Monthly Archives: June 2017

The Myth of Real Estate Investing

Investing in Real Estate has become urban legend the myths abound about how much you can increase your wealth by investing in real estate and in particular residential real estate, so much so that the average Joe believes that making money and creating wealth when it comes to real estate is a given and in alienable right so to speak.

Average mums and dads are jumping onto the real estate bandwagon with no knowledge or training in the fundamentals of investing. These folks are fed the myth that using their equity from their family home will miraculously make them into real estate tycoons, all to often these poor misguided souls end up losing the home and everything else in their pursuit of real estate’s Eldorado.

To perpetuate the myth these naive investors are advised to hold on to their real estate investments for ten years or longer, this is great in theory if you are in your twenties and do not need the profits in the immediate sh rt term to help fund a decent retirement, unfortunately when you look at the demographics of these investors they are in their fifties with plenty of equity in their family homes most usually own their family home and have neglected doing any thing for their retirement till now and in horror discover that they will not be able to have their current lifestyle on the pension.

Little wonder real estate investment seminars are packed with these late bloomers all hoping to make a fortune by investing in residential real estate, the seminar presenters ensure that is all these folks here, after all this is a valuable gravy train.

Try this little trick next time a telemarketer calls and asks you to attend a real estate investment seminar, and the telemarketer asks you if you own your own home and how much equity you have in it, reply by saying that you have none, I will guarantee that before the word none leaves your mouth they have hung up on you, interesting isn’t it?

Tragically no one is told when a real estate investment has gone bad or failed to perform as happens on a daily basis with the stock market, why is this so? One of the major reasons are the volumes of money that Governments, Banks and marketers make from selling the residential investment myth, that is also the reason why Governments have been loathe to legislate that investors under go an investment training program before they can invest, as once the myth is busted the gravy train will not be as plentiful and the flow on effect into allied industries would be catastrophic.

This myth is well and truly busted as you can loose everything from a failed real estate investment and there are no such things as guaranteed growth with out doing some work for it.

Here are 7 simple ways to maximize your money from real estate investment

1. Know your profit before you buy

Do your due diligence and find out if the price you are paying is below market value, a simple rule is can you resell this property today for a profit and if so how much.

2. Type of Neighborhood?

The community surrounding the property can change in a variety of ways that can adversely affect your real estate income property. Increasing vacancy, for instance, can lead to reduced rents, which in turn means reduced maintenance causing building deterioration, This can cause a roll on effect if more properties start to decline in the whole neighborhood,compounding the problem.

The nearby construction of facilities such as prisons, sewer treatment plants, and airports will also likely have an adverse effect on the area. Also, perhaps more subtle and slower in coming, is a decline due to increased crime, perhaps resulting from an adjoining neighborhood spill over. If you still want to invest here find out what it is that makes it special that everyone else has over seen, often gems are discovered with a little digging,

3. Impact of poor or neglected Infrastructure

The impact of being directly under the flight path of airplanes, construction of a major highway or intersection can limit access to the property, cause noise and dirt by the construction and all this can have a negative impact on the property’s ability to attract and keep tenants. The end result may be an increase in your investment real estate value, but construction and major works can take up to a year or more and during that time you could expect your real estate investment value to drop. Or worse still the infrastructure is neglected and the local authority does not have the Tax base to start remedial works to bring it up to standard,


Governmental controls and regulatory changes to zoning can adversely impact real estate investment properties. Real Estate investors that purchase raw land for development, for instance, can see their plans grind to a halt because of a building moratorium or anti-development sentiment. All of which results in downturn in value.

5. Finance

Difficulty obtaining finance or the lenders require more of your capital to top up your borrowings,yers for your rental property if you decide to sell, This type of condition is prevalent at the moment as lenders are devaluing the amount that they are willing to lend against real estate, in most instances I have seen lenders valuations or real estate down by up to 30{7e85073c76c3d79b39e14375ac08e2b172f3657265e07e75076dfac08ff09335} to 40{7e85073c76c3d79b39e14375ac08e2b172f3657265e07e75076dfac08ff09335} of the contract price depending on the region this could be higher again, this trend should alert the investor that the deal they think is great may not be so great after all, unfortunately marketers have this covered as they are dealing with naive and unsophisticated investors by saying that the lenders always value the property for less, if that is what some one lending you money says about your intended investment wouldn’t it be prudent to listen and renegotiate or if that is not possible walk away from the deal.

