Accurate assessment of the present and the future is the key to successful investing in anything. If you want to invest in the stock market, you must understand the principles of business. You then must analyze companies based on those principles. The track record of the company, its current status, and its plans are all combined with what you foresee as the future. You then make an investment decision. Alternatively, you can let others do the work and invest based on their recommendations or invest in their mutual funds.
Investing in the stock market is not luck. It requires education. Likewise, investing in real estate is not luck. However, we have a head start – we already know something about real estate.
Right now, while you are reading this book, chances are good that you are sitting in a building. If it is your home, you either own or rent. If it is your office, you either own or rent. No matter which of those four conditions is true, you know something about real estate. If you are an entrepreneur, you have had the experience of evaluating buildings suitable for your business and negotiating a deal to rent or buy the space.
If you are not an entrepreneur, you have probably had the experience of finding your personal residence. Once again, you went through the evaluation process and negotiated the best deal you could for the space which met your needs.
See how your experience compares to mine. When I was a child, my parents were fixing up a huge house. My father had his office on the first floor, and we lived upstairs. I learned how to paint.
An elderly friend of the family hired me to remodel her bathroom when I was about twelve years old. She bought vinyl and taught me to measure, cut and glue it to the walls and floor. Being a perfectionist, I was a little disappointed in my work even though she seemed quite happy. Years later I was amazed at how nice it looked. I had forgotten the tiny flaws which bothered me at the time of installation.
When I was a teenager, we bought a farm and restored the farmhouse. I pounded nails in sheet rock, painted, and helped put up paneling.
When I moved away to college, I looked for the lowest priced housing which would suit my needs. I got a single room in a dormitory. After two years of that experience, I moved to a first-floor apartment. One day I drove through pouring rain to visit my parents. Two days later, I returned to my apartment and noticed an odor. I took out the trash and opened a window. After studying for a while, I decided to go to bed. As soon as I took my shoes off, I realized the problem. The carpet was wet. The rain had come up through the slab foundation and soaked the carpet. The smell was mildew. The carpet had to be replaced. I learned that concrete slabs can leak.
Next, I shared a few rooms in an old house and had a roommate. He and I took out the vinyl floor in the kitchen. There were three layers of flooring, with dirt between each layer. When the final layer was removed, we could see large cracks between the boards in the old floor. I learned that floor coverings can cover up a lot of dirt and rot.
Then, I got married and needed an apartment for two people. After a few months in a one-bedroom apartment, we moved to a two-bedroom duplex. Then my son came along, and we moved to a slightly larger duplex.
When I quit my job at IBM to go to chiropractic college, we moved into a “townhouse apartment.” Each building had six two story apartments with finished basements. While there, we became managers and had the responsibility of finding renters, collecting rent, making minor repairs, and cleaning and painting the apartments between tenants.
We then moved closer to the college and stayed in a similar “townhouse” until I graduated, and we moved to Bellingham. Our first place in Bellingham was a two-bedroom duplex. After one year, we moved to a three-bedroom house, which we rented for nine years.
Although nine years in the same house seems like stability, during that time I was moving my chiropractic practice. My first space was 700 square feet and I did most of the remodeling myself with a little help from a friend. I hired an electrician for the electricity to the x-ray machine. However, I created four rooms myself using paneling on 2 x 4 studs.
My second office was 900 square feet and was professionally designed and remodeled. However, due to ambiguity in the contract I painted the trim myself and installed my own phone. I learned about phone installation.
After four years in that office, I had an associate and moved to an 1800 square foot office which I once again remodeled. This time I was more of a contractor. My brother-in-law had moved to town and did most of the carpentry and sheet rock. I got caught without the proper permits and was stuck with a stop work order. However, I drew up the plans myself and got them approved. I hired a plumber and electrician. I learned the permit and inspection process.
Then it was time to move our residence. We bought our first house. It was a three-bedroom house with two bathrooms and a two-car garage. By now, we had four children, so we immediately converted the garage to two bedrooms, a computer room and laundry room. I had help from three patients: a designer, an electrician and a carpenter.
When my chiropractic associate and I split up, I moved my office to a 600 square foot space with an open design.
I had evaluated personal residences eleven times and signed leases ten times. I had been a property manager. I negotiated one purchase and sale agreement for my home. On the business side, I had evaluated business property four times and negotiated leases four times. I had learned to do some carpentry, painting, installed a hot water heater, changed faucets, installed lights, light switches and electrical outlets. All those experiences were before I became an agent and began looking at real estate as an investment.
Your list of experiences will be more, or less than mine. My point is that based on our life experiences, most of us know more about real estate than any other form of investment. Let’s take advantage of that knowledge base – add to it – and make money!