Each, day thousands of real estate professionals go online to research real estate software. But what is real estate software, and how can it help you improve your real estate business? These are the questions we will address here.
What is Real Estate Software?
When we talk about real estate software, we’re actually covering a wide spectrum of software products. In general terms, real estate software is any software that helps you manage some aspect of your real estate business.
The “some aspect” part of that definition is important, because to date there is no real estate software that will help you manage all aspects of your business. Instead, most types of real estate software are designed to help you manage a certain element of your business, like contract preparation for example.
Various Types of Real Estate Software
Below, we look at some of the most popular types of real estate software. As you will see, each type of software is designed to help you perform a certain part of your real estate business. Please note that this list is not all-inclusive. There are more types of real estate software than I could possibly cover in this one resource. So at the end of this guide, I’ve listed some additional resources where you can find any type of real estate-related software imaginable.
Content Management Systems
Some types of real estate software are designed to help you manage property listings on your website. Basically, these are content management systems (CMS) that have been adapted for real estate purposes. A good example of such a program would be Realty Manager by Interactive Tools.
Such programs allow you to add, edit or remove property listings (including house photos) within your real estate website — without any knowledge of web coding. If you have listings on your website that require constant management, you can see the convenience of this kind of real estate software.
Real Estate Contract Software
As the name implies, this type of real estate software helps agents prepare real estate contracts. As you well know, contracts are a big (and often time-consuming) part of the real estate business. So anything that can streamline and simplify the process would be welcomed by real estate agents. That’s what contract-management software strives to do.
One of the best features of real estate contract software — a feature you should look for when purchasing this type of software — is the ability to create contract templates by pulling in required disclosures and other commonly used items from your city and state. This way, once you have the real estate contract software set up how you want, you would simply enter new client details and listing prices to generate contracts.
Real Estate CMA Software
Once again, the name tells you what this type of real estate software does. CMA software helps you prepare comparable listings / sales reports that you can show to clients. The biggest benefits of this type of software are time savings, professional appearance, and basic mathematical functions. CMA software will help you produce an attractive and informative CMA report in less time than doing it without software assistance.
Contact Management Software
Contact management software is not to be confused with contract management software. Though they only differ by one letter, these two types of software have nothing in common. Contact management software helps you manage your contacts, or client communications.
Most of these applications are built around databases. You enter client information into the database (with details such as name, phone number, neighborhood of interest, etc.), and then you can easily search the data later.
When choosing a contact management solution, look for one that allows customization of the data fields. You want the ability to create whatever info fields for each contact that’s important to you. All of these programs will let you enter the basics, like name, phone number, address and the like. But what if you wanted to also label people with buyer vs. seller? Or by price range? Or by the neighborhoods they’re interested in? You’ll need this kind of flexibility, and any good contact managements solution should offer it.
Real Estate Educational Software
This is another popular type of real estate software. As the name implies, this kind of software helps you advance your professional education. The most common types of real estate educational software are the test preparation programs. These programs help you prepare for state licensing exams and other real estate-related professional exams. For just about every real estate exam you can imagine, there’s a piece of software that can help you prepare for it.
Virtual Tour Software
Virtual tours are extremely popular among real estate professionals these days. Home buyers love virtual tours, so when you add them to your real estate website, you’ve increased your website’s value for your key audience. The only problem is, virtual tours are not an easy thing to put together. That’s where this type of real estate software comes in.
One way to create virtual tours is to have a virtual tour company do it for you. With this option, you shoot the photos or film footage yourself, and send it to a virtual tour company who creates the finished product. But for the more adventurous agents, there is also the virtual tour software path. Using this software, the agent creates his or her own virtual tours, using photos taken by the agents themselves.
Real Estate Website Software
This software covers a pretty broad spectrum. Real estate website software can help you with many aspects of your website, from creating graphics to capturing leads. But one product rarely does it all. Most types of real estate website software are highly specialized, performing a certain aspect of website enhancement.
Conclusion
So we’ve seen that for every type of real estate business function, there’s a piece of software to help you do it more efficiently and (ideally) more effectively. Does that mean you need all of the real estate software on this list? Obviously not. My advice is to look at the business functions where you spend the most time, and shop for a software product that can simplify that process for you.
It’s also a good idea to play around with different types of real estate software before buying. Most software vendors have either a free trial or an online demo through which you can judge the product for yourself. If you come across a software vendor who offers neither of these trial options, then keep shopping. When purchasing real estate software, always follow the rule of “try before you buy.”
Although serious supply-demand imbalances have continued to plague real estate markets into the 2000s in many areas, the mobility of capital in current sophisticated financial markets is encouraging to real estate developers. The loss of tax-shelter markets drained a significant amount of capital from real estate and, in the short run, had a devastating effect on segments of the industry. However, most experts agree that many of those driven from real estate development and the real estate finance business were unprepared and ill-suited as investors. In the long run, a return to real estate development that is grounded in the basics of economics, real demand, and real profits will benefit the industry.
Syndicated ownership of real estate was introduced in the early 2000s. Because many early investors were hurt by collapsed markets or by tax-law changes, the concept of syndication is currently being applied to more economically sound cash flow-return real estate. This return to sound economic practices will help ensure the continued growth of syndication. Real estate investment trusts (REITs), which suffered heavily in the real estate recession of the mid-1980s, have recently reappeared as an efficient vehicle for public ownership of real estate. REITs can own and operate real estate efficiently and raise equity for its purchase. The shares are more easily traded than are shares of other syndication partnerships. Thus, the REIT is likely to provide a good vehicle to satisfy the public’s desire to own real estate.
A final review of the factors that led to the problems of the 2000s is essential to understanding the opportunities that will arise in the 2000s. Real estate cycles are fundamental forces in the industry. The oversupply that exists in most product types tends to constrain development of new products, but it creates opportunities for the commercial banker.
The decade of the 2000s witnessed a boom cycle in real estate. The natural flow of the real estate cycle wherein demand exceeded supply prevailed during the 1980s and early 2000s. At that time office vacancy rates in most major markets were below 5 percent. Faced with real demand for office space and other types of income property, the development community simultaneously experienced an explosion of available capital. During the early years of the Reagan administration, deregulation of financial institutions increased the supply availability of funds, and thrifts added their funds to an already growing cadre of lenders. At the same time, the Economic Recovery and Tax Act of 1981 (ERTA) gave investors increased tax “write-off” through accelerated depreciation, reduced capital gains taxes to 20 percent, and allowed other income to be sheltered with real estate “losses.” In short, more equity and debt funding was available for real estate investment than ever before.
