People invest in real estate for a myriad of different reasons. Some people have a very clear plan for what they want to accomplish, while others jump in on a whim. It can be very seductive to see the amount of wealth that can be created in real estate. With so many different avenues available to a new investor, which one is right for you?

Do you start by being a bird dog or wholesaler? Many people choose this road because they do not have the access to capital that is required to follow other paths. Do you try your hand at being a landlord? This can be a fantastic way to amass wealth over the long-term but it can be a source of frustration as well. Perhaps you are looking to flip-and-grow-rich. There are a plethora of great deals to be had. The obvious challenge is being able to flip them to a willing buyer at a decent profit.

My Chosen Route

My path was to follow the rehab road. I was led in that direction by circumstance, not by an overwhelming desire to find my fortune in real estate. I was at a point in my life when I was looking to purchase a home for myself. I bought a “fixer” because I was able to buy a house in a better neighborhood by using my own sweat equity. I soon discovered three things about rehabbing houses:

Do What you Enjoy

With so many different aspects of real estate investing, there is sure to be something that you are good at and enjoy. Many people who invest in rental properties find that they are not cut out for it. Dealing with tenants can be very difficult and stressful. You can avoid a lot of that by using a property manager, but that has its own set of problems. Then you have to deal with repairs and vacancies. However, many others have no problem with those issues.

Nothing in life is perfect, but you need to choose what is best for you. Spend time investigating different aspects of investing until you find something that you think you would enjoy. Proceed slowly until you find out if you are suited to that particular investment style. When you discover your niche, run with it.

Finding Your “Why”

In order to achieve any significant goal in life it has to have meaning. New Year’s resolutions are a great example. Most people who make resolutions at the start of the year will break them quickly. They stop smoking for a short time, stick to a diet until they get a whiff of a fresh sticky bun, or they work to get out of debt until they see something on sale that they absolutely have to have.

If you are able to get in touch with your “why” you have a much greater chance of reaching your goal. You may think of investing as a great way to make money, but what will that money do for you? Perhaps it means more time with your family or time to pursue activities that you enjoy. Maybe you have a desire to get out of the rat race that is your typical 9-5 corporate job. Whatever it is, if you keep sight of why you are doing something, you have a much greater chance of following through with it.

What you get by achieving your goals is not as important as what you become by achieving your goals. - Zig Ziglar

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Tags: goal-setting, real estate, real estate investing, rehab, Rehabbing, Richard Warren

From the time I was very young I had an entrepreneurial mindset. I did everything I could think of to make money, from selling Kool Aid in front of my house when I was very little to selling soda to thirsty golfers on the course at the age of ten. It was also at the age of ten that I started working for my brother in his construction company (so much for child labor laws). My job at that time was to hold things while he nailed them or to help with the clean up when a job was done. I wound up working for him during my summer vacations and occasional weekends throughout the year all the way through school. He taught me an incredible amount about working on houses, but more importantly, he taught me to be independent and not rely on a 9-5 job.

I went on to college after high school and tried my hand at engineering. That wasn’t what I wanted and I left school for a while but later returned to study investments and finance. I took a position in the financial services industry and eventually became a Certified Financial Planner (CFP) owning my own firm. I did this for better than 15 years but it was not as glamorous as movies like Wall Street made it seem. I grew tired of the constant struggle to make a living and I was looking for something more.

In my financial planning practice I worked with a lot of wealthy people and came to learn that many of them didn’t find their fortune by investing in stocks, bonds and mutual funds. These investment vehicles were what they were using to diversify their assets after they became rich. Most of those that didn’t get rich through an inheritance had accumulated their assets through a business that they had started or by investing in real estate. It was definitely an “ah ha” moment when I realized that.

As fate would have it I was in search of a home at this time and I thought that I could buy a house in a better neighborhood if I bought a “fixer” and used my construction experience to rehab the house. The movie The Money Pit could have been made about this rehab, if it could go wrong it did. Nightmare on Elm Street had nothing on this house! Somehow I got through it and the house slowly evolved into a nice piece of real estate. I had acquired the “rehabbing itch” and decided that I needed to do it again. The next time was a much better experience and I made a tremendous profit. I remember people telling me that I was out of my mind and that I should buy a house that didn’t need so much work. When my project was finished they were amazed at the result.

