Real Estate Course

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Real Estate Course: Lesson One

Step #1 - Deal Only In A Specific Investment Area

   You don't have to own a lot of real estate to become wealthy and retire. In most areas, six properties will provide enough income to comfortably support you and your family. With the exception of your vacation home, it makes management sense to keep your properties concentrated in a specific investment area with a population of 25,000. A specific investment area of 25,000 people will give you enough owners and variety of properties to make this system work.


   If you live in the city, 25,000 people may be just one section of the city. If you live in the country, 25,000 people may encompass several towns. From a management perspective, you do not want your investment area to be more than a fifteen or twenty minute drive from your home.

   The best-case scenario is to build your investment portfolio within one government district; one city or one town. Then you will be dealing with one building inspector, one housing authority, one board of appeals, one zoning board and a limited number of banks and realtors. These boards and organizations and companies and institutions are all made up of people whom you can befriend and who can significantly aid or hinder your investment plans.

   Master's Tip: In the real world, a contribution to political campaigns buys access. Example. Let's say you wish to convert a large house into apartments. The value of that property may differ significantly based on the number of units that you are permitted to create. In other words, permission to create six units may be worth a lot more than permission to create two units.

   If you were only buying one house, you may not care about the building inspector or the zoning board. But, if you own six properties or ten properties, you find it very useful to know the personalities and idiosyncrasies of your partners in government. If you are wheeling and dealing in real estate, buying and selling on a regular basis, you will definitely need to know your local government cast of characters. Friends in government are an important asset to an ambitious businessperson and can play a key role in your success.



   However, perhaps the most important reason to deal in a single specialized investment area is valuation. Real estate values can change from one section of town to another; from one street to another; from one end of a street to another. Being able to write a certain zip code on your letters or being able to send your children to a certain elementary school or being able to walk to public transportation can be worth tens of thousands from one similar property in one neighborhood to the next. Your objective will be to use your specialized knowledge to make tens of thousands of dollars. The smaller your investment area, the easier your research task will be and the greater likelihood for your success.



Research Is Your Edge

   Unfortunately, you cannot rely on the advice and expertise of most real estate agents on the subject of value. Most real estate agents try to work an area much larger than your investment area. They will NOT know the small ins and outs, the details that may result in large profits for you. On the North side of town, an extra 5,000 square feet of land or a garage might add $25,000 in value when compared with the South side of town. You have to know these variables. YOU have to know them. Don't rely on anyone else. Research, research and more research and don't stop until you have your six properties.

Six Properties Is Your Goal

   Who is doing this kind of research? Probably, no one but you! Your research will make you a better local appraiser than any homeowner, the overwhelming majority of real estate agents and even most full-time professional appraisers.

   The knowledge gained from research combined with your willingness to make offers will make you your fortune. Be a person of action. Most people are doing nothing.

   Begin to define your specific investment area immediately. Get out your map and mark off your specific investment area with a population of approximately 25,000 inhabitants and you'll be ready for the next step.

Step #2 - Drive Your Area

   After you have determined your specific area for investment, the next step is to learn that area. It doesn't matter if you've lived your whole life in the area and consider yourself the ultimate townie. Now you're going to view real estate from a different perspective, as an owner. Therefore, don't presume that just because you may have lived in your investment area for years, you can skip this step. You can't.

   Master's Tip: Drive around with loving eyes. Pause to think and smile about your future. These houses, stores and buildings will form your fortune! The only thing that will stand between you and prosperity is a little bit of time.


   For your drives, you'll want to take along a map, notebook, pencil and a camera. You can develop your photos as prints and paste them into a notebook along with your notes. Or, if you're a little more technically sophisticated, you can scan your photos into a research database. Of course, you can substitute a portable computer or PDA for the notebook if you wish. You get into your car with the pencil, notebook, map and camera and, alone and with the radio off, you start to drive a section of your area. This is not a step to be rushed. Take your time. The more investigating you do the better. The more you'll be learning. At a minimum, you should plan to devote ten or twenty hours to Step #2. You should break this time down into one-hour segments. After each segment, give yourself time to reflect and form opinions.

   As you drive, you start to think like a real estate investor. You survey the landscape. What do you like about certain properties? What do you dislike? Which properties would you be proud to own? Which would cause you to take immediate remedial action? Visually, what do you like or dislike? Can you identify areas where all the homes are single-family residences? Are other areas reserved for apartments, commercial or industrial properties? What is your opinion of each neighborhood within your area? Use your camera to document your likes and dislikes. If you see house colors that you like, take a picture. If you see landscaping or a fence or a driveway that stands out, take a picture. Start your own Real Estate Success Scrapbook. This self-created motivational book should stimulate your thinking.