6. Lack of or no maintenance.

If your property is the run down, get it brought back up to a good condition. This will make it more appealing to prospective tenants

7. Pressure to sell

Highly motivated sellers may reduce a property to a bargain basement price and smart investors watch for property owners who must sell to take advantage of the owner’s strong motivation to quit the property. Always try to avoid ever reaching the moment when you are forced to sell.

Real Estate Investing Terms and Formulas

Understanding the real estate investing terms and formulas is extremely helpful (if not crucial) for brokers, agents and investors who want to service or acquire real estate investment properties.

This is not always the case, though. During my thirty-year experience as an investment real estate specialist I often encountered far too many that had no idea, and it showed – both in their performance and success rate.

As a result, I felt it needful to list what I deem are the top 20 real estate investing terms and formulas worth understanding categorized as either primary or secondary. The primary terms and formulas are the very least you should know, and the secondary terms takes it a step further for those of you who are seriously planning to become more actively engaged with real estate investing.


  1. Gross Scheduled Income (GSI)

The annual rental income a property would generate if 100{7e85073c76c3d79b39e14375ac08e2b172f3657265e07e75076dfac08ff09335} of all space were rented and all rents collected. GSI does not regard vacancy or credit losses, and instead, would include a reasonable market rent for those units that might be vacant at the time of a real estate analysis.

Annual Current Rental Income

+ Annual Market Rental Income for Vacant Units

= Gross Scheduled Income

  1. Gross Operating Income (GOI)

This is gross scheduled income less vacancy and credit loss, plus income derived from other sources such as coin-operated laundry facilities. Consider GOI as the amount of rental income the real estate investor actually collects to service the rental property.

Gross Scheduled Income

– Vacancy and Credit Loss

+ Other Income

= Gross Operating Income

  1. Operating Expenses

These include those costs associated with keeping a property operational and in service such as property taxes, insurance, utilities, and routine maintenance; but should not be mistaken to also include payments made for mortgages, capital expenditures or income taxes.

  1. Net Operating Income (NOI)

This is a property’s income after being reduced by vacancy and credit loss and all operating expenses. NOI is one of the most important calculations to any real estate investment because it represents the income stream that subsequently determines the property’s market value – that is, the price a real estate investor is willing to pay for that income stream.

Gross Operating Income

– Operating Expenses

= Net Operating Income

  1. Cash Flow Before Tax (CFBT)

This is the number of dollars a property generates in a given year after all cash outflows are subtracted from cash inflows but in turn still subject to the real estate investor’s income tax liability.

Net Operating Income

– Debt Service

– Capital Expenditures

= Cash Flow Before Tax

  1. Gross Rent Multiplier (GRM)

A simple method used by analysts to determine a rental income property’s market value based upon its gross scheduled income. You would first calculate the GRM using the market value at which other properties sold and then apply that GRM to determine the market value for your own property.

Market Value

÷ Gross Scheduled Income

= Gross Rent Multiplier


Gross Scheduled Income

x Gross Rent Multiplier

= Market Value

  1. Cap Rate

This popular return expresses the ratio between a rental property’s value and its net operating income. The cap rate formula commonly serves two useful real estate investing purposes: To calculate a property’s cap rate, or by transposing the formula, to calculate a property’s reasonable estimate of value.

Net Operating Income

÷ Value

= Cap Rate


Net Operating Income

÷ Cap Rate

= Value

  1. Cash on Cash Return (CoC)

The ratio between a property’s cash flow in a given year and the amount of initial capital investment required to make the acquisition (e.g., mortgage down payment and closing costs). Most investors usually look at cash-on-cash as it relates to cash flow before taxes during the first year of ownership.

Cash Flow

÷ Initial Capital Investment

= Cash on Cash Return

  1. Operating Expense Ratio

This expresses the ratio between an investment real estate’s total operating expenses dollar amount to its gross operating income dollar amount. It is expressed as a percentage.

