economic cycles are tremendous opportunities. All you have to do is take advantage of them.

I'm not advocating that you run out and buy every piece of real estate you can find as soon as the economy shows signs of slowing down. In fact, I don't recommend buying a property that must be sold immediately to produce profits. If we are in a down or flat cycle, and you buy and must sell right away to make a profit, you could lose your shirt. But if you buy properties that have enough cash flow to pay the expenses and have a little left over, you can afford to wait until the cycle comes around. So look for properties that can support themselves (and you) with positive cash flow, and ones that will make money for you whether your keep them or sell them. We'll talk about how to choose the right properties a little later on in this chapter.

What's important now is that you understand that every recession has been followed by a period of prosperity, every period of prosperity has been followed by a recession, and there's no reason to expect that pattern will change. It's one of the natural laws of our economic system, so don't sweat the tough times. Recognize and take advantage of the fact that tough times create great opportunities. In fact, it's during the tough times that wealthy people set themselves up to hit major financial home runs when things turn around.

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If you found this excerpt from the completely revised and updated Building Wealth: Achieving Personal and Financial Success in Real Estate and Business w ithout Money, Credit, or Luck valuable, you'll want to read the entire book. In his always practical, easy-to-understand style, Russ Whitney shares his own story and tells you how you can duplicate his success. To order your copy, visit www.russwhitney.com/buildingwealth.