Many times a real estate agent who has been successful in brokering real estate transactions finds that a property meets some real or perceived investment needs. They purchase that property, allowing their real estate business to lead them to become a real estate investor.
My experience was flipped. I first became a real estate investor, based upon a windfall of money that came to me, then became a real estate broker after I lost it all!
Winning a lottery when I was sixteen years old began my investing career. In the Western states, the government initiated a lottery, which was called the “Simultaneous Oil and Gas Lease Drawings.” These drawings were prevalent in the early 70s, and these government-sponsored drawings gave the opportunity for an individual to submit $20 for a chance to own an oil and gas lease that may or may not be valuable.
The leases may or may not have had any potential for oil or gas, but the government offered them to all entities including major oil and gas corporations along with private citizens. Some of these leases were more valuable than others. There was a private, free, call-in service to determine which leases might be the valuable ones. Obviously, on the more valuable leases, there were more lottery tickets submitted and a reduced chance of winning. However, I always lived by one of my father’s credos, “No guts, no glory!” I called in for the best lease to set my ticket on.
$20 was hard to come by for a sixteen year old. I mowed a few lawns, and I borrowed $10 from dad. I mailed in my $20 ticket fee. Being sixteen, I promptly forgot about the lottery as more pressing matters (cars, girls…what else was there?!) took priority.
Approximately four months later, a man showed up at my home unannounced, saying that I had won a ten-year lease in Campbell County, Wyoming, and he wanted to talk to my father about negotiating a purchase. This man had a $10,000 check with him to buy the lease that night. My father, being one of the world’s greatest negotiators, said that if someone makes an unsolicited offer and flies unannounced from New Mexico, maybe that offer could be bettered. He promptly asked the man if we could get back to him.
My father researched the oil and gas leases surrounding my winning piece of ground; he contacted the owners of those properties around mine. He negotiated the sale to Atlantic Richfield (ARCO), who owned other leases in the area. ARCO gave us $36,000 for the rights to this oil and gas lease. My father also negotiated a percentage of any oil and gas found on the property over the next ten years.
My sixteen year-old response to all of this excitement was versed in the classic 70s vernacular, “COOL!” I could actually see my car – a Porsche, of course. I could see myself driving down the coolest of all college campuses and attracting the most beautiful co-eds!
Hopes were diminished when my father, who loaned me $10 of the $20 initial investment, mentioned ownership rights to the lease, thus cutting my proceeds from $36,000 to $18,000. In the 70s, you could still get an excellent used 914 for $18,000! I presented this game plan to my father. His response – “You need money for your future, seed capital for business, and a savings account for college!” I felt nauseous.
I explained how necessary it was to have a car. He calmed my anxieties and said that he had not forgotten about buying a car for me. However, his priority was to obtain a growth vehicle for our money, and in the 70s, real estate was said to be a fast-moving vehicle.
A family friend and real estate broker helped us find a four-plex in El Monte, California. Upon seeing the four-plex, my father explained that I would be the new manager for this property and that I would be learning tricks of the trade as an owner. This sounded all too boring to me – and none of it included the part where I got my car!
From the proceeds, my dad graciously held out $400 for my first car. This allowed me to get a USED Mazda! It was not a chick magnet. I made the best of it with my father’s advice. He told me to take the young co-ed by the four-plex. He said to point out the investment potential, then she would understand my investment prowess and income potential. This would help me achieve great success with her and life!
At this time, the real estate agents said that listings were scarce. An agent caught me on the front lawn of my new building. We listed the four-plex and received offers almost immediately. We took the best and sold it. At the closing, I realized that I had more than doubled my money! Upon inquiring how this could happen so fast, our real estate agent said, “This always happens! Real estate is an amazing investment.” I had to agree because our savings account balance proved it!
A twelve unit property was available down the street from the original four-plex. Based upon my almost super-human abilities as a real estate advisor, we negotiated and purchased it. Within months, we had a buyer who wanted it much more than we did. This time we tripled our down payment investment!
