Master Real Estate Course

Lesson #7 Look at Properties

Objective:

• To preview all new listings in your specific investment area.

1. Buy six properties. 2. Love your tenants. You buy a property and you pay off the mortgage. Then you enjoy the income. Then your children enjoy the income. Then your grandchildren enjoy the income. Your great-grandchildren will enjoy the income. When does this end? Now, you know why real estate investing is so great because it never ends. In a hundred years, your offspring will be saying, "Thank you great-great-great-great grandpa or grandma!" Start your family dynasty. This is beyond the comprehension of average people. You can do this. You deserve this.

Background:

Right now, you know the difference between a Master of Success in business and the naïve slacker. The difference is preparation. The master's Mission #7 is the slacker's Mission #1. Who is better off? The first six missions may take a month or two to complete, but what a difference!

A listing sheet is a property information sheet used by agents. Ordinary agents feel compelled to guard these property-listing sheets with their lives. The information on the listing sheet is really all that separates you from them. The Super Agent, the Don Nardo type, doesn't worry. He has established a relationship with you. Nardo isn't worried that you'll steal the information or try to cut him out of a commission. Nardo is a successful businessperson. He's busy; he's organized. You have a question, fine. You want to see a property, fine. You want to discuss a property, fine. Nardo isn't interested in wasting time by taking you on a haphazard cab ride around town. Nardo, or any Super Agent isn't afraid to give you access to the listings. A Super Agent wants to deal with a knowledgeable consumer.

You know the type of properties you want. If you don't own anything, your first purchase will be a single-family house, a condo or a small multi-family. The obvious advantage to owning and living in a multi-family is that you will have rental income to support your debt service, your mortgage.

If you're handy, you might consider a property that needs cosmetic upgrading.

If you're more conservative or don't have much management time, look for newer properties where all the work has been done.

Ask Nardo to help you compile a list of properties that meet your criteria. Take some notes: address, price, rental information, etc. Ask for downloads of all the listings that look interesting.

Don't be rushed into making an investment decision. It may take you four to six months to complete your research. Work at your own pace and on your own schedule. The deals will always be there.

You don't need your agent to drive you by the properties. Drive by yourself, taking additional notes. With your drive-by and your notes, you have a good basis for discussion with your agent and Mastermind Alliance. A Super Agent should understand if you're not ready to buy immediately. He or she will understand that you're still educating yourself. If you feel pressured, you are dealing with the wrong agent. Fire him or her. There are lots of other agents.

Super Agents and others in your Mastermind alliance should fill the role of enthusiastic advisers. If not, move on. Regardless of your previous military rank, you are now the commanding general of your own life. You are in charge. You are in control. You are making the choices for yourself and your family.

Remember, back on an earlier mission, you learned that most average people have no conception or connection to wealth. They are average. They are plodders who are waiting for life to happen to them. If they are average types, they are probably naysayers, putting down your early ideas and early plans. And, if you were average, like them, they might be right.

But, if you are a Master of Success, you aren't like them.

You are a Master of Success. You have goals and you have the commitment to research and hard work necessary to achieve those goals. There is nothing wrong with advisers presenting contrary ideas if those cautionary words are backed by rational thought. You don't need sycophant "Yes Men" around you who are more interested in collecting their fees and really don't care about your success. Yes, you want people to feel that they can voice an opinion. However, you don't want to surround yourself with average advisers who are against real estate investing, who don't have faith in your abilities and are generally pessimistic type people. One of your Action Principles^® is Avoid Negative People.

Again, keep reminding yourself that it doesn't matter if you were a corporal in the motor pool. You aren't now. Now, you are the commanding general of your future and you are free to pick a team with the capability to accomplishing the missions.

What others have done, you can do and why not you?

As you narrow down your choices, you'll be ready to begin looking at properties from the inside. Single-family houses and condos are usually sold by owner-occupants, who are motivated to sell. Therefore, making showing appointments shouldn't be a problem.

