Urban Real Estate Investing: Thinking Outside the Box

More than a million people have attended a Donald Trump University workshop, bought one of his real estate principle books, or stayed up late at night convincing them that an infomercial held the key for them to begin investing in the real estate market. Some time after the conference or reading the book or receiving the materials you realize that you have been hoodwinked into believing that getting into the market and making money was simple, easy and guaranteed. Tada! Or as ESPN football analyst Lee Corso says every Saturday morning, 'Not so fast my friend'.

There is no genie in a bottle method to making money in real estate. What worked for Donald Trump when he was in his 30s, over thirty years ago will not work for you today. And the lessons he is pushing today might work for only a small segment of the investment population who has the credit, capital, and charisma to pull off a million dollar deal with no background in real estate investing. For the rest of us, real estate investing can take on an entirely different life cycle as we struggle to find a method and system that works best for us.

You may have read in a previous article some possibilities for getting into the game of real estate investing. Did Donald Trump suggest any of those? Nope. I attended a seminar and I didn't hear any of them. But then I was not willing to shell out $1,500 to get the full package either. So, pushing the possibilities a little there are two additional ways for you to get into real estate investing while the real estate market is in its monsoon season.

Something you have to understand is buying homes is not the only way to get into real estate. Flipping houses is the most flamboyant and obvious method. It is possibly the riskiest as well. In a downturn like this, a house can sit on the market for a year or so before you get a sale at the price you want. So if you remove houses from the equation, small apartment buildings are becoming the new thing to do in some markets by aggressive investors looking for long term sources of income. These investors are not looking to flip their money in the immediate. Their approach is almost like taking out an IRA or a 401k.

In most urban cities, apartment buildings with 8-10 units have been left for the dogs to stay in and have become eyesores especially in the downtown communities. They do not offer the prolific impact of larger projects. But if done right, a small apartment building can be a cash cow if you know what you are doing. For instance, many apartment buildings have obviously gone into disrepair because of a lack of attention or care by the property owners. Because of that they are prime targets to be sold at bottom dollar prices just like houses that the market refuses to gobble up. If you can get one for less than $100,000 you have an absolute steal. Here is what you do.

Close on the property as soon as possible and become best friends with someone at your local Home Depot or Lowes. Find the nicest, but lesser expensive priced items like faucets, sinks, appliances and flooring and pick it up for each apartment. Paint them neutral colors like beiges and browns, not extravagant colors and leave white at the door to. What you will notice is structurally, there is nothing wrong with the apartments. They just look like crap because they have not been taken care of. Invest in a nice looking set of stairs and landscaping to give the look and appeal of something way more expensive. Replace the cabinets with stock cabinets from Home Depot or Lowes as well as the windows if possible. All told, you should look to put around $35-40,000 in the apartment building in renovation costs.

With the market in such arrears, really good people will long, stable work histories are in the market for quality places to stay. They are not in a place to buy a home. But they do want to live in a place that feels like home. So if you can reach that market and price your apartments accordingly, you will have a massive hit on your hands. Don't try to market your building above $900 or below $700. Home Depot or Lowes can help you present a high quality apartment in that price range that will be nicer than anything else around. Besides, pricing yourself above or below those numbers communicates something you are not looking to say.

Another option for people looking to get into the real estate market is auction via tax sale. Because people bought homes they could not afford, their local or county taxes were something that flew by the wayside along with the mortgage payments. In Memphis, you can find homes set for tax sale at the Shelby County Trustee's website. Imagine getting a $100,000 home for less than $10,000. That happens when you buy a home via a tax sale.

A tax sale is held by the local municipality when real estate taxes have accrued and the homeowner has refused or not been able to catch them up to the municipality's liking. Is it a negative thing for a person to lose their home? Absolutely, but their problem is not yours. You are in the market to make money and invest in new properties. Don't allow guilt to rule your investment decisions.

Just like there is more than one way to skin a cat there is more than one way to get into the real estate market. Think outside of the box and be innovative in making a splash in the real estate market. Just because the market is down does not mean people stop having a need for a place to live. If you can offer it and keep your occupancy levels at really high numbers you will pay off your mortgage and other bills in short order allowing you to make more money long term than you would have by buying residential homes.