Now it is 15 years after that first disaster of a house and I haven’t looked back. I could have gone the traditional route and stayed in the corporate world and spent my life enduring the rat race like so many others. Was it easy? Absolutely not, it was a lot of work and I took a lot of risks that others wouldn’t. I have had several people look at my lifestyle and say to me “you’re so lucky!” to them I say that luck had nothing to do with it. I am where I am because of the choices that I made along the way, some were good choices and some were bad but I learned from them all. Most of all I had a plan and I followed it, I succeeded because I kept going when others would have quit. I remember when I first started as a stock broker an industry veteran told me that if I would spend ten years working harder than other people were willing to work I could spend the rest of my life living like other people were unable to live. No where is that more true than in real estate investing.

I wanted to use this column as a way for you to get to know me a little. In future columns I will share different experiences I have had and things that I’ve learned along the way. If you have specific questions or topics that you would like me to cover please let me know and I will attempt to answer them.

In closing I would like to share some words that have inspired me. They are from the poem by Robert Frost, The Road Not Taken:

Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.

Tags: rehabber, Rehabbing, Richard Warren

We’ve been working hard to build up our blogging team for you and are happy to announce another talented professional to our team of experts, Richard Warren.

Richard has been investing in real estate since 1985 and began rehabbing in the early 1990’s. With a background in financial planning, Richard learned that most of his wealthy clients had acquired their money from a variety of ways, but real estate stood out for him as one of them. He began investing in Long Island, NY, but after moving to the Las Vegas Area, he, of course began investing in real estate and rehabbing properties around there.

Richard has been a great contributor in our forums as Rehab702, and has also participated in our investor interviews know as Meet the Investor. We are extremely happy to have him join us as a part of our blogging team!

Lets all show Richard a warm, BiggerPockets welcome!

For more on Richard, visit our Contributors page.

Tags: las vegas real estate, meet the investor, rehabber, Rehabbing, Richard Warren

It is great to have the opportunity to interview someone with a good amount of rehabing experience. With rehabbing being the hottest craze in real estate (condotel investing seems like a close second), many people don’t see the reality behind the craze. Learning from pros like Richard, whose interview you are about to read should be helpful to anyone considering jumping head first into a rehab project.

Note: For rehabbing advice, help, etc. please visit our rehabbing forums.

Meet Investor Richard Warren

How long have you been investing in real estate?
I purchased my first piece of real estate, a condo, in 1985 as my primary residence. I didn’t do another until my first rehab project in the early ‘90s, that was my first investment.

What attracted you to becoming a real estate investor?
My background is in financial planning, I was a CFP or Certified Financial Planner for over 15 years. I did a lot of investment planning and estate planning for some very wealthy people. What I found was that most of them had acquired their wealth one of three ways:

1. The old fashioned way (my favorite), that is to say that they inherited it.
2. They had started a business venture that turned out very well.
3. Investing in real estate.

When I saw how people had achieved great wealth using real estate and the leverage available to acquire it, I became very interested.

Are you a full time or part time investor?
I wouldn’t call it full-time because I have periods with a lot of activity and other times where I’m just not finding the right opportunities. But I don’t have a regular job anymore, I left the “rat race” in June of 2005. I do other forms of investing and I have built a fairly successful network marketing business. However, I take real estate investing very seriously and find in very rewarding both financially and in terms of personal satisfaction.

How did you get started investing?
I needed a place to live but I wanted to buy not rent. I didn’t have much in the way of money so I looked for something on the low end of the market. I lived in Long Island, NY, one of the most expensive areas in the country at the time. I had a lot of construction experience from working in my brothers construction company as a teen so I thought “why not find something I can fix up?” So that started my adventure in rehab.

Tell Us About Your First Deal.
That first deal was a bank REO property that needed a major overhaul. I was in way over my head both financially and in terms of the amount of work required. If it could go wrong it did, termites, leaky roof, electrical problems, plumbing problems, you name it. I quickly understood why no one bought it. In retrospect it turned out to be a great learning experience. The thing that saved me was the fact that this was where I lived not something I was trying to flip quickly. I took my time and went room by room, new bathroom, new kitchen, every room was gutted and redone. I realized how much satisfaction I received from doing this sort of work. This house was where I received my rehabbers education. I learned what to look for and what to watch out for and in spite of everything it was still a profitable deal! May next deal was much better. It was a HUD foreclosure that I purchased for 124k, did about 15k worth of renovation and repair and sold it for 300k. I was on my way.

