Building Wealth - Cutting Costs

As anyone who knows my true identity could attest to I dearly love to hunt and fish. For many non hunters it is hard to understand how much hunters truly love the animals we hunt. In fact an non hunter would be surprised how much sorrow really is felt in the heart of a hunter that sees a wounded animal or an animal that is killed with no purpose on a highway by a car or truck.

OK so what in the world does this have to do with real estate investing? It has a great deal to do with it. I want to discuss with you the concept of “investing in land for generations to come”. One of my biggest motivations for acquiring wealth is so I can purchase tracts of undeveloped land, improve the wild life habitat there and do all I can to make damn sure it stays undeveloped for as long as possible.

There is of course the potential to profit from this approach if you want to. Land that can be used by hunters and is not marred by human interaction is becoming more and more scarce. I want you to understand that you don’t need to buy hundred acre tracts to participate in this type of “investing” a 1-5 acre lot in the right place can be something you turn into a sportsman’s paradise. The goal would be to find land that either adjoins protected public land or perhaps land that is so rugged that developing it will be so costly as to protect it from development.

Such land is still available in many places all over the country. In fact the harder it is to build on the less it costs and the lower the cost of the taxes on it. Switching your mind from “property flipping” to the long term investing and you start to see some real opportunities. Let’s look at them in two categories, one as investing for money and the second as investing in the future.

Strictly looking at a profit stand point, if you find some nice land especially some that adjoins public and protected land like national forest, state parks or national timber lands you can be pretty sure that simply waiting for a few years will certainly see a return of investment if you want to then sell the land. Now take some steps to manage the land for wild life and you can really see a great return. Put in some feeders, clean out some of the brush and plant beneficial trees and plants in its place and perhaps construct a low impact shelter for camping and you start to really see the potential to not only sell the land at profit but to know that your buyer will want to preserve the land as well. If you can go as far as providing a year round water supply on land that previously had no water on it your return goes way up.

Now turning to the concept of investing in the future I get a lot more excited. To me owning the land is about also caring for it and doing the things I mentioned above. Such land is beautiful and a solid way to hold and insure your wealth. Yet if you really care for and manage the land you have a chance to leave behind to your family something that can continue to provide for wildlife and sportsmen for centuries. Three hundred years from now your great, great, great, great grandson could be teaching his son about wild life, nature and preserving beautiful things because of something you started. Perhaps while showing him an ancient digital photo of you and your family and telling the story about how you gave this gift to the family.

Isn’t that a bit more exciting then a CD, government bond or flipping a multi tenant property?

My view is people should work hard to build and preserve wealth. Yet as you do it is important to think beyond the return at the end of the year, we need to think about the legacy we create. Just something to think about as you build that empire.

So where do you find land like this? You have to hunt for it and venture out into the rural world yet there is at least one very good source to search for and find land like this. It is called United Country and my only warning is if you love country living or long for a place in the mountains you can spend a day just browsing on it. Anyway I would love to hear the thoughts of other nature lovers and sportsman about this type of “land investment” so please give me your feed back below.

We talk a lot about building wealth and being prepared here and when it comes to both a true master is Donald J Trump. Well I just found this very cool, entrepreneurship test provided for free by Trump University. I took it and got an over all score of an 8 out of a 10 and in the areas where I scored low I very much agreed. These are actually areas I have “shored up” these specific areas with team members, partners and employees.

I was very impressed with the accuracy of the profile produced. The entire test is 36 simple questions you just click where you feel the area applies to you on a 1-5 scale. It took me perhaps 5 minutes to complete. If you want to see how you stack up against Donald Trump then give his entrepreneurial test a shot.

This post is not about setting your budget for a mortgage, taxes, insurance, etc. That is a number you need to come up with before you start even looking for a home. You need to determine what you can afford then follow this golden rule, SPEND LESS then you can afford.

What this post will do is help you find the right home for the right price with in your means. So let’s begin.

First, write down what you want this includes,

• What area you want to live in
• Your price range
• Bedrooms, Bathrooms, Garage, etc

The typical things you are looking for in a home.