Operating Expenses

÷ Gross Operating Income

= Operating Expense Ratio

  1. Debt Coverage Ratio (DCR)

A ratio that expresses the number of times annual net operating income exceeds debt service (I.e., total loan payment, including both principal and interest).

Net Operating Income

÷ Debt Service

= Debt Coverage Ratio

DCR results,

Less than 1.0 – not enough NOI to cover the debt

Exactly 1.0 – just enough NOI to cover the debt

Greater than 1.0 – more than enough NOI to cover the debt

  1. Break-Even Ratio (BER)

A ratio some lenders calculate to gauge the proportion between the money going out to the money coming so they can estimate how vulnerable a property is to defaulting on its debt if rental income declines. BER reveals the percent of income consumed by the estimated expenses.

(Operating Expense + Debt Service)

÷ Gross Operating Income

= Break-Even Ratio

BER results,

Less than 100{7e85073c76c3d79b39e14375ac08e2b172f3657265e07e75076dfac08ff09335} – less consuming expenses than income

Greater than 100{7e85073c76c3d79b39e14375ac08e2b172f3657265e07e75076dfac08ff09335} – more consuming expenses than income

  1. Loan to Value (LTV)

This measures what percentage of a property’s appraised value or selling price (whichever is less) is attributable to financing. A higher LTV benefits real estate investors with greater leverage, whereas lenders regard a higher LTV as a greater financial risk.

Loan Amount

÷ Lesser of Appraised Value or Selling Price

= Loan to Value


  1. Depreciation (Cost Recovery)

The amount of tax deduction investment property owners may take each year until the entire depreciable asset is written off. To calculate, you must first determine the depreciable basis by computing the portion of the asset allotted to improvements (land is not depreciable), and then amortizing that amount over the asset’s useful life as specified in the tax code: 27.5 years for residential property, and 39.0 years for nonresidential.

Property Value

x Percent Allotted to Improvements

= Depreciable Basis


Depreciable Basis

÷ Useful Life

= Depreciation Allowance (annual)

  1. Mid-Month Convention

This adjusts the depreciation allowance in whatever month the asset is placed into service and whatever month it is disposed. The current tax code only allows one-half of the depreciation normally allowed for these particular months. For instance, if you buy in January, you will only get to write off 11.5 months of depreciation for that first year of ownership.

  1. Taxable Income

This is the amount of revenue produced by a rental on which the owner must pay Federal income tax. Once calculated, that amount is multiplied by the investor’s marginal tax rate (I.e., state and federal combined) to arrive at the owner’s tax liability.

Net Operating Income

– Mortgage Interest

– Depreciation, Real Property

– Depreciation, Capital Additions

– Amortization, Points and Closing Costs

+ Interest Earned (e.g., property bank or mortgage escrow accounts)

= Taxable Income


Taxable Income

x Marginal Tax Rate

= Tax Liability

  1. Cash Flow After Tax (CFAT)

This is the amount of spendable cash that the real estate investor makes from the investment after satisfying all required tax obligations.

Cash Flow Before Tax

– Tax Liability

= Cash Flow After Tax

  1. Time Value of Money

This is the underlying assumption that money, over time, will change value. It’s an important element in real estate investing because it could suggest that the timing of receipts from the investment might be more important than the amount received.

  1. Present Value (PV)

This shows what a cash flow or series of cash flows available in the future is worth in today’s dollars. PV is calculated by “discounting” future cash flows back in time using a given discount rate.

  1. Future Value (FV)

This shows what a cash flow or series of cash flows will be worth at a specified time in the future. FV is calculated by “compounding” the original principal sum forward in time at a given compound rate.

  1. Net Present Value (NPV)

This shows the dollar amount difference between the present value of all future cash flows using a particular discount rate – your required rate of return – and the initial cash invested to purchase those cash flows.

Present Value of all Future Cash Flows

– Initial Cash Investment

= Net Present Value

NPV results,

Negative – the required return is not met

Zero – the required return is perfectly met

Positive – the required return is met with room to spare

  1. Internal Rate of Return (IRR)

This popular model creates a single discount rate whereby all future cash flows can be discounted until they equal the investor’s initial cash investment. In other words, when a series of all future cash flows is discounted at IRR that present value amount will equal the actual cash investment amount.

