What Are You Waiting For?

Think about the market pricing for anything real estate-related three or four years ago.  Someone with limited investment funds had virtually no way to penetrate the market as real estate prices assured that all but the large institutional investors were priced out of the market.  My, how things have changed.

I’m going to veer off the beaten path here and talk about sidelines.  You know, the things that mark the boundaries of any sports field.  The sidelines are where the players who aren’t quite good enough to make the starting team stand, waiting for their opportunity to get in the game.  If the player they are meant to replace never comes off the field, the reserves never get the chance to play, and they never get the chance to get better.

For years, we small investors watched as the big institutional players got all the playing time, and scored all the touchdowns, hit all the homeruns, (insert your favorite sports analogy here); in essence, bought all the best notes.  Then came the subprime crisis of 2006-2007, when most of the big players got badly injured and, in some cases, got knocked out of the game permanently.  The playing field has changed dramatically, and we all now have a chance to get in the game.

As the Editor/Owner of the NoteWorthy Newsletter, I receive dozens of phone calls every week from people who really want to play, but are afraid to leave the relative safety of the sidelines.  My question to every one of them is the same:  What are you waiting for?  Prices to come back up to where they were?  How do you expect to grow wealth with a sell low / buy high mentality?  Nothing ventured, nothing gained, I say.

Part of my business is trading REO (real estate owned) from banks, mortgage companies, etc. that has become such a headache the holding companies just want to be rid of it.  Because they didn’t play the game smart the last few years, they are now being penalized (sticking with a sports analogy) and are losing millions in these sales.  As Warren Buffett likes to say, buy when everyone else is selling, and sell when everyone else is buying. 

Me?  I’ve decided to start buying.  Each time I bid a portfolio of REO being liquidated by a bank, I search out properties that are close to where I live.  I guess you could say I like the home-field advantage.  I then submit my bid for the individual property along with the bulk prices I get from my institutional REO buyers.  Just this week I bid $5,000 for a property listed for $35,000 and tax assessed for $50,000.  I should know next week if I’m awarded the bid. If I am (and there’s a good chance I will be), I plan to provide owner financing to a credit-worthy borrower.  If I can get a $5,000 down payment from them at time of sale and finance the rest on a 10 - or 15 - year note, it pretty much looks like a slam-dunk to me. 

There are also opportunities in buying existing notes that we haven’t seen in years.  My strategy above just fits better with my business focus right now, but you can find similar bargains in notes.  It takes determination, focus, and execution.  Oh, and you need to take a risk now and then.  And you certainly can’t do that standing on the sidelines.

Once a year the professionals in the note business get together for the NoteWorthy Convention.  Think of it as the Super Bowl for getting educated on the note business and all the opportunities therein.  Visit www.noteworthyconvention.com for registration information.

Avoid fumbling your investment decisions by attending the convention and getting first-rate coaching from the most successful professionals in the business.  If you’re still standing on the sidelines, it’s time to buckle up the helmet and hustle on out there.  Take that ball and run with it.  What are you waiting for?

("Reprinted and used with Permission of the author - 10-2009")