What does a plan look like? I’m not sure what anyone else’s plan would look like; I’m only sure what mine looked like when I started. It has been modified over the years as I progressed, as unforeseen circumstances necessitated some agonizing reappraisals from time to time. The key elements, however, are probably similar in everyone’s plan.
First, I believe you should chart your available and foreseeable financial resources. Extrapolating your career path, and charting it against industry norms, can accomplish
this. You should know where you fit into the scheme of things, and, being realistic,
be able to outline this fairly accurately.
Second, start with the desired end result and back into a program to get there. If, for instance, you want to own a building worth $3,000,000 by the time you’re 40, then you know that you will need approximately 25 percent ($750,000) of the purchase price as equity to make that purchase. How do you accumulate this by the age of 40 with your available resources? Your solution could be to invest $25,000 per year until you have a down payment for a smaller investment, then, through astute management,
roll this over with your ever-increasing capital pool until you can exchange into the property you want.
Your plan may be too ambitious, or a little too shortsighted. Don’t worry about it. As along as you set your resource goals realistically, you can fine-tune the plan as you go along.
Where to Start
Start today, looking at what you have accumulated so far. Is it enough to start with? Do you need to readjust your lifestyle to accommodate a pattern of investment? Do you need to sell the Ferrari and buy a Chevy to have the money to accomplish your goals? Are you married? Do you have children? Do you plan to have any, and, if so, how much will they cost? What about saving for their education? Does your wife or husband work? Will he or she continue to do so?
These questions and the corresponding answers will have a vital bearing on your plan and the probability of its successful fruition. If you are married, you will have to get the wholehearted cooperation of your spouse. You will have to agree on the program,
and, further, will have to formulate a plan of dissolution
should you face a divorce in the future. It would Better Believe It! be pointless for you both to successfully implement Your first deal is similar an investment strategy only to find that you will both to a hunter’s first kill. The agony lose it to attorneys in the event of a divorce. Be real-and the ecstasy are all part of istic. These things happen. Plan for the worst, and the deal. you can safely enjoy the present and whatever happens
in the future.
Unless you live in Farmtown, U.S.A., you should start your investment program by selecting an investment locally. Chances are that you are fairly familiar with your local environs, and with a little work can get an accurate handle on its potential for real estate appreciation.
If you live in a small town, chances are that you are part of a larger SMSA (Standard Metropolitan Statistical Area). Any SMSA can be divided into quadrants that can be charted almost uniformly throughout the United States. The NE (northeast) quadrant usually contains the most expensive residential areas, the SE (southeast) quadrant the medium-priced homes, and the SW (southwest) quadrant the “starter” or “blue-collar” homes. The remaining SE quadrant is composed of the old core city area and/or the industrial area of the SMSA. Why is this, and is it consistent throughout the country? The simple answer is that wealthy people do not drive to and from work with the sun glaring in their faces through the windshield. This rule holds true all across America unless there is some natural barrier such as a mountain, ocean, or a river to prevent it. Obviously there are exceptions, and your community may be one of them. The important
thing is that if you intend to invest your hard-earned cash in a community, you had better know what is where, and how and why it is growing or shrinking.
Draw a financial and real estate map of your area, and check your assumptions with the local real estate professionals. Talk to real estate brokers about your program. After all, they will be the ones looking for properties for you to buy.
Enlist the aid of a good investment broker, and take him into your confidence. Convince him that you will stick with him throughout your program if he will commit
to giving your portfolio preferential treatment when buying and selling investment
properties. You will have to pay a broker anyway, so get one on board early, and get him on your side for the long haul.
If you live in a rural farming community, there will be little or no opportunity for investment, and you will have to compete with the local movers and shakers for what limited opportunities there are. You are better off searching in areas of growth and consistent demand. The best examples of this type of area are found in the Sunbelt states, as they are the ones experiencing consistent, annual, net immigration.
Other areas of opportunity lie in states that experience high rates of population turnover, transient areas such as Arizona, Nevada, California, and Florida. Change breeds demand for diverse real estate products.
How to Get There
Having made your plan and done your research, the next step is to actually do it. The first step is the hardest, and the uncertainties are rampant. Remember, real estate investment
is the business of taking calculated risks, and the process is the elimination of as many uncertainties as possible, so that you enter your comfort zone. When you feel comfortable with the resulting facts, understanding the potential problems to the extent that they may be foreseen, then you will be able to pull the trigger with confidence.
The Least You Need to Know
Do the research, as there is no shortcut to knowing firsthand what the shape and texture of your market feels like.
Make a realistic plan, based on your resources, background, and abilities.
Work like mad, keeping in mind that success is a mixture of sweat and common sense.
Stay loose. Don’t become too narrowly focused; the ability to think on your feet and adapt will put you ahead of the competition.
At all times, keep looking for innovative ways to enhance your investment.