A town crier steps out of the shadows, looks down his nose at you, and unrolls a parchment. He clears his throat and says:

Here ye, here ye, let it be known that, Jon Morrow, the Ruler of Real Estate, has thrown down the gauntlet.

He pauses for a moment, daintily pulls off his glove, and drops it to the ground.

His Majesty challenges all Personal Finance Bloggers of friend and foe alike to a duel of words, a debate on the superiority of real estate to stocks. If a challenger steps forth with sufficient insight to merit consideration…

He stops again to snicker at the idea.

… then he will earn a link from this blog and an official response, posted for the world to hear.

Rolling his eyes, the crier stuffs the announcement back into his jacket and pulls out another roll of parchment. He hands it to you. Curious, you unroll it and begin to read:

Continue reading ‘Why Real Estate Beats the Crap Out Of Stocks’

The latest fodder in the “no money down” witchhunt is Casey Serin, a 24-year-old investor in Sacramento, California that’s now $2 million in debt after leveraging himself to the hilt with techniques from Russ Whitney and Carleton Sheets. To the personal finance blogosphere, he is a classic example of what can happen when you buy into the get-rich-quick mentality.

Personally, I think he’s a victim of employing strategies he doesn’t understand. You can buy real estate with no money down, but it’s an advanced strategy that requires foresight and close attention. I’ve purchased several million dollars of real estate using no money down techniques, and I’ve never gotten burned. The difference is, I’ve been involved with this business for my entire life and (most of the time) I know what I’m doing.

To make “no money down” strategies work, you need to:

Continue reading ‘Why “No Money down” Is an Advanced Strategy’

Browsing real estate over the Internet is a wonderful thing, but nothing compares to driving around neighborhoods and paying close attention to what’s happening. It’s called “farming.” You take note of:

• When houses go up for sale, what they’re asking for, and how quickly they sell
• When houses go up for rent, what they are asking for, and how quickly the vacancy is filled
• Improvements to properties in the area and how it affects sales prices
• The type of people living in or out of an area and how it affects sales prices

Not only do you look at the data, but you talk to people. You call every For Sale or For Rent sign, chat with people walking their dogs, and generally get to know everyone in the area. It gives you a tremendous “feel” for the market. Since you know everyone, you’ll also probably get first dibs on any opportunities.

Let me give you an example.

Continue reading ‘One Simple Technique to Help You Find Hidden Real Estate Deals’

Flat rate listings are taking the Realty world by storm. For a few hundred bucks (or nothing at all), you can put your house on the Multiple Listing Service (MLS) and popular sites like realtor.com. Usually, this means you’ll save 3-6% of the sales price, a tidy figure for sure.

There’s only one problem. Your house may not sell.

In many cities, agents are deliberately boycotting discount listings to keep fee-based brokers from moving in on their commissions. They also despise dealing with sellers without representation because, most of the time, they’re much more trouble.

A couple of years ago, I actually experimented with a flat rate broker, just to see if it worked. The result? Not a single phone call for about five months. Admittedly, both houses were over $1 million, so I was limiting myself to a smaller subset of the buyer’s population. Still, it was a seller’s market, and I should have received some attention. Yet, all I got was phone calls from drive-bys.

In response, I listed both of them with the hottest agents in their respective cities and had both of them sold within three months for near full price. The difference in response was huge, going from no showings to over 60.

Can flat fee listings work?

Yes… eventually. Not only will the discount market continue to grow, but I believe less and less people will use a realtor to find their house because of the amount of information available on the Internet. The old guard will eventually lose the war, and the results will pick up dramatically.

I think it can also work in exceptionally hot markets. For instance, a friend of mine was standing in line for three hours for a preconstruction deal in Sacramento yesterday. If the market is that good, then you shouldn’t have to worry about some brokers boycotting you.

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You can make money as a part-time investor. There’s no doubt about it. Only, you’ll never make as much money as a professional investor.

You see, the professional makes investing his career. Through hours and hours of experience, he becomes a master of the trade, often gaining and losing it all several times over.

But he never stops.

Regardless of the tragedy or triumph he faces, the professional investor continues, learning, experimenting, and all the while building his empire. He can’t imagine doing it any other way.

Take the movie Cinderella Man, for instance.

At the surface, it’s just an inspirational boxing movie, but if you look closer, I believe it’s a story of what it means to be a professional.

Continue reading ‘The Cinderella Man Guide to Investing’

If you’re a subscriber of the various personal-finance blogs out there, you’ve undoubtedly heard about Prosper.com. It’s a distributed lending network where everyday people loan money to other everyday people. I love the concept, but I’m also feeling left out.

Currently, Prosper.com has a lending limit of $25,000 — a gigantic sum for your average borrower, but peanuts to real estate investors. We borrow several times that on individual properties, and my companies frequently carry over $1 million in unsecured debt from private investors. Another $25,000 doesn’t do me much good.

To give Prosper some credit, they’ve started in a great niche. People are using the money to pay off high-interest credit cards and start small businesses, both of which are underserved in the lending community. Private lenders are also making a much better return than they would receive from their savings account or CD.

So yes, congratulations are in order. Now it’s time to expand.

Continue reading ‘Prosper 2.0: The Next Generation of Prosper.com’

How much money are your houses really costing you?

Most investors stop budgeting after adding up the downpayment and carrying costs, forgetting to include taxes, maintenance, improvements, and commissions when selling the home. If you add it all up, they’re not making nearly as much as they think they are.

Over at Consumerism Commentary, Flexo breaks down the costs of a typical home over a 30 year period. If you buy a house for $300,000 and sell it for $1 million 30 years later, are you really making good money? Not really. In his article, he breaks down $710,000 of fees over a 30 year period, meaning the homeowner is actually losing money.

The same type of thinking applies to your real estate investments.

Continue reading ‘Are You Making This Common Budgeting Mistake?’

As a real estate investor, it was tough for me to write this post. We take pride in how much money we can borrow, and the thought of paying down a mortgage is almost painful, unless we’re selling the property.

But it has its advantages.

In my last post, we covered three reasons why paying down your mortgage is a bad idea, but there are also three equally good reasons that it’s a good idea:

Continue reading ‘Why Paying down Your Mortgage Is a Good Idea’

It’s tax refund time. You’ve got a few thousand dollars coming back from the IRS, and you’ve got to decide what to do with it. Do you pay down your mortgage or use the money for a downpayment on a new house?

This is the question that JD over at the Get Rich Slowly blog asks his readers. I’m going to give my take on the issue, looking at it from both sides. Then you can decide for yourself.

First, let’s go over why paying down your mortgage is a bad idea.

Continue reading ‘Why Paying down Your Mortgage Is a Bad Idea’

We’ve been going over some pretty philosophical material in the Real Estate Investing 101 series, so I thought we’d take a break for a quick negotiation tip.

I can’t tell you how many negotiations come down to a few percent difference between what the seller wants and the most a buyer will pay. You come across a great deal, ripe with opportunity, but the seller won’t budge on the price.

So, what do you do? Walk away?

Sometimes, yes, but the good news is there’s a way you can shave 3% off just about any purchase price. It’s a little secret that real estate agents don’t want you to know because it technically takes the money out of their pocket.

Let’s go through it, step-by-step.

Continue reading ‘Here’s a Quick Way to Save 3% on Any House’