Why Most Real Estate Agents Don’t Know Diddly-Squat
Issue #1994
- WEALTHY: 4 money-making property investment rules (Justin Ford)
- HEALTHY: A "perfect" food with a host of health benefits (Dr. Al Sears)
- WISE: Admiral William D. Leahy on the atomic bomb
ALSO IN THIS ISSUE:
- How being bold got me "in" with Dustin Hoffman (MaryEllen Tribby)
- Michael Masterson on chicken entrepreneurship
- It’s Fun to Know… about Michael Masterson’s travels
- Add "cynosure" to your vocabulary
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"This is the biggest fool thing we have ever done. The [atomic] bomb will never
go off, and I speak as an expert in explosives."
Admiral William D. Leahy in 1945
Why Most Real Estate Agents Don’t Know Diddly-Squat
(Plus Other "Experts" to Be Wary of)
By Justin Ford
Want to find a good investment? Don’t call a real estate agent. Your chances are one in 20 you’ll get someone who even has a clue. The same goes for stock brokers. Ninety-five percent of them are salesmen. They’re not investors. They wouldn’t know a good deal if it bit them on the seat of their pinstriped pants.
Here’s the number one job of real estate agents: to help someone buy a property at the highest possible price. The higher the price, the more money they make.
Here’s your job as a real estate investor: to buy a good property at the lowest possible price.
See the disconnect here?
Now, the fact is many real estate agents do indeed provide a valuable service. But they provide it on a retail level for people who are buying homes for themselves. It’s only the rare agent - perhaps five percent at most - who understands what an investor needs in a deal.
What do you need?
To buy below market value when a market is fully valued and to buy deeply under market value when a market is overvalued. In most cases, you should also buy at a price where the property cash flows with a margin of safety built in. (That’s even if you only intend to flip the property and never intend to rent it out.) You should also fix your interest rate for longer than you intend to own the property.
Follow these simple rules just for starters, and your chances of losing money are slim while your chances of making money are much greater than for the chase-the-market, buy-and-hope speculator crowd.
Unfortunately, many beginning real estate investors don’t get it. I met two last weekend who are both holding negative-cash-flowing, brand-new condos no one wants to buy. These women don’t know each other and they’re in different cities. Yet they’re both in bad shape thanks to pre-construction deals sold to them by brokers at the height of the boom. "Pre-destruction" would be a better name for them.
To make matters worse, their real estate brokers put them in touch with mortgage brokers who helped them get loans that would make the properties more "affordable."
Both women are now holding their cash-flow-negative properties with neg-am loans. That’s where you make your minimum payment on time and the amount you owe goes up month after month. What’s more, they’re usually adjustable-rate mortgages. So they start with an introductory rate (a.k.a. "sucker’s rate") and then climb like a monkey.
Here’s some more broker baloney some investors fall for: They take the "economic forecasts" of broker trade groups seriously. The National Association of Realtors, for instance, probably has over 100,000 members. They also have a powerful PR machine, and they have a guy they call their "chief economist."
His name is David Lereah, and he’s quoted all the time in The Wall Street Journal, business mags, the business sections of all the major newspapers, you name it. But don’t be fooled. He’s about as independent as Fidel Castro’s economic advisers. He’s expected to spout a party line and that’s just what he does.
That’s also what a lot of other real estate organizations do. They’re always saying "buy"… but almost never talk about buying right. Yet that’s the most important thing.
For instance, here’s something from a March 13th press release from the Florida Association of Realtors:
"It’s official: Now is the time to buy a house, according to a UF study, noting that the market has probably bottomed out, and ‘there’s not much to be gained by holding out at this point.’"
I think UF stands for the University of Florida, but it might as well stand for Uncle Fester. Good investors don’t rely on market forecasts, official or otherwise. You have to make your own call there. And if you buy cash-flow properties under market value, even if you’re off on your market call, you can still make good money - because you bought a property that can pay for itself and you bought right in the first place.
Here’s the bottom line: Some realtors are excellent for investors. I work with a few, and so do quite a few investors I know. But they’re few and far between. Most realtors are not experts on value. That’s your job. You have to know what a good value is. Then you can tell brokers what your criteria are. If - and only if - they’re interested in looking for deals for you that meet those criteria, then you’ve found a valuable ally.
