Don't Count on Luck in Real Estate Investing

This quote from Seneca, a Roman philosopher of the middle of the first century AD, has been one of my favorites for years. It is a great saying because it reminds us that we create our own "luck" according to the things we do or do not do. But this phrase never resonated as strongly with me as in my first days as a full-time real estate investor. It was then that I realized for the first time the meaning of this saying and put it into a fast and successful work. It happened in January 2004, when he was still a "novice" investor.

It had been only 8 months since I left the corporate world, after 18 years of "working for the man". I was fortunate to obtain a wide variety of experience, with 5 years in public accounting for a large CPA firm; 6 years as the Corporate Controller and Director / Vice President of Finance of a $ 100 million consumer products company; 3 years gaining experience in Sales / Marketing / Operations with a Fortune 500 technology company; and then 4 years as COO / VP for an international software company. My works took me to many places, here in America and abroad, including Europe, Asia and Africa. I earned my living, averaging 6-figure compensation plus expense accounts, medical benefits, 401k contributions, and the like.

But he was still "working for the man". No matter how well I performed, the company would receive the vast majority of dividends in the years to come. I made a decent life, but I did not have the luxury of significantly improving my lifestyle or controlling my own schedule. Then, when the opportunity presented itself, I began seriously to build my new future, and that started with a real estate spree in mid-2003. At that time, I had been a full-time investor for less than a year and a Part-time investor since 1992, and although he had already made more than 25 transactions, they were all traditional purchase and retention transactions.

I would buy the houses below the market, put them in profitable conditions and then find lease customers or lease options to cover my mortgage (and provide some cash flow) while accumulating capital. I still had to get out of that comfort zone, even though I had read about the many other ways in which one can earn money in real estate. It's one thing to read about that, but quite different to take the plunge and submerge. What happens if I missed something in my analysis? What happens if I do not have the correct documents to protect me properly? What if....??? Maybe that was my collegiate and corporate brainwashing that came out-- get education, then analyze. Make a list of all the disadvantages, and then analyze some more. Paralysis by analysis may be the result.

But my corporate and fiscal experience provided me with many tools that, when used successfully, would lead me to success in the real estate sector. One of those tools was the foresight to plan and prepare for the future. I had been diligent about building a strong FICO score (credit) of ~ 800, which served me well since I bought and financed many houses the previous year, quickly accumulating a $ 3 million portfolio. I also prepared myself by selecting a strong bank (Wells Fargo) and developing a good relationship with them. I had become a preferred client of the bank, who took advantage of requesting an unsecured line of credit (LOC), and they gave me a line of $ 35,000! That meant instant access to cash if / when I needed it.

An unsecured LOC is not backed by any collateral, such as cash in the bank, or property, and therefore is more difficult to obtain from a lending institution, and interest rates are higher. My unsecured LOC had an interest rate of about 12%, which was not the cheapest money, but it was even cheaper than almost all the credit cards offered, so it made sense to have it in place, just in case an emergency or the opportunity was presented.

In January of 2004, such an opportunity did arise, and I was prepared. A business acquaintance, who later became my business partner (Sean Terry), came to me with a deal in which he was involved. Sean had a very different education from mine. Instead of going to college and climbing the corporate ladder, Sean was busy climbing real rope ladders and trudging through the mud as part of his training in the Marine Corps, before continuing to start several businesses in a true corporate way. . The marines taught him to ignore fear, which was very useful in these entrepreneurial ventures. In this case, Sean was working with another investor and they had found a house below the market in a nice neighborhood, where the remodeled houses were selling at good prices. This house needed to be completely renovated, including a new roof, new kitchen and bathrooms, more livable square footage, a more open / efficient floor plan, new flooring and paint, and new landscaping, in order to get its target market price and profit goals They were planning to do a classic real estate flip.