However, if you are buying a multi-family, showing may require patience. Tenants may be more reluctant to show their units. Tenants quite justifiably fear that a change in ownership will signal an increase in rents. As a policy, tenants are given 24 hours notice before a showing; asking for less is asking for a favor. Super Agent Nardo will handle making the appointments and will accompany you to the property. These first showings are, again, just educational. When you are dealing with tenants in a multi-unit building, it may take more than one trip to see all the units. Accept this. It is part of your new business.

Print the following form and use it to record your general impressions. Nardo is your agent. Let him show you the property. Let Nardo lead the discussion while you're at the property. Don't embarrass the tenant or the seller of a property by making critical comments while you're in someone's home. You'll have plenty of time later to make comments. You may not want to buy this property. That's all right. You're going to look at many properties before you buy.

The number of properties you should look at before getting serious depends on your experience. A first time buyer should reserve a minimum of two months to research and looking at properties. You might love the first property you see. You might have to wait to love the twentieth property you see. You know yourself and your finances and your downpayment situation. You'll have to decide when the time is right for you to proceed to the offer and negotiation stage.

The information that you gather from your property observations must be analyzed in conjunction with a study of the economic vitality of your area. Are people and businesses moving in or moving out? Where? Why? How? You can make money in real estate whether the local economy is good or bad, but you have to know if the economy, and especially people's perception of the economy, is good or bad.

From Donald Trump, "To build a great brand, be conscious of the image and the quality of the product. Trump Tower was focused not only on location, but the quality of the building: windows, floors, rooms, kitchens, and the whole thing."  Your collection of General Observation Forms is an excellent educational resource. Study them. Use them to clarify your thinking and objectives. When you have a question, call the appropriate member of your Mastermind Alliance.

Always keep alert and aware for abandoned property and vacant lots. Look for overgrown landscaping, peeling paint, trash, broken windows, junk cars, graffiti, etc. Do your research. Look for building code, health code and safety code violations. Determine the highest and best use. Make an unsolicited offer.

Of course, if you're tech savvy, you can do all of this note taking on a PDA or laptop.

   GENERAL OBSERVATION FORM

   Address______________________________________
   Date___________________

   1. Rate the location:

      Excellent      Average      Below Average

   2. Is the type of property in character with the neighborhood?

      Yes      No

   3. General physical condition relative to the neighborhood:

      Better      Average      Worse

   4. Overall exterior physical condition:

      Few improvements needed      Average      Many improvements needed

   5. Layout of rooms or apartments:

      Excellent      Suitable      Needs revision

   6. Overall interior physical condition:

      Few improvements needed      Average      Many improvements needed

   7. Major components:

A. Roof	Looks OK	Looks Bad
B. Plumbing	Looks OK	Looks Bad
C. Electric	Looks OK	Looks Bad
D. Heating	Looks OK	Looks Bad
E. Appliances	Looks OK	Looks Bad
F. Basement	Looks OK	Looks Bad
G. Insulation	Looks OK	Looks Bad

   8. List amenities:

   9. If income property, do present tenants appear:

      Excellent      Average      Below Average

   10. Does property warrant further consideration?

      Yes      No

   Other comments: Use back of this sheet.

Use the back of the form to record both the asking price and the final sale price. Any surprises? How does this sale price fit with comparable properties currently listed and with others recently sold?

How Reinvestors Make Money with Homes

Some homeowners have found a safe and management free way to invest in residential real estate called the home reinvestment method. The home reinvestment method is based on the simple business premise that you try to buy low and sell high. It is most popular with single men, single women, and couples without children. The method presupposes ability to judge property values and a willingness to move on short notice.

Reinvestors put their personal housing preferences aside. They don't look for their dream house. Instead, they look for a house that is listed or can be negotiated to an excellent price, for instance, a transferred executive who wishes to sell his home quickly.