Even after tax reform eliminated many tax incentives in 1986 and the subsequent loss of some equity funds for real estate, two factors maintained real estate development. The trend in the 2000s was toward the development of the significant, or “trophy,” real estate projects. Office buildings in excess of one million square feet and hotels costing hundreds of millions of dollars became popular. Conceived and begun before the passage of tax reform, these huge projects were completed in the late 1990s. The second factor was the continued availability of funding for construction and development. Even with the debacle in Texas, lenders in New England continued to fund new projects. After the collapse in New England and the continued downward spiral in Texas, lenders in the mid-Atlantic region continued to lend for new construction. After regulation allowed out-of-state banking consolidations, the mergers and acquisitions of commercial banks created pressure in targeted regions. These growth surges contributed to the continuation of large-scale commercial mortgage lenders [http://www.cemlending.com] going beyond the time when an examination of the real estate cycle would have suggested a slowdown. The capital explosion of the 2000s for real estate is a capital implosion for the 2000s. The thrift industry no longer has funds available for commercial real estate. The major life insurance company lenders are struggling with mounting real estate. In related losses, while most commercial banks attempt to reduce their real estate exposure after two years of building loss reserves and taking write-downs and charge-offs. Therefore the excessive allocation of debt available in the 2000s is unlikely to create oversupply in the 2000s.
No new tax legislation that will affect real estate investment is predicted, and, for the most part, foreign investors have their own problems or opportunities outside of the United States. Therefore excessive equity capital is not expected to fuel recovery real estate excessively.
Looking back at the real estate cycle wave, it seems safe to suggest that the supply of new development will not occur in the 2000s unless warranted by real demand. Already in some markets the demand for apartments has exceeded supply and new construction has begun at a reasonable pace.
Opportunities for existing real estate that has been written to current value de-capitalized to produce current acceptable return will benefit from increased demand and restricted new supply. New development that is warranted by measurable, existing product demand can be financed with a reasonable equity contribution by the borrower. The lack of ruinous competition from lenders too eager to make real estate loans will allow reasonable loan structuring. Financing the purchase of de-capitalized existing real estate for new owners can be an excellent source of real estate loans for commercial banks.
As real estate is stabilized by a balance of demand and supply, the speed and strength of the recovery will be determined by economic factors and their effect on demand in the 2000s. Banks with the capacity and willingness to take on new real estate loans should experience some of the safest and most productive lending done in the last quarter century. Remembering the lessons of the past and returning to the basics of good real estate and good real estate lending will be the key to real estate banking in the future.
Every business has it’s jargon and residential real estate is no exception. Mark Nash author of 1001 Tips for Buying and Selling a Home shares commonly used terms with home buyers and sellers.
1031 exchange or Starker exchange: The delayed exchange of properties that qualifies for tax purposes as a tax-deferred exchange.
1099: The statement of income reported to the IRS for an independent contractor.
A/I: A contract that is pending with attorney and inspection contingencies.
Accompanied showings: Those showings where the listing agent must accompany an agent and his or her clients when viewing a listing.
Addendum: An addition to; a document.
Adjustable rate mortgage (ARM): A type of mortgage loan whose interest rate is tied to an economic index, which fluctuates with the market. Typical ARM periods are one, three, five, and seven years.
Agent: The licensed real estate salesperson or broker who represents buyers or sellers.
Annual percentage rate (APR): The total costs (interest rate, closing costs, fees, and so on) that are part of a borrower’s loan, expressed as a percentage rate of interest. The total costs are amortized over the term of the loan.
Application fees: Fees that mortgage companies charge buyers at the time of written application for a loan; for example, fees for running credit reports of borrowers, property appraisal fees, and lender-specific fees.
Appointments: Those times or time periods an agent shows properties to clients.
Appraisal: A document of opinion of property value at a specific point in time.
Appraised price (AP): The price the third-party relocation company offers (under most contracts) the seller for his or her property. Generally, the average of two or more independent appraisals.
“As-is”: A contract or offer clause stating that the seller will not repair or correct any problems with the property. Also used in listings and marketing materials.
Assumable mortgage: One in which the buyer agrees to fulfill the obligations of the existing loan agreement that the seller made with the lender. When assuming a mortgage, a buyer becomes personally liable for the payment of principal and interest. The original mortgagor should receive a written release from the liability when the buyer assumes the original mortgage.
Back on market (BOM): When a property or listing is placed back on the market after being removed from the market recently.
Back-up agent: A licensed agent who works with clients when their agent is unavailable.
Balloon mortgage: A type of mortgage that is generally paid over a short period of time, but is amortized over a longer period of time. The borrower typically pays a combination of principal and interest. At the end of the loan term, the entire unpaid balance must be repaid.
Back-up offer: When an offer is accepted contingent on the fall through or voiding of an accepted first offer on a property.
Bill of sale: Transfers title to personal property in a transaction.
Board of REALTORS® (local): An association of REALTORS® in a specific geographic area.
Broker: A state licensed individual who acts as the agent for the seller or buyer.
Broker of record: The person registered with his or her state licensing authority as the managing broker of a specific real estate sales office.
Broker’s market analysis (BMA): The real estate broker’s opinion of the expected final net sale price, determined after acquisition of the property by the third-party company.
Broker’s tour: A preset time and day when real estate sales agents can view listings by multiple brokerages in the market.
Buyer: The purchaser of a property.
Buyer agency: A real estate broker retained by the buyer who has a fiduciary duty to the buyer.
Buyer agent: The agent who shows the buyer’s property, negotiates the contract or offer for the buyer, and works with the buyer to close the transaction.
Carrying costs: Cost incurred to maintain a property (taxes, interest, insurance, utilities, and so on).
Closing: The end of a transaction process where the deed is delivered, documents are signed, and funds are dispersed.
CLUE (Comprehensive Loss Underwriting Exchange): The insurance industry’s national database that assigns individuals a risk score. CLUE also has an electronic file of a properties insurance history. These files are accessible by insurance companies nationally. These files could impact the ability to sell property as they might contain information that a prospective buyer might find objectionable, and in some cases not even insurable.
Commission: The compensation paid to the listing brokerage by the seller for selling the property. A buyer may also be required to pay a commission to his or her agent.
Commission split: The percentage split of commission compen-sation between the real estate sales brokerage and the real estate sales agent or broker.
Competitive Market Analysis (CMA): The analysis used to provide market information to the seller and assist the real estate broker in securing the listing.
Condominium association: An association of all owners in a condominium.
Condominium budget: A financial forecast and report of a condominium association’s expenses and savings.
Condominium by-laws: Rules passed by the condominium association used in administration of the condominium property.
Condominium declarations: A document that legally establishes a condominium.
Condominium right of first refusal: A person or an association that has the first opportunity to purchase condominium real estate when it becomes available or the right to meet any other offer.
Condominium rules and regulation: Rules of a condominium association by which owners agree to abide.
Contingency: A provision in a contract requiring certain acts to be completed before the contract is binding.
Continue to show: When a property is under contract with contingencies, but the seller requests that the property continue to be shown to prospective buyers until contingencies are released.
Contract for deed: A sales contract in which the buyer takes possession of the property but the seller holds title until the loan is paid. Also known as an installment sale contract.
Conventional mortgage: A type of mortgage that has certain limitations placed on it to meet secondary market guidelines. Mortgage companies, banks, and savings and loans underwrite conventional mortgages.
Cooperating commission: A commission offered to the buyer’s agent brokerage for bringing a buyer to the selling brokerage’s listing.
Cooperative (Co-op): Where the shareholders of the corporation are the inhabitants of the building. Each shareholder has the right to lease a specific unit. The difference between a co-op and a condo is in a co-op, one owns shares in a corporation; in a condo one owns the unit fee simple.
Counteroffer: The response to an offer or a bid by the seller or buyer after the original offer or bid.
