Through my 20 plus years in real estate investing I have developed a “handbook” if you will, on how I approach an investment. This fundamental approach keeps me disciplined & out of trouble. I am not swayed by bubbles, suckered into so called “hot markets” that turn cold & spit so called “investors” (I call them speculators) out like watermelon seeds.
There are 3 basic ways to make money in real estate:
1) Appreciation: If you are fortunate enough to own property in a strong uptrend, you can make a lot money. Strong appreciation covers up mistakes & makes everyone look like a genius.
2) Bargain Purchase: This is the favored approach by many Real Estate gurus. The “motivated seller” sells you their property for significantly below what it is worth, due to some stress, lack of education, lack of information, etc. I define a bargain purchase as at least 20% below fair market value minus repairs.
3) Change of use: This is where huge amounts of wealth can be generated. When you can create a higher & better use for a piece of land or building either by repositioning i.e. rezoning Farm land to commercial, converting a warehouse into lofts, etc. There can be tremendous leaps of value. This is where I focus most of my efforts these days & where my intention is to become an expert.
Ideally I like to have 2 out of the 3 conditions in order to proceed with an investment. I am the kind of guy that wants to focus on both managing risk as well as creating potential upside profit.
We are witnessing an economic cycle where too many people focused on the potential profit & not the downside risk.
These are unfortunate times for many & also exciting times for SMART & DISCIPLINED investors.
My intention is to share my knowledge, experience, & current activity as a full-time professional investor.
Ellis San Jose
