Anticipation – One Key to Real Estate Investment Success

11 Mar

Post written by Sean Terry. Follow me on Twitter.

“A Good Hockey Player Plays Where the Puck Is, But a Great Hockey Player Plays Where the Puck is Going to Be”

—Wayne Gretzky

Sydney Crosby

Sydney Crosby captured the essence of Wayne Gretzky’s famous quote and became a hero among Canadian hockey fans all over the world.  What an amazing game it was, just minutes into overtime, every spectator on pins and needles and with one swift flick of the wrist the Canadians won the Olympic Gold Medal and beat the USA! (I was bummed)

So what does this have to do with real estate you ask?

The game…absolutely nothing. Anticipation…everything!

Here’s the story, as you know, or might not know, Mike and I own Fortress Investments — a small real estate investment firm based in Arizona, (not to be confused with Fortress Investment Group out of NY) we’re fairly aggressive investors that offer turn-key cash flow properties to investors across the country.  In early 2009 we were clipping along buying, renovating and selling nearly 5 to 7 properties a month through

Then in late March of 09 we heard word of an appraisal change that was to take place on May 1, 09.  It was said that it could slow the process of obtaining conventional financing.  I remember being slightly nervous, but overall not worried enough to halt or slow down our current operations.  We consulted our lenders and they said it would only be a small bump in the road.  This change called HVCC or the Home Valuation Code of Conduct snuck up on us so quietly but its effects were so devastating it’s hard to put it into words.  It was as if business just stopped and nothing could get done in the way of financing.

At the time we had roughly 15 properties that we purchased, renovated and sold to investor/buyers that were obtaining conventional financing to close the deal.  We were expecting over $500,000 in proceeds from these sales over a 30–45 day period.  Not a bad payday, we also had multiple other properties in escrow to purchase.  Well, the infamous “run-around” began. To make a loooong story real short ALL of these deals blew up due to the appraisal guideline change.  We spent months trying to nurse each deal along.  As a result was we spent way too much time & money swimming up-stream!

I believe that for every adversity there’s an opportunity and looking back on the situation we could have anticipated and adapted a lot quicker than we did.

1. I know this is cliché, but never put ALL your eggs in one basket.  Our only sources of short term income came from a small amount of cash flow and selling properties to investors using conventional financing.  When it became next to impossible for investors to obtain financing, the tough got tougher.

2. We spent way too much time trying to force a round peg into a square hole thus costing us precious time and money.

So what did we finally do?  We’ll, we realized through some quick research that the deals getting done were FHA loans and cash transactions.  So we repackaged our properties, made deals with tenants to move out and we renovated some further to sell retail on the MLS.

We also created a website where we sell Arizona wholesale properties 30%-40% below market value to cash buyers. We started to aggressively market to find these cash buyers.  We also stepped up our marketing to find motivated sellers and away we went.  We’re now were able to generate income from 3 different sources:

1. Selling properties to FHA/first time home buyers via MLS

2. Selling Properties to cash flow investors

3. Selling wholesale properties to cash buyers

It took us nearly 8 months to adapt and make the necessary changes to succeed.  This is way too slow…

I share this story with you because becoming a full time real estate investor takes intestinal fortitude.  You have to have thick skin and be willing to adapt & change to the market place.  Information and education is key to growth and recognizing opportunity.  When adversity hits, look for the opportunity and make changes necessary as fast as possible before too much time and money is lost.

So do you have the ability to be a “great” real estate investor and anticipate where the next big opportunity might be?  If so, I’d like to hear your prospective.

Happy Investing!

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One Response to “Anticipation – One Key to Real Estate Investment Success”

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