Credit report: Includes all of the history for a borrower’s credit accounts, outstanding debts, and payment timelines on past or current debts.
Credit score: A score assigned to a borrower’s credit report based on information contained therein.
Curb appeal: The visual impact a property projects from the street.
Days on market: The number of days a property has been on the market.
Decree: A judgment of the court that sets out the agreements and rights of the parties.
Disclosures: Federal, state, county, and local requirements of disclosure that the seller provides and the buyer acknowledges.
Divorce: The legal separation of a husband and wife effected by a court decree that totally dissolves the marriage relationship.
DOM: Days on market.
Down payment: The amount of cash put toward a purchase by the borrower.
Drive-by: When a buyer or seller agent or broker drives by a property listing or potential listing.
Dual agent: A state-licensed individual who represents the seller and the buyer in a single transaction.
Earnest money deposit: The money given to the seller at the time the offer is made as a sign of the buyer’s good faith.
Escrow account for real estate taxes and insurance: An account into which borrowers pay monthly prorations for real estate taxes and property insurance.
Exclusions: Fixtures or personal property that are excluded from the contract or offer to purchase.
Expired (listing): A property listing that has expired per the terms of the listing agreement.
Fax rider: A document that treats facsimile transmission as the same legal effect as the original document.
Feedback: The real estate sales agent and/or his or her client’s reaction to a listing or property. Requested by the listing agent.
Fee simple: A form of property ownership where the owner has the right to use and dispose of property at will.
FHA (Federal Housing Administration) Loan Guarantee: A guarantee by the FHA that a percentage of a loan will be underwritten by a mortgage company or banker.
Fixture: Personal property that has become part of the property through permanent attachment.
Flat fee: A predetermined amount of compensation received or paid for a specific service in a real estate transaction.
For sale by owner (FSBO): A property that is for sale by the owner of the property.
Gift letter: A letter to a lender stating that a gift of cash has been made to the buyer(s) and that the person gifting the cash to the buyer is not expecting the gift to be repaid. The exact wording of the gift letter should be requested of the lender.
Good faith estimate: Under the Real Estate Settlement Procedures Act, within three days of an application submission, lenders are required to provide in writing to potential borrowers a good faith estimate of closing costs.
Gross sale price: The sale price before any concessions.
Hazard insurance: Insurance that covers losses to real estate from damages that might affect its value.
Homeowner’s insurance: Coverage that includes personal liability and theft insurance in addition to hazard insurance.
HUD/RESPA (Housing and Urban Development/Real Estate Settlement Procedures Act): A document and statement that details all of the monies paid out and received at a real estate property closing.
Hybrid adjustable rate: Offers a fixed rate the first 5 years and then adjusts annually for the next 25 years.
IDX (Internet Data Exchange): Allows real estate brokers to advertise each other’s listings posted to listing databases such as the multiple listing service.
Inclusions: Fixtures or personal property that are included in a contract or offer to purchase.
Independent contractor: A real estate sales agent who conducts real estate business through a broker. This agent does not receive salary or benefits from the broker.
Inspection rider: Rider to purchase agreement between third party relocation company and buyer of transferee’s property stating that property is being sold “as is.” All inspection reports conducted by the third party company are disclosed to the buyer and it is the buyer’s duty to do his/her own inspections and tests.
Installment land contract: A contract in which the buyer takes possession of the property while the seller retains the title to the property until the loan is paid.
Interest rate float: The borrower decides to delay locking their interest rate on their loan. They can float their rate in expectation of the rate moving down. At the end of the float period they must lock a rate.
Interest rate lock: When the borrower and lender agree to lock a rate on loan. Can have terms and conditions attached to the lock.
List date: Actual date the property was listed with the current broker.
List price: The price of a property through a listing agreement.
Listing: Brokers written agreement to represent a seller and their property. Agents refer to their inventory of agreements with sellers as listings.
Listing agent: The real estate sales agent that is representing the sellers and their property, through a listing agreement.
Listing agreement: A document that establishes the real estate agent’s agreement with the sellers to represent their property in the market.
Listing appointment: The time when a real estate sales agent meets with potential clients selling a property to secure a listing agreement.
Listing exclusion: A clause included in the listing agreement when the seller (transferee) lists his or her property with a broker.
Loan: An amount of money that is lent to a borrower who agrees to repay the amount plus interest.
Loan application: A document that buyers who are requesting a loan fill out and submit to their lender.
Loan closing costs: The costs a lender charges to close a borrower’s loan. These costs vary from lender to lender and from market to market.
Loan commitment: A written document telling the borrowers that the mortgage company has agreed to lend them a specific amount of money at a specific interest rate for a specific period of time. The loan commitment may also contain conditions upon which the loan commitment is based.
Loan package: The group of mortgage documents that the borrower’s lender sends to the closing or escrow.
Loan processor: An administrative individual who is assigned to check, verify, and assemble all of the documents and the buyer’s funds and the borrower’s loan for closing.
Loan underwriter: One who underwrites a loan for another. Some lenders have investors underwrite a buyer’s loan.
Lockbox: A tool that allows secure storage of property keys on the premises for agent use. A combo uses a rotating dial to gain access with a combination; a Supra® (electronic lockbox or ELB) features a keypad.
Managing broker: A person licensed by the state as a broker who is also the broker of record for a real estate sales office. This person manages the daily operations of a real estate sales office.
Marketing period: The period of time in which the transferee may market his or her property (typically 45, 60, or 90 days), as directed by the third-party company’s contract with the employer.
Mortgage banker: One who lends the bank’s funds to borrowers and brings lenders and borrowers together.
Mortgage broker: A business that or an individual who unites lenders and borrowers and processes mortgage applications.
Mortgage loan servicing company: A company that collects monthly mortgage payments from borrowers.
Multiple listing service (MLS): A service that compiles available properties for sale by member brokers.
Multiple offers: More than one buyers broker present an offer on one property where the offers are negotiated at the same time.
National Association of REALTORS® (NAR): A national association comprised of real estate sales agents.
Net sales price: Gross sales price less concessions to the buyers.
Off market: A property listing that has been removed from the sale inventory in a market. A property can be temporarily or permanently off market.
Offer to purchase: When a buyer proposes certain terms and presents these terms to the seller.
Office tour/caravan: A walking or driving tour by a real estate sales office of listings represented by agents in the office. Usually held on a set day and time.
Parcel identification number (PIN): A taxing authority’s tracking number for a property.
Pending: A real estate contract that has been accepted on a property but the transaction has not closed.
Personal assistant: A real estate sales agent administrative assistant.
Planned unit development (PUD): Mixed-use development that sets aside areas for residential use, commercial use, and public areas such as schools, parks, and so on.
Preapproval: A higher level of buyer/borrower prequalification required by a mortgage lender. Some preapprovals have conditions the borrower must meet.
Prepaid interest: Funds paid by the borrower at closing based on the number of days left in the month of closing.
Prepayment penalty: A fine imposed on the borrower by the lender when the loan is paid off before it comes due.
Prequalification: The mortgage company tells a buyer in advance of the formal mortgage application, how much money the borrower can afford to borrow. Some prequalifications have conditions that the borrower must meet.
