Real Estate Conversation From Inside the Trenches

Last night I talked shop about real estate properties with a business colleague. I've done some work and partnered on some specific real estate properties with this guy in the past so I trust him and he definitely has tremendous knowledge of what it takes to be a true real estate investor.

And most of it is not what the real estate gurus would have you believe.

You must be willing to make tremendous sacrifices and be very dedicated and persistent. I'm not going to say it's hard at least it's not hard to understand.

But for most people and maybe even you the hard part is to remain persistent pushing through all the no's to get to those yes deals which are highly profitable and make or break your business.

It was a very revealing conversation about the overall state of the economy as well as the more micro state of the real estate economy.

He recounted a tale of one of the properties he's had for about 16 months.

He bought the property as a quick fixer-upper with the intention of flipping it fast.

You've probably seen this type of rehab projects on the A&E TV show Flip This House and there's another show called Flip That House.

It was supposed to be a quick fix and turnaround deal…in and out. But it turned into 6 months of hell.

After real estate negotiation, financing, and bringing in a partner he was able to get the property fixed up in what turned out to be a six-month process and the original budget of $40,000 mushroomed out of control into a completion budget of $62,000.

So as you can see both the time estimate and cost to repair budget were way way off. And not in a conservative way.

This has definitely been a super frustrating property for him as evidenced by him talking about various details of the project to me for roughly 35 minutes.

I could sense the pain in his voice.

Tough as it was for me to hear and I'm sure for him to say it was a good thing. It forced him to reevaluate the strategy he was using in this current market.

The biggest problem with those TV shows and what the gurus tell you is major fixup projects like that are basically construction projects. They're a lot harder than the salesman tell you they are.

It's easy when you've been in the business for years and have reliable construction workers, but most people don't. And if you just hire a general contractor most of the time his fees are too high to make it profitable for you.

He's moving into the tried and true, buy it for a small discount and hold it as rental appreciation strategy.

This method has been used successfully in real estate for as long as I can remember because it's fundamental even though it's slow.

Even though it's slow isn't it worth it to you to become wealthy?