It is my firm belief that do-it-yourself investors should learn everything they can about the many different ways to make profits with real estate. I don’t believe you can reach our maximum potential as an investor until you learn to do many things well. These include buying single-family houses, foreclosure properties, run down apartments, options, and wrap installment selling, landlording and buying discount paper. In case I missed anything, just toss it in with the rest because you’ll need to learn them all! It may seem like a large task at first glance, however, all of these things I’ve mentioned are related. All the pieces will tie together to make you a “complete” investor.
Before I unintentionally mislead anyone, allow me to say I also feel very strongly that successful investors must have a specialty. I define specialty as something you learn to do better than everyone else in your investment area. Your ace-in-the-hole investment strategy, we might call it. Something you can always count on to make you money when everything else quits working. For example, I specialize in fixing run-down properties. It always works for me and I can count on making money doing fix-up.
The most important reason for buying run-down, ugly houses is that you can quickly add value to these types of properties. What this really means is that you will be able to buy cheap and sell for a profit in the shortest possible amount of time. You can also increase rents and develop a positive monthly cash flow more rapidly, unlike buying pride-of-ownership properties at top market prices where your only chance for profit is waiting for inflation or appreciation. Fix up properties are different. Making your own improvements, you, yourself, can force the value up. Upgrading the property automatically increases its value and you don’t have to wait nearly as long to make a profit this way.
Use Personal Skills to Develop Fast Equity
With fixer-upper real estate, often a simple clean-up and painting together with a change of tenants will get you higher cash flow almost immediately. With the increased income, you now have a more valuable property.
Several of these deals can pump up your equity and allow you to build wealth much more rapidly than otherwise. I call this fast-track investing
As a rule, investors will not develop these do-it-yourself skills buying ordinary non-fixer type properties. Most people are generally reluctant to tackle jobs they’ve never done before. They’re afraid they might ruin something or make a bad situation worse than it really is. That’s the one major advantage of buying and working on your very own “guinea pig.”
With run-down properties, most folks are not nearly so afraid to experiment. I can promise you this much: you’ll learn to do some things you never thought you could! More importantly, the experience you get will be invaluable as you continue to build your real estate wealth.
Investing in real estate the way I suggest does not require perfection. There is adequate room for mistakes. They are easy to overcome as you learn. What’s important is that you learn to do better on each new transaction. Mistakes are natural and provide valuable lessons on your path to success. When you read autobiographies of successful people, you’ll find none have become successful without making their share of mistakes along the way.
Learn From Others
Don’t forget what I told you about your wealth-building education. It pays big dividends to seek out and learn from successful investors who are already established and have a verifiable track record doing the same kind of investing you wish to do. Stay away from those who talk it but fail to walk it. After all, an advisor who doesn’t use his own advice is not very credible, wouldn’t you agree?
Finally, there is another important benefit for you which I rank just as high as all the others – it’s called confidence in yourself. Once you actually experience positive cash flow coming in, you begin to realize -hey, this is me! I can really make great things happen!
Confidence in yourself is worth more than the money, yet money builds confidence faster than anything else I know.
Jay P. DeCima, known as “Fixer Jay” of Redding, California has specialized in fixing up ugly houses and small apartment buildings since 1977. Jay’s latest book, Investing in Fixer Uppers, was voted number one on Chicago Tribune’s Top 10 Real Estate books list. Jay also writes the informative monthly newsletter, Trade Secrets.