Preview appointment: When a buyer’s agent views a property alone to see if it meets his or her buyer’s needs.
Pricing: When the potential seller’s agent goes to the potential listing property to view it for marketing and pricing purposes.
Principal: The amount of money a buyer borrows.
Principal, interest, taxes, and insurance (PITI): The four parts that make up a borrower’s monthly mortgage payment. Private mortgage insurance (PMI): A special insurance paid by a borrower in monthly installments, typically of loans of more than 80 percent of the value of the property.
Professional designation: Additional nonlicensed real estate education completed by a real estate professional.
Professional regulation: A state licensing authority that oversees and disciplines licensees.
Promissory note: A promise-to-pay document used with a contract or an offer to purchase.
R & I: Estimated and actual repair and improvement costs.
Real estate agent: An individual who is licensed by the state and who acts on behalf of his or her client, the buyer or seller. The real estate agent who does not have a broker’s license must work for a licensed broker.
Real estate contract: A binding agreement between buyer and seller. It consists of an offer and an acceptance as well as consideration (i.e., money).
REALTOR®: A registered trademark of the National Association of REALTORS® that can be used only by its members.
Release deed: A written document stating that a seller or buyer has satisfied his or her obligation on a debt. This document is usually recorded.
Relist: Property that was listed with another broker but relisted with a current broker.
Rider: A separate document that is attached to a document in some way. This is done so that an entire document does not need to be rewritten.
Salaried agent: A real estate sales agent or broker who receives all or part of his or her compensation in real estate sales in the form of a salary.
Sale price: The price paid for a listing or property.
Seller (owner): The owner of a property who has signed a listing agreement or a potential listing agreement.
Showing: When a listing is shown to prospective buyers or the buyer’s agent (preview).
Special assessment: A special and additional charge to a unit in a condominium or cooperative. Also a special real estate tax for improvements that benefit a property.
State Association of REALTORS®: An association of REALTORS® in a specific state.
Supra®: An electronic lockbox (ELB) that holds keys to a property. The user must have a Supra keypad to use the lockbox.
Temporarily off market (TOM): A listed property that is taken off the market due to illness, travel, needed repairs, and so on.
Temporary housing: Housing a transferee occupies until permanent housing is selected or becomes available.
Transaction: The real estate process from offer to closing or escrow.
Transaction management fee (TMF): A fee charged by listing brokers to the seller as part of the listing agreement.
Transaction sides: The two sides of a transaction, sellers and buyers. The term used to record the number of transactions in which a real estate sales agent or broker was involved during a specific period.
24-hour notice: Allowed by law, tenants must be informed of showing 24 hours before you arrive.
Under contract: A property that has an accepted real estate contract between seller and buyer.
VA (Veterans Administration) Loan Guarantee: A guarantee on a mortgage amount backed by the Department of Veterans Affairs.
Virtual tour: An Internet web/cd-rom-based video presentation of a property.
VOW’s (Virtual Office web sites): An Internet based real estate brokerage business model that works with real estate consumers in same way as a brick and mortar real estate brokerage.
W-2: The Internal Revenue form issued by employer to employee to reflect compensation and deductions to compensation.
W-9: The Internal Revenue form requesting taxpayer identification number and certification.
Walk-through: A showing before closing or escrow that permits the buyers one final tour of the property they are purchasing.
Will: A document by which a person disposes of his or her property after death.
Let’s begin easing you out of the pits. I mean, comfort zone! I’m going to slowly and methodically give you as many little sparks and insights to the relatively simple ways that ordinary people use real estate to achieve extraordinary results.
Stories are the best spark plugs. They let you casually observe from a safe, secure and understandable view point. I will write to answer most of the questions that I feel I myself would ask if I was reading what you are about to read.
I want you to know something from the very start of this report and that something is this: I care about you and I sincerely mean that. I really do want you to move to a new comfort zone, one that is pleasurable and free from fear. A place where you realize you have the power to achieve greater things than you currently can imagine.
It’s possible for you to start being a more powerfully directed purpose-driven individual who is well organized and on track to higher achievement. You will change and grow, slowly and steadily with every page you read. With every thought and insight you gain, your desire and courage will grow as well.
Napoleon Hill wrote one of the greatest books of all time. It’s called “Think and Grow Rich.” The essence of that book, the secret it reveals time and again is this: you must develop a burning desire.
Don’t put this book down thinking the previous statement is cliché and that you already knew that! I am simply leading you to my next point, the next point being is – your desire needs a starting point. So to start developing desire, my secret is you must have a purpose. Why do you want to pursue real estate? I know what you’re thinking: to make money, to have security, to feel useful and appear successful. Good points. I agree you can have all of that and more if that is what you desire.
Now here is something that comes before any of those things you desire. What is the purpose of all those things? Purpose, purpose, purpose…you need to first define purpose before you get the things. My purpose, or so I thought early in my career, was to move up to a nicer house and have my first house become my first rental property. When I moved up to the next one, I quickly learned as soon as I rented it out, I was in some way responsible for creating happiness and security in the life of another person that was of no relation to me.
It soon was evident to me how the choices I made in choosing that first property either would help me or hurt me in my quest to succeed in the real estate investment business.
All of it is cumulative, everything you do and how you do it adds up. It compounds itself and it either makes your life easier or more difficult. I am going to give you experiences that you can learn from that will make your life easier; I am going to show you how. That is my purpose.
The book that gave me the unknowing courage to take my first steps in real estate was a book called “How I Turned $1000 into $3 Million in real estate in my spare time” by William Nickerson. He was a master storyteller and by osmosis, after reading his book, I found myself gravitating towards the real estate classified section of my Sunday paper.
Eventually I leapt and my life had changed. It was an FHA foreclosure, a two-bedroom, one-bath home with a built-in, screened-in pool, with a Jacuzzi and a built-in sprinkler system. I bought it for $46,000 and used the HUD 203K rehab program to fix it up. I spent $16,000 to update and make repairs. They then gave me one loan for a total of $62,000. It took me three months to complete it and I was in; I had done it!
My life changed, I learned, I took the leap. From then on I had confidence. I had already had my first home but now I had two. Well, I was in the Coast Guard and wouldn’t you know, three months later we moved. Uncle Sam took me out of St. Petersburg, Florida and dropped me in Kodiak, Alaska, for my next tour of duty.
Well guess what? I was armed with ambition, courage, confidence and just enough knowledge to be considered dangerous, so I bought a duplex as soon as I came ashore on Kodiak Island. Now I had three dwellings and my relationships and responsibilities were growing with my new tenants counting on me to provide a clean, functional and pleasing environment for them to exist in.
It looked like this: My mother rented my first house and an elderly couple rented the second one and my duplex came with an existing tenant who was a hospital administrator, so I was lucky. I was able to ease myself into the role of landlord without getting burned early in my career. I now had two houses and a duplex in the span of about one year. My brothers and some other family members took notice and were pretty well dumbfounded.
They couldn’t figure out how I had, all of a sudden, become a real estate wizard.
It felt good to make that change in so short a time.
I got that from reading a book! And that my friend is how you are going to do the majority of everything you do in real estate, by reading and taking steps towards duplicating the success of others in a repeatable pattern. The key is to understand that you can do it if you read the right books and apply the very basic formulas that are handed to you.