[Ed Note: The best way to learn to invest well is from other investors - not from brokers, trade groups, or even universities. From May 18th through the 20th, a dozen self-made-millionaire investors from all over the country will share the secrets that have made them successful. Click here to learn more .]
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Justin Ford
Editor, Main Street Millioinaire
ETR Insider Report: How to Get an Interview With a Celebrity
By MaryEllen Tribby, ETR’s Publisher
You see someone you really admire - a top business exec who could become your mentor, a competitor who could help you learn the secrets of your industry, or a celebrity who could share valuable information with readers of your e-zine. But you don’t approach her, because she’s too famous or well-respected or intimidating. And, just like that, a big opportunity walks away from you.
It doesn’t have to happen.
When I saw Newt Gingrich, former Speaker of the U.S. House of Representatives, at the World Money Show in Orlando, I knew I had to meet him. He had spoken at the New Orleans Investment Conference last November and was the keynote speaker at the Orlando show - and both appearances had caused a real buzz among audience members. If I could get an interview with him, I could share his Macro Economic opinion - and how it applies to investing - with readers of ETR’s sister publication Investor’s Daily Edge.
I got that interview - which you can read by visiting the IDE archives - and I got it just by marching up to Mr. Gingrich, shaking his hand, and requesting it.
Now, this was not the first time my bold approach proved to be advantageous. When I was in college, studying theater in New York City, I discovered that my acting hero, Dustin Hoffman, was appearing on Broadway in one on my favorite plays, Death of a Salesman. I managed to acquire one ticket for a Sunday matinee, and was determined to make the most of it.
Before the show, I sent Mr. Hoffman a single red rose with a note explaining my love for the theater and saying what an honor it would be to meet and interview him after the performance. I’d told my friends about my plan, and they all sneered. An actor of Dustin Hoffman’s caliber would never meet with a college kid!
They were wrong. After the show, I knocked on the stage door and said, "Hi, I’m MaryEllen and I believe Mr. Hoffman is expecting me." The stagehand called down to the green room and, moments later, I was face to face with my idol. He took my hand and spent 20 minutes telling me how he broke into the business … all while hordes of celebrities were waiting to speak with him.
People are always surprised when they hear how I got interviews with people like Mr. Hoffman and Mr. Gingrich. But I figure, why wouldn’t they want to speak with me? Even a celebrity puts his pants on one leg at a time.
The next time you want to approach someone "unapproachable"… just walk up and say "Hello."
Anti-Aging Tip: Why You Should Eat Your Eggs Raw
By Al Sears, MD
Eggs are one of the few perfect foods. They’re full of vitamins and powerful nutrients - and packed with omega-3 fatty acids. Plus, they are the only protein source with a protein quality rating of 100 - meaning they have all the amino acids you need in exactly the ratio you need. Red meat is second at 70, followed by fish at 60 and chicken at 50.
Since protein has many anti-aging properties, including preserving your muscle, brain, heart, and libido, you might want to increase your egg intake right away.
Unfortunately, when you cook eggs many of their benefits are either altered or destroyed altogether. Especially highly perishable nutrients like lutein and zeaxanthin - carotenoids that keep your vision sharp and protect you from blindness.
What’s more, raw eggs act as a tonic to your digestive system, flushing out toxins and revitalizing your immune system. Only when the nutrients are delivered in their pure, raw state do you get this cleansing effect.
I’ve eaten raw eggs most days since childhood. And, no, eating raw eggs is NOT particularly dangerous. According to the U.S. Department of Agriculture, your chances of getting salmonella from raw eggs is about 0.003 percent - much lower than getting food poisoning from oysters.
If you don’t like the texture, whip up one or two eggs in a blender with some Ultra Greens and cod liver oil. Raw eggs have almost no taste, so you won’t even notice them - and you’ll have a real "breakfast of champions."
[Ed. Note: Dr. Sears, a practicing physician and the author of The Doctor’s Heart Cure, is a leading authority on longevity, physical fitness, and heart health.]
Treasures From the ETR Archives: Michael Masterson on Chicken Entrepreneurship
[Ed. Note: Our mission at ETR is to help you reach all your goals - and to celebrate our upcoming Issue #2000, we are presenting you with some of Michael Masterson’s most powerful, life-changing messages to date. To read each full article, click the link embedded in the text.]