What Is Turn-Key Real Estate

This is a simple concept in which the investor buys, rehabilitates, and then resells a property at a profit. This is also known as “flipping” a home. This process usually happens remotely, because the investor remains in his or her own home, sometimes in a locale where flipping doesn’t make sense, and utilizes the Internet to find and invest in opportunities. The goal here is to make the process of investing in real estate as easy as possible, so all the investor has to do is flip a switch or “turn the key.”

Typically, then, you’re purchasing a single-family home, fixing it up, in order to bring it in line with current codes as well as make it more appealing to buyers. Here’s how it works:

  1. A turnkey retailer or company purchases the property.
  2. One or more investors purchase a share in or all of the shares in the house.
  3. The retailer or company “fixes up,” or rehabilitates, the property to make it current and appealing to buyers.
  4. Once the property is rehabbed, it’s put back on the market for resale.
  5. As soon as a sale is closed, the investor gets his or her money back plus whatever profit was earned, according to what share of the investment he or she owned.

If done properly, this can be a very sound investment strategy. You, as the investor, have earn a profit from flipping the home, and you can have as little or as much involvement as you wish. You can be as involved or uninvolved in the flipping process as you desire, helping to oversee the contractors rehabilitating the home or leaving the entire process up to the turnkey retailer.

Why not just buy a house myself and flip/rent it?

You might be thinking you can just eliminate the middleman, the turnkey retailer or company, and do all of the legwork yourself. While many investors do just that and succeed at it, there are some drawbacks. In most cases, you’ll end up undertaking much more work than you would as an investor. Here is what you would have to do if you became a flipper, rather than utilizing a turn-key solution and having the turnkey retailer handle the process for you.

  • Finding the property: First, you would have to locate a suitable property, which means knowing which neighborhoods are going to appeal to buyers or tenants.

  • Rehabilitating the property: Next, you would have to renovate and rehabilitate the property, making it adhere to current codes and also be an excellent single-family property. This requires proper budgeting and attention to contractors and laborers, something that requires an on-site presence.

  • Marketing the property for sale or rent: Once the house is move-in ready, you would have to find a buyer or a paying tenant to move into the location.

Should you decide to rent out the property, you would be entering a whole new dimension. For more information on turn-key real estate investment where you rent instead of resell, check out our outline of that investment strategy.

If this sounds like a lot of work, that’s because it is. With turn-key real estate investing, as little or as much of that work can be taken off your shoulders and put on someone else’s. Let’s look at the advantages of turn-key real estate investment.

The advantages of turn-key real estate investment

In a full-fledged turn-key real estate investment situation, you are an investor, not a flipper or landlord. You’re hiring someone else to manage the property for you, so all you have to do is collect on the profit. Here are some of the primary advantages of turn-key real estate investment.

Does not require your presence locally

With turn-key real estate investment, you acquire single-family properties in remote locations. This allows you the freedom to remain living where you want, while still maintaining a cash flow from a location that has excellent real estate values. You can continue living in your gated community in Florida, for example, where flipping houses might not make sense, while investing in flippable or rentable properties in Seattle or anywhere else that has a strong demand for such properties.

Easy diversification of your investment portfolio

turn-key real estate investment can be a wise move, if done correctly. One aspect of correctly executing a turn-key real estate investment strategy is investing properly in multiple markets, something that is easy to do since it requires little to no time of your own. The benefits of investing in multiple markets is simple: it provides you with protection from an unexpected downturn in an economy. For example, an investment in single-family properties in Seattle might seem like a guaranteed cash flow scenario, but what happens if Boeing announces major layoffs? If that were to happen, home prices would fall and properties would be more difficult to sell, negatively affecting your profit.

Since turn-key real estate investing makes it so easy to have multiple properties, this is a significant advantage of the investment strategy if you do it right. In other words, don’t put all of your eggs in one basket.

You don’t have to be a real estate expert

When you deal with a reputable turn-key real estate retailer or company, that provider knows the real estate markets with much more precision than an outsider would. Sure, you could do some basic research on an area, checking out the local school ratings, crime reports, and price ranges, but a turn-key provider will know all of that and more; they’ll know the heart of an area, such as why people prefer one neighborhood over another.