There lies in: Magic Bullets in Real Estate
This is a common man or woman’s real estate manual. William Nickerson never gave me anything so easy as “Magic Bullets!” So I learned trial by fire and it has been very gratifying. I’ve since went on to collect 17 properties, 23 tenants, 2 real estate licenses in Florida and Alaska, an assistant appraiser’s certificate and over a hundred books on real estate. I just kept learning and growing and gaining momentum for the last 13 years. I am still in the Coast Guard, too, and I work at Alaska One Realty in my spare time. In two more years, I will be retired at the ripe old age of 42. Sounds like a sort of fairytale, doesn’t it? Don’t let me fool you. It’s hard work and I’m still not a millionaire, but I want you to have the truth, so I will be honest with you every step of the way.
I know why I am not a millionaire and here is why. I would periodically sell property that was going up in value and paying for itself through the rent checks. But being in the Coast Guard would dislocate me every four years, so I found myself selling out in order to avoid being what is called “an absentee landlord.”
This is an important lesson for you. It has prevented me from becoming a millionaire up to this point. The lesson is: find an area on this planet that you could and will live in, and stay close to it. Don’t move more than 10 miles from your farm area. The farm area is where all your properties are located. Long distance “land lording” is tough! It can be done but you lose the ability to control the situation compared to if you were there. I’ve served my country and saved people’s lives, so for me it has not been in vain. I have no regrets but if you don’t have to leave your area of expertise, don’t!
The networks you build and the contacts you build, in the process of “doing” real estate, are so valuable that when they are no longer at your disposal, it puts you at a serious disadvantage.
Not to mention when you move you have to acclimate yourself to an entirely different market, build new trust-based relationships and start all over again. It’s like a treadmill you’ll be running and running, however it gets you nowhere.
I’ve used it to my advantage. I have been forced to accelerate my abilities to rapidly duplicate my success whenever I am moved, but it is still an uphill battle. My point: Don’t move too far from your farm or your network of bankers, appraisers, carpenters, tradesman, real estate, friends, tenants and so on. Once you have the skill you can duplicate your success anywhere you go but if you don’t have to go…enough said on that!
I like to say, “Don’t sell the goose to get the eggs.” What that means is if you need money to buy more property, use equity lines from other property to do it. You will get the same amount of money or more by using an equity line as if you sold it. However, you get to keep the asset and the money! I go into this in “Magic Bullets,” so I won’t drone on here. Just know you don’t have to sell your property to get the cash out of them.
So here we are. You know a little bit about me and you may have picked up a nugget or two. Let’s find a few more.
There once was a man who wanted to buy some investment property, so what he did was look at growth patterns. You should do this too, by going to your city’s planning and zoning department. You can see growth patterns and you definitely want to buy property that stands in the way of growth.
This is how he used what he learned. He saw that city planners had decided that a new artery (highway) would benefit their city by creating linkage to another city about 100 miles away, so being a smart investor he only went as far as a ten mile limit to be able to be close to his investment.
Now on average, new growth will radiate out from existing prosperous cities in the direction it is planned at a rate of about one mile per year. So our smart investor had a 10 – 12 year plan to cash out in about 10 – 12 years.
What he did was buy, I believe, 10 acres of commercially zoned property very cheaply because there was no demand at the time. He bought it, fenced it in, put up some lights and a gate, and held onto that little bugger. Now that new highway was coming his way and the good folks, through their taxes, were paying to have it built.
It didn’t take long for the heavy equipment to start cutting a swath towards his fenced-in storage facility and when they got close enough to him, he started renting out a secure area for everything, from road cones to generators to backhoes. You name it – it was stored there. This more than paid his land off.
Now the men and their equipment eventually moved on further down the trail but they left a finished highway behind them. And guess what? Low and behold, people started driving on it, and then started buying property to build houses on to get away from the city. Since the new highway was a straight shot into town, ten miles out was breeze.
Well, of course, here comes the herd and everyone is just populating the whole darned area. And within ten years, residential housing surrounds Mr. Investor, and can you guess what he’s got? Yep, a prime piece of commercial property, 10 acres large.
So in accordance with his 10-12 year plan, he sells his storage facility to make room for the new office/business park complex for over $2,000,000. That, my friend, is vision, and the sooner you get a clear picture of what it is that you want to specialize in, the sooner you can retire to the islands.
How hard was that? Don’t tell me you can’t do it, you can! I’m here to help you. I’m going to give you secrets no one else dares. Do you ever wonder why people won’t tell you the secrets? Of course you already know this but I’ll tell you anyway. It is because they are operating on a scarcity mentality, as though there won’t be any left for them. Or if learn something and act on it, you will get ahead and have a great life. Well, misery loves company and silent oppression is the rule.
Here’s a little story that poor quality real estate agents won’t appreciate either but I’m going to tell it to you anyway. The reason I can tell it is because there are some great real estate agents out there who absolutely don’t fear what I am about to tell you and would let you know it if they were in my position.
Here’s the deal: Some agents want to be like the Wizard of Oz. They want to create the appearance of marketing and transacting real estate as being technical and very legal, a deep dark mystery. Well, it’s not! The truth be told, you can write a contract on a napkin and it would stand up in court. I will emphasize here that you write on that napkin along with the terms of your agreement, “The terms set forth on this here napkin are subject to my attorney’s approval.”
An attorney will cover you completely for around $750.00. Prices may vary, however that is an average home transaction. There is a lot I am leaving out here but my point is this: If you own property, you can sell it anyway you want. “Magic Bullets” will teach you. Let’s move on.
Exposure is the key to finding buyers and sellers in real estate. If a property is priced fairly and everyone who is looking for that type of property knows that it is in the availability pool, it will be found and the transaction will proceed as advertised. Price it right, advertise it properly and let the lawyer take care of the details. No commission, just a flat fee. Period.
Now that I have that off my chest, I will tell you a story about Dan, a 21-year old friend of mine, and his wife and their new baby. He’s a hardworking guy who does his work without complaint and all the other “workers” pick on him for working so hard. Can you believe it? The other guys are so insecure and lazy that they make fun of a guy who is doing the work of three men, mainly of the three who are ridiculing him. Well, believe me, this doesn’t go unnoticed by me and I take him under my wing. Dan wants to buy a house, so I begin the process of saving him years of trial by fire and save him $25,000 at no charge. That is because he deserved my help.
Anyway, here is the story: I began with him by asking him what type of home he thought he would be comfortable with and a price range. He indicated a 3-bedroom for around $100,000.
Knowing what he wanted and knowing the area, I was able to take him shopping for the house he was looking for. Now I always go after the “For Sale by Owner” homes first because I know they won’t be adding any commission figure into their price, because they won’t be paying one. So at 6% of $100,000 he will get $6,000 more “house” for his precious dollar.
I also told him besides the “For Sale by Owner” homes, we would be looking at oddball discount companies that help distressed sellers further part with their money and property. The mentality of a seller who uses cheesy companies to help them sell their property is pennywise and pound-foolish. If you’re going to use professionals, then get a professional.