"I firmly believe that one of the best (or possibly the best) ways of growing wealthy is to start your own business. And while I’m all for taking on a limited amount of risk, I’m not about to recommend that you jump ship in the hopes that you can build a raft while struggling to stay afloat. That’s where my principle of ‘chicken entrepreneurship’ comes in.
"A chicken entrepreneur is somebody who keeps his day job while he gets his ideal job going at home in the evenings and on weekends. He is an entrepreneur, because he is taking the initiative to start his own business. He is chicken, because he’s not willing to quit his current job and lose the income. The compromise he accepts is that he will have to work 60 to 90 hours a week for several years before he can either abandon his great idea or fire his boss."
* * * * *
"[Spinning] off of an existing enterprise gets you past two of the three biggest new-venture hurdles: knowledge and contacts (vendors, marketers, consultants, etc.).
"The great thing about starting a business you’re already in is that you can gain the knowledge and make the contacts while you are still an employee. Start by ‘promoting’ yourself. Do the job you want, not the job you have. Learn everything about it. Find out what makes your business grow, how your sales are made, and what, if anything, makes your product or service special."
* * * * *
"I am NOT in favor of quitting your day job. Going into business is tricky and requires a lot of trial and error - which can be very costly and even ruinous if you don’t have a reliable way to pay the bills.
"I’m a chicken entrepreneur (as I’ve told you many times) and favor chicken entrepreneurship, which consists of the following rules:
- Don’t try something new. Instead, knock off something that’s been proven.
- To get a fast share of the market, try to develop a way to underprice the competition.
- Don’t spend any time and/or money worrying about logos or business cards or even customer service. Instead, spend the majority of your time learning how to sell your product or service efficiently."
[Ed. Note: Learn how you can be part of an exclusive group of 25 to 50 ambitious businesspeople that Michael will be leading through an elite 5-day program that can help you dramatically increase the profitability of your business here.]
ETR Issue #2000 Celebration - It’s Fun to Know: Michael Masterson’s Travels
With real estate holdings in Nicaragua, business clients in South Africa and Paris, and a love for travel that takes him from Rome to Hong Kong, Michael Masterson sees more of the world each year than most people see in a lifetime. Along the way, he discovers new business ideas, out-of-the-box strategies for handling tough situations, and under-the-radar techniques for making travel easier that he’s been sharing with ETR readers for the past seven years.
Since 2000, Michael’s drawn upon more than 30 countries for inspiration in writing his articles for ETR, including these: Argentina, Australia, the Bahamas, Brazil, Canada, China, Costa Rica, Croatia, Ecuador, France, Germany, Greece, Honduras, India, Ireland, Italy, Martinique, Mexico, New Zealand, Nicaragua, Nigeria, Norway, Panama, Peru, Russia, Spain, Chad, Sweden, Thailand, the United Kingdom, Uruguay, Venezuela, and Zimbabwe.
We Couldn’t Have Made it Without You!
I’m sorry to say that you are not invited to the office party celebrating ETR’s milestone 2000th issue. After all, we have our reputations to think of… and you never know when someone might break out the lampshades and digital camera!
But seriously, you will get something far better than hors de oeuvres and champagne…
Today, you get to change your life. Today you get to start the future you’ve daydreamed about. Today you get moving on the spur-of-the-moment weekend trips to Europe… the $99 bottles of Chardonnay instead of the house wine… the invite-the-whole-family-on-a cruise surprises. Today you get going on everything you want out of life.
ETR is here to give you the information, the tools and the encouragement you need to get going and reach every one of your dreams and each of your many aspirations.
Right now our programs that help you reach those goals are available at up to 65 percent off regular price.
Word to the Wise: Cynosure
A "cynosure" (SIE-nuh-shoor) - from the Latin for the constellation that contains the North Star - is something that (1) strongly attracts attention and admiration or (2) provides guidance and direction.
Example (as used by Randall Stross in a New York Times article about Thomas Edison): "No one of the time would have predicted that it would be an inventor, of all occupations, who would become the cynosure of the age."
[Ed. Note: Become a more persuasive writer and speaker… build your self-confidence and intellect… increase your attractiveness to others… just by spending 10 VERY enjoyable minutes a day with ETR’s new Words to the Wise CD Library, on-sale now through the 28th to celebrate the 2000th issue of ETR.]
Michael Masterson
Copyright ETR, LLC, 2007