The disadvantages of turn-key real estate investment

If turn-key real estate investing sounds like a sure-fire way to make money, you should be aware that there are disadvantages to the strategy. First and foremost, you will come across turnkey retailers that try to maximize their own returns at the expense of cutting corners, but beyond that there are other drawbacks.

The “middle man” needs to make money

The turn-key company is a business, and that business needs to make money. This means buying property at a discount and then selling it to you at a higher amount, of “flipping” the property, often for a hefty profit margin. Following that, the turn-key company can make an additional profit by managing the sale or rental of the single-property property for you. One thing to remember about this drawback, though, is that turn-key companies often have a marketing machine running at all times and can find incredible deals in their market, allowing them to give you a great deal even as the company makes its profit.

You gotta trust someone

There are “shady” turn-key companies out there. These companies will encourage an out-of-state investor to buy a bad property in a bad location, meaning more money leaking out of the investor’s pockets than coming in. You have to rely on the turn-key operator’s knowledge, expertise, and credibility to actually make you a good deal. This means you have to be dealing with someone you can truly trust.


There are serious benefits to turn-key real estate investment, and it can definitely be an attractive cash flow strategy. However, there are also drawbacks to take into account before you proceed with any deals. You will need to investigate the turn-key provider and make sure they are both reputable and profitable, and ensure that the cash flow opportunity they are offering you is actually feasible and realistic. turn-key real estate investment is a fantastic way to make money, as long as you are smart about it and take care of your own due diligence throughout the process.

Essential Features That Make Real Estate

Every now and then persons trying to make up their minds where to put their money ask me if real estate ventures are more or less profitable, compared to other businesses opportunities around.

My response is always that apart from its potential for yielding significant profits, investing in real estate often confers long terms benefits.

I discuss five such advantages below:

  1. You Can Refurbish (to Enhance the Value of) Real Estate
    After you buy a stock, you hold it for a period of time and hopefully sell it for a profit. The success of the stock depends on company management and their corporate success, which is out of your control.

Unlike other conventional investment instruments, like stocks, for instance, whose rate of returns, depend on third parties (e.g. company management), real estate investments are directly under your control.

Even though you will not be able to control changes that may occur in demographic and economic aspects, or impact of nature induced changes, there are many other aspects that you can control, to boost the returns on your investment in it.

Examples include aspects relating to adding repairs, or improvements/enhancements to the physical property and tenants you allow to live in it.

If you do it right, the value of your investment will grow, resulting in increased wealth for you.

  1. Real Estate Investing, When Done Right, is Proven to be Profitable Even During a Recession (like the one we’re in right now)
    It has on several occasions, been used to effect a bail out, from financial setbacks, such as those that many have experienced during the economic downturn happening in Nigeria today.

A considerable number of clients have confided in me that due to the present economic situation, they are not sure of profitable channels to invest their money. Some of them are done with bonds and treasury bills, but are in dire need of a new investment.

We had extensive discussions, and based on my expertise as a real estate consultant, I recommended landed property investment, as the most suitable and secure alternative channel of investment.

This is because, even if all businesses crumble, land will always appreciate greatly. Then to drive my point home, I ended by sharing the following apt quote, by a former American president:

Not surprisingly, the client chose to take my advice – and signed up: it was the obvious, common sense thing to do!

  1. Real Estate Investments Are Immune to Inflation
    In other words, investing your money in ownership of viable real estate can protect you from the harsh effects that inflation usually has on other conventional investments.

This is because the value of real estate generally tends to rise in positive correlation with inflationary pressures. This is why property values and rental rates go up with rising inflation.

The nature of real estate, therefore affords owners the unique advantage of being able to adjust the rates they offer, to match inflation.

Monthly rents for example can be raised to compensate for inflation – thus providing a cushion effect against inflation induced losses that other monetary investments suffer.

  1. Real Estate is Uniquely for Being Universally Acceptable as Collateral, Towards Securing Funding from Banks
    Today, real estate in form of either building or lands, with proper titles (i.e. Certificate of Occupancy – aka “C of O”) is the most recognized and accepted form of collateral in Nigeria – and some other parts of the world.

