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Today I am going to show you how to become a millionaire...
STEP ONE: Get a million dollars.
What? Ok, it's a tad more complex...just follow along...
If Ed Asner's eyebrows dressed in drag singing downtrodden show tunes with a thick Scottish accent can generate 120 million internet hits...you can sell ANYTHING in this country. You just have to find its appeal. Right now Real Estate is about as appealing as Susan Boyle doing toe touches in a G-string. But that voice of hers...oh so beautiful, so perfect, so magical, and oh so uplifting...see, that nasty G-string visual is almost gone.
Quiz: What's at the root of Real Estate's appeal?
Answer: MONEY. The solution and cause for all of the world's problems. So I've heard.
It's been my experience that most people tend to like money. It doesn't even matter the denomination. A large duffel bag filled with any manner of rectangular green bills is sure to bring a smile to most any face. I had this epiphany last October as I was swirling my ketchup soup with a worn plastic spork in my cardboard apartment. Instead of trying so vainly to make money, perhaps I should SELL money! BAM! Genius.
And thus I decided to quit selling real estate. Real Estate just doesn't make people smile the way a bag full of money does now does it? Last October my company began selling money...and man, we have discovered that people really like buying money!
Let me save you some time. Money can't be printed easily. The cloth paper jams the copier. Money can't be "found" easily as the Brinks drivers carry Mace. (Mace stings!) The banks won't give you money unless you pass them a well written explanation note and even then the money you get comes with explosive paint packets that discharge and leave a stain that lasts for weeks. Why did I wear the white pants!?!
Properly Purchased Property Pays Plenty.
Say that five times fast. C'mon, ply it!
For the last few years the Phoenix housing market has hit more snags than Susan Boyle's comb...wait...is there a reference limit? It got so bad around here mortgage brokers began posting the "lack of interest" rates. That's what mortgage brokers do while on their smoke break at Bennigans....or the car lot...furniture store....we miss you guys.
Beauty is in the eye of the beer holder. We found a pocket of Phoenix real estate that wasn't going to win any beauty contests...but when it opened its mouth, money came pouring out like a Donald Trump pinata. One of our clients, a twenty year "Legend" in Phoenix Real Estate Investment circles, approached us last fall with a challenge. "Find some real estate that rents for significantly more than it costs to hold onto. I don't care what it looks like, or where it is. It just has to make money."
Game on brother!
Before we proceed with today's story you must know a couple of basic facts about the Phoenix Metropolitan Housing Market:
In the Phoenix Metropolitan market we have three distinctly different housing areas. The North side, the East side, and DA WEST SIDE BABY, A'IIGHT! (Note: there is no longer any South Side as it seceded from the union in 2005). The North side is home to Day Spas, Porsche dealerships and breast enhancements. On the East side you will find water parks, strip malls and the southern half of Salt Lake City. Over on the West Side...uhm...you will get shot. Ok that's a bit extreme. You will "probably" get shot.
If you are ever lost in Phoenix, listen for gunshots. If the gunshots become more frequent, you are heading west. This is of course an exaggeration, one unfortunately enhanced by silly things like statistics.
We are a numbers company. As we studied the Real Estate market's freefall these last few years we noticed that Newton's Law was being violated by the West Side. It was falling at a significantly faster rate than the rest of the valley. Numerous factors account for this...different story for a different day...but if you want to find the bottom of a big metro market, find the spot that's falling the hardest. We did.
We uncovered a tight geographic pocket of depreciation, where housing prices had fallen so hard, so fast, that the homes could be acquired for FIFTY PERCENT of their previous value. Oh...oops...let me rephrase that: Fifty percent of their 1982 value! Read again: NINETY EIGHTY TWO VALUE. Yeah, half of THAT value. 50%. We're going back in time folks! Cue that annoying Huey Lewis song.
I am writing this today because the anomaly is now over. The prices have now corrected. The bottom for that area is in the rear view mirror, probably forever. We've moved to a new shopping area for investments, but from October of 2008 thru March of 2009...my friends, we slaughtered that market.