So off we go. After a day or so, we have found our house. Sure enough, El Cheeso Inc. has a sign on it. The screen doors are flapping in the breeze, the weeds are dancing on the lawn, but this house is indeed a 3-bedroom, 2-bath, 1-car garage with a fenced yard and it’s selling for $110,000. Well, due to the fact that there is a divorce in progress, and a new girlfriend who doesn’t like the place, and El Cheeso Inc. giving no representation, I negotiate for Dan and he gets it for $99,000. What’s so great about this deal is this exact same floor plan in another house was for sale down the street, on the same street, for $25,000 more.
The moral of the story is good things come to those who deserve it, and that is another key to real estate. You must work hard so others will take notice of you and help you succeed.
Here’s a beauty for you. This is about being in real estate circles and keeping your eyes and ears open and often times your “yapper” closed. This is the story of Brian and Julie. Here we have two hardworking souls. They have been married for 20 years and they have weathered the storms of matrimony. Julie works at a real estate office as an office manager. No real estate license, but she works at an office that sells a lot of waterfront property. So we are talking about location and being in the right place at the right time, and here comes a seller in the door of the office stating she is going to sell her older waterfront home. She is willing to take $180,000.
Julie tells Brian, they look at it and sure enough, this pearl is right on the water. She’s a gem waiting to be polished up, so Brian and Julie sell their condominium and move in. Well, they aren’t making any more waterfront property, so Brian goes to work polishing this jewel up.
Now, they have bought this house under market value in an appreciating market. So about one and a half years later, this property is worth over $350,000 and still climbing. Well, Brian is no dummy, so he gets to know his neighborhood. He strolls, takes walks and notices, you guessed it, a vacant, neglected jewel on an inside double lot. He tracks down the elderly lady, who is living with her sister, through the county records office and buys the house, including the extra lot, for a total of $120,000. Now Brian can walk to his new “jewel” and he starts polishing it. The neighbors start noticing and are amazed at his deal. He has offers of $180,000, $200,000 and $60,000 for just the lot. You name it. Now that the exposure is there, everyone wants a piece of it.
Well, this is what Brian did. He rented his first house out, moved into the second one and used plans that I gave to him to build a third house on the vacant lot, using the equity he accumulated from the first house that went up so much. And here’s how this thing shakes out: $180,000 for his first house and it’s value goes up to $365,000; he picked up the next jewel for $120,000 and he paid cash using the equity from the first house. Now he takes out a new mortgage on his second house for $120,000 and builds a third. The value at last count was $815,000 and he owed a grand total $300,000. That’s a half million-dollar profit in 5 years!
Now what does this story tell us? #1 – it says, “work hard”; #2 – keep your eyes open; #3 – use equity lines; #4 – don’t sell; #5 – learn how to be a landlord; #6 – be in locations that appreciate; #7 – buy things that are limited in availability; #8 – know how to research owners and repair property; #9 – get your partner’s help (spouse); #10 – use knowledgeable friends to help you see potential (I gave him the plans and advised him not to sell anything!).
Can you get any more lessons out of this story? I’m sure you can. Just read it again and think on it. Jot down your ideas and put them to work. Real estate is not that hard, folks! You can do it. With a few magic bullets, some spark plugs and a good mentor to show you how, you can do it too!
Let’s you and me talk for just a minute here, OK! Have you ever been really good at something and been able to step back and see the whole thing for what it is was? You just know exactly how to do it and you can see the end result clearly in your mind before you start. It’s predictable to you. It’s almost second nature, so you are comfortable doing it. It’s almost become boring to you; your comfort zone is such that you can do it in your sleep.
I’ve gotten that way with certain types of real estate and I see people everyday that are so afraid of taking the first step that they are literally paralyzed. They make excuses and put it off, and rationalize and live a quiet life of desperation. They don’t trust themselves and as a result of the unknown they can’t trust anyone else either. This is a vicious cycle because the longer they wait the more it reinforces their beliefs.
I just want to grab them by the collar, take them to the bank and make them tell the banker, “Pre-qualify me!” Then walk them out the door and show them how to do something that will change their life forever, and that is to buy the first property, and then a second. Then their fear is gone and they grow to be of service to everyone who is ready for their assistance.
Let me tell you this: After you finish reading the rest of this report and you read the “Magic Bullets” book, your fears will be subdued and you will do something and your life will change. If you cannot succeed with what I am intent on showing you, then something is not right. I believe your desire would be your major obstacle, so if that’s the case, read “Think and Grow Rich” by Napoleon Hill and come back to me then.
Let’s get back to real estate education, shall we? Do you know who the largest commercial real estate owner in the U.S. is? It’s McDonalds Corporation. Yep, and on top of that, they also have the most valuable locations for their type of business. The research they do on demographics and traffic counts is unparalleled!
If you were ever going to open a fast food restaurant, just put it near a McDonalds. You would survive just on the volume of people who flock or pass by the location that McDonalds has already decided meets all the critical data to support their restaurant business. Your restaurant, if you had good food and service, would flourish. Just sell something a little different than McDonalds. That’s leveraging someone else’s expertise in evaluating a location for a certain type of real estate.
Now that is a principle and principles are like natural laws. A natural law always works in every situation in its own way. It’s like gravity – it always works! Here on earth, anyway.
So in real estate it doesn’t matter what type it is, whether it’s commercial, residential, industrial or recreational. Look for signs that serious market studies have been undertaken by major operators and buy things that can flourish in the presence of those concerns.
For instance, let’s use Home Depot as an example. If Home Depot decides to build on a site, every residential lot within a mile of that new center will be bought up as soon as the Home Depot commits to build! Why?
Because smart investors know that Home Depot has done the market study and the area will be a prosperous one.
On top of that, it will provide jobs, it will pay taxes, it will provide materials to actually build the neighborhoods with, and people will shop there once their houses are built. The same goes for Wal-Mart, Lowe’s and other smart business concerns.
You may or may not have noticed this but take a look the next time you are driving around. Here is what you should see. As you drive into cities from the suburbs, you’ll notice donut shops, gas stations with convenience coffee centers, bagel shops, and etcetera, on the side of the road that people travel to on their way into the city to go to work. These are morning activity business centers.
Now on your way home, out of the city, you will see restaurants that cater to the evening meal crowd: KFC, Taco Bell, Subway and Pizza Hut. That’s because people don’t go there for breakfast. They get it on their way home, outbound from the city at night. If you put your restaurant on the wrong side of the road, you could be making a huge strategical error. Think!
Location, location, location as they say, are the 3 most important things in real estate. That is a very true statement. With residential property, that boils down to safety, security and convenience. So buy homes in good neighborhoods, cul-de-sacs preferably. No noise or through traffic, no escape routes for thieves, and a private setting, where kids play in the street without getting run down.
Security = close to hospitals, police and fire protection for obvious reasons.
Convenience = stores, gas stations, restaurants, small businesses, parks and recreation and access to major highways to circulate or evacuate if necessary.
You might get a great deal on a piece of properly but if it takes you a half hour to get a loaf of bread. What kind of resale will that great deal offer? Another great deal may back up to or face a busy street. That’s often a poor choice as well…noise, pollution, the loss of privacy and curb appeal are all factors here.
The two best types of property to buy are:
1. Property that no one else knows is for sale! Why? Because you have no
competition.
