The Hindu Business Line : `Real' isn't a four-letter word to abstain from

IF you want to get started in real estate, here is a short programme for you from Robert Shemin: "40 Days to Success in Real Estate Investing," from Wiley (www. wiley. com). "Anyone can follow these ideas and become an investor," assures Shemin. "You don't need experience or a licence... You just require these three things: desire, time, and commitment."

Without desire, you wouldn't be reading this book. Time you'd need to devote is about 5 to 10 hours a week, over the next six weeks, says the author.

Talking about commitment, he frets that most people fail not merely in real estate but also in any business because they try it for only two weeks with a part-time focus. "After a few phone calls, they decide this particular road to riches doesn't work."

Shemin peps you up with wise counsel: "Realise that you don't have to know everything there is to know about real estate... Nor do you have to have a lot of money or credit to get started."

He'd challenge those who bought a house to live in, made $100,000 in three years on it, and still spend 50 hours a week at a job they don't like: "Why don't they spend more time on real estate and less time at jobs they don't like?"

If `real' is a four-letter word that can be attractive, most people are afraid of another such word, `risk'.

They are afraid of `real estate bubble' and `high prices'. That's paralysis by analysis, chides Shemin. "Rather than assess what your risk is for getting into real estate, assess what your risk is for not getting into real estate."

But "Why real estate investing?" Because of several advantages over other businesses, explains the author.

First, appreciation, at 3 to 6 per cent a year, "which means approximately every 10 years, a property doubles in value". Second, tax advantages, and you may have to factor in the law that's specific to the country.

Third, debt or leverage, so you can buy real estate without using your personal funds; "what other businesses can you start and have funded by other people?" asks the author. Fourth, "your costs to maintain the property are generally covered by rents you collect for properties you hold over time".

Fifth, with a house, you're on the supply side; however, "analyse the market to understand how the supply and demand principle works in your locality".

And sixth, "endless ROI possibilities", because you have "three wealth engines running", viz. the property that appreciates, tax benefits, and the use of other people's money.

Shemin's list of ways to make money in real estate has a dozen entries, starting with `buying, renting, and/or rehabbing properties'.

For instance, you can `wholesale', meaning, "you find a good deal, put it under contract, advertise it for more money than you are paying, then close on it with the buyer at the same time that you close on it with the original seller".

No buying, no borrowing money, and no dealing with tenants and contractors, points out the author, as advantages of wholesaling.

Think of `lease optioning', that allows you to lease a property with the option to buy it at a fixed price, below market value; "self-employed people who can't qualify for a mortgage can rent-to-own their home". Do you know that many successful real estate investors are `hard moneylenders', lending money on property, secured by real estate, and also that they broker to get paid for putting deals together?

If the word `broker' puts you off, think of `consulting', because "once you've been in business for a few years, people ask you for advice". And you can charge by the hour or at a percentage of the deal.

Yet another avenue is property management, where you can charge 5 to 10 per cent of gross rent for managing rental property for other people.

Develop land, counsels Shemin, provided you can manage to buy a patch of land, add zoning and sewers, add homes and then sell everything for much more than you paid for it.

"Two of the most lucrative businesses in the world are buying whiskey by the bottle and selling it by the shot, and buying land by the acre and selling it by the lot."

Thus, real estate developers make a lot of money doing not one deal at a time, but by dealing with multiples!

Let me walk you through a few of the 40 days. "You don't even need to get dressed up to find good deals. Just grab a cup of coffee and scour the newspaper," is the lesson of day 7. But on day 4, you would've known who could be the best sources of `real' info!

And on day 8, Shemin teaches you phone calling 101: "Don't try to sandwich calls between all the other things you're doing that day. Make calling a priority... Turn everything else off, shut the door, and focus on just making phone calls... "

Ah, well, do I see you shutting the door already, to read Shemin?

BookValue@TheHindu.co.in

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