Commercial Real Estate Investment Articles

How to invest in real estate? Don’t. You heard me right. I don’t invest in real estate and neither should you. Forget about being a real estate investor, and you’ll be well on your way, financially, to wherever it is you’re trying to get.

In Part One, Riding the “Paper” Tiger: The Subprime Disaster, I left off with a discussion of the current marketplace and the role subprime lending is playing. In Part Two, let’s explore how your knowledge of recent history–and what is going on right now can help you use time-tested techniques to profit in today’s marketplace.

Curb appeal is one of the most important aspects of any real estate transaction. For me, it is the curb appeal that defines everything about my deal. How much will I offer? How much will it take to rehab the property? How does it compare to the surrounding living conditions?

Ray, what factors indicate the climate, good or bad, for investing in mobile home parks?

The real estate contract is the most often used, yet little understood tool in the real estate business. Whether you are a rank beginner or seasoned expert, there is no excuse for not knowing and understanding real estate contracts.

“Do not try this at home . . .” There’s a reason those guys on television ask you to not do the things you see them attempt to do. They’re risky or downright dangerous, and for a novice to do whatever it is they’re doing on the screen is just an accident waiting to happen.

The so-called day after “hangover” from the fast and loose lending spree that helped fuel the real estate boom during the first half of this decade keeps getting worse, with a continued fall out among lenders who catered to high-risk (or “subprime”) borrowers. Several dozen lenders have closed their doors because the Wall Street firms who have provided their funding will no longer do so.

We’ve all done it. Anyone who invests in real estate is bound to make a clunker deal sooner or later. I’ve been in this business for over 25 years and have made plenty of mistakes, and I am always reminded that experience is what you get right after you needed it.

As I write this in the spring of 2007, the real estate market is in the throes of yet another of its recurrent downward cycles. Consequently, a frequent question we get these days is: “How is the latest meltdown in the subprime lending industry affecting the purchase of owner-financed paper?”

More Americans are falling behind on their mortgage payments at a record pace as stagnant home prices and a convergence of weakening economic factors have taken a toll on housing affordability, according to the quarterly survey just released by the Mortgage Bankers Association (MBA).

“Flipping” is the buzzword of the year in real estate: Flipping books, flipping articles in the newspaper, and even flipping shows on TV! What is flipping, how does it work, and how you can profit?

When I go to speak to real estate clubs, sometimes my reputation precedes me: “Mr. Landlord is the guy who talks about adding extras and upgrades to your properties for more cash flow.” After speaking for nearly 20 years and publishing the Mr. Landlord newsletter for 22 years, I’ve played a big part in revolutionizing the way thousands of rental owners market their rental homes.

I often hear people say they can’t get started investing in mobile homes because either they don’t have any money, or they have very little money. Just this week, Eric, a young man in our local real estate club, said he only had $5,000 and wanted to know how he could get started with such a small amount. I told him that the amount doesn’t matter; what matters is that he get started. And NOW!

For real estate agents, business brokers, and mobile home dealers and brokers, seller-carryback financing can make the difference between a “sold” or an “expired” listing. This is particularly so in certain economic cycles, like the one we are entering NOW! A majority of listings expire, UNSOLD, especially single family residential (SFR) properties.

The question of the day for commercial real estate investors is: What is the effect of a slowing economy and possible recession on valuations? The run-up in values for some sectors has raised alarms, and opinions range from “no more than a ripple” to “impending doom.” For investors, there is much to consider in plotting our course.

Is it too late for real estate? I’ve been investing in real estate for twenty-four years, and I’ve seen the ups and downs of the real estate market. I’ve made some bad investments, but most of them have turned out great–as long as I was prepared to stay through the bad times.

In How to Profit in a Slow Economy (Part One), we discussed economic conditions and the outlook for capital availability for real estate investment. Now let’s turn our attention to the effects of those conditions on various commercial property types, and specific strategies that can profit from the current trends.

In an average year, our family business will buy, sell, and finance $10 million to $15 million in deals. That volume gives us a pretty good read on market conditions, and we stay in close contact with dozens of buyers, sellers, and brokers. Over the years, we’ve learned that there are generally two types of players in this game: 1) dealmakers, and 2) to borrow a term from the car business–tire kickers.

Two of the most popular types of retirement savings plans available today are the Roth IRA and the 401(k) plan. In 2001, Congress married these two types of plans by passing the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), which included a provision allowing 401(k)s (regular and solo/individual) the opportunity to make Roth 401(k) contributions after the 2005 tax year.

One of the most popular property types in commercial real estate are “triple net,” also known as “NNN” deals. These are typically single-tenant retail properties leased to tenants with high credit ratings on “net, net, net” terms (hence the NNN acronym), meaning the tenant is responsible for real estate taxes, insurance, and all maintenance.

Acquiring investment real estate can be handled with many approaches. Two very popular “no money down” approaches are lease options and “subject to,” or “getting the deed.”

So often, beginning real estate investors focus on techniques that they lose sight of the important issue: Is this a good deal? Learning to recognize a good deal takes research, education and, above all, experience. Here’s a good formula to determine whether a potential real estate purchase is a deal. It’s a simple acronym called C.L.E.A.R.

A key to understanding the power of using “paper” in real estate transactions is to understand that despite what a promissory note might state on its face as the amount of debt owed, it could very well have different perceptions of value to different folks.

And now your nerves kick in. Good grief! Gulp. You ain’t ready, friend, and even I can see it in your eyes. That door opens slowly and he pokes his nose through the crack, glaring at you now, “What the heck do you want?” Gulp.

I get a lot of questions from people asking, “Will real estate investing work in my market?” The truth is, real estate investing works in every market. But you need to learn your market and adapt the techniques that it requires.