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Value-Oriented System
In this final lesson, let's begin with a review.
Realize that this is a value-oriented system. You study to understand value. You become an expert by studying a small, very specific investment area.
From the real estate chapter in the Master Success Course, you know that it is better to buy a poor property in a poor area that is worth $80,000 that you can buy for $40,000 than it is to pay a million dollars for a million dollar property in a beautiful neighborhood. You make money on the poor property and no money on the great property. When you are ready to own your dream house, then you buy the great property. The poor property is a buy/sell opportunity. This means that the common real estate success mantra of Location, Location, and Location is not always accurate.
Attitude
Have a realistic plan. Know that you can do what many others have done, and that is to become financially independent through local real estate investing. You keep studying, talking, seeing and making offers on real estate in your area. You have confidence from your research. You ONLY need six properties. You ONLY need to actively work on buying and selling until you have your six long-term properties.
Most people are doing nothing. Even if you use this system to buy your own home, you will come out ahead.
Education through research is your edge. If you follow the steps in this course, you will become one of the few real estate experts in your area.
Income Property
You can achieve financial independence by buying six properties. Your first property is your primary residence, then four small income properties, and then a second home for a total of six properties. Real estate is just like most other businesses. You can buy wholesale and sell retail. You can buy property for 10% to 20% under market value and you can often sell property for 10% to 20% over market value. Since real estate is expensive, the profit potential is high.
You may consider buying a two-family as your first purchase and later buy your single-family house and keep the two-family for investment.
The type of income producing property isn't important. What is realistic for your area? For your four long-term investments, it doesn't matter if they are condos, co-ops, single-family houses, multi-families or stores.
Raw Land
If you own raw land, you still want that land to produce an income, especially if you have to pay taxes and service debt. Servicing debt means to pay a mortgage. Raw land income can come from several sources including: farming, parking, mining, drilling, hunting, fishing, camping and/or cutting timber. Of course, you would buy land if you could resell at a profit to a builder or other raw land user.
Location, Location, Location
Yes, you absolutely want the best properties in the best locations for your six long-term investments. However, when you are wheeling and dealing and flipping properties to raise investment capital, location is not as important as value. Would you buy a toxic waste dump for $100,000? Of course not. Would you buy a toxic waste dump for $100,000 if you knew that it would cost $250,000 to clean up and that the government will give you $400,000 to do the job and that the property would be worth $500,000 when the clean up is complete? Of course, you'd want that dump and ten more. You don't know if a deal is a good deal until you have all the facts and have had the time to analyze them.
Real Estate Agents
You've learned the importance of dealing with a successful, experienced real estate agent and that many agents are neither experienced nor successful. The best agents realize that the best way to make money in real estate is to buy properties for themselves and not sell properties to others. The best agents often become investors and/or office owner/managers because being a real estate agent is a really tough job. The primary reason for being a real estate agent is to have early access to the best listings and to buy those properties.
Many real estate agents have little to offer except access to listings and a car ride. Unfortunately, the demands of the business force many agents to tell a home seller any price (however high) in order to get the listing. The plan would be to reduce the unrealistic price at a later date by blaming the economy or whatever.
Since you are learning so much about real estate in your specific investment area, you may consider getting your real estate license. If you are an agent, you may be able to make money on all the properties that you buy, since you will act as your own agent. And, if you are an agent, you can sell your own properties. And, when you find opportunities that do not fit your objectives, you can sell them to others.
Real Estate Buyers
Most buyers are not value-oriented, but dream house oriented. They want to fall in love with the house they buy. When they see the house of their dreams, they are willing to pay the listing price to get it. Except for a little Internet surfing, most buyers do little or no personal research before looking at properties. Most residential property owners move every seven years.