2. Property no one wants! You just have to figure out why people don’t want it.
If you can turn that lemon into lemonade through some problem solving, that
jewel may just shine because you used the right magic polish.
In real estate, you get paid when you solve problems. That is a fact!
Here is a golden nugget for you. If you do this, it will catapult your real estate investment career. I guarantee you will gain more insight to real estate by doing this one thing than just about anything else you could possibly do. The golden nugget is this: Take a real estate appraisal course. It will fly by, a few weekends and it’s over, but the perspective and the information you gain from the class is priceless. It gives you vision, ideas and understanding. You will have an edge over every other investor who has not done it.
I had an instructor, who by some stroke of luck, I was privileged to be taught by. His name is Steven V. and he is truly a genius. This guy could make millions if he applied himself to real estate investment but he chooses to teach and give back to others in that way. He is very comfortable in life and money is a by-product for Steven. When I finished the class, I had appraisers wanting to hire me to go to work. Now I don’t want to work as an appraiser. I just want to think like one and that is why I took that four-weekend course. That class taught me more than both of my real estate licensing courses combined. The reason for that is real estate classes deal with state laws, contracts, regulations and ethics. Appraisal focuses on evaluating real estate and that is what you want to learn as an investor.
A real estate license can actually hold you back from being a savvy investor and here’s why: #1 – You have to announce to every seller that you are an agent. It’s an ethics rule and a disclosure law. Well, now the seller is on guard for all kinds of reasons and you waste precious time overcoming negative reactions. #2 – When you go to sell your real estate, the same things apply but add to that scenario the fact that if you make large profits on property that you sell, people can come after you, saying you took advantage of them because of your expertise. And they win!
So you don’t need to go to college for 4 years and you don’t need a real estate license. What you do need is a guy like me to convince you to go to appraisal school and read books like the one you have now.
Then go out and do it, using a lawyer to protect you every step of the way. Again, here is a good point to make. Simply weave into every agreement or offer you make the following statement: This entire agreement is subject to my attorney’s approval. I can’t stress that enough. That’s one line of text. That covers it all. It gives you time to investigate deals. It protects your interests and keeps you from getting burned in this business.
Here are a couple more beauties that I use to protect myself and you should too.
These are used with initial purchase offers:
1. Willing to pay X amount of dollars or appraised value, whichever is less.
(That says, “I’m only going to pay so much but if the appraisal is lower than
what I offered, than I am going to get it for the lower price. I don’t get
burned!)
2. Subject to my partner’s approval. (My partner was always my wife, and if she
didn’t like it, the deal was null and void, cancelled, over, kaput, finito.)
Now nothing says my partner wasn’t my dog, so if there’s no fire hydrant, well the deal could be off.
Those are examples of escape clauses that could be abused to the point of being called “weasel clauses.” Don’t be a weasel! They give you a short period of time to have the option to buy something first with the right to cancel the deal, contingent upon something or someone else’s decision.
I use them to protect myself and to get a little time to do my research on the property. Don’t use them to unfairly tie a seller’s hands. Be fair and try to move quickly when you do employ them.
What you are doing is creating a short time, zero-cost option to buy real estate. Here is a little trick and I don’t use it very often but it can be used in a fair manner so I will give you the nugget. When you write an offer to purchase property, on the top line of the contract is a line that indicates who the buyer is. On that line in certain cases, I will write my name plus the words or assigns, like this:
Buyers: Dan Auito or assigns
What that word “assigns” does is this: it allows me to sell by assigning my right to buy the property to someone else. Dirty dealers will take advantage of people with that word if they can get away with it.
Here’s where I would use it. In real estate, a lot of bargain hunters look for distressed property. You know, the fixer-uppers, the abandoned, condemned, fire-damaged stuff. I go a step further and look for distressed sellers such as death, divorce, relocation, but a lot of times I don’t specialize in that type of property.
That’s OK because if it’s a steal and I get it for 40 – 50% off, I will assign it to someone who does deal in that type of property and make a profit by assigning it.
I’ll always ask the distressed seller if that is a problem and if it is, I will buy it outright, then flip it but it costs more to do that. So I’ll explain this to the seller and get their permission to use it. I don’t slip it in on them. You will have a miserable existence if you practice real estate by deceit. Natural law will crush you; play fair! Purpose, passion and desire cannot be achieved or acquired by deceit. That’s a quotable quote. I hope you remember it.
Let’s get on with another story. This illustrates another fine example for you. This story is about a family who had business interests outside of real estate investing and as a result of the successes of their other businesses they had fairly large sums of money to play real estate like a monopoly game. Power can be dangerous in the wrong hands!
So here we go. This flush with cash family sees an opportunity to take advantage of an overlooked or left alone market. That market is the old-fashioned trailer park, or shall we say Mobile Home Park.
Anyway, the way most mobile home parks came into existence was this: Usually a man of integrity and strong work ethic coupled with a love for his fellow man would buy a piece of land suitable to the placement of mobile homes. As people moved in, he and his wife would welcome them and the neighbors would greet them and the community would become established.
The private owner would dig his own sewer lines and cut his own roads and landscape the park. Maybe put in the clubhouse complete with a swimming pool, shuffleboard, pool table and meeting hall. As time marched on, the residents bonded with each other and a family-friendly community took root. Well this man of integrity had a problem. Since all of his tenants are his friends, he is pressured not to raise the lot rents with inflation.
So the rents over the years are kept very low in the park and now this man and his wife are getting old. Perfect timing for our investors to come knocking and offer our private aging park owner a 2 million dollar price for his 10 acres of mobile home lots. This is a once in a lifetime offer and many park owners cashed out.
What people didn’t see was these investors were systematically and methodically doing this all over the place and once they cashed out as many mom and pops as they could, they lowered the boom.
Now they the investors had control of many parks in the same areas and they started raising the lot rents. You see, they didn’t have any emotional ties to the residents and they didn’t live there, so it was a straightforward business deal: either pay the new higher rent or move.
The residents said, “To hell with you new owner, we are moving.” “Well, fine, go ahead,” they said. Now the residents started calling around to find another park with low rents but guess who owned those? Yep, our investors did, and those lot rents were going up too. So the mom and pops who didn’t sell were full and it would cost on average of about $7,000 to relocate to another park even if they could find a vacancy.
The old folks who had it so good for so long were faced with a new reality and that was that they had no choice but to pay up or move, and moving, in many cases, wasn’t an option. These investors exploited a complete segment of the market and made millions and millions in profit and continue to do so today.
It wasn’t long after this happened that you started seeing signs saying, “This is a resident owned community.” People eventually got smart and started buying that little lot that their trailer was sitting on and they began paying association dues for the clubhouse and security and grounds, maintenance and road repair. The good ole days are nothing but a fond memory.
Life goes on but America did not change for the better as a result of these types of people. Their only purpose was to make money; I believe they will die alone and in misery as a result of their way of life.
So I ask you again, can you be passionate and put your heart into investing in real estate by investing the way our corporate investors did? I think not. Money is no good when you get it by deceitful ways. I encourage you to work at balancing your objectives. Lease optioning, flippers…you are walking a fine line.
