“We have been in the real estate business for a long time. Earning well into the high six figures, until the end of 07 and now 08. We are a small company and have implemented some things that we feel should help. We have added a website that should be up shortly, something we have not needed before. We have new mailing lists and are constantly searching for buyers and sellers. This has been to no avail. Deals on sellers’ sides are falling apart, thereby making other deals fall apart (even though they were solid-looking to begin with). Lending is at a standstill… and on it goes.
“We offer solid corporate guaranteed leases with minimal involvement by the landlord, making these easy to own. A ‘recession-proof’ asset, and an enduring one in these markets.
“So my question is this: What else can I do to reach buyers? I am on several publications, e-mails daily, working on a newsletter to put our name in front of buyers… but they are still not making the move. They have to be out there. We just need to tap them. And I have lists.”
It’s good to get a tough question from an experienced pro.
I have two things to say. First, I am – as longtime ETR readers know – the ultimate chicken entrepreneur. By that I mean that I love starting and growing businesses, but I never put all my eggs in one basket. As I explain in Automatic Wealth, real estate has been, for me, an extremely rewarding secondary investment. My net worth today is twice what it would have been because of the incredible appreciation I enjoyed for 25 years in the real estate market.
That said, I’ve been primarily an investor in real estate – buying condos and single-family homes, apartment buildings, and offices, collecting rents, and selling them after they appreciated. I have been a managing partner on a major development only once, in Latin America. My partner and I got into that so inexpensively that it worked very well. Even now, with a third of the property left to sell, we have seen our initial investment returned more than tenfold.
But, being a chicken, I never put more than 20 percent of my investible income into real estate. The lion’s share of my investing was in small direct-response businesses and publishing companies, which operate on a different cycle than real estate.
So I’ve hedged my bets. And that has worked for me. Like everyone else who has real estate holdings, I’ve seen depreciation in the past 18 months. In fact, I predicted that downturn in ETR three years ago and again every year since then. Because it was obvious to me that the market was bubbling out (and because I am a chicken entrepreneur), my investments in real estate have been minimal for the last year and a half.
It’s different for someone like you, Dolores, for whom real estate is a full-time endeavor. You have to make it work now in order to keep your business growing. The recession we’ve been living through (which started at least a year ago – the government hasn’t been the least bit honest about economic indicators) has made it difficult to stay in real estate. I have many friends who have suffered from the collapse. Some have lost tens of millions of dollars.
Meanwhile, others have developed new strategies that have allowed them to continue to prosper with real estate as a full-time business. If you’ve been reading ETR regularly, you’ve been introduced to several of these experts and their innovative ideas. I asked one of them, Justin Ford, what he thought you could do to weather the storm. (One of the investments I made in the past 18 months was with him and it is doing very well, even in this market.)
Since you’ve already exhausted the obvious ways to find investors for your deals, Justin recommended trying these three less-conventional approaches:
- Look at local real estate investment clubs. Most of them are full of active investors, but a few may be interested in the type of passive investment you offer.
- Advertise, in local papers, the key benefits of your deals. Invite the people who respond to your ad to a luncheon or dinner where you will have time to deliver your full sales pitch.
- If your list broker has lists of owners of bank CDs, it might pay to advertise to them… offering them higher, secure yields on their money. (Banks are paying low rates on CDs these days – and since your properties generate income with guaranteed corporate leases, these otherwise conservative investors may be interested in the yield, amortization, and eventual appreciation your investment may offer.)
The long-term future of real estate looks bright, so try to stick with it. In another six months or a year I expect the market to bottom. Then I’ll be investing heavily again. There is only so much good land to go around. Between now and 2025, the U.S. will need to add something like a million housing units. Thousands of Americans will make billions of dollars from that. I intend to participate in that boom.[Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]