What is your focus (area of expertise)?
As you’ve figured out by now, I focus on rehab. I live in Las Vegas but the majority of my projects have been in the eastern Nevada town of Ely, which is about 250 miles north of here. The Las Vegas market has appreciated a great deal so the cost of doing a deal here is very high. Ely, on the other hand, is a rehabbers paradise. The area had been in a major economic downturn for so many years that houses were not only being neglected but many were abandoned outright. Fast forward a few years and things are dramatically different. A major copper mine has reopened, not one but two coal-fired power plants are being built to supply electricity to Las Vegas and Reno and a large natural gas and oil field has been discovered to the east. Ely is now a boomtown with a severe housing shortage. I was ahead of the curve on this and was buying as many of these old houses as I could get my hands on. I was able to get most of them using my own cash because they were so low in price. Some I have rehabbed and rented while I have fixed and flipped others. The housing shortage has caused rents to rise significantly and there are still great opportunities here. I’ve purchased houses for 20 to 30 thousand that are now worth 75–100 thousand in less than two years and I am still very bullish on the area.

What do you look for in an investment?
As a rehabber I look for three things, structure, condition and price. If the basic structure is not sound I walk away. Next is the condition, does it need extensive rehab or is it mostly in need of cosmetic improvement? I’m ok with either I just need to factor those things in when considering the profit potential. The last thing is price. I look at the potential sale price, the cost of the project and desired profit. From these numbers I determine the price that I am willing to pay, if I can’t acquire a property at a comfortable price I walk away.

How many deals have you done in your career?
All told, I’ve done about a dozen deals. That isn’t a great number but most of those have come in the last two years. I am very selective and do a lot of my own work. Because I’m doing deals that do not have a high carrying cost I can take my time. I hold most of them long enough to be treated as a capital gain rather than ordinary income. I also hold a property as a rental if the cash flow is better than average. The deals I’ve done that did have a lot of carrying cost I’ve worked to turn around quickly.

Do you have your real estate license?
I do have a real estate license, but I do not act as an agent. I have the license to gain knowledge and access to information. I also have the ability to obtain referral fees by passing deals along.

What advice would you give to a beginning investor?
Don’t be afraid to act, the toughest thing to do is pull the trigger on your first deal. On the other hand don’t be afraid to walk away if it isn’t right. I remember my dad telling me that a once in a lifetime opportunity comes along about once a week, the trick is to recognize it, be open to it and, if appropriate, act on it. Another wise man once said that the best decision is the right decision, the second best decision is the wrong decision and the worst decision is to make no decision at all. As the commercial says, “Just do it!” The only way you will truly learn is by doing, I learned so much more from my mistakes than I ever did from my successes.

What was your toughest deal?
My toughest deal was my first, hands down. I was in so far over my head. You learn from your mistakes so I earned a PhD on that one. Funny thing is, it was still profitable!

What would your dream deal be?
I would love to take a historic building and turn it into apartments or condos. I’m actually looking at such a deal now. I’m not optimistic about getting this particular building on terms favorable enough to make it work but there are plenty of others.

Is there anything else you’d like to share with the rest of us?
Watch the money! Money is probably the biggest issue facing a rehabber. There are plenty of deals out there but loans for rehab projects are very costly and can turn a great deal into a loser very quickly. That’s why I try to do as much as I can using my own cash.

As you’re a rehabber, is there anything you’d like to share about rehabbing?
Watch your emotions, they can cause you a lot of grief. It is very easy to get caught up in the excitement and become overly optimistic about what things will cost and how long they will take. Many people have the rehab fantasy, “I’ll just buy this run down house and fix it up and make a huge profit.” Many people watch shows about rehabbing and flipping houses and think there is nothing to it. Remember that these shows are entertainment and there is a lot that they don’t tell you such as real estate commission or financing costs. A lot of people make a lot of money doing this but many more lose their shirt. Take the time to educate yourself and assess your own ability. Start small and be sure that you have the temperament for rehab before you find yourself in a difficult spot.

Additional Information
The following link is to an article in Realty Times about Ely, NV. The reference in the article to an investor on a roof is me and the gentleman being quoted, Sean Brown, is a friend of mine.

Richard Warren
Rich Kat Properties, LLC
(702) 281-3704
rehab702@yahoo.com

Tags: CFP, condo, license, Nevada, real estate, real estate investing, real-estate-license, rehab, rehabber, Rehabbing, Richard Warren