   When you find memorable properties, positive or negative, take notes and a picture. Which neighborhoods do you prefer? What streets look bad? What building styles do you like?

   Keep looking and learning. Does the upkeep of the lawns and yards give you an indication of the type of neighborhood you are in? Does there seem to be a pride in ownership in the area? Are there abandoned cars or beautiful automobiles on the streets? Is the city or town doing its job to keep the area safe and attractive? Are there parks and other recreational amenities in the area? How do they look? What about the appearance of the schools and government buildings and houses of worship? What is your impression of the people in each neighborhood?

   Add your commentary to your notebook. What do you want to know about your specific investment area? Everything. Start to learn the street, store and school names. Look for vacant buildings and vacant land. Look at For Rent and For Sale signs. Look for new construction and new developments and people fixing up their own homes.

   Do you find any surprises in your area? Are all of the basic commercial services available in your area? Supermarket, pharmacy, banks, real estate offices, insurance offices, restaurants, tailors, doctors, lawyers, accountants, hardware stores. Is there public transportation? Are there major highways? Do most folks seem to work in the community or commute to work outside the area?

   Master's Tip: To achieve maximum results, champions learn the power of concentration. They can focus. Become a championship level investor. Only venture outside your area of expertise at your own peril. Stick to your small specific investment area. It's what you'll know. It's all you'll need.

Before You Make An Offer:
A Neighborhood Questionnaire

   When you purchase a home, you are also buying into a neighborhood and community. So, it is important when contemplating the purchase of a specific home that you also evaluate the neighborhood to ensure that it meets the standards and has the amenities that you expect. Here's a quick questionnaire to aid your thinking:

1.Overall Appearance. Are the homes attractive and well kept and are the streets clean and well maintained?
2.Neighboring Homes. Are the neighborhood homes of the same size and in the same price range as the proposed purchase?
3.Neighbors. Does it appear that the age composition of the neighborhood is what you are looking for; i.e., with or without many school-age children?
4.Schools. Are schools and playgrounds nearby, or will transportation be necessary?
5.Public Transportation. What type of public transportation is available and what distance is the transportation from the home?
6.Public Services. What is the status of police and fire protection? Where is the nearest hydrant? Is trash collection available? When? Is the water supply adequate? Have there been any problems with the local drinking water?
7.Medical Facilities. How close is the proposed purchase from the hospital, physician and dentist offices, emergency medical services, etc.?
8.Flooding. Is the area high enough to prevent basement flooding and water backup from the street?
9.Security. Is the neighborhood adequately lit at night?
10.Noise. Are there any unusually annoying noise disturbances from factories, airports, highways, etc.?
11.Odors. Are there any unusually unpleasant odors from factories, sewers, rivers, etc.?
12.Power Supply. Are there any high-tension power lines in the area or other power supplies, which may interfere with, radio, TVs, etc.?
13.Telephone. Will you be located in an area where the majority of your calls will be local and not long-distance?
14.City Streets. Are the streets owned and maintained by the city?
15.Cable TV. Is cable TV service available in the area?

   Every piece of real estate in your specific investment area is a possible future investment opportunity. Take an interest in this area. This is the area that is going to make your investment dreams come true.

   Master's Tip: When I was teaching real estate investment seminars, I would always be asked, "Aren't you worried that other people are going to take your ideas and take all of the best opportunities away from you?" No. First, most people aren't going to do the research. Second, very few of the people who do the research are going to translate their knowledge into action. Third, it doesn't matter. I wish them luck, because there are too many opportunities and possibilities in any investment area for any individual or even any group of individuals.

   Now, when you are doing your twenty minutes of quiet time, think about what you are learning. Start quizzing yourself. Where are the good areas and the bad? What properties do I like and not like? What kind of properties am I going to own? How will I maintain those properties? Think. Take more notes. Refine. Review your notes. Look some more. Who is doing this kind of research? It is a safe bet that no one is. This fact should not stop you, but motivate you.

JUST DO IT!


Continuing Education. Realtor.com Official site of the National Association of Realtors: Comprehensive information on all aspects of home buying including finding, buying, financing and selling.

Go to Lesson 1
Step #3 - Collect Municipal And Online Info

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