First, the bad news.

According to Local Market Monitor (LMM), a real estate research firm, the 10 worst cities for real estate investing are:

1.  Lakeland-Winter Haven, FL

2.  Reno-Sparks, NV

3.  Orlando-Kissimmee, FL

4.  Deltona-Daytona Beach-Ormond Beach, FL

5.  Port St. Lucie, FL

6.  Las Vegas-Paradise, NV

7.  Boise City-Nampa, ID

8.  Cape Coral-Fort Myers, FL

9.  Phoenix-Mesa-Scottsdale, AZ

10.  Warren-Troy-Farmington Hills, MI

LMM selected markets with a population of at least 40,000 and ranked them based a combination of jobs forecasts, historic population growth and home-price changes, based on data through September 30.

And now for the BEST…

1. Tulsa, Okla.

2. Oklahoma City, Okla.

3. San Diego-Carlsbad-San Marcos, Calif.

4. Albany-Schenectady-Troy, N.Y.

5. Indianapolis-Carmel, Ind.

6. El Paso, Texas

7. Winston-Salem, N.C.

8. Cincinnati-Middletown, Ohio-Ky.-Ind.

9. Worcester, Mass.

10. Louisville-Jefferson County, Ky.-Ind.

So what should you look for? This is a common question that most new investors ask.  Real estate investing can be an intimidating process.  Think about the location, type of property, price, intended use.  Do you want to be a landlord or not?  How are you going to pay for the property- cash or loan?  Financing options include traditional financing with a bank, savings and loan or other financial institution or a private money lender such as a family member, friend or investor.  Traditional financing is better if you are going to keep the property for 5 years or longer.  Private financing is smarter if you are going to fix it and flip it.  Also, with private financing, you get your money quicker and you don’t have to worry about strict financing guidelines and having perfect credit.

Try and find a short sale, REO or foreclosure auction property because they are sold at discounted prices and offer built in equity.  Be prepared to make repairs though.  Always have a property inspection so you know what you are getting into.

Location, Price, Type of Property and Intended Use

Make a list of the areas you are interested in.  Drive around and look for sale by owner, short sale or bank foreclosure signs.  Check out the demographics.  Look at recent sales in the area in the last six months.  Check out the prices.  Are they affordable?  Make a budget and stick to it.  If you cannot afford the first location, then choose another area close by.  If there is redevelopment or plans for redevelopment, then you know the area is appreciating in value.  Location is really important in investing in real estate.  You will hear these words over and over again- location, location, location.  Decide if you want to work with a local Realtor.

Some questions to keep in mind.  Is the property near public transportation, accessible to highways and freeways, and close to shopping, restaurants and entertainment?  Where are the nearby schools, and how are they rated?  This is important if you are planning on renting to families.  What are the comparable rents in the area?  Vacancy factors.  For commercial property, what are the income and expenses?  Calculate your rate of return.

Stick to properties within a 25 mile radius of you home unless you are planning on hiring a management company.  Decide how you are going to use the property.  Rent it, flip it or hold on to the property for awhile.  New investors like to start with one or two single family or multi-family properties in the beginning.  They are easier to manage yourself.  If you are planning on residing in one of the units or one of your family members is going to live there, then a multi-family property is a good choice.  Don’t rule out 8-12 unit apartment buildings or other commercial properties such as warehouses or industrial buildings. They bring a higher stream of income than a single-family home or multi-family home, although there are more expenses involved, and you may need to devote more of your time to managing the property.

When I first began investing in real estate in 1994, the first strategy I tried was tax lien investing. I liked it because I could get in with very little cash and tax liens in my county paid 16% at that time and that sounded pretty good to me.

It went pretty well. I rounded up some friends at work and we pooled our cash to invest in the liens. We “won” four tax lien certificates at auction and invested about $2,500 for all four. Three of the liens redeemed at the expected 16% but I have to tell you that my cut of the profits was pretty tiny. Too tiny in fact.

On to residential lease options.

I went to a lease option bootcamp and one week later I had signed up two properties. A condo 40 miles from my house and a house 43 miles from my house.

When I found myself zip-tying bandit signs to a telephone pole at 11pm 43 miles from home in the snow by the (rapidly approaching) light of a cop car, I decided that there had to be a better way.

On to rehabbing.

I think you get the idea.

Here’s what I wish I had done before I chose a strategy: taken an inventory of my skills, financials and time. I think I would have avoided a lot of wasted time strategy hopping. Here are some questions you should ask yourself before selecting or considering changing strategies.

SKILLS
Am I a strong negotiator?
Am I handy with a hammer and nail?
Am I a good networker?
Can I deal with forms, applications and red tape?
Do I have good organizational and follow up skills?
Am I a good manager?

FINANCIALS
Do I have good credit?
Can I qualify for conventional financing?
Do I have any cash for repairs and/or holding costs?
Do I need fast cash or a tax shelter?

TIME
Can I conduct business during normal business hours?
Do I have more than 20 hours a week to devote to this business?

Here are some potential strategies:
Wholesaling
Fix and Flips
Rehabs
Short Sales
Subject To/Lease Options
Commercial
Land Development/Construction
Buy and Hold
Tax Liens
Bulk REO
Note Buying
Private Money Lending
Syndication

Here’s how to use the list:
If I had a ton of time, poor credit, no cash and wanted to invest for fast cash I would choose wholesaling. I would not choose buy and hold.