This owner knows that if he were willing to take the time to go through the regular selling process, the house might bring between $280,000 and $290,000. However, he has to move and he has to buy a new home. So, in exchange for a quick sale, he is willing to sell the house for $260,000.

The reinvestor buys the house for $260,000 and moves in. Now, the reinvestor, who has the time to wait, places the house back on the market for $310,000. When the house sells for $310,000, in two months or two years, the reinvestor realizes his or her profit and looks for the next property. Some reinvestors will buy and sell two houses a year. Each time they will move into the house and make it their principal residence. The reinvestor also attempts to keep buying more expensive property each time, thereby avoiding any capital gains tax.

Of course, an uneducated average person is going to say that the above never happens. However, you, as an educated person, a Master of Success in business, will find examples where it does happen. The primary motivation of all sellers is not always to get top dollar. Many people want to move or have to move for a wide variety of reasons. These sellers don't want to give their properties away, but they don't want to wait around for six months either. They want action. They are lucky. You are a person of action.

Story:

Mr. Corrigan

There was a little girl named Nancy Corrigan who went to my elementary school. Her father drove her to school and picked her up every day. He wore a suit. He drove a Lincoln. On vacations, Nancy's family went skiing in spring and to the beaches in winter. Of course as a kid, I didn't know how rich people got to be rich people. You were either rich or you weren't rich. As a teenager, I figured that Mr. Corrigan was either a drug dealer or had inherited the money. The one suspicious thing about this family was that they were always moving around town.

Years later as a real estate agent, I learned the Corrigan Secret. Mr. Corrigan bought houses and Mrs. Corrigan decorated them. That was it. The Corrigan Family would buy a house, decorate it and put the house immediately back on the market. When the house sold, they bought another house. Apparently, this was how these rich people got rich.

There is a flip side to success. In the Master Success Program, you are learning exactly what it takes to become wealthy and successful. As a Master of Success, you are learning that with persistence, determination and hard work, you have what it takes. Now, if you don't take the necessary steps to achieve success and you fail, you will feel guilt. If you don't make offers you will feel guilt. If your properties are in disrepair, you will feel guilt. If your tenants don't treat you with respect, you will feel guilt.

J. Paul Getty's Rules for Success

Billionaire Industrialist

1. Beat your own path. Know your strengths and use them.

2. Be open-minded. Hearing different views expands your thinking.

3. Enrich your life with art. Don't miss the beauty of the world.

4. Get the facts, and then act. Facts are facts. Have the courage of your convictions.

Library

The Weekend Millionaire's Secrets to Investing in Real Estate: How to Become Wealthy in Your Spare Time, Mike Summey

Real Estate Investing From A to Z : The Most Comprehensive, Practical, and Readable Guide to Investing Profitably in Real Estate, William H Pivar

Are You Dumb Enough to Be Rich? The Amazingly Simple Way to Make Millions in Real Estate , G. William Barnett II

Property Management 101

Take every opportunity to survey your competition. When your fellow landlords, with comparable apartments have a vacancy, ask to preview the unit. It adds to your knowledge base to see all apartments in all price categories. Knowledge is power.

Take pride in your responsibilities. Listen to your tenants and respond to repair needs and safety concerns promptly. Keep to a regular maintenance schedule. Start a replacement reserve fund. Make your tenants feel appreciated, safe and secure.

Your best tenants will pay the rent on time, keep their units in good repair, not disturb other tenants and keep renewing their leases. Love your tenants.

Operational Limitations:

Most people are average. Average people are not ambitious which accounts for their being average. Non-ambitious average people tend to be negative. They haven't done it, so why should you? You can smile and walk around these average people on the way to achieving your financial goals. You do not need these average naysayers on your staff or as a part of your Mastermind Alliance. You are now the commanding general. Listen. Think. Act accordingly.

Tenants in properties being sold may be uncooperative. They fear the unknown which would be you and your future plans. They may have every right or no reason to be apprehensive regarding your ownership.

