I spent some time on Saturday with some real estate friends and colleagues, and we were all talking about how boring our businesses were.

The business itself was exciting and interesting to each of us. And to a person it’s been a gratifying experience. But it never seems that anything really interesting happens, or at least nothing interesting enough to talk about to other people.

But then we got talking about the First House.

You know, the very first house that you got up the guts to actually make an appointment and go and see. That one.

And I got to remembering mine. The conversation with the seller seemed odd to me. While I was far from smooth then (some would argue still) I did my basic fairly blunt song and dance about needing a good deal, about paying cash, and about closing quickly. Strangely, this seller didn’t seem to bat an eyelash, and thought that a discounted sale price would work just fine. So we booked the appointment for the following Saturday.

The first bad omen was that we woke up Saturday to an unbelievable blizzard. I left with plenty of time to spare, but even in four wheel drive mode it took me 20 minutes to go a mile. I called and rescheduled for the following weekend.

The weather had moderated the next weekend, so I went to take a look. It was a two bedroom, one bath frame home on a slab in Waterford (I had not yet learned the proper purchase criteria from the Obi Wan Ijlal). It was also on a very nice double lot. Decent condition on the outside and not in need of anything before it could be rented. That was on the outside.

The inside was a little bit different.

Actually when the seller brought me in the front door the place didn’t seem all that bad. It smelled a little musty – but as I looked around I saw that basically all of the furniture and personal belongings were still there, such that it looked like the person living there had just up and left.

Pretty quickly I learned that that was almost the case.

All the rooms were in pretty decent shape until we got to the primary bedroom. The place was a mess. Personal belongings everywhere, couch cushions everywhere, the carpet torn up right in the middle of the room. And as it happened, in this home the back door was in this bedroom. It had been kicked in from the outside, and someone had put it back up in place and then nailed three 2×4s across the door to keep it in place.

I turned to the seller and asked – what the heck happened here?

“My son.” He said. “My son owned this home. Two months ago he had a violent reaction to some illegal drugs that he dad taken. He started bleeding badly (I did NOT ask for details) and he managed to call us, and we called the paramedics. They arrived the same time that the police were kicking down the door. They worked on him for about 20 minutes, but he ended up having a massive heart attack. And he was only 28. He died right there on the floor in the middle of the room where the carpet has been torn up.”

???

I didn’t end up buying that property. Nope. And it wasn’t because of the OD. Not at all. It was because the seller wouldn’t come down enough on the price to make it worth my while!

Hey – this is a business, isn’t it? And that wasn’t the only house that I looked at that someone died in. There was another. Maybe I’ll write about that one sometime. Talk about gruesome. I’ll tell you one thing though – you won’t BELIEVE the deal I got on it!

So it seems that after all of that this business really does have some interesting aspects to it. Maybe not on a day to day basis (I can tell because my wife’s eyes glaze over when I talk about business), but enough to keep it interesting. Sometimes.

October 29, 2008 was a good day in my real estate business.

A pretty good day in fact.

Because on that day I bought a little over $1 million in real estate. One 20 unit apartment building and one single family home. (And didn’t use one penny of my own money. But that’s a topic for another post.) Not only that, but I had an offer accepted for what will be my 11th single family rental home, and a colleague that I’m helping to buy his first rental had HIS offer accepted as well.

But like most things all of this didn’t just happen. If you’ve been following my travails you know that I’ve been slogging through the process for months (since April 5th of last year to be exact) on the apartment building, and at various times thought that it just wasn’t going to happen.

Now I’m not going to give myself tennis elbow patting myself on the back about this because it’s not my style, but I was fortunate that two of my strengths match up well with my two fundamental take-aways from this experience. And they are:

• Patience is key. The process required to buy an apartment building takes time. A lot of time. No matter what. On my single family homes my all-time record is 11 days between offer acceptance and closing. That’s not going to happen with an apartment buildings. Personally I scoffed at it when everyone told me that it would take six months to close. I’m not scoffing any more. There is no way to short-cut the process, and I don’t think that you’d want to when you’re spending a million dollars. This is a marathon not a sprint so plan accordingly.

