investing

I want to be honest with you. I often hear about investors that find a great deal and start evaluating it. They approach the deal with incredible energy and excitement. Nothing can stop them!

Then, sometimes they hit a roadblock. An obstacle.

Sometimes I see investors that let a single obstacle derail their deal, and they give up. I hate to see it, but it happens.

Now, I ALSO see many investors and my students who plow right through obstacles, and are very successful. These wealthy investors think creatively, and find alternative solutions to problems they face. For example, I have a group of students in Seattle who recently hit an obstacle on a deal, and instead of giving up, they used their education, and found a new solution that will net them even more profits.

This group of MWI students is known as Infinite Partners, LLC, and they recently showed us how you to create big profits by thinking through problems on a “stalled” project. The partners are Laura and Supin Ko, Tim Andrews, and Keith Zeiler.

When they found the property, it had been on the market for over 1,100 days. They uncovered this hidden gem using simple MLS search techniques that expose properties that aren’t living up to their full potential.

After their original plan for the property hit a wall, they didn’t give up like most investors would have. Tim Andrews said, “Originally, we intended to build 33 apartments and condos over 5,000 square feet of commercial and retail space. Once we were through the city’s free review, we discovered that the property had issues that prevented us from putting a building over it. We were hopeful that we would get around this, but it was not possible. We went back to the drawing board and looked at the permitted uses for the zone and found an even better use that would produce great results within the limitations of the lot (3 story office building targeted at the medical and dental fields, an under-served need in the community). Mike teaches us to think through our problems and when we did this, we hit a home run!”

By using their skills just a little differently than other investors, the forward thinking team of Infinite Partners, LLC stands to make a huge profit. Their short-term (if they sell the building) potential would produce a profit of about $400,000. Their long-term profit would be about $800,000 and cash flow.

Tim Andrews said, “Although we were nervous, we trusted in the system to help us through the process. Since then, we have attended five more of Mike’s Degree Camps and have gained a huge amount of knowledge about the process of developing land and investing in properties with Higher and Better Uses. This same education is available to all investors who have the desire to get it.

Tim had some simple advice for other investors. “Being committed to the system and thinking through challenges as Mike teaches us has opened the doors to our future as fantastically profitable investors!”

I am so excited and proud of our students when I hear stories like this! I think the lesson we can learn today is to always, always, ALWAYS be creative when we hit a roadblock. Never let a naysayer or an obstacle slow you down!

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The market around the country has faced some unique challenges as of late. I have really been thinking about what has contributed to the slow down in real estate. I have also tried to determine what has contributed to the slow down in investor’s actions.

As far as I have been able to tell with my research, the single biggest cause of our slowdown has been the crisis in the mortgage industry. Mortgages the last couple years (before this year) were given out far too liberally. Products were create to get people in homes and properties that were not ready for the responsibility of ownership. Lenders gave loans to people that they had to suspect couldn’t handle the debt service of their loans. Especially considering the adjustable rate mortgages, prepayment penalties, historically low consumer credit scores and little or no money down products being given.

The free-lending practices combined with available housing and decent interest rates set America on fire. Prices escalated incredibly around the country. The euphoria helped to cause an unsubstantiated increase in value causing many to buy in a market that was doomed to have the bottom fall out. Sure enough, as adjustable rate mortgages increased payments and the market began to fall, owners were not able any longer make their payments or refinance to get a fixed mortgage at an affordable payment. The foreclosures began.

Foreclosures have continued at an alarming rate causing a banking crisis that we probably haven’t seen the equal of since the Carter-lead interest rate problems of the late Seventies and early Eighties. The difference is that in the high interest days, banks still wanted to lend but borrowers couldn’t justify the high mortgage payments. Today, banks don’t seem to want to lend.

I find it amazing that an industry that makes money lending doesn’t want to lend anymore. We have watched them transition from being far too liberal to far too conservative over the last 6+ months. Essentially, far too many people could get mortgages before and far too few can get them now. I personally believe that lending is what got bankers into this mess and lending is what is going to get bankers out of this mess.

If we look back to the aforementioned Eighties crisis, a technique emerged and became extremely prominent in the real estate market place. That was seller financing. Banks couldn’t lend due to rates so sellers became the banks. I am mentioning this because the market today is another prime example of a situation where people can’t or won’t get traditional financing. Those that are able to seller finance, as a buyer or seller, will have opportunities for success on a level not seen in over 20+ years in the real estate industry.

The question isn’t whether seller financing will become a predominant part of today’s real estate landscape. The question is whether or not you will participate in this amazing technique and the success offered by today’s market place. Seller financing is just one of the amazing factors that I believe will be a hugely successful investing environment. Below is a list of some of the factors I will be focusing on in my blog that will cause great success for those that still want to practice profitable investing.

1. Meeting seller’s needs in seller financing

2. Creating mortgages without the banking industry

3. Making those mortgages “recyclable”

4. Capital raising

5. Taking advantage of deep discounts in the market place

6. Utilizing falling construction costs

7. Capitalizing on ever-increasing rents

I hope you follow along as I discuss each of these opportunities over the next several weeks.

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