A thriving real estate investor or retailer solves a
lot of other people’s problems; that’s how you become successful. The more
knowledge, ability, experience, contacts, and resources you have, the more
solutions you can begin to offer people in solving their problems. In addition
to this, you will be ahead of the pack if you can get people calling or coming
to you with their specific problem first. That means you have to advertise the
fact that you are in a position to help while being fair, trustworthy, and
accurate in making quick decisions before the competition tries to persuade
these people first.
For the above reason alone — competition — you will need to understand
marketing. That means deciding on what you are going to specialize in,
developing a method to define your target audience, and then attracting them
with a well-written message using the different types of media to get the word
out. That last paragraph brings up a good point: What exactly do you want to
specialize in? Following are some categories from which to choose:
Condos, vacation property
Apartments for one to four families (residential duplex, triplex,
Commercial— hotels/motels, strip malls, office complexes, mobile home
parks, storage units, parking lots, garages, restaurants, stores, apartments
for five or more families, and so forth
Industrial—factories, refineries, manufacturing plants, and so forth
Farms—commercial, industrial, or agricultural, depending on zoning
Raw land—lots, vacation, recreational, sub-dividable residential,
commercial, industrial, agricultural, and special purpose
Special purpose—churches, schools, hospitals, power plants, theaters,
sports arenas, golf courses, marinas, and so forth
Here are some examples of how you might go about finding some good deals:
Look at bulletin boards, local papers and small independent
publications. This goes for every publication you get. Make sure you get one of
the first copies off the press. Go to the facility that houses the presses and
get your copy before the ink has a chance to dry. Let no one beat you to the
Better yet, advertise yourself and get people who are thinking about selling to
call you before they actually tell the world through an ad.
Look at the legal section of the newspapers. Contact heirs and attorneys,
and sales in the garage or estate sale sections. Also, 20 percent of people who
have garage sales are planning on moving soon. Ask about their house or their
neighbor’s homes. Always keep your antenna up! Your odds of success increase
when you choose large population centers and remain in the market constantly on
the lookout for your type of deal.
Look for vacant houses that are run down, fire damaged, or abandoned, with
city notices evident. Talk to the neighbors of these homes. They usually know
who owns it and what is going on. They have an interest in seeing it restored to
beauty. It sure is a shame you can’t look in the mailbox to see who is receiving
mail at the property in question—wouldn’t that be easy? Walk up to a property
and look in a window to confirm that it is indeed vacant—but don’t endanger
yourself by getting bit or shot! Use common sense. Contact out-of-state owners
through property records or by letter and/or phone. Leave your cards on the
OREO stands for Other Real Estate Owned. Make friends with your local
lenders and let them know you are the one to call when they have a foreclosure
looming or in progress. Hint: If you pre-qualify with lenders beforehand, they
may call you sooner.
Watch the local paper for foreclosure auctions, tax sales, and HUD and VA
listed properties. Note: Auctions held in bad weather where the property
absolutely must be sold are your best chance to limit competition and get
property at rock-bottom prices. Because there is no low limit on what can be
accepted (no reserve) you may win big.
Real estate agents are going to try to sell you something! When you approach
them be very specific with them and tell them to call only if they have an
absolute steal. Ask agents to give you those expired listings since they
couldn’t sell them. Suggest a 2 percent commission if they will assist with
closing the paperwork after you make the deal with the seller on your own.
Don’t be so selective. If the property is an absolute steal, lock it up and
sell it to somebody who does like to work with that type of real estate. Get the
option and hand it off to another buyer. Look for distressed sellers in addition
to distressed property.
Post fliers everywhere—colleges, Laundromats, shopping centers, bowling
alleys, public bulletin boards, churches, local businesses, wherever large
numbers of people congregate. Give them a chance to give you a lead on a hot
deal. (For example, print up cards that say “I pay $500 to you at closing if I
buy a house that you told me about! Do you know anyone who is selling property?
Please call [your name] at 555-1212.”) Print quality business cards.
Join organizations of all types. The sky is the limit. There are so
many—just pick the ones that you would be interested in truly being a member in
and let it be known you pay bounties for consummated (closed) deals.