• Persistence is critical. My first deal died through no fault of my own, and this deal died three times since April. But the location is spectacular, the numbers are spectacular and there was/is substantial upside so I was not going to be denied as long as the fundamentals remained the same. Out of all the skills or traits necessary to bring this to closing I’d say that without a doubt that dogged, focused persistence is the most important.

I can’t tell you how excited I am to get started harvesting the upside potential on this building. (The best part about it was that my kids invested in this building as well. They cashed in their savings bonds and all four are now earning 10% interest on their money.)

But lost in this discussion and dwarfed by the building in terms of dollars is the little single family home that I closed on in the afternoon. Now you wouldn’t BELIEVE the grief that I continue to get for my dogged pursuit of single family rental homes, especially since I’ve made the leap to apartment buildings.

But not only do the numbers make sense, they’re off the charts. It’s a three bedroom one and a half bath bungalow in the best school district in the state, Grosse Pointe. It’s all brick, has a full partially finished basement, central air, a two car garage, refinished hardwood floors, nice paint (actual colors) and all appliances. The roof and mechanicals are in great shape as well. It’s in better than move-in condiiton.

I bought it for $60,000 and had it rented for $1075 per month before I closed on it. A house across the street sold for $137,000 in 2005. So cash flow and upside. And oh yeah by the way – my private investor funded this 100%. And it STILL cash flows around $300 net per month. And it will cash flow on Day 1.

So my question back to my grief-giving friends and colleagues is – why not?

So yes I’d say that we had a good day in my real estate business. A million dollar day. A BSD day.

I have thought for a long time that Star Trek is a metaphor for life.

Especially for work and business.

But as much as I try to explain it to my wife, I still usually get the blank stare (you know the one I’m talking about), even though I converted her into a STNG fan when we were courting way back in grad school in 1990. (She doesn’t like or get Monty Python either)

I have been mapping out my business over the last couple of weeks trying to decide what to outsource and in-source, and it hit me again how Star Trek is relevant. In particular I thought about the different management styles of Picard and Kirk. (I’m serious! Keep reading!)

You see, in my view Kirk represents the old way of managing. He was involved in every decision. He led every away mission. He did all the heavy lifting on the show, to the extent that the only way that missions succeeded were because of his own heroic effort.

That made for some great television, but it’s certainly not any way to run a business, because it’s not a practical, nor sustainable, business model.

Now contrast that with Picard’s style. He made a point to recruit the best people possible for his crew (as did Kirk), but Picard got out of their way and let them do their jobs. He delegated everything, pushed his people to do more and develop their own leadership skills. And he rarely, if ever, led any away missions. He led, and focused only the tasks that he needed to handle. And he knew the difference.

Could Spock, Chekov, Sulu, Scotty, and McCoy have rescued Kirk from the Borg like the NG crew did with Picard? I doubt it. They had little experience operating anywhere but under the direct control of Captain Kirk.

So I’m choosing to structure and run my business like Picard ran the Enterprise – by outsourcing everything except for the tasks that require my personal attention, and delegating wherever I can.

But without the French accent.

I’m sure that you have seen the news reports out of Ohio a while back. First one, then a second Federal Judge dismissed foreclosure proceedings because the lenders “failed to prove that they owned the properties they were trying to seize”.

That’s a complicated way of saying that the paperwork is screwed up. (If you’ve ever worked at a big company, you know that this is the rule not the exception.)

More importantly though, neither judge passed any judgment whatsoever on the validity of the actual facts in the case – that the homeowners had defaulted on their payments and were therefore in material breach of their promissory notes and therefore subject to losing their homes. So basically these homeowners got off on a technicality.

But not just a technicality. A technicality that is totally, completely, and 100% irrelevant to the case.

