Browsing: Rate of return

Commercial Real Estate
4

It’s no secret that the real estate market is at its worst since the great depression.   It doesn’t help that most of the media seems to set their sights on publishing only articles that highlight the latest crash or the biggest loan scandal.  Defaults are rising, foreclosures are at an all time high and Realtors are leaving their jobs to pursue careers in acting.

It’s not really as bad as it seems though.  At least, not in the long run.  Boom and bust cycles are nothing new, and thankfully there has always been a boom that followed a bust.  In part due to the investors who sweep with the time tested strategy of “buy low…sell high.”  The time has come to prepare for the next boom cycle, and those who can invest now will find great wealth in the near future.

You may be saying, “Thanks for the tip, Craig.  Tell us something we don’t know.  Problem is, we don’t have any money to invest.  How do we do it.”  Great question.  Let’s start by discussing how not to do it.

How Not to Get Money to Invest

A simple search on BiggerPockets for the term “bulk reo” yields over 400 forum posts and articles about buying or flipping bulk reo portfolios.  Go out further by searching “bulk reo” on Google and you’ll find just under a half million results.  Take a moment and read a few of them and you’ll notice many newbie investors stating their plan is to go out and search for the mother lode of REO portfolios, buy them at four cents on the dollar and then wholesale them at twenty five cents on the dollar.  They all plead for other people to invest with them stating if they could just pool some money they could go out and take over Citibank’s entire portfolio.  Mostly, those posts go unanswered or just get ignored, the would-be investor tucks his tail and moves onto the next brilliant money making scheme.  That’s a great example of how not to do it.

I don’t mean to pick entirely on newbie investors because there are many seasoned investors out there using the same strategy.   We all understand the math of “buy low and sell high” but it begs the question:

How is it that Sam Zell, even during bankruptcy, can raise $600 million to buy property in this market when you can’t raise a dime?  The answer: he’s got a plan and you don’t.

That is… until now!