There are no excuses. If you don't want to invest in residential real estate and deal with residential tenants, you can still make the Master Real Estate Program work by investing in commercial real estate, industrial real estate, and land or by using the home reinvestment method. No excuses.

Jargon

Appraisal - An estimate of the value of a property on a certain date, usually provided by a qualified appraiser, after both an inspection of the property and a comparison of that property with other comparable properties that have recently been sold.

Compound Interest - Interest paid on the original principal balance and on the accrued and unpaid interest.

Delinquency - Failure to make mortgage payments when mortgage payments are due.

Exclusive Listing - A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner's right to sell the property alone without the payment of a commission.

Executor - A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. "Executrix" is the feminine form.

Fee Simple - The best title to a property that is available—ownership that is not subject to dispute.

FHA Mortgage - A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.

First Mortgage - A mortgage that is the primary lien against a property.

Grantor - The person conveying an interest in real property.

Homeowners' Association - A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.

Personal Property - Any property that is not real property.

Questions and Answers

How do I become an expert on my area?

I want you to become "the" expert on your area and this can happen with as little as six months of research and footwork.

You study the real estate newspaper ads and the real estate magazines. You learn the names of the real estate offices and you study their websites. You go to For Sale By Owner websites. You go to Open Houses on weekends and collect listing sheets.

More and more cities and towns have their public records posted online. Who owns the income property? Who owns lots of income property? How can you meet and talk with these investors?

You drive around the area and learn every street name, every school name, every church name, and every store.

You become an expert by working hard and day by day, your knowledge base increases. As your knowledge base increases, so does your chance to spot opportunities and profit.

When you talk about doing your real estate research, how often and how much time?

The Military Action Principles^™ philosophy is to improve yourself and help others. In the Military Action Principles^™, you learn a Japanese concept called kaizen which means continual self-improvement. So, your research is not a little bit here and a little bit there, it is continual. You read the newspaper classified real estate ads every day. You read the free real estate magazines every week. Every time you go on the Internet, you check a few of your favorite local real estate websites. You will try every week to visit your Super Agent and go to Open Houses. No one else will do this. You will do this. You will be a real estate multi-millionaire because you will be better informed and more active than everyone else. They talk. You listen. They wait. You do.

How do I find a Super Agent?

Never call a real estate office cold. Always try to have a specific name or a specific address before speaking to anyone. To find the best agents, ask. You want someone who understands your plans and is willing to work with you.

Most agents are not shy about promoting the awards they have won. If they are on the Million Dollar Roundtable or they are the #1 RE Max agent or they are Realtor of the Year, they will say so in their ads and on their websites. You will be talking with other area investors. Who do they use? You will see income properties listed for sale. Who are the listing agents?

You can informally interview agents. How do your personalities mesh? If you talk to an agent about investing, does he or she treat you with respect or disdain? You know that over the course of the next twenty years that you will be generating a lot of commission money for a smart agent or agents. You want someone who is going to work harder than giving you a ride to and from properties. You want someone with banking connections. You want someone with political connections. You want someone who has a good rapport with established area investors.

It isn't going to cost you more money to deal with a super agent than a run-of-the-mill agent. But, transactions will run so much easier with the super agent. Later, you may test for your own real estate license, and this issue of agency will be not be a concern. You will be a real estate agent working for one great action oriented client who is motivated, knowledgeable and capable of making a decision. Who is this one great client? Of course, yourself.

You make it sound like an investor should be fawning over a super agent. If the super agent is just doing her job and making a fair commission is all this extra attention necessary?

If you are asking me if it is worth the time and effort to find a super agent, the answer is yes and yes again. Should you buy her flowers and candy, take her to lunch, give her theater tickets? The answer is yes and yes again.

