Real Estate Problem Solver
By: More articles by kismet

Introduction

There are many areas one can invest in. Since I was 15 years old I have looked for the fastest most effective way to accumulate a lot of wealth with the least amount of risk. I am now 58. While looking for this road to truth I spent a lot of time in the school of hard knocks. The school of hard knocks is a very interesting but painful school to attend. It is also the most expensive way to learn something but when you graduate you have a PHD in what to do and not do with your time and money. The schools I attended were: Investing in businesses as a silent partner owning my own businesses working for another family memberin my case my father buying publicly traded stocks and securities penny mining stocks commodity trading investing in gold and silver real estate private lending real estate development real estate remodeling buying foreclosure properties. I also worked as a real estate problem solver/matchmaker bringing business owners together with business buyers and matching up real estate owners with real estate buyers.

Writing about all of these activities would take an encyclopedia so we will limit this essay to the kinds of situations you can run across in the real estate school of hard knocks. I will present my solution with the given situation. There are more than one possible solution and I invite you to come up with other possible solutions as you read. If you get some value from my experiences that will hopefully lower your tuition to the real estate school of hard knocks. Feel free to email me your comments alternate solution or stories. Do please let me know that it is all right for me to publish them.

My Real Estate Philosophy

As a way of introducing myself I thought you might find what lessons I have learned after all these years of real estate interesting. Buy real estate instead of stocks bonds mutual funds or commodities. When you pick a winner in one of these nonreal estate areas you can make 510 times your money. When you are wrong in one of these nonreal estate areas you can actually loose up to 90% of your money. In real estate if you are not greedynot trying to get rich quickin one year you can make 100 times your money on the upside. The downside risk is only based on how well you looked at all the possibilities ahead of time. If you did the downside risk is reduced to only the holding time to fix a mistake. If you rush in and do not explore all the possibilities of a business venture you can actually loose 100% of your money. In my mind an upside of 100 times profit is better than 10 times profit.

My philosophy on real estate ownership has changed in the last 15 years. I used to think that selling at the top of the market was the smart move and buying in the crash. Now I feel that buying when prices are down is still a smart move but never selling is the way to go. In order to hold on to a property in a down market you require proper planning to survive the crash. This I call a back door or emergency plan. This is have a plan and knowing what you will do if everything goes wrong with you original plan. When you have a backup plan you rarely need it. This is the basis of my philosophy. With this understanding you might more clearly see why I did what I did in these situations.

The Stories and article:

The area of real estate investing is one of the most complex because it is a combination of law and real estate. It is one of the most interesting because fortunes are made and lost in this area and the numbers are so enormous. Lastly it is an area where crooks can make a lot of money and many times get away with it. Following are some stories (case histories) I have dealt with and some articles I have written on the subject of fraud in real estate. Finally I have included an article on the basics of foreclosures and real estate in general for your interest. I hope you enjoy them.

The Stories:

Story #1:
It was early March 2000 and I received a call from Kevin. He said that he had heard about me from some mutual friends. He wanted to speculate in buying HUD houses (Properties that the Government had foreclosed on). He wanted to buy them fix them up and then sell them at a profit. He had heard that I had bought many foreclosures in the 1970s and 80s and he was hoping I could advise him. We met for lunch and he told me his life story. The important part of this conversation is that he had bought a boarded up 14 unit apartment building in downtown San Bernardino across the street from one of the roughest high schools in California.

By the end of the meeting I had figured out that he had overpaid about $75000 for the building he had already wasted $200000 trying to remodel it and it was still $100000 away from being finished. He had bought it 1.5 years ago and a large part of his costs was the interest on all his loans related to this project. He was now broke and in deep trouble but in his mind the badly needed money was coming.

It is interesting to note where he got the money to invest in this project. 4 years earlier he was given money to buy an apartment building by his father. He was given enough money that he only needed a very small $150000 real estate loan to purchase a building in Pasadena that cost him a total of $525000. In order to buy the San Bernardino rehab project he first refinanced the first trust deed on the Pasadena building and jumped the loan balance to $385000. When that money was gone he borrowed $74000 as a second Trust Deed on both the Pasadena and San Bernardino properties. By the way that loan cost him 15% interest and $15000 in up front fees to get the money. Before we parted I told him that he made a very expense mistake in buying San Bernardino. I explained that from the day he bought the building it was a sure bet that the project would fail. I then had to tell him that I would not lend him any money on San Bernardino to save his butt.

Over the next 2 months I received periodic phone calls telling me the progress of the fund raising. One of those updates I was told that the existing 2nd Trust Deed lender was saying that he might give Kevin the added $100000 he needed to finish the project. At the same time Kevin also believed he had found a bank that might refinance all the loans of San Bernardino. The difficulty with the bank loan was that the appraisal fee was $3000 and it had to be paid in advance even to just apply for the loan. Again Kevin asked me for money. Again I refused to put more good money down his black hole.

Then one morning I got a call from Kevin If I dont make the $2000 payment to the 2nd trust deed holder he will start foreclosure in 2 days. Kevin also told me The 2nd trust deed lender said that he would buy the Pasadena apartment building for what I had