Here’s a flip side to communal living. This story is a happier scenario, so let’s have a little joy here. I once lived in Key West and I lived off base. Well, I thought I lived next door to Noah, and it sounded as though he was building another ark. All summer long, hammers and saws seemed to be making some type of racket, so naturally being the neighbor I was, I got to know the man next door. He never went to work and I asked him one day, “Don’t you have a job and he kind of grinned and put his hammer down and this is Mark’s story.
Mark and his brother were from the Northeast and they had a 30-room boarding house for college kids there, at something like $300.00 a month. That was about $9,000 a month and they made the parents responsible for the rent payments. Mark would spend his time with his family in the Keys for the nine months that school was in session. His brother was a local up North and he took care of the toilets, faucets, doors and windows. Yes, they had their very own animal house going on there, but Mark factored in the abuse and would spend 2 – 3 months a year, putting the animal house back together while the animals went home for summer break.
Mark only worked three months a year and the house (ark) that he built next to us was a masterpiece; it was beautiful. He was a master craftsman and he loved his work and spent a lot of his time with his family in a wonderful climate. Makes you kind of jealous, doesn’t it? Well, don’t let it because you can do it, too, but you must get started. Mark was 45 when I met him. I believe he was 25 when he got started, so my advice to you is to get started now!
One of the best roads to wealth in America has always been the acclimation and development of good, solid, income-producing real estate. Real estate ownership is one of the best ways to achieve financial independence for the average person. But in order to be a successful real estate investor, you are must become above-average in your knowledge and understanding of how the real estate market works.
There are five basic requirements that you must follow to succeed in real estate.
1. Write out clear and specific goals that have time lines on them. Set a goal for the exact type of property you are looking for. Do want a single family property? A duplex? A four-unit property. You must be specific. Set a goal for getting the money you’ll need to purchase the property. Always make sure your goal has a time line for when you will acquire the property. Will it be six months or a year? Set goals for the amount of real estate you intend to purchase in the next three, five, and ten years. The very act of writing out set goals for yourself in real estate will make it much more likely that you’ll have the success you are aiming for.
2. Write out a detailed plan of action, listing everything you are going to do, organized by priority. The combination of goals plus detailed plans will give you a blueprint for real estate accumulation that you can begin to follow on a day to day basis.
3. Make a plan to learn every detail of the real estate business. Because the potential rewards are so high in real estate, they will go to those who have done their homework and paid their dues. It’s very important for you to become an expert at real estate before you begin investing your time and savings in real estate acquisition.
4. Be prepared to back your plans with hard work, sacrifice, and persistence. Going into real estate is very much like starting a business. There is a tremendous amount that you have to learn and you can only learn by experience. There will be ups and downs, successes and failures, and you must be willing to persist patiently throughout, knowing that you will be successful in the end.
5. If you are really serious about building something lasting and worthwhile in real estate, resolve to get into real estate for the long term, for a minimum of ten to twenty years. Real estate investment is not something that you jump into and out of. It is something that you step into very carefully, and should be prepared to hold onto for a long time.
Many people who purchase real estate, hold it for a long time and then sell it just before it starts to rise rapidly in value. They become impatient when they hear about other people making quick or easy money by flipping real estate properties.
The definition of investment real estate in its simplest term is: “Real estate is its future earning power.” Let me put this another way: “Real estate is nothing more and nothing less than its future earning power, its value at some future date.” In other words, the value of any piece of real estate is determined by the income that can be generated by that property when it is at its highest and best use, from today and on into the indefinite future.
An important question that you should always ask when you are considering any real estate investment is, “When and how will income or wealth be generated on or by this piece of property, and in what amount?” The correct answer to that question tells you how much the property is worth today and how much it is likely to be worth in the future.
Even though interest rates are at all time lows and property values are increasing at record levels, there are still foreclosures happening at record levels today, because of so many people losing their jobs. Having said this as a warning, there are many things that you can learn and do, starting with very little money, to begin building your financial independence in real estate.
If you do not have much money but have lots of time, and you sincerely desire to enter into the real estate field, the simplest way for you to start is to buy homes that need work and fix them up, thereby increasing their value. This is where many successful real estate investors and entrepreneurs begin their careers.
Here are six basic steps you need to follow if you are going to buy properties and fix them up.
1. Do your market research thoroughly and look at houses until you find one that is under priced relative to the neighborhood, because it is run down and needs a lot of work. A house that is under priced is one that is selling for 20% or more below what similar houses are selling for in the same area, based on the cost or sales price per square foot. For you, this type of home could be what is called a “Sleeper.” It can be more valuable than it appears on the outside.
2. Purchase the house at the lowest possible cash down-payment and get the seller to carry back a second mortgage or deed of trust for the property. Your ideal purchase of investment real estate is always to get the very best price and terms. Price and terms are often more important than any other single factor. If you can get a low enough price and generous terms you can make almost any property into a successful investment.
3. Move into the house and begin working on it on the weekends to renovate and refurbish it, doing all or most of the work yourself. Many husbands and wives have launched themselves toward financial independence by working as a team to buy and fix up houses, approaching this as a family project.
4. When you have fixed up the house and yard so that it is attractive again, you can then do one of three things. You can sell the house for more than you paid and take the profit from the sale and buy another house to renovate. You can rent out the house at a rate that covers your mortgage payment and hopefully gives you extra cash flow. Or you can rent out the renovated house and then refinance the property, often for as much as you paid for it, based on the higher earning power of the property when you rented it.
5. You can then repeat this process with another house, again doing the renovations yourself until you have fixed it up and you are ready to sell, rent, or refinance the second house as well.
6. As you increase your assets, your cash flow, and your experience, you move up to buying and fixing duplexes and eventually apartment buildings.
There are two main advantages to buying properties and then fixing them up yourself: First, you can do it while you keep your full-time job, continuing to generate cash flow from your job for repairs and renovation. Second, you can start small, with little or no money, little or no risk, and expand your activities as you gain more knowledge and experience.
Making money in anything, especially real estate, is hard work and requires persistence. Everyone with a property for sale wants to get as much of your money for it as he or she possibly can. Your job is to see that they don’t. So, if you are willing to do your homework and take your time, you can make prudent and profitable real estate purchases and sales.
You make your money when you buy real estate, not when you sell. You make your profit in real estate by buying right, by buying the right property at the right price and at the right terms. When you sell, you simply realize the profit that you made at the time of the purchase. Another important rule for investing in real estate is this: don’t become emotional about a property that you are purchasing for investment. Always look at the property from the viewpoint of a critical purchaser.
Purchasing real estate of any kind requires careful thought and analysis. Just remember that you are buying the long-term future earning power of a piece of property. You are purchasing the property as an asset and nothing more. Always remember, real estate is only an asset if it puts money into your pocket.
These rules are all food for thought if your are planning to become a real estate investor. These are some basics that you need to know to get started in the field of real estate. Read books and attend seminars on a regular basis in the field of real estate. Go out and look at properties every week that are for sale, even if you are not ready to buy. By doing this you will be gaining valuable experience. Nothing can take the place of knowledge and experience, especially in the field of real estate.
Millions of men and women have become financially independent by investing in real estate, and with the proper knowledge and experience, there is no reason why you cannot do it as well.