Yes, you want to be represented by a super agent and you want to be a preferred client of that super agent. Here is an example. The super agent gets a call from an old client who wants to sell a beautiful six-family house. Now, the super agent could make twenty calls and get twenty offers but whom does she make the one phone call to? You want to be that person. Is this deal worth a hundred thousand or five hundred thousand or a million dollars in future profits? It could be. Don't you want to be the first call?

The super agents find a way.
   The poorer agents insist that there is no way.
   The super agents find what you want.
   The poorer agents can't see beyond what they want.
   The super agents know that some clients will buy and some won't.
   The poorer agents need money, and get angry with clients who don't buy.

What's the difference between a cooperative and a condominium?

In a condominium project, you actually own your specific unit and you own the common areas of the building with the other condominium unit owners. In a cooperative project, you do not own your specific unit but rather shares in the whole building. In a cooperative, you then are given the exclusive right to use your unit. Cooperatives are very common in New York City and not common elsewhere.

As an ex-Navy Chief Petty Officer, my ideal home would not be a land home but a houseboat. Do you think that I can use the principles in this course to invest in houseboats?

For tax purposes, your principal residence can be a houseboat or mobile home or cooperative apartment or condo or house. Yes, you can use our Master Real Estate program to become a multi-millionaire in the houseboat investment business. Why not you?

Deal in a small specific investment area. Become an expert on that area. Become an expert on the different types of houseboats. Become an expert on houseboat financing and insurance. Understand the particular interests and requirements for houseboat owners and tenants. Make lots of offers. To get started, you'll want to check out http://www.HouseboatMagazine.com.

I'm lucky to have a very good handyman working for me. I don't know if I'm getting a good deal or not because what I've noticed is he tends to change me twice the cost of any materials he's bought. Should I have a talk with him?

You know the old saying, "If it ain't broken, don't fix it." If you have a good handyman and you are satisfied with his prices, worry about something else. For your own information, the customary material/labor breakdown is not 50/50 as you are being charged but 80/20 with the 80 being the cost of labor.

Should I get my real estate license?

If you get your real estate license, you will have one great client – yourself. The answer is yes. In most states, studying for a real estate license is not terribly difficult. You have to take a course and pass a test.

Since real estate agents work on a strict commission basis, most offices will hire you especially if the owner/manager sees you as an asset: hard working, serious and generating dollars for the office. And, because most residential offices do not have agents who specialize in investment real estate, by doing so, you will bring a new profit center to the company.

Your advantage to being an agent is obviously direct access to MLS [Multiple Listing Service], easier access to previewing properties and the commissions you will save when buying and selling for your own account.

Also, you will always be farming for new investment opportunities and from time to time there will be deals that aren't right for you but you still profit by acting as the agent. You will make money when you buy and when you don't buy. This is win/win.

I was a clerk in the Air Force and now I'm twenty-nine and I work full time as a file claim's manager for an insurance company. I make $31,000. I can barely pay my bills and I just can't foresee saving enough for a downpayment on any real estate any time soon. Am I going to be left behind?

Your question implies that you already know the answer. Yes, if you just see yourself scraping by in the future, do something about it. No one is likely to walk up to you in the street and hand you a bag of money. The state lottery is only good for people who aren't good at math. You need to reclaim your warrior spirit. You must take charge of your own financial future.

Get yourself on a higher career track at your present company. Get a better paying job at another company. Certainly, commit to working sixty hours or more per week. If you can get by on your current salary, then start working part-time and using all of that money for your investment program. Yes, this means working harder and longer. Yes, you must sacrifice. And, yes, you can retire financially secure before you are fifty. Let others think, how did she do that?

Does all real estate have value or are there some properties that you would never buy?

All real estate will have value. However, there are problem properties, which may be beyond your ability as an individual investor to correct. You are a businessperson. You are not a police officer, probation officer, social worker, housing activist or government official.

You are not an engineer, so be suspicious of properties with serious structural issues.

