Zen of Real Estate

Give Us This Day Our Daily Rant

Dear Everyone,

I was going to analyze some real estate news stories in this post. I'll save that for later. There's a lot going on in the real estate investing world to talk about. You, dear everyone, deserve my complete attention in these matters. This evening, I am a bit tired and perhaps just the slightest bit cranky. In other words, I feel a slight rant coming on.

I have already found a Dundee nominee for this week. I'll give you the details with this week's list of nominees. In short, it's a heartbreaking story about a costly newbie error. On the same day I found out about this newbie, I received a mailer touting someone's investing system. A list at the top of this mailer stated four reasons Americans are unhappy at work are: 1) not earning enough money; 2) not enough recognition or appreciation; 3) boredom; and 4) hatred of their supervisor. I wonder if this poor newbie received something similar in her mailbox before she made her costly error?

Granted, the list contains good reasons to be unhappy at work, but not necessarily good reasons to launch a real estate investing business. Just spend a few minutes surfing, you'll find plenty of real estate investors who are not making enough money. And while I am currently implementing a strategic plan for my business, my bank account would impress no one. This business can be seasonal, especially in geographical areas like mine that have extreme winter temperatures.

Please, dear everyone, don't start a real estate investing business because you are bored with your day job. Figure out what excites you and pursue that. Those late-night real estate infomercials emphasize lifestyle--yachts, nice cars, large houses, swimming pools and movie stars. What you're seeing are the results of a process and not the process. You don't get to see the countless hours of research, endless cold calls or tromping through knee-deep snow drifts and unshoveled sidewalks to look at vacant houses. (Why do you think I'm tired tonight?) I am reminded of an old Garfield cartoon where Garfield decides to write a book. After he makes this decision, instead of sitting down to write, he starts modeling clothes for his publicity photos. Results before process.

If you are one who craves recognition and appreciation, I would suggest some other business. Watching award shows is one of my guilty pleasures. I'll watch them all: Oscars, Emmys, Golden Globes, Tonys, Country Music Awards, NAACP Awards, ESPN Awards...if it's a televised award show, I've watched it at least once. However, no one, I repeat, no one has so much as muttered a simple "thank you" to me for being a real estate investor. I don't expect it. I just have my spot on the couch reserved for the Oscars.

I can't say much if you dislike your boss other than caution you about becoming become self-employed. It's possible that you will still dislike your boss.

Dear everyone, start your real estate investing business because you feel passionate about buying and selling property. Buying and selling property. That's all real estate investing is. Buying and selling properties.

That's enough ranting for one day. With that, I say goodnight.

Elaine

Dunderhead Nominees

Dear Everyone,

I decided to institute the Dunderhead Awards or "Dundees" to encourage myself (and, hopefully, you also) to avoid bad decisions, bad investment strategies and, most of all, bad behavior. The stories you're about to read are all true and are based on information I have either read or heard firsthand.

Ladies and gentlemen, I offer for your consideration:

Dundee Newbie Nominees:

The MySpace newbie who wrote that based on information he gleaned from a purchased reaI estate investing system, he was going to call a title company to get a list of foreclosures. Dearest Newbie, I really hope you misread your system because title companies do not keep lists of foreclosures. Depending up where you live, you would have to research the courthouse of your county seat or municipality; check the legal notices in your local newspaper or legal journal; or subscribe to a service that produces lists of foreclosures (though often it's dated information).

The newbie who emailed me offering her services as a "property locator." While I admire your moxie, I checked your company online. As I suspected, it's someone's system. While you may call yourself a property locator, you are actually a wholesaler. Please, dearest newbie, learn your business and industry well enough to know commonly-used terminology. If you choose to call yourself a "head cook and bottle washer" or a "sanitation engineer," please do so intentionally and not because you don't know better.

The newbie blogger who gleefully wrote about how ugly his WE BUY HOUSES signs are. You are right, dearest newbie. Your ugly signs will get attention, but perhaps not the kind of attention you're seeking. Ugly is as ugly does. Those signs look like bad karma to me.

Dundee Hall of Fame Nominee:

The veteran investor who confessed to me that he didn't tell a buyer that she had a 700 FICO score and allowed this woman to continue believing her credit was damaged. Lying to your customers is very bad karma, dude. You thought this poor woman purchased your property because she felt beholden to you and the financing you offered. If you had been honest, treated her respectfully and offered her a nicely-rehabbed property, she probably would have bought from you anyway.

To the day when Dundees will not be needed...

Elaine

Flipper Nation: Buy It. Fix It. Sell It. Lose Money!