Second, start to form your own idea of what is available in your area. Cruise over to Realtor.com and search properties. Drive the neighborhoods you are interested in and get prices on the houses with signs in their yards. Do your home work before you speak to a realtor. Visit new model homes, get pricing on everything. Learn what homes are like just above and below your target budget. If you are going to spend about 150K, then look at homes in the 90-250K range. Learn your market before you even think about spending a penny. Take as long as you need to do this well. Write down homes you could see yourself buying and see how long they take to sell at their price point.

Third, call a few different real estate agents (get referrals if you can). Talk to at least three, tell them exactly what type of home you want to buy, the neighborhoods you want to look it and the schools you want, etc. Be very specific. Tell the agent that you know about the phrase, “buyers are liars” and find it offensive! (I will explain buyers are liars at the end of this article). Then ask the agent what price range you should expect to have to pay to get that type of home.

In other words DO NOT let your agent start the whole interview by asking you what you can afford, you tell an agent you have a 125-150K budget and odds are you will find yourself in a 160K home! Remember you now know your market and you should get a number back from your agent that matches what you already know. Many times the number is much higher and this tells you that your agent is NOT LISTENING TO YOU, they are not understanding you. In many instances they are therefore not right for you.

Never let your agent call the shots control the relationship from the get go. They are experts, they are supposed to know more then you your preshopping will tell you if that is the case. Just because they know more then you does not mean they know what you want. Never let an agent say crap to you like, “you don’t what this” or “you really need to consider paying a bit more”. My accountant knows more then me, my financial advisors do to. Yet they work for me and are employed at my pleasure, I do not let them forget it.

Your agent may want you to sign a buyers agent contract. Never sign one that forces you to buy a home via them, one that protects you from going direct to the seller is fine. So is one that requires that if you buy a house they show you that your work with them on it but stay away from those that want a 180 day exclusive agreements. Explain you will be fair, that you want the right place for the right place and will give them the time they need to get the job done. Yet be clear they work for you and reserve the right to fire them at any time.

Fourth, choose the agent you get along with best that was at least close to the price range you expected to hear when you answered the question. Now take your maximum budget (lets call it 150K but it could be anything based on where you live and your income level, etc) and cut it by 10%! So that would in our example mean down to 135K and now your mission is to find a home that compares well with others selling at 150K. You can ALMOST always do this. Not in every market and not all the time but in most instances you can always find a deal like this.

Fifth, when you find the home you want to buy make your offer at least 10% below the asking price. So on this 135K home you now offer about 123K! All the seller can do is say no, you can always offer more, what do you think is going to happen? Do you think they might be so offended as to raise the price to 180? The only risk is someone else will buy the home. So what you must be willing to walk away from any deal. Most times when you low ball at precisely 10% the agent on the other end “gets it”, they generaly counter offer in the middle some where, you just might get that home worth 150 that is listed at 135 for 130.

There are always deals

Such deals are possible and in fact anyone can get one! I have done it on the last three homes I purchased. I bought one for just 84K and sold it for 109K just two years later with no improvements other then a deck. I bought another for 135 that was appraised at 159 and sold in three years later for a few pennies under 200K.

My latest find was a house easily worth 170 that was listed for 139 and I paid get this 120! How come, the listing agent was an idiot! The home had a second living area, a huge yard (1/3rd of an acre average lots are 1/10th), and a home office. The listing agent listed the house as a 3 bedroom, 2 bath, 2 car garage home, brick and vinyl. Nothing more! The guy should have been shot but it was my gain, we offered 115 they countered at 120 and I jumped on it.

The owners were days from having to start paying a second mortgage and I got the place for a song. Honestly there wasn’t another house with all of this going for it under 200K with in 10 miles of it but the buyer had to sell. The house was on a culdesac so it got no drive by traffic and the agent clearly blew the marketing.