Real Estate Sellers
Even though the equity in their homes represents by far the largest percentage of their financial holdings, most sellers do little independent investigating. They trust their fortunes to real estate agents. Most sellers are driven to get top dollar for their properties, but not all. For some sellers, personal or career situations may necessitate a fast sale or special selling circumstances which you can accommodate. For example, sellers may want to sell and get their equity out of their home, but remain as a tenant for some period of time.
Handyman Specials
You don't have to be a contractor, builder or developer to make money in real estate. In fact, many major remodeling projects are losing propositions. Painting, papering, cleaning and raking are realistic and important. Make your money with your knowledge and your willingness to make offers. Let others dabble, hesitate or try to be Bob Villa.
Government Officials
Gaining permission to construct or convert can turn an average opportunity into an extraordinary deal. Pay your homage, dues, contributions or whatever to be seen as a positive force for change in your community. You will not regret making friendship at City Hall. You may long regret making an enemy.
Extra Special Deals
No money down deals and foreclosures sound like excellent opportunities, but they rarely prove lucrative for average investors. Ask yourself, how many people knew about this great deal before you? If the deal is that good why aren't the lawyers and bankers and agents buying the property themselves, rather than selling the property to you?
Tenants
Tenants are your customers. Give them good customer service. As Nardo taught, Love your tenants. Here is the real estate business in a nutshell: You borrow money to buy real estate to get rich and your tenants pay back the money you borrow. You borrow money and someone else pays back that money. Is this a good business or what?
Your rental units are your tenants' homes. The overwhelming majority of tenants will treat your property with respect as their homes.
And, don't overlook the possibility of selling the house to one of your tenants. If you know value, then you know a price at which you will sell any of your properties.
Mastermind Alliance
There are many people in your area that can assist you
in developing your investment program. Find them and sincerely ask for
their help. Keep your Mastermind Alliance list current. Do favors for
each other. And, always follow-up with a thank you when any type of help
is given.
Other Investors
You don't have to own a lot of real estate to become
financially independent. There is plenty of room in your specific
investment area for you and several other active investors to operate.
Befriend them and hopefully work together to your mutual benefits.
Remember that all wealth is passed from old hands to young. If you are
young, you will have the chance to purchase almost any and all of the
properties in your investment area.
Highest and Best Use
Look at every property through your new investor eyes.
Should this building be a McDonald's or a nursing home or apartments? Is
there extra land that can be built on or sold to an abutter? Can you
move a house on a lot to create another building lot? Can you add units
to the existing structure or convert to condominiums?
Management
Charge market value rents. Keep your properties in
good repair. Treat your rental units as you would your own home. Credit
reports are your best tenant-screening tool. Get rid of bad tenants,
even if you have to pay them to move.
Primary Financing
Don't lose a good deal while worrying about interest rates. Acquire the property and you can refinance on better rates and terms at a later time. After you buy your first or second property, arrange a line of credit so that you are ready to avail yourself of new opportunities.
Secondary Financing
You or Nardo should always ask the seller if they are offering any type of secondary financing. In some cases, you can negotiate with the seller delayed payment loans that allow you to increase cash flow to cover loan payments. You don't know what is negotiable if you don't ask.
What happens from here?
What happens from here is entirely up to you. This
course was easy to read, but the words and ideas will have little
lasting impact without your hard work. Think of real estate investing as
your part-time job. Get to work! Define your area. Study it from all
angles. Find the best agents and agency in your area. Look at lots of
properties and start making offers. Every property doesn't have to be
your dream house. Try to buy at 10% - 20% below market and then resell
at 10% - 20% above market. All the people who will tell you that you
can't do this are the people who aren't doing it. You can buy low and
sell high in real estate the same way you can in any other business.
Knowledge through research is your tool. Think highest and best use.
Make lots of offers.
In the next five years, as a part-time real estate investor following the Action Principles® and the advice in the Master Real Estate Course, you can put yourself on the direct path to financial independence. Others will wonder. You now know. Be a person of action and make it happen for yourself, your family and all the others who will benefit from extra time and resources.
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