You may think that dealing in real estate, I’m happy to see anybody come in the door (or over the Internet) as long as they have money. Nothing could be further from the truth. Imagine a house-painter - one who takes pride in his work - with a client who wanted a house painted mango orange. Do you think that house-painter would point to that house as an example of his or her best work? Probably not.
I’m the same way. Let me illustrate by telling the story of two investors. You pick whom you think I like working with best.
Let’s start with a couple who called me about a property in Syracuse, New York. She was a social worker and he was an Internet researcher. It was a classic bad news/good news situation. The bad news was that, though they had been married a while and had three kids, they hadn’t put much aside for their retirement. The good news was that one of their parents had passed away and left them a sizable inheritance with which to rectify their financial situation.
These people looked upon real estate investing as something akin to a trip to Disneyland. They are throwing money into it with abandon. They wanted to buy houses, fix them up, and sell ‘em for a profit, and then start over again. They look at real estate investing with an unalloyed optimism, thinking of it as a money machine. When I asked them how well they wanted to do, they said, “As well as we can.”
Does that sound like heaven? A couple with money, optimism, and time.
Let’s contrast them with someone working from a different perspective, a woman who called me about the same multi-unit property in Syracuse. She’s a very studious investor. When she called, she interrogated me about our business model. She spent a lot of time mulling over a potential investment, even though she is already familiar with that particular area. She visited the properties to see their condition in person. She sent a contractor over to get an estimate of how much it would cost to get the property in shape. She even took the time to research the title, making sure DBNR actually owned the property and that there weren’t any liens against it.
She spent a long time on the phone, explaining to me with her extremely meticulous strategy. She buys properties and holds them until they increase in value, unless she derives significant cash flow from them. She determines whether the cash flow is sufficient by looking at what she gets in tax deductions and her return over three years. No matter what, she says, she needs to see a realistic exit strategy within five years.
Whom do you think I enjoy working with more? The answer next week…