Dear Everyone,

It was another cold, snowy day not fit for woman nor rehabber. I ran across Flipper Nation today. I uploaded it on the sidebar for your viewing pleasure. I watched and howled. I hope they can develop this online series into a television show that runs before and after every episode of Flip That House.

Watch and enjoy. But also watch and learn. Only you can prevent yourself from becoming a real estate investing dunderhead.

Elaine

The Business of Real Estate Investing

Hello Everyone,

I am snowed in today. There are three-foot drifts in my driveway. Some neighbors came and dug out part of my driveway and porch. After their hard work, the wind blew and the snow fell some more. Oh well, I've taken the time to do some marketing chores and to think about this entry.

I was fishing around online last night, looking at real estate investing (REI) discussion forums and blogs. I have participated in REI online discussion forums for many years. I've also attended REIA meetings (real estate investors assn) and had many talks with both newbies and veterans. One of the things I find missing from those discussions is how to treat your REI as a business.

There are countless places online to find information on every sort of investing strategy--subject-to; preforeclosures; lease options; or buy/hold with a half twist. In this mass of information, I haven't seen investors encouraged to write business plans or to do their own marketing research. These two things would be considered basic elements of any other business.

It's not difficult to find and purchase a canned system of real estate investing. I'm not discouraging anyone from seeking one out or criticizing anyone who sells one. I have purchased systems and attended workshops. I will continue doing so. I am, however, encouraging current investors and would-be investors to not rely solely on someone's system. Go further. Look at census figures and other economic development reports so you know firsthand about your local economy and population trends. Wouldn't it be good to know which age group is the fastest growing in your area? Wouldn't it be good to know what kinds of new businesses are gaining ground in your area? Don't you need to know what strategies investors in your area are using? What about the people who are going to buy or rent from you. Don't you need to know something about your customers? And most of all, don't you want to think seriously about what your strengths and weaknesses are as a business owner?

If you can't answer those questions, then you might find yourself wasting time and money on WE BUY HOUSES signs. And you might find yourself wondering why your telephone isn't ringing after placing those carefully-worded classified ads you bought with your investing system--those carefully-worded and market-tested ads from someone else's market.

Drafting a business plan forced me to stop and think. I can now make informed decisions about my business and the strategies I use, based on my specific strengths and my specific local economy. In my area, I could get the deed to a $150k house tomorrow. But that house that was so easy to acquire would soon become the bain of my existence. Because of my local economy, a $150k house is considered expensive. As a rental, it would be priced out of the market. As a property for sale, it would to sit for a long time, draining my company's cash. In another market, a $150k house might be considered a hard-to-find bargain, with buyers quickly offering more than the asking price.

The business plan also made me take a hard look at myself as an investor. There are countless people teaching others how to do short sales. I know investors who use this technique exclusively and are doing quite well. For those of you who are good at short sales, bless you. You have my admiration. I am not talented at doing short sales. I am sure if I focused on doing them, I would improve. But there are other techniques that are a more natural fit for me. In this case, it seems to be a better use of my time to focus on my strengths.

So, dear everyone, learn all you can about real estate investing. Buy that system that teaches you how to do a double sub2 with a preforeclosed short sale and a lease option on the side, hold the mayo. Just make sure you also do your own business research to make sure that system fits with your economy and fits with your talents.

Elaine

One Thousand Words

Hello Everyone,

We're getting up to 24 inches of snow by Valentine's Day. Just a little something to help you feel grateful for wherever you live. Elaine

Falling in Love is So Easy

Hello Everyone,

One of the first rules of REI that I learned was to never fall in love with a property. I've even quoted that investing rule to others. I suppose the thinking is that if you like a property too much, you'll make errors in judgment about the property, such as paying too much to purchase; spending too much to rehab; or hanging onto the property when you should let go.

But what's love got to do with it? A bad decision is a bad decision. Does this call for detachment mean that we can't make good decisions about things or people close to us? Does this mean that affection automatically clouds judgment? I realize that it can, but I don't believe that affection and a dunderhead are conjoined twins.

Let's look at some examples. I talked to a homeowner about two weeks ago and made an offer on his house. The offer was significantly lower than the asking price, but the house has major problems that will be costly to fix. The homeowner was adamant and unwavering on price. He was almost insulted that I offered less than he wanted. The home is still sitting and I doubt seriously if anyone will buy at his price.

Some REIs think that this kind of behavior stems from love. I think homeowners act the way they do because they see homes as extentions of themselves. Some homeowners view low offers as being the same as telling them that THEY aren't worth their asking price. That's not love. That's ownership and the inability to separate the self from the things the self owns.