A technicality that is tantamount to a murder suspect caught red-handed getting off because the coroner spelled the dead guy’s name wrong on the death certificate.

That irrelevant.

And as usual, the self-proclaimed “Victims Rights Groups” are having a field day with this, and you can imagine the fervor that this has spawned in the office of every ambulance chasing trial attorney in the nation. But contrary to the claims of all the spammy marketing that my colleagues are directing at these borrowers, it IS their fault, they ARE responsible, and they SHOULD face the consequences of their actions. And these borrowers should stop considering themselves “victims”.

What’s interesting, though, is the implication that this might have for the real estate investor, at least in the short-term, because I’m betting that this gets overturned on appeal in pretty short order.

When I first read about this I made a mental note to revisit it and think about how it might be used in my investing activities, and in particular in my short sale negotiations. I hadn’t had a chance to do that when I visited a real estate discussion forum that I frequent on a regular basis. (Hmmm. That sounds redundant.)

I saw a very interesting post on exactly this topic – leveraging this situation in Ohio in short sale negotiations. The post was long, considered, and very well written by an experienced investor. It also hit the nail on the head in describing how you might add this to your negotiating repertoire. As with most forums, 98% of the posts in this forum are from people that have never done anything giving advice to others that aren’t going to do anything. So it’s mostly harmless drivel. But this post was a brilliant analysis of the situation and an equally brilliant discussion on how you would implement it today, and in no way suggested coaching the homeowner to use this as a way to delay the foreclosure.

Bravo I said.

But I was shocked when I visited the forum later that same day. There were now a number of posters that had come out strongly against using this tactic in any way. One in particular caught my eye (and my ire).

This clown climbed up on his moral high horse and started lecturing everyone about how “wrong” it was to use tactic because it was “unethical” to help someone avoid foreclosure due to a technicality. Which of course it would be. But he was on a roll, and therefore, in several pontificating posts, he conveniently kept overlooking the fact that the original poster had specifically stated that this was merely a short sale negotiating tactic and not something that you would even talk to the homeowner about.

But in all of his moral superiority he wrote one thing that made me laugh out loud.

He said that in his business “everyone wins”.

And not only that, but he also said that in a short-sale, you’re trying to make the best deal for both the homeowner and the bank. He even went on to say that if it’s not a win for the bank then it wouldn’t be a win for him.

Huh??? Perhaps I’m missing something here, but I always try to make the best deal for ME. In a short sale the homeowner is irrelevant and the bank is an adversary.

But more to the point – since when has real estate – or LIFE – ever been a “Win-Win” situation?

I know that the namby-pamby, never-got-picked-for-kickball-in-the-third-grade crowd loves to believe that business is all about kumbaya hugs and everybody succeeding, but that’s just not the way it is in real life.

The answer, as hard as it may be to swallow, is that neither business, nor life, ever has been, nor will it ever be “Win-Win”.

And the reason is plain and simple – because real estate, and life, are both zero-sum games. What that means in simple terms is that if you and I participate in a transaction as buyer and seller, you can’t make a dollar unless I lose one. And I can’t make a dollar unless you lose one. It’s that simple. Somebody wins. Somebody loses. That’s capitalism.

That’s life.

When you think about it, it is pretty harsh, isn’t it? Cold reality usually is. And unfortunately I think that’s why most of us now choose the college route rather than the entrepreneur route, because going to college and getting a job lets us appear to be “successful” while we hide from the bare-knuckle competition that is the marketplace.

On one hand that’s a shame. On the other, it leaves the playing field wide open for those willing to take a risk.

