First of all, never buy any property more than a half-hour drive from where you live. Why? There are always problems that need solving. You can’t spend too much time going to & from the places you own. Time is limited and before you know it, you will be 80+ like me. So don’t waste your time doing geographically inconvenient deals. If you own a newsletter with 250,000 subscribers to sell & rent to, maybe you can play that game. But a simple tycoon like me can’t afford to do it. Stick to the green pastures you know or can get to know well.
How to make a million dollars a month in real estate?
What usually happens is that a person looking to buy a home in an unfamiliar town or area goes to a friendly real estate broker. They don’t want to waste a lot of time on what they call in the trade “Lookie Loos.”
Thus, their strategy is to get the requirements of the buyer, and first show them around half a dozen vastly overpriced &/or unsuitable houses. When the buyer seems discouraged, the broker pulls out of his “secret listing.” Wow, he says, this just came in and you’d better grab it quick. The deal that is usually overpriced, but looks much better than what the customer (or victim?) has seen so far.
The broker then applies strategic pressure like “This is perfect for you and there are XX people looking at it intending to make offers, but I can get you into the deal, arrange the financing and get the seller to accept (slightly) less than the offering price. But you must act fast!
The sucker who is in a hurry to get a place and move in, bites, and buys his house at essentially retail. Because of acquisition costs and commissions in order to break even he needs to sell at roughly 20% more than he paid. This is an impossible task and he is buried.
OK ! What should a potential real estate investor, home-buyer do to come out way ahead financially?
I wrote a book once and some related special reports (now digital) called Think Like A Tycoon. In them, I explained that a buyer should, in fact, MUST really get to know the market. HOW? By looking at least (arbitrary number-100 deals). Read the ads in the newspapers, Craig’s List, The Internet, For Sale By Owner. Visit every broker in your chosen neighborhood to see what they hand. Look at many places very carefully. Talk to owners, renters, real estate agents until you know the area like the back of your hand. As Warren Buffet famously said, never invest blindly in places or things you don’t fully understand. Knowledge is POWER.
Then after becoming an expert —better than any broker— start making low ball offers at around half market price. Look for distress property. Property that doesn’t show well because it needs cosmetics—i.e. PAINT! Forget major fixer-uppers. This sounds like and maybe it is a lot of work. But instead of being suckered into a bad deal, you may (as I & my book taught my girlfriend to do) make over $1 Million on your first “no money down” deal.
Is it worth the time? Maybe not if you already make over a million a month in your non-real estate activities. Anyway, to answer the question, 99% of people looking to buy a property, they don’t Think Like A Tycoon or Entrepreneur. They just go out and buy retail. 1% .
WRONG! Do as I do. That is how you will make your millions. That is why there is a 1% financially independent class and 99% not doing so well.
By the way, I do the same when I need a new car. I never pay more than 50% of the Argus or market price. That is why I have made a profit on some 250 properties and have had numerous “free” or profitable car deals over my lifetime. Now at age 80+, I am not so willing to put in as much effort & time, but with the experience behind me, I go much faster than you can.
I am currently looking for a condo in Manila. As of today, I have looked at around 75 places. When I have seen and appraised another 2 dozen, I will start making low offers on everything I look at from then on. I know that for every 100 offers (way under the market that I make) I will get at least 3 good deals. I expect to make my usual million a month in Manila. You can do the same but it’s work. Although I consider it fun.