I will openly admit that I have fallen in love with a property. It's a 100-year-old old farm house on five acres of land. The siding is a barn-red color. The property overlooks a river. The rooms are spacious. Friendly neighborhood dogs run to greet you when you arrive at the property. (Ok, the charging dogs probably aren't a selling point.)

Yes, I love this property and can see that it would be beautiful with an extreme makeover. But with my love comes respect. I respect the house, my business, my reputation and business partners too much to be lax with due diligence. So I will schedule a walk-through with a contractor to make sure everything can be fixed or upgraded within budget. Since it is a century home, the upstairs ceilings are quite low. It doesn't bother me personally, but I realize that most homeowners aren't munchkins. If the ceiling cannot be raised, then I can still love the house. I can still go play with the neighborhood dogs. I just won't purchase the house.

So to all you REIs out there, celebrate Valentine's Day by going out and falling in love with what you do and the people in your life. If you hold rentals, love those rentals. And love your tenants. Those folks may bring you headaches, but they also bring you cash flow. And especially love your rehabs. Love your contractors and those who partner with you to turn those ugly properties into gems. Be filled with awe and wonder with each improvement made, knowing you are one step closer to bringing a little bit of beauty to a neighborhood and to the world.

Elaine

On Turning 50

Hello Everyone,

I turn 50 in August. Gosh, I never thought I would be this old. When I was in grade school, I used to calculate how old I would be in 2000. It seemed ancient and unattainable, especially since I had an overwhelming fear that I wouldn't make it past 11. (Uh, I was a neurotic little girl.)

So here I am, miles beyond the year 2000. What a journey it has been. I've gone from being a military brat to a college co-ed. From student to school teacher. From teacher to grad student. From grad student to journalist. From journalist to being chronically ill & disabled. From being ill to being miraculously healthy. And I've bought and sold some properties along the way, just to make life interesting.

Who I am and what I've experienced informs my style of real estate investing. I love doing rehabs because I am a rehab. When I look at a property that is in disrepair, I can see its glory days and want to do what I can to restore the house. There's an element of danger with rehabs, especially the major redos. Fishing around behind the drywall can reveal costly secrets that could not be anticipated before purchasing the property. That's what makes rehabs exciting to me.

Many of the people who worked with me while I was ill--physical therapists, nurses, doctors, alternative health providers--saw beyond the body that was not functioning properly. They accepted the danger and excitement of investing energy and emotion into someone who had been diagnosed with multiple sclerosis. Maybe I would recover. Maybe I wouldn't. Maybe, maybe, maybe...

And my investing business is also a rehab. Following my own mistakes (the learning curve can be costly) and a few factors beyond my control (like my local economy), my business has fallen on hard times. I'm looking for financing on two rehabs I found last week. I'm peeling back layers to see what I find. Maybe I will succeed. Maybe I won't. Excitement and danger.

Why I Should Not Invest in Real Estate

Hello Everyone,

I really shouldn't be doing what I'm doing. Oh, I don't mean writing the blog. I mean investing in real estate. You would see what I mean if you looked over my shoulder and the read my responses to one of those should-you-be-an-investor magazine surveys. To further illustrate, I have composed my own pseudo-survey. You be the judge.  Elaine

Are you energetic?

Umm, no. I'm not lazy, either. I do, however, spend vast amounts of time in bed.

Do you enjoy talking to strangers?

The word "enjoy" might be a little strong. I can talk to strangers, but I prefer to watch them, then write poems about them.

Are you risk averse?

Well, here's one I can answer that will give me points. No, I am not risk averse. But how many poets are security-conscious, waiting-for-the-401k-to-kick-in, 9to5ers?

Do you have difficulty in asking for money?

Please see my response to the preceding question.

Do you know what constitutes a good real estate rehab deal?

Oh, of course. A rehab deal can be purchased and rehabbed for 75% of the after-repair value. A good rehab deal can be purchased and rehabbed for 75% of the after-repair value AND the property makes my stomach tingle.

A New Year, A New Beginning...

Hello Everyone,

Those of you old enough to remember Zen and the Art of Motorcycle Maintenance will readily understand why I am writing. I want to explore my world and life, using forays into real estate investing as the vehicle for exploration.

Well, that's just peachy, but isn't real estate investing about making money, you may ask. As with any  business venture, yes it is. I chose, with intention, to invest in real estate as a means of creating a financial safe haven for myself. But the money-making aspect of REI doesn't mean one can't pause along the way to the money market fund for some healthy navel-picking. Look at my literary reference and the title of this blog. Isn't it obvious? I'm a baby boomer. We have vast amount of lint to pick.

With that, I shall begin this portion of my journey. I hope you enjoy the ride.

Elaine