September 6, 2007: Income Properties, a few basics

Regular readers know my passion for this field. Being an active real estate investor for over thirty-five years has taught me to be both well-prepared (to say "no") and to be humble. A few great deals are purely dumb luck. Most, however, are not. Being well-prepared separates the winners and losers in this game, And I believe there are more losers at investment real estate then there are losers at the gaming tables in Vegas.

No one person can tell you the easy way to real estate riches. Literally everyone I know who has been successful in real estate has nuanced their path differently. You must "know yourself". Nearly everyone wants to make money. But before you merely run with the bulls, take measure of your personal and financial resources, your talents and your objectives.

My first investment property was a single family home where my wife and I raised part of our family. The second and third homes were divorces (nasty - the best for the investor). Then a few duplexes in a neighboring community owned by a doctor's investment group without a clue. It grew to apartment complexes, more homes, some commercial space and offices in five states. It also included property management, consulting and brokering deals.This was my "part time" job. It is now my "retirement job". I never gave up my regular professional employment which now grants a nice pension and benefits. NEVER quit a good job to speculate in real estate, regardless of your confidence level or early success, unless your true rental income triples your salary, Then, think about it if you have no leverage to worry about.

A couple of facts I learned early on may assist you:

1. Not all income properties offer the same potential.

2. Never rely on a so-called market vacancy rate.

3. Not all square footage counts equally.

4. Closely evaluate the size and quality of the site.

5. Converted large houses can make great starter properties.

6. Never pay much for furniture or appliances with the purchase of a property.

7. Before you buy, verify what legal restrictions apply.

8. Coordinate a legal strategy with your market strategy.

9. Beware of "bootlegged" repairs and rehabs.

10. Read the tenant leases before you buy.

11. Left wing politics creates real estate millionaires. I must elaborate on this.

Democrats love to protect the "little people". Ha. In a narrow sense, lopsided tenants rights laws seem to favor tenants. Over the long run, such laws discourage new housing supply and thus drive down vacancies, push up property prices, and make life miserable for all persons who would like reasonable accommodations at an affordable price, either through rental or purchase. High rent levels and property prices prohibit nearly all of the middle class from living in San Francisco and other far left Democratic-machine controlled cities. Many property investors, though, have made millions.

I will continue this discussion, which was prompted by several readers, over the next few posts.

Is now the right time to invest in rental real estate? Sure. I haven't seen this many great deals in twenty years.

Is this a great time to flip properties? NO.