Since you have the option to buy elsewhere, it is not a good idea to risk buying property near halfway houses for released criminals or sex offenders. You don't want to own properties near those used by gangs. Don't buy near landfills, high-tension wires, slaughterhouses, nuclear power or sewerage treatment plants.

Don't buy residential property near any facilities that operate 24/7 or late night. This would include factories, trucking facilities, bars, etc.

Stay away from properties that have been designated or even hint at toxic waste. Be aware of properties that may have or had significant insect infestation or mold problems.

Be very careful about buying property where notorious crimes have taken place

Action Plan:

• Again, go back and look at real estate prices in your small specific investment area from 20 years and 10 years and 5 years ago. What percentage of those owners have made money today? Yes, all of them. If a monkey had chosen properties from ten years ago that would be a very wealthy monkey today. The biggest mistake you can make would be to not buy.
• Start tracking the asking price and later sales price of all property marketed in your small specific investment area. How many listed properties didn't sell. Look for the good deals and the bad deals and the okay deals. How will all of these deals look in ten years?

Support:

• For Real Estate Services: Realty.com
• For real estate supplies: www.sanzospecialties.com
• For inexpensive real estate signs: www.1st-political-yard-signs.com/real-estate-signs.html
• For internet marketing services for real estate: www.diversesolutions.com

Inspirational Insights:

Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.

President Franklin D. Roosevelt, b. 1882

Never worry about numbers. Help one person at a time, and always start with the person nearest you.

Mother Teresa, b.1910, Christian missionary

Land increases more rapidly in value at the centers and about the circumference of cities.

William E. Harmon, Real estate executive

We were young, but we had good advice and good ideas and lots of enthusiasm.

Bill Gates, b. 1955, founder of Microsoft

Whenever you find you are on the side of the majority, it is time to pause and reflect.

Mark Twain, b. 1835, American writer

Outstanding people have one thing in common: an absolute sense of mission.

Zig Ziglar, b. 1926, motivational speaker

Success is not measured by what a man accomplishes, but by the opposition he has encountered and the courage with which he has maintained the struggle against overwhelming odds.

Charles Lindbergh, b. 1902, American aviator

I know my customers. I'm not going for the old wealth that dates back to the Rockefellers and duPonts. My target is the rich Italian with the beautiful wife and the red Ferrari. That's the audience that Trump Tower was designed for.

Donald J. Trump, b. 1946, billionaire developer

When the only tool you own is a hammer, every problem begins to resemble a nail.

Abraham Maslow, 1908, American psychologist

A competitive world has two possibilities for you: you can lose or, if you want to win, you can change.

Lester C. Thurow, b. 1938, Economist

Motivate them, train them, care about them, and make winners out of them...they'll treat the customers right. And if customers are treated right, they'll come back.

J. Marriott Jr., b. 1932, founder Marriott Hotels

Each of us has a fire in our hearts for something. It's our goal in life to find it and to keep it lit.

Mary Lou Retton, b. 1968, Olympic gold medalist

The more I want to get something done, the less I call it work.

Richard Bach, b. 1936, American writer

The leader must be an actor.

General George Patton

The big shots are only the little shots who keep shooting.

Christopher Morley, b. 1890, American journalist

Don't compromise yourself. You are all you've got.

Janis Joplin, b. 1943, American singer

Have fun and win. When you are having fun, you exceed everyone's expectations, win lots of projects and achieve amazing results.

Steve Van Amburgh, CEO of Koll Development

I think it is an immutable law in business that words are words, explanations are explanations, promises are promises – but only performance is reality.

Harold Geneen, b. 1910, financier

Successful and unsuccessful people do not vary greatly in their abilities. They vary in their desires to reach their potential.

John Maxwell, b. 1947, Christian leadership expert

It is the chiefest point of happiness that a man is willing to be what he is.

Desiderius Erasmus, b. 1466, Dutch theologian

The best thing workers can bring to their jobs is a lifelong thirst for learning.

Jack Welch, b. 1935, former CEO of GE