It has the unique feature of being able to protect the interests of both the borrower and the bank (that’s doing the lending), so that funds can be released i.e. after due verification, and terms and conditions are agreed.

This is one of the key advantages a private C of O has over the global C of O, because the former (i.e. private C of O) is what will be needed by the intending borrower, in the event of any future financial dealings with bank in Nigeria.

  1. Real Estate Investing Allows Use of Other People’s Money
    In other words, you can do it even if you do not have enough money. You just need to know how.

This is possible because real estate is physical property or what is called a hard asset. That is an attribute that makes it attractive to financiers i.e. people with money to invest.

This is why many times real estate products are bought with debt – unlike conventional investment products like stocks which are NOT tangible, and therefore perceived as being more risky to invest in.

So real estate investment can be done using cash or mortgage financing. In the latter case, payments can be so arranged to allow payment of low initial sums, provided by you or a willing third party.

Those payments will be happening on landed property which will continue increasing in value throughout the duration of such payments – and indeed beyond. That further inspires confidence in the minds of those financing the acquisition, that their investment is safe.

Little wonder that real estate investing has continued to prosper for so long!

[A WORD OF CAUTION] The listed benefits notwithstanding, I still tell prospective investors that due diligence is a crucial requirement for succeeding.

Whether you do everything yourself or use industry professionals like me, it is imperative that you exercise caution and arm yourself with relevant information and education.

This is something I advice my clients to do all the time, so they can make good decisions in investing.

The importance of the above cannot be overstated, especially in Lagos where quite a number of individuals, have had their fingers badly burnt, because they failed to take the needed precautions.

Real Estate Investing Skill

Real estate investing is not in any list of high school electives. You can’t get an accredited degree in real estate investing. You won’t find a high school or college guidance counselor who recommends a career in real estate investing (if the guidance counselor understood real estate investing, he or she probably wouldn’t be a guidance counselor!)

The public school system and educational curriculum in the U.S. is only a feeble attempt to prepare students to just “get a job.” Unfortunately there is no class in “Making Money 101.” You don’t have the opportunity to take a class in “How to Become Financially Independent.” No teacher ever taught a class in “How to Succeed When Everyone Else is Failing.” I never learned anything about succeeding as an entrepreneur or becoming wealthy during my 10 years in the university classroom. I only became a multi-millionaire when I learned the skills of real estate investing, and I paid the price out-of-pocket and out-of-the-classroom for that education. I learned these skills in the ole University of Hard Knocks through trial-and-error.

Never disparage the cost of education. There ain’t no free lunch. You’ve gotta get this know-how outside of a classroom, and learning how to make money is gonna cost you. But if you think the cost of education is expensive, you should calculate the cost of ignorance!

However, learning real estate investing doesn’t have to cost you an arm and a leg. Yes, I know, the real estate investing TV infomercials and the real estate investing seminars held around the country charge big bucks for those 3-day seminars and week-long Boot Camps. But that’s pocket change compared to the fees they want to collect from you later. Catch this fact: all the real estate investing infomercials and seminars target you as a candidate for “real estate investing coaching.” That’s where they charge you up to $25,000 and over $50,000 per year for “coaching.” And often you are assigned to some kid “still wet behind the ears” to call you each week or month to hold your hand and whisper in your ear what common sense and a persistent drive should already tell you! I’m not exaggerating the real estate investing educational system, because I know it inside and out. I personally know many of the so-called “gurus.” I’ve been close to it for 25 years. My opinion is that the fees charged are exorbitant because the promoters have found deep pockets in the marketplace.

When I started my real estate investing career 25 years ago, real estate investing TV infomercials were unknown and real estate investing seminars were extremely rare. Back then, Mark Haroldsen followed an emerging trend started by Al Lowry and Nick Nickerson by holding occasional real estate investing seminars across the country. Later Robert Allen expanded the industry. Robert Allen promoted real estate investing conventions in the major cities across the U.S. He found a market for costly real estate investing packages of information with cassette tapes and note books. TV infomercials, expensive seminars, and outlandish coaching fees followed in subsequent years. Would-be real estate investing aspirants today who want more than an inadequate salary from a job in Dullsville often conclude that they have to “pay through the nose” for real estate investing know-how.