Our next purchase was 91 units in downtown Los Angeles. The miraculous quick-turn of a hot Southern California market, once again, left my savings account brimming over.
I now realized that I knew everything there was to know about real estate and I did not need my father’s advice in investing and constant nagging to slow down. So, I nicely bought out dad and started investing my own money. The first “investment” went to a new, European delivery Turbo Porsche Carrera direct from Stuttgart, Germany. This super car was a pre-mature bucket three investment. The day that it arrived – I showed it off to everyone by parking it at my new college fraternity house, Kappa Alpha at the University of Southern California. There was no one bigger than I was!
Anything that I bought in real estate seemed to turn to gold! I had advanced my “empire” to include other states including Arizona and Washington. Since real estate seemed to always go up unabated – I foolishly bought properties without even looking at them. I hired individuals to paint and repair the properties so we could generate higher incomes thus higher sales prices, believing the only way to properly repair a property was to clear it of tenants. Negative cash flow was not a concern because of high appreciation rates and the quick turn, short holding periods.
Then came 1979….
18% mortgage rates changed my real estate world. I was caught with many vacant apartment buildings in numerous states. I had brokers telling me that the equity I had expected to receive was not available; in fact, some of the properties were actually worth less than the high leverage loans that I had on them. Losing a property in foreclosure or selling in a distressed market is one of the worst experiences that a real estate investor could ever have. I graduated from USC with a diploma in real estate finance and a life lesson in real estate speculation!
It was at this time that I decided to make up with my father regarding my past arrogance and to once again seek his advice. My father thought that I was young and smart and I could be at the top again; however, neither of us realized that when you lose everything, you can actually go way past zero!
I had to make a huge sum of money each month before I could even buy groceries. I was left with no seed capital and had only a checkered past of real estate experience. I asked my dad what kind of job could help me make enough money to get out of trouble. He suggested real estate sales would be good for me. He said since I had lost more money than most people would make in a lifetime, that it would probably provide a valuable frame of reference to anyone that I represented. It seemed to make sense to me. With my experience, I found that I had a leg up on the competition.
I went to Long Beach, California to start my new real estate career. Long Beach was the location of one of my unsold real estate investments that I could actually move into! It was a large 1930s California Mission style home. Nothing had been done to the home since World War II! Upon moving in, there was a ton of work that needed to be done to make it acceptable to a new wife who was used to my “mucho dinero” days. The only way to get enough money to refurbish the home and pay off my extremely large debt was to become a very successful real estate agent.
My dad, once again, intervened with some sage advice saying, “You can become anyone you want to be by just doing what they did!” With that advice, I took many real estate agents out to lunch and arranged meetings with the top agents from all over the U. S. and Canada. From this information, I put together the wisdom necessary to become a successful real estate agent.
Today, I coach real estate agents on the systems and strategies that were developed to gain the majority of market share in my region and update it often.
It was at this point in my life that I found that earning real estate commissions was a business that I had to pay attention to every day. My real estate systems are based around pro-active, seller lead generation systems, which allow broker/agents to acquire a larger percentage of listings in my neighborhood.
Once I had the listing leads as an agent, I developed a better listing presentation to gain a larger percentage of signatures on listing contracts at the correct price. When that happened, I had a larger percentage of signs up to create more buyer phone calls. With the systems in place to eliminate the non-profitable buyers and work only with the profitable buyers, I found that I could close transactions in less time than a majority of my competitors. Good systems and checklists coupled with monitoring by an assistant, allowed me to “duplicate” myself and delegate some of the responsibilities that I was not excited about doing. This allowed me to better utilize my affiliates in teams and free up more time to conduct pro-active seller lead generation. As a single-man office, I was able to do the production level of most full offices and still find time to invest with a lot of net proceeds.
While earning money as a real estate broker, I was actually able to view the best inventory for free. As I was creating pro-active, seller lead generation, I found that I was actually able to find “off-market” inventory. Some of this inventory was available to me for purchase. The only problem was finding the down payment….
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