Starting Real Estate

A friend of mine keeps up his financial IQ by browsing For Sale by Owner listings and calculating if it’s a worthy investment. Last week he found a gem in Texas. The house had three tenants paying rent, enough to cover mortgage, utilities, insurance and taxes, and leave a couple hundred on the side.

He made some calls, got a realtor. We were both super excited. Even calculating for having tenants move, it just seemed like a no way to lose situation.

It was a good thing he got a realtor though, and got good pics of the house. Turns out there’s something wrong with the foundation. The house is leaning over, and will eventually fall over unless work is done.

While it still may make a little money, my friend decided to pass on this one considering quite a few miles states away (in California).

Almost a year back, my cousin started getting really hardcore with his prospecting. The cycle finally started coming back and now people are contacting him. Technology, particularly craigslist, is helping out a lot. It’s interesting how some things take a lot of time to build, but when they come about it’s beautiful.

As far as real estate appraisals go, business varies throughout the year. At a nearby appraisal place, things have been extremely slow. Since most appraisers work straight from commission, unless someone is comfortable with having such income fluctuations and can afford to go a few weeks without a decent paycheck, a person should really think twice before hoping into this part of the business. Especially if you consider the ridiculous amount of time it takes to rise in rank as far as your license is concerned. If it’s one’s dream to do this, or it’s a side job that’s one thing, but to depend on it–unless one reaches the level where he or she can evaluate commercial properties–means a really difficult financial situation.

A similar question occurs with what type of place to work for a real estate salespereson. Is it better to be an agent at a place that sells many medium to lower priced properties, versus an office dealing with the big guys? At the “smaller” place you get less commission but more deals and more steady income, at the big place, if you do get a deal, it’s enough for half a year to a few years. The catch is that deals take forever at the “high roller” place, and the whole time you work there, unless you can afford it, you’re getting in debt to them (they’ll pay a salary, later deducted from your sales). A good friend of mine works for such a place, with a strong conviction that he’s almost there, but the catch there is, a good year might mean three sales, which really isn’t that different from a bad year, with no sales, which does happen. It’s really a tough question, because obviously, there’s potential to get far more at the high roller place, but at the same time, it can be crushing seeing month after month go by being almost there, a hair away from it, but nothing closed. An agent should have iron nerves and reserves to play this game.

Have your own real estate slowdown and or your choice of who to sell with? Have an opinion? Post a comment or email me.

Red-tagged properties are those designated as structurally unsound. Here’s another cool trustree sale story from the teacher.

Up in a nearby affluent neighborhood, a guy decided to build another story for his house. He did it himself, without permits, and the work that came out, looked like it came from the wrong end.

Somehow the city found out and red-tagged the property. The guy was sick. Real sick, so the state was nice and only red-tagged the upper floor. However, what could he do to get rid of it? It would have to be demolished, but he didn’t have the money for that and the property lost its value due to the red-tagged second floor. So the guy talked with his lawyer, who had the following idea, “Save what you have and move to a place where they can help take care of you. Foreclose the guy. But whatever you do, keep your mouth shut. Don’t tell anyone. I mean not a word.”

So it went through, the guy trusted his attorney, and had the sale go through. Ironically, a bunch of lawyers bought the property. Since it’s a bidding system and the foreclosure demands a set amount, they paid enough for the guy to actually make a profit profit.

What happened? Well the guy’s lawyer was a licensed real estate attorney, and knew that with trustee sales you can choose not to disclose anything, but you may not mislead. Well by keeping silent and out of the way, the guy couldn’t do any misleading. Foreclosure fun indeed.