You know the old saying, "Give someone a fish, and they will eat for a day. But...teach them how to clone a fish's DNA, then genetically manipulate the string, and add a dash of growth hormone...then they're putting the Gordon's fisherman on food stamps."
In October we set a course for profit. We fished. We bought homes for $30K. We bought homes for $25k. We even bought homes for less than $20K. Never less than 1000 sq feet. Never less than 3 bedrooms. Do you know what $16 per foot looks like? It's rectangular and green.
For a long while, we seemed to be the only people buying these homes. Over the course of four months, this particular investor client spent more than $1 million acquiring, fixing, and then renting out dozens and dozens of homes. Pay attention and you will get paid. We purchased almost exclusively from banks. The banks misunderstood the election year cycle, and the annual Holiday lull. They buried prices just for the sake of sales expediency. And for a brief moment in Phoenix housing history, the bottom was visible. Then it vanished.
Those same houses are today subject to bidding wars sixty participants strong. 40 - 60 bids on the first day is common right now. Competition is rough and tough. Prices have recalibrated into the $40K-$50k range. It's odd to think January was 50% less than April. But it was!
Like Willie Wonka said, "If you want to view Paradise, just look around and view it."
The properties we purchased won't be featured on the cover of Better Homes and Gardens. They may seem more fitting for Guns and Ammo. To me, beauty is beauty in spite of perfection. Which explains my attraction to one legged women ("Hop in Eileen!") and why a block home with all windows intact, tile floors, and a flame burnt no maintenance lawn scar landscape makes my heart tremble like Mohamed Ali guzzling a ten gallon pot of espresso. Perfect rental potential!
When a home could be had for $30k. Then rented for $800 monthly. That is beautiful! Because nothing is more beautiful than a shiny green dollar bill! Well, except maybe a large pile of shiny green dollar bills. How about a fountain of them?
A few words about the product:
These are "mature" homes. Built in the post war era, late forties to mid-fifties. My father once told me, "An old house is like your old lady. Don't expect any appreciation." But when it cash flows...suddenly you don't quite care about where the market is headed. If it makes money, it makes cents.
These are block construction homes. It is mere coincidence that the same construction material used to assemble prisons was first field tested in this part of town.
This particular part of town is known as gangland to most Phoenicians. We beg to differ. It is simply Hispanic. And if you think a double income household with hard working parents doing thankless jobs for minimal pay to raise their children with a solid roof over their heads is a bad thing...then this game is not for you.
I mentioned we bought almost exclusively from the banks. The banks OWN the Phoenix housing market right now. They will be gone in time. Grab a nipple and start sucking while you can! They are too big to succeed.
Bank owned properties can be NASTY. Just touching a doorknob can spawn a Ringworm Brothers Circus in your intestinal tract. I found myself questioning house layouts, "if a human being defecates in the living room, is that a bathroom now?".
Here are a few Bank Owned (REO) buying tips:
If you encounter a kitchen with appliances and countertops still in it...beware, the original owners are nearby and not quite done moving.
Chalk outlines of a body are a great way to keep other bidders at bay. Always carry chalk.
Pit Bulls are not always friendly. An aluminum bat will change their attitude.
Everything ugly can be fixed with paint, tile, and a shitload of Clorox.
I've seen homes that would make a billy goat puke. And I've also seen what they can generate cash wise when revived. For those of you still standing around with a pocketful of million dollar listings, awaiting the paytrain that used to make regular stops. Quit it. Stop. Become aware of your surroundings. Like Sam Kennison said, "Move to the food!". If the market is declining, let your standards go along for the ride.
We helped a very wise man invest over a million dollars in real estate this past Holiday season. By my calculations, he has just about doubled his equity position as of today. This recent influx of investor hordes, arriving late to the dinner table, are currently bidding values up...up...UP... in a frenzy of purchasing activity.
Does this mean the entire Phoenix housing market is on the rebound? Hell no. It just means that this little tidal pool of profit is running dry, and we must move on to the next one. Where might that be? Ha ha...we'll tell you in a couple of months!
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Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.