SOME TIME TESTED INVESTMENT RULES FOR REAL ESTATE….IN ANY MARKET.

We don’t stop investing in real estate just because the market is weak; any more that we would forget about investing in other asset classes when they experience weakness. So, if you decide to invest in property, experienced or Novice, here are some rules that I have developed and used over the past 20 years of investing and brokering:


1. There are periods of time (in the 7 year cycle which ended in January) where I have invested and other periods where I have pulled back. From 1988-1990 we bought three properties in San Francisco. From 1991-1992 we bought three properties in Scottsdale. From 1994-1995 we bought three properties in Berkeley. From 2000-2001 we bought 3 properties in Scottsdale. In 2005 we bought two commercial properties, two lots, a divorce house, and a foreclosed condo. We sold the condo 30 days later. We have done nothing since April 2005. Be aware of where we are in the cycle.

2. I look at about 100 listings per month, to review 5, to maybe select one to write an offer on, knowing that after I perform all of the due diligence I will probably wind up with nothing. Buying right going in means everything. And, I know in advance that the listing package is filled with lies and misrepresentations.

3. Beware that after a big run up in prices the past five years, foreclosures that everyone is waiting for will still be overvalued and present few good buying opportunities.

4. I have never searched for and acquired “trophy properties” for me or for my buyers. I leave that to the REITs and pension funds who are not investing their own money. These properties offer little upside from the chance to change into a better, higher use potential.

5. I never buy with 100% cash or 100% leverage. If I put down 20% (or 25-30% for commercial) I will probably get the most favorable financing (cheapest money) at the time of the purchase. If I put down 100% cash, my cash on cash return and internal rate of return may not be very attractive. And, I want to know these numbers before I buy.

6. Do not be afraid of negative cash-flow. Gurus think I'm wrong here. But, it doesn't prevent people from making money later.

7. Hire a trusted contractor who comes recommended.

8. Keep transaction costs low by negotiating and shopping.


Getting the right loan going in is very important, so read: WEEKLY MORTGAGE RATES then, How Toxic is Your Mortgage?

Of course, investing in real estate includes Commerical as well.

Now read: With America's housing market clearly cooling, will commercial real estate start to swoon?