However, through diligent searching, these want to-bees often find that this education in real estate investing is more readily obtained from other sources than they previously imagined.

Real estate investing is probably one of the most easily learned skills never taught in school. Real estate investing is probably one of the most prolific careers available on Planet Earth. Because families now live in houses instead of caves, houses available for fix up are everywhere. And probably nothing contributes to upgrading the deplorable housing conditions across America comparable to real estate investing in fix up properties.

The entrepreneur-minded aspirant who discovers the real estate investing industry often catches a vision of life-beyond-a-job. Books and online courses offer an alternative to expensive seminars and coaching.

Real Estate Investing Books,TV Infomercials

Real estate investing has become popularized today because of real estate investing TV infomercials and traveling seminar circuits. But real estate investing has not always been so popular.

In the 1960s, William Nickerson wrote, “How I Turned $1000 into Three Million in Real Estate” and “How to Make a Fortune Today Starting from Scratch.” It was one of the first real estate investing books to get national attention. A little later, Al Lowry authored “How You Can Become Financially Independent by Investing in Real Estate.” Al Lowry might be called “the father of the modern-day real estate seminars,” because he was the first to hold seminars as a result of his book sales.

“Real estate education”

But it was Mark Haroldsen who carried the real estate investing book/seminar thrust to the next level. Haroldsen wrote, “How to Wake Up the Financial Genius Inside You.” If you were tuned in to real estate investing at that time, you remember the newspaper and magazine advertising showing a picture of suave and bald-headed Mark leaning against the front hood of his Mercedes. The picture appeared everywhere in full page ads of major publications. And as Mark began selling his books, he began holding real estate investing seminars. I have had lunch with Mark and Al Lowry as they swapped stories of the advertising blitzes that vaulted them into national prominence for their real estate investing prowess. Mark later wrote “The Courage To Be Rich” and “Tax Free.”

But it was Robert Allen who capitalized on the previous groundwork by Lowry and Haroldsen. Robert Allen was reportedly paid $1 million advance royalties for his best-selling book, “Nothing Down,” a compilation of 50 techniques for buying property with no money. Robert had learned these techniques from several years experience with a commercial real estate firm. He later wrote “Creating Wealth” and “Getting Started in Real Estate Investing.” The Robert Allen Real Estate Investing Seminars became a phenomenal marketing bonanza. Conventions were held in the major cities across the country, like Orlando, LA, Dallas, Chicago and Atlanta. The authors of various real estate investing techniques spoke at these seminars, but their spiel focused on selling packages of real estate investing materials that they offered for sale. Millions of dollars of real estate investing materials were sold at these 3 day conventions. The convention frenzy ushered in what has since become known as “The Nothing Down Real Estate Movement” of the early to mid-1980s.

I keep all of these books in my personal library, and you can probably still find them in your public library and book stores. There’s a lot of great information in these books that can make you very knowledgeable, even though some of the ideas are out-dated.

We are now presented a variety of ways for making money in real estate investing in TV infomercials, books and seminars. Which is best? Who can say? Real estate investing is learned through trial and error. Real estate investing skills and techniques are acquired by practice. I don’t think anyone can dogmatically recommend a technique best for another person. Every real estate investor has unique needs and is in a unique situation. Objectives of real estate investing differs.

However, if you are limited with real estate investing educational dollars and need to generate quick return on investment, I think fixing up cheap houses is an ideal beginning point. Real estate investing in makeover properties generates quick, profitable dollars with low risk.

Real Estate Investing Financing

No Money Down and other ‘Creative’ Real Estate
Investment Methods

For many years, investors have seen the traditional
real estate investment methods described in Part 1
of this article as a lot less than desirable!

They began looking at the prices of houses and
finding methods of bringing the price more in line
with making more money in a faster way.

These savvy investors developed ways to get loans
on properties that allowed them to pull money out
whenever they buy a real estate investment (cash
back at closing) and lower their payments to build up
their cash flow (‘creative’ investing).

