When this world becomes an ocean, we will find the desert…

Last time I spoke about vision and the ability to see things that others don’t see. Before we all go out and get Lasik surgery, let’s talk about what needs to be seen and how that translates into wealth in real estate.

My first client ever was an investor and a funny guy. We’ll call him Bob. Actually, let me back up just a smidge. The way our office is structured, our broker doesn’t show his own listings. So if someone calls in on one of his signs, one of us goes out and shows it. When I’m called to show one house, I always pull several listings close by to show them as well if the people don’t like our listing. Bob didn’t like our listing, but by the end of the day, I had shown him a total of seven. Of the seven I showed him, he had narrowed it down to two properties he was quite interested in. He could see past the verbose termite report, lousy carpet, dingy paint and stolen appliances. He wrote strong offers for both properties and got both properties. He paid around $200k each. He got in there, got them painted, carpeted, got some appliances off of craigslist, had some handyman type stuff done around each property and now one is rented for $1500 and the other for $1700. If he doesn’t raise the rent, both properties will have paid for themselves in 125 months. Of course, there will be annual increases and that number will come down a little. Essentially, in less than 10 years he’ll own both properties outright. Any proceeds from selling them will be return on his investment. He is very well positioned with positive cash flow.

Even though the market has changed, and it has in the last month, there are rocking deals to be had. But every deal is commensurate with each person’s individual goals and risk aversion. I’m seeing a lot of what I call “cocktail party fodder”. Bob brought me a lot of that. We all know a happy customer will tell their friends and that’s what he did. My phone was lit up like the Fourth of July. Everyone wanted to see $200,000 houses in Hayward . But everyone didn’t have the risk tolerance that Bob did. As much as I explained the market and what they would see and what needed to happen to the properties, no one saw what Bob did. The only saw his finished product and couldn’t see how the $200k I was asking them to spend on this stinky vermin infested stripped out shell of a structure could ever yield any income. They needed some financial Lasik surgery. Now that market has passed them by and they’re still on the sidelines.

I had another guy who had an empire of real estate back in the 1980’s. These properties were all in questionable neighborhoods. He kept them rented. After he built his empire, he married and had a family. It was getting to the point that he felt he was risking too much by going to his own properties. He sold them all. He’s now rebuilding his empire and I was lucky enough to get a piece of it. He’s in better neighborhoods, but he’s looking for property that can be had for 30% under current market. That’s his math. He doesn’t fall in love with real estate, its straight numbers with this guy. He lets a lot of stuff go by and moves on stuff that sometimes other people don’t understand. That’s his risk tolerance and that’s his vision, clear and unrestricted.

With risk comes reward. Learn your own risk tolerance. Then apply it. Know you might get knocked around by the market now and again, but it’s a long term investment. And at the end of the day, land is finite. You can’t grow any more. So look the good and go for it.

Valerie Crowell, Real Estate Consultant
Alco Properties
To contact Valerie send an email to women_buildingwealth@yahoo.com with “Valerie” in the subject line