the-abcs-of-real-estate-investing-ken LifeFeeling

find what fits my parameters. You might think that’s a luxury only established investors can
afford. Not so. The person who works for me is a broker and he gets paid when he finds a
deal that closes. Anyone can afford this kind of help. And helpful it was for both of us.
Together we were able to focus our search, hold each other accountable, and improve our
chances of success. Now, we meet for an hour every week. It’s not a huge commitment of
time, but it adds a lot of value.
For me, it helps a lot to have a precise idea of the kind of property I’m interested in. It
saves a lot of time, keeps my broker and me focused, and helps make the work manageable.
I am very specific about what I want to consider. For example, we’re looking in one market
right now for a 150-plus-unit community in a good location with high visibility, drive-by
traffic on major streets, and constructed after 1988. Even more specifically, I’m looking for
owner-managed properties where the owners live out of state and have just one or two
properties in the entire city.
These parameters are not arbitrary. I want properties that are of substantial size so we
can afford to have a professional property manager on site to handle the day-to-day issues.
That works well within my company’s structure. The year 1988 is important because many
properties older than that take a lot of money to bring up to the standard of other apartment
buildings in the area. You will find it’s normal to replace roofs, paint, install new carpeting,
and so forth. But if all the other apartment buildings in the area have washer-dryer hookups
and yours doesn’t, you will either have to spend lots of money remodeling and updating if
possible, or charge below-market rents. Neither is a good alternative. See what I mean about
knowing your market?
By targeting properties that have owner-managers who live out of state, I have found
there is a higher likelihood that they are not managing the property to its full potential.
There are a number of likely reasons for this:
• Travel. Often people buy property in hot markets that are far away from their own
hometowns and underestimate how much time and energy is required to manage it. Add in
travel time and expenses to that, and you can see why absentee ownership is prevalent.
• Complacency. It’s easy for out-of-towners to lose interest and become complacent
over time. Especially if they are making money and their property isn’t one they drive by
every day.
• Perception. Many owners wrongly believe that the investment real estate business is an
investment and not a business. They think it is like a stock or a bond that they can buy and
forget. In truth it is a business they need to operate.
• Lack of information. This actually happened with a property my company manages;
the owners have no idea at all about the market, the market potential, or the condition of the
property itself. The owner bought it sight unseen! That is beyond my comprehension.
Learning about your market to the level of detail that will make you successful in this
business continues during this phase of the process. At last, you are drilling down to
individual properties and there are a lot out there. You’ll want to make sure your target
market isn’t too big or you will end up considering thousands of properties. Recall in the
last chapter the concept of markets and submarkets. In San Diego, you have the Gaslamp
Quarter, Balboa Park, Sea World Area, Old Town, and Coronado Island. In New York, you
have Greenwich Village, SoHo, Upper West Side, Upper East Side, TriBeCa, Harlem,
Midtown. Then there are submarkets within those areas. Know where you want to be