If I had no time during the day, good credit and lots of cash I might choose private money lending or note buying since I can do that for the most part on the weekends. I would not choose bulk REO or short sales since they require speaking with business people during the business day.

Get it?

Really give some thought to the strategy you choose to make sure it aligns with your skills, time and financials. You’ll be happier. I promise.

At first, stock investing was easier and much more lucrative. I was an executive at Hertz when Ford split us off and took us public. I got a piece of the IPO at the strike price and invested heavily in LEAP’s and companies that announced stock splits. Everything was going great until I filed my taxes that year and realized the full force of short term capital gains. Yikes.

So… real estate investing.

Again, I turned to my mentor for training and advice. I bought books, tape sets (remember cassettes?), videos (remember VHS?) and attended a few live events. I learned a lot about creative investing strategies and asset protection. And now I don’t fear the tax man so much because real estate gives me better protection and deductions than stock investing.

So, fast forward to 2010 and I find myself a bit of a real estate mentor. And as I peruse the real estate forums and blogs online I keep hearing the “scam” word being thrown around. I’ve written about this a few times before because “scam” is a pretty harsh word that I think is misused. And I hate to see it applied to something I do and respect – training, coaching and mentoring.

I was reading a blog where some poor real estate investing trainer was being throttled for not disclosing exactly where he invests. People were saying he must be shady or have something to hide. In fact, one guy went so far as to say that he had bought some of the guys courses and the strategies worked and he was making money but he now thinks he is a fraud because he is “secretive.”

I laughed to myself and thought, “Wow. People would freak if I ever revealed who MY mentor is.”

Because my mentor is in prison.

Behind bars. Locked up. In the slammer for 88 months for tax evasion as a result of an FTC investigation into his marketing practices.

But here’s the real question…

Does that make his investing strategies any less effective?

He never taught me to evade taxes so that’s not an issue. Am I now a failure? Do I not make money? Does this stuff not work after all? Here’s the book that changed my life:



And, yes, Wade Cook is my mentor. Convicted felon. Federal prisoner. Register #36240-086 at the Lompoc Federal Correctional Complex in California.

Now, I’m not defending his tax evasion or any of the underlying reasons why the FTC was targeting him to begin with. If he lied and cheated on his taxes, that’s not cool. But I am defending the fact that his training helped me succeed.

Was it all him? No. I’ve had other excellent mentors to guide me through various aspects of my real estate investing business. But he’s the main one.

Bottom line is Wade Cook was instrumental in my development and success as a real estate investor. And I thank him for that.

Does that make my real estate investing success a fluke? Was his training all a scam? Does that make me a scam?

I think, as I always have, that if you find a mentor you resonate with then learn everything you can and run with it. Your success is your responsibility. So is your lack of success. Which one will you choose?

Let me tell you about my coaching client Al.

Al owns two investment properties – a duplex and a single-family house in Oregon. He is working out of the country so he is managing the properties long-distance.

Here are the issues as Al described them to me:

• The house is currently on the market. It’s been listed for several months and the Realtor keeps telling him to drop the price (drastically) and he has.
• The house is still not selling even though he has dropped the price by $50,000.
• The rental income on this house is $700/mo and his mortgage payment is $1,000/mo so he’s ponying up $300 a month to keep this rental.
• The feedback from the showings is that the house is filthy and needs work – paint, new carpet, etc basically all cosmetic.
• The renters are three men who are on a month to month lease

Some Interesting Info Came Out During the Coaching Call:

Market rents for this area are $1,200 a month. I told Al to raise the rent immediately to solve the cash flow problem and he said, “I tried that and the renters refused to pay more than $700 a month.”

Al is afraid to raise the rent for fear the tenants will move and he will lose $700 a month income.

Al hasn’t performed any cosmetic improvements based on the feedback from potential buyers because “the renters said if someone wants the house they will buy it even if it’s ‘dirty’.”

Al thinks he should pull it off the market and relist it when the economy improves. According to him, “It should sell with no problem then.”

OK, Al, here we go.

You have a rental that is filthy with tenants refusing to pay more than $700 a month and trying to justify the fact that they have wrecked your house AND are causing you to potentially lose $50,000 in profit?

Here is EXACTLY What You Do:

• Present the tenants with a new lease for $1,200 a month. If they refuse to sign and pay the increase – GOOD!
• If they pay the increase – GOOD! You are now positive $200 a month.
• Begin eviction proceedings if they refuse the new lease. I provided a referral to a landlord’s attorney in Portland to do the job for cheap.
• Once the house is vacant, hire a handyman to perform ALL the cosmetic improvements required – new paint, carpet and clean up.
• Have your Realtor stage the house and bump the price up to 10-15% below the comps in the neighborhood.
• Your house will sell and the $700 a month you “lose” will be more than made up for with the increase in the listing price.

Lessons

• NEVER be bullied or intimidated by tenants. EVER. You own the property, not them.
• Correct problems with the house based on the feedback BEFORE just dropping your price arbitrarily.
• If a filthy house isn’t selling in a down market, it sure as heck won’t sell in a good market so in the words of that financial analyst on Saturday Night Live’s Weekend Update – FIX IT!

Need Real Estate Coaching?

I have a few spots left.  Call the office at 303-534-7078 and let Deanna know. I’ll give you a call to discuss. Spots are filling up fast, so call ASAP if you are interested in affordable, real estate investing in the real world coaching.