9 Audio CD’s For New Apartment Building Investors

How To Buy Your FIRST Apartment Building

This is critical information that a new Real Estate Investor needs to shortcut the learning process necessary to have a truly Set and Forget Rental Property business. Just some of the content in the five audio CD’s includes:

1. The Michigan Rental Real Estate Update for 2009 – why this is the year to buy apartment buildings.
2. What do you need to know BEFORE you buy your first apartment building.
3. Demystifying all the terms you’ve heard but might be unsure of like Cap Rates, Cash-on-Cash Return, Cost per Door, Operating Expense Ratio, positive cash flow, forced appreciation, etc etc etc.
4. The math – and how you know that you have a good deal despite what your broker tells you.
5. The CRITICAL SUCCESS FACTOR that you MUST know to be successful in this business, ESPECIALLY in this market and these economic conditions.
6. Due Diligence – what it is and why it’s critical. And you’ll learn my approach to doing it.
7. The timeline is NOT your friend – ignoring this will cost you THOUSANDS of dollars.
8. The situation with commercial financing – and they way that I got around it and what I’m doing today to buy more units.
9. How to setup a correct corporate entity to protect yourself and get the maximum tax benefits.
10. My 90-day quick-start roadmap for you to buy your first apartment building here in Michigan.

Not only do you get over four hours of solid content, I’m also throwing in three BONUS CDs to make a total of EIGHT audio CD’s:

Bonus CD #1: Let’s talk property inspections

No seriously. There’s only one property inspector that I’ll use for my own purchases when my money is on the line. He’s done 9 single family homes for me and 2 apartment buildings. And he’s forgotten more about inspections that most inspectors out there know.

Spend an hour learning what a new apartment investor MUST know BEFORE they go out looking for something to buy, and learn what to look for while you’re looking for the right one to buy.

This is critical information if you’re just starting out – information that can save you MONTHS of learning time and prevent you from making mistakes that could cost you thousands of dollars.

Bonus CD #2: Commercial real estate brokers are the gatekeepers of this business. Learn the secret to finding one that will work FOR you.

Beware – the apartment real estate market here is fragmented with several different brokers operating in many different ways. It pays to talk to all of them to find one that’s a fit. That’s what I did when I got started.

This CD is my interview with the broker that I worked with when I bought my first building – and he’s the only one that I’ll have represent me. Find out why.

Bonus CD #3: How to Create a Tax Free Income for LIFE.

Learn the secret to how the rich are amassing a fortune and having it grow Tax Free, simply and easily through investing in real estate with retirement plans.

Bonus CD #3: Property insurance is boring as hell. That is until you need it. I was shocked when I heard some of this information. You will be too.
I never really paid much attention to property insurance when I bought property. I usually just shopped around a little and found someone with a low price. That was until some paperwork got screwed up and I got something in the mail almost a month after closing that said I was not insured. All insurance agents and companies are NOT created equal. The only insurance agent that I now use spends 45 minutes talking about the ins and outs of property insurance. Trust me – it’s better to know this information NOW, BEFORE you need it. I wish I had.

Your Investment:

Business is great here in 2009, and I think that you need to hear this information before missing out on the financial security opportunity of our lifetime.

Your investment is $30. That’s it.

And you get 8 audio CD’s (5 audio CD’s contain the UNPLUGGED and unedited recording of my seminar – the rest are the bonus audio CD’s).

My Brass Balls Guarantee:

You have 12 months to decide if you want to keep these audio CD’s or not.

That’s right – 12 long months. 12 months that if you put the information to good use will be VERY profitable months.

Listen to them as many times as you want. Make your kid’s ears bleed in the car – I don’t care. Because if you’re not convinced that this is GREAT and ACTIONABLE training for ANY reason – just ship the package back and I’ll refund you 100%. I won’t even ask why because I don’t really care.

But you need these CD’s. With everything in the economy crashing and burning around us – you have nothing to lose and your financial health and future to gain. There is ONE catch though – I want a favor of you. And that’s when you buy your first apartment building, and you get that first rent check in the mail – go over the the house and have your spouse or business partner take a picture of you standing in front of the house holding the check – then email me a copy of the picture.

I want to celebrate your success with you. That’s all I want.

To your success -

Dennis Fassett