Go From “Woulda, Shoulda, Coulda” to “Did It!”

“You must live in the present, launch yourself on every wave, find your eternity in each moment. Fools stand on their island opportunities and look toward another land. There is no other land, there is no other life but this.” – Henry David Thoreau

From the mid-80s to early 90s, I’d take the Long Island Railroad into Manhattan five days a week. Just before the train would dive under the East River, we’d pass through the southwestern-most part of Queens. There, you’d see rows of zero-lot-line homes, one against the other in a brown and grey landscape.

And I’d think to myself, “Those homes are closer to midtown Manhattan than the Manhattan neighborhoods of Riverside and Soho. They are going to soar in value.”

Time would prove me right. Western Queens skyrocketed. Major corporations built skyscrapers by the river, facing Manhattan, and home prices rose five-fold over the next 15 years. With a little leverage, it was an opportunity to make 50 times your money. With a system to reinvest your growing equity, you could make hundreds of times your money.

And what did I make from the boom I had correctly predicted?

Zero Dollars and Zero Cents.

I got the big picture right, but failed to profit because I failed to act. And that wasn’t the only time.

I wanted to invest in South Florida real estate as far back as 1993, when I first moved here. But it wasn’t until 2001 that I actually got started.

What held me back? The same two things that kept me from investing in Queens. Namely…

1. I had no knowledge.
2. I had no money.

I’ve met a lot of people who’ve been in the same boat – people who’ve missed tremendous opportunities because they didn’t know how to get the knowledge and resources needed to do the deals they wanted to do.

So I’d like to suggest a simple way to steadily increase your investment knowledge and access to money in the New Year – so you’ll be ready to act when your next opportunity presents itself.

Carpe Deal-em

If you have ambitions in real estate that are beyond your grasp at the moment, the best way to close the gap is to come up with a simple plan of action. Then carry it out every day. Once I started to do that, I stopped watching opportunities pass me by.

I began by talking to investors, attending real-estate-related events, reading books, and listening to tapes about real estate. This soon gave me enough knowledge to establish my key criteria: I would buy only cash-flow properties below market value in up-and-coming neighborhoods, and I would fix my interest rates.

I scoured a few neighborhoods in my rapidly growing hometown. I became knowledgeable about local values, cultivated relationships with potential partners and investors, and ended up buying a few properties at good prices.

Then, when my town got too hot to find cash-flow deals, I bought in a town 10 miles to the north and 10 years behind my town in terms of appreciation. When that market got too hot, I adapted again. I researched and traveled to value markets in other parts of the state and in other states. I made new contacts and found new deals.

This persistent action steadily increased my knowledge, experience, and wealth. And it helped me continue to make good returns the last few years, even while prices in South Florida peaked and began to fall.

Whether you’re a new investor looking to do your first deal or an experienced investor looking to move up (from single-family homes to apartment complexes, for instance), you can use this same incremental approach to get where you want to go.

1. Write down a specific goal. (E.g., I will acquire at least $500,000 of under-market-value, cash-flow residential real estate in a value-and-growth market in 2008.)
2. Identify the market you want to invest in. (E.g., if you live in a bubble market, you may want to pursue only short sales or bank foreclosures in your area. Or you may decide to buy in a value-and-growth market in another city or state.)
3. Develop relationships with investors experienced in the type of real estate – and the market – you’re interested in.
4. Get recommendations from these investors on worthwhile educational materials for your type of real estate – from courses to books, seminars, and mentorship programs.
5. Join local clubs involved in your chosen type of real estate. If no local club exists, consider starting one. In the meantime, you can make contacts through online networks.
6. Let family, friends, and associates know what you’re doing, and find out which of them may be interested in lending on your deals or investing in them as equity partners.
7. Identify one or two improving neighborhoods that you’ll want to focus on. Using public records, or with the help of a real estate agent, start to accumulate data on recent sales of your property type in those areas.
8. Get to know the average dollar-per-square foot sales prices and gross-rent-multipliers in your target market. (If a property produces gross rents of $24,000 a year and it sells for $240,000, that means it sold for a gross-rent-multiplier, or “GRM,” of 10.) If you’re dealing in commercial property, get to know the average cap rates too. (The cap rate is the net operating income of a property divided by its sale price.)
9. Spend at least 15 minutes every day educating yourself about your property type.
10. Spend at least 15 minutes every day looking at new for-sale offerings via websites. (Check the online version of your local classifieds and realtor.com for residential, and Loopnet.com and Propertyline.com for commercial.)

There’s no need to feel overwhelmed. You can put these simple steps to work every day in 2008. Once you do, your knowledge and confidence – as well as the network of people who can help you do deals – will steadily grow. Then, when a solid opportunity presents itself, you’ll be ready for it.

[Ed. Note: Justin Ford is an active real estate investor and the author of Main Street Millionaire – a deep-value residential real estate education program. He is also the chief editor of Secret Value & Growth Cities, a guide to the best-priced real estate growth markets in the U.S. today.]