They even developed methods of determining a
Sellers motivation for selling – and bought the
property at a discount price.

These creative investors also saw that some Sellers
were not able (for whatever reason) to sell the
property at a discount price, however, they still
needed to get rid of the property, as they didnt
know how to manage it as a landlord, or make
money from it – not that it couldnt be done, they
simply lacked the knowledge of how to do it.

The Seller just never learned how to profit from a
real estate investment.

These investors understood how to make money
from such properties, and did.

They bought the property on discount terms, and
made money from the spread by selling it at retail
price and/or terms (certainly one of my favorite
methods of real estate investing).

Buy Every Real Estate Investment via Discount Price
or Discount Terms.

Several years ago (actually, it really took off in the
1980s), Real Estate Investment Experts began
seeing the potential for making money in bringing
this treasured knowledge to the public in the form of
home-study courses, seminars and Boot Camps.

They found that it wouldn’t create competition for
themselves, as many people, even though they
purchase real estate courses and attend seminars
and Boot Camps, will not actually take the
information and utilize it to make the hundreds and
even thousands of dollars possible for anyone
serious about Real Estate Investing.

These Real Estate Investment Experts (being
dubbed ‘guru’) found that this side of the business
was lucrative often making more income from
teaching about real estate investing than the actual
real estate investments themselves.

It is important to understand that these real estate
investment gurus learned early that they can only
teach others what to do, not be responsible for the
other persons success.

Providing the information to those that choose not
to use it is very similar to the old adage “You can
lead a horse to water, but you cant make it drink”.

Yes, these real estate investment gurus got wealthy
from selling this information, but their theories,
principles and techniques taught thousands of
others (those that take action on what they learn)
how to realize their dreams utilizing their tried and
true methods of real estate investing.

From home-study courses and seminars, to boot
camps and one-on-one training, these methods
have been proven to be not only interesting to
millions of people, but capable of bringing massive
wealth to those that take action on what is taught –
those that go on and actually make real estate
investments themselves.

Knowledge changes things…

This knowledge of no money down real estate
investing techniques being known by thousands of
Sellers has made changes in the industry.

By bringing the Seller into the knowledgeable realm
of Real Estate investing, Sellers now know many of
the methods that the gurus teach.

This is both a blessing and a curse.

To the talented investor, these knowledgeable
people are more likely to work to create a WIN-WIN

Investors that avoid the tricks and stick to the basic
real estate investment techniques and terms that
have been proven to work over and over again,
have proven these powerful real estate investment
strategies work even with these informed Sellers.

Oh, yes, many of these real estate investment
techniques work today, as they have for many
years. So much so that it is almost possible to say
they have become principles; things that work, over
and over, the same way no matter what happens –
like gravity.

However, sadly, they are not really principles, as
several of the real estate investment methods and
techniques that worked in the 1980s and even
through the 1990s are today not as powerful, nor do
they work as often as they did before (although
some ‘gurus’ are still teaching the same methods –
even after 20 years…).

Some of this decline is due to a more educated
society (due to the flood of real estate investment
information available via books, tapes, home-study
courses and the Internet), while some of it is due to
simple changes in policies and laws.

It seems like a wave started late in 2003, the FHA
announced that flips (transactions where investors
buy houses cheaply and sell them at or near market
rates) are “illegal”. (Note that illegal in this context is
not a legal term, but one that has been adopted
from “you are not allowed to do that and do
business with us”.)

The FHAs announcement started a wave of concern
(if not panic) throughout the Real Estate investing

Title and Mortgage companies began to tighten up
their reigns. Many of these companies, in lieu of
direct information, began simply not completing any
transactions that did not follow the traditional real
estate investment system. This made it hard for
investors to complete transactions that involved
simple buy-then-resell agreements (as they are not
really real estate investments, but a rather nice way
to make some fast CA$H!).

In rapid appreciation areas (California and Nevada,
for example), the ability to flip a property all but
stopped (became ‘illegal’). All the ‘traditional’
creative real estate investing methods were virtually
put on hold.

Ingenuity to the rescue, other methods of real
estate investing always seem to pop up. After all,
“Necessity is the Mother of Invention”, and “Where
there is a Will, there is a Way” are absolute