When you use headhunters, leave out no one. Property managers, moving
companies, relocation services, neighbors, landlords, tenants, the mailman, the
paper boy, gardeners, landscapers, service technicians, pest control people,
friends, acquaintances, relatives, and other investors. You name it!
Everyone should know they can make $500 if you end up buying a property they
tell you about. Enlist your army! Give each of your soldier’s stacks of your
cards for exponential growth.
A special note: Water, gas, and electric company personnel who shut off
utility meters can be very good bird dogs when it comes to finding property that
is in trouble or vacant. Make sure they have your cards.
Have at least 10,000 business cards printed with your offer of the $500
bounty and hand them out in stacks to everyone you can.
As you grow, you might consider TV, radio, phone books, billboards, street
benches, bumper stickers, and bigger commissions. Use your imagination.
Put up signs telling people you buy real estate.
Make multiple lowball offers on overpriced properties and walk away. Don’t
deposit earnest money but they may stew on your offer and call you a month later
accepting your deal. Leave the offer with them.
Older people should not be left out. They are very valuable informants. They
know everything and need people to talk to! Listen to them. Go to free seminars
on real estate. Do this not only to learn about real estate but also to capture
names and circulate among real estate–minded people. Once you have their names,
call your own club meeting and network to prosperity. Find your mentor here.
Go to where people are buying those “by owner” signs. Ask them what they are
selling. Follow them home and get the first look! Be first or lose the deal.
Try offering 15 percent less than what you intend on paying. You never know;
they may accept it. If they don’t, you can still negotiate up to 15 percent more
and get it for what you originally were willing to pay. If it’s any higher, walk
away but leave the offer on the table (the offer stands).
Make your offer easy for the seller to understand. Get the option to buy but
use a contingency to protect yourself. Iron out the details later but lock it up
Buy from sellers who tend not to care: seized, foreclosed, tax sales,
corporations, nonprofits, disinterested heirs, probate attorneys, and private
Try just helping someone to sell his or her property even if you don’t want
it. Be a friend and offer to help for nothing in return. You will be amazed at
what happens when you sincerely try to help with no thought in mind of making
money. This is a magic bullet in disguise. Those are some of the basics of
advertising and finding the opportunities to buy real estate below market. The
old saying goes: You make your profit when you buy, not when you sell. (20
percent off retail, minimum).
Residential Real Estate
As a fairly general rule, homes appreciate about four or five percent a year.
Some years will be more, some less. The figure will vary from neighborhood to
neighborhood, and region to region.
Five percent may not seem like that much at first. Stocks (at times)
appreciate much more, and you could easily earn over the same return with a very
safe investment in treasury bills or bonds.
But take a second look…
Presumably, if you bought a $200,000 house, you did not pay cash for the
home. You got a mortgage, too. Suppose you put as much as twenty percent down –
that would be an investment of $40,000.
At an appreciation rate of 5% annually, a $200,000 home would increase in
value $10,000 during the first year. That means you earned $10,000 with an
investment of $40,000. Your annual "return on investment" would be a whopping
Of course, you are making mortgage payments and paying property taxes, along
with a couple of other costs. However, since the interest on your mortgage and
your property taxes are both tax deductible, the government is essentially
subsidizing your home purchase.
Your rate of return when buying a home is higher than most any other
investment you could make.
Commercial Real Estate
Let's start by defining commercial real estate. Commercial real estate is a
broad term used to describe properties that are not single-family residences and
that are used for work, income generation, and/or investment purposes.
When we speak of investing in commercial real estate, we are talking about
individuals who put capital to work in a commercial property seeking to earn a
profit from three potential areas: property appreciation (either a market-driven
increase in value or from adding value such as making improvements or solving a
vacancy problem); from cash flow from rent collected (after expenses), and from
potential tax benefits of ownership.
Generally speaking there are two main categories of commercial property:
multi-residential (or multi-family) commercial property and non-residential
commercial property. Multi-residential properties include any properties
intended to house more than one family-from duplexes, to small apartment
buildings, to large apartment complexes and rental communities.
Non-residential commercial property is real estate in every other form
(except single-family residential). Office, industrial and retail properties
make up the dominant portion of the non-residential market. The remainder of
non-residential commercial property includes hospitality, medical buildings,
civic buildings, care facilities such as nursing homes, and land zoned for