So there you go a blueprint for finding the best deal on a home. Will it work in those white hot markets where houses sell in 24 hours? Not usually but generally just outside of those areas there are deals just waiting to be had. Be flexible, consider your options and spend LESS then you can afford. With a little work you can really get a great deal and build a solid investment from day one. Just remember real estate is not a game, you are not in it to be nice or make friends or even help people. You have to be tough, stand your ground and walk away if you need to.

Part of the benefit of having extra money is the ability to spend some of it. I believe in cutting costs, investing wisely and building wealth and security. Yet I also believe in enjoying life along the way, if not then what is the point? Any of us could die tomorrow so the key is to balance living for today with planning for tomorrow. So what are some of the things I spend more money on then I should or some of the stuff I just buy when I am bored? Here are a few,

• Starbucks Coffee - I will admit it, I am a caffeine fiend. When I made a lot less money Starbucks was a luxuary that I enjoyed once in a while, now I don’t go a day without a Vente Cappuccino or two. This is extravagance, a waste, a senseless spending that I end up with nothing to show for. Still it makes me happy and I have no real debt to worry about any more, I don’t stop investing to fund it and I only pay in cash so I have the money in my pocket each week to cover the expense.

• My Animals - I have dogs, cats and a lot of reptiles. As a child I wanted to be a herpetologist (a biologist who studies reptiles) but the lure of business was too powerful and I never went to college to pursue the biology degree. When I didn’t have much money and was in debt heavily I kept no pets, today I have an abundance of animals around me. I do breed the reptiles and one day they may pay for themselves but for now all the animals are an expense that never returns any money. Yet the dogs and cats bring joy to me and the family and the reptiles allow me to fufil my childhood dream of being a researcher working with snakes.

• Gadgets - I have all kinds of electronic do dads and I buy something new at least every month. Cameras, software, media players, etc. I just love technology, I like seeing what you can do with it, what you can create and what the latest craze is before it hits. Some of the stuff like my Blackberry has a real purpose for work and organization but most is just for fun. I didn’t need a Sony Alpha DSLR but I bought one because I wanted it. I always pay cash for these gadgets but I must admit I blow money on them. Most are never used to turn a profit I just enjoy having them.

Now let’s say I am bored and just want to go out bumping around with my wife to shops and what not. Doing so will almost always result in spending money! We are all human though and just sitting at home counting money can get old and you don’t always want to really plan an activity so “shopping” (our parents window shopped but we seem to have failed to inherit that ability) has become an American past time. Here are some things I have done to allow me the activity with out totally blowing it.

• Silver Coins - I am a huge fan of American Eagle Coins and often during a jaunt out I stop by one of several local coin shops and buy one or three of them. I keep them in plastic tubes and have been doing this past time for about 10 years now. I occasionally buy more numismaticly valuable coins, mostly older silver dollar and silver half dollar coins. The Eagles have a fixed value against the silver market price (at least newer ones do) so they are decent investments. The other coins have a bit of “subjective value” based on both the silver and collector markets combined. Still even they have a basis based on the price of silver. I will never make a mint on this but there is a value to these coins that will grow. So I get to browse, spend money and not just throw it away.

• Houses - I shop for houses all the time and the beauty of this is multiple. There are always countless new model homes to take a look at, walk around in etc. You never impulse buy a home so that is nice, I shop a lot and buy very seldom. The biggest value is I know my real estate market cold, I know exactly what different types of homes in different areas sell for. So I do know a deal when it pops up. This is the best rule I can give you if you want to invest in real estate some day, window shop houses for a year or so first. Record how long those “great deals” take to sell and keep your whits about you. In time you find gems and when you do you will know it.

• Books - I love knowledge and I love to shop for books, both audio and print. To help with my addiction I shop mostly at Half Price Books so I pay less per book then buying new. A used book is no big handicap to reading it so I just can’t see paying full price unless I want a new book. Then here is the best part, some of these go into my home library but others I read, am done with and sell them back to half price books. They generally pay about 20% or what I bought them for.

So there you go some ways I admit to just blowing money and other ways I stave off boredom with shopping that doesn’t just reduce my net worth dollar per dollar.