Memphis Real Estate Investing

Interestingly enough, I happened to notice a “For Sale By Owner” sign across the street from my primary residence.  This is not really news, except for the fact that the median home price in my neighborhood is about 160k and they were asking 250k.

While I am of the school that thinks “getting the price you are asking for a home will happen just because you say so” is over, I went to the open house they were having to see if there was an opportunity of any kind.  Call me a real estate nerd if you will, but I like to find deals.

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In our little world at DiscountPropertyWarehouse.com, we often find ourselves being put into new, unusual, and at times uncertain, situations.  Most of them are related to real estate, to be certain: usually we find ourselves asking questions like:

Does this house make a good potential deal?

How can we structure a deal so our clients can make the most of their investments?

What is an appropriate exit strategy for this particular home?

Would this property be a good candidate for lease purchase?

And so on.

For the experienced investors reading this, such questions are very bread and butter queries that get asked hundreds of times a week if you are full – time real estate investors like we are.  You are always evaluating deals and opportunities, of course, and throwing away usually about 90% of what you find.  As readers should know by now, just because a house is for sale DOES NOT necessarily make it a good deal.

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In my office DiscountPropertyWarehouse.com, we generally spend time doing a variety of things:

1)     Talking about, or investing in, residential real estate

2)     Discussing the use of various non real financial instruments and how we can maximize our investing dollars through them, such as stocks, bonds, options, or currency trading

3)     Trying to identify the next emerging entrepreneurial trend that we can potentially capitalize on for profit.

One thing that we tend to talk about when we are discussing wealth accumulation is the idea of ‘pieces of the puzzle.’  This is the notion that, everyone should be building a portfolio of sorts, and each person’s portfolio is a unique ‘puzzle’ with different needs and goals.  For some people, opportunities that seem really attractive and desirable in one portfolio are an absolute misfit in another portfolio.  Hence, you have opportunities that appeal to you that will not appeal to someone else.  The idea, of course, is that when you identify an opportunity that you are interested in then you work on accumulating it, and once you do you have added another ‘piece’ to your portfolio.  Hence, ‘pieces of the puzzle.’

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Come around you rovin’ gamblers and a story I will tell
About the greatest gambler, you all should know him well.
His name was Will O’ Conley and he gambled all his life,
He had twenty-seven children, yet he never had a wife.
And it’s ride, Willie, ride,
Roll, Willie, roll,
Wherever you are a-gamblin’ now, nobody really knows

-        Bob Dylan

What is so interesting about real estate investing is that many(non – investing) people think of real estate investing as akin to gambling, with the idea that buying houses is really a crapshoot – you may get lucky or you may bust.  Being a ‘gambler’ of some sort in my (rare) spare time, and also being a real estate investor, I get the unique perspective of looking at these two very different disciplines somewhat objectively, and I can tell you with great surety to that these are two entirely different worlds.

Let’s examine, first, the similarities between gambling and real estate investing:

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A Primer For Creative Acquisition Strategies

Written by Robert Feol for the Baltimore Real Estate Investor’s Association

If you are like me, or should I say ‘were’ like me, the acquisition strategy of taking a property ‘Subject To’ is a bit of an enigma.  ‘I took that property ‘Subject To’’ the annoying guy at your local REIA says, somewhat boastfully, knowing that he SOUNDS like he knows so much more than you ever will.  You quietly walk away wondering if you will ever be successful in real estate investing.  After all, you probably are unsure of exactly what taking a property ‘Subject To’ is, let alone how it is accomplished.  In and of itself the phrase doesn’t even make sense – “I took a property ‘Subject To’”, grammatically, isn’t even proper English.  It’s an incomplete phrase.  Your 7^th Grade English teacher would fail you if you tried to diagram the sentence.  Older generation, you know what I mean.  So let’s figure out what taking a property ‘Subject To’ really is, and isn’t.

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Those of you familiar with my real estate theories know that it is really unlikely that you will find any formulas here. The Gary Eldred, Ph. D school of examining real estate deals doesn’t really apply to me, for better or worse. Where as Eldred tends to introduce a deep analytical /mathematical way to arrive at an answer to the question “Should I buy this deal?”, I tend to subscribe to a much more grass roots style of real estate investing, which is as follows:

1) Can I buy this house really, really cheap?

2) Is it in an area where I would send my wife to pick up the rent?

3) Will this house bring a check to my mailbox every month?

Now, #3 is more of the Lonnie Scruggs School of Thought(read: Mobile home Paper Guru who’s philosophy is ‘don’t walk by your mailbox daily without picking up a check’), but even Lonnie uses a financial calculator to help make his decisions, although his reasons are less analytical than more of a ’show me the money’ type of record keeping that allows him to demonstrate substantial 3 and 4 digit returns on his money, and in doing so sell lots of books.

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Pete Finger, renowned German fingerstyle guitarist, once wrote a song titled “Sinn Ohne Worte”, which is translated as “Sense Without Words.”  Sense without words, you say?  Does that even make sense???

The same principle can be applied to landlording.  Is there any sense in it?  Is it sense without words?  Or words without sense, possibly?  Whatever your view, one thing is for certain: landlording represents almost every investor’s greatest fear –  the fear of failure through placing poorly qualified or unqualified tenants that then wreak terror on you, your property, and your family(and your wallet).

Is it really the monster under the bed that we make it out to be though?  In my experience, certainly no, but maybe I have just been lucky over the past 13 years.  The fear of landlording can become so strong that it actually deters potential investors from getting in the game – and that is a mistake. Let’s look at some urban myths that are often associated with landlording – fears that you probably have heard somewhere before.

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