Middle Tennessee Property Management Blog

Why Real Estate


Why Real Estate

What do the names Brad Kelley, Herbert Simon and Jorge Perez mean to you? No, they are not famous actors, congressmen or presidential candidates…at least as far as I know. All three of these men are on The Forbes 400, The Richest People in America list. Why is that special to us real estate investors (or potential real estate investors)?  They are three of 26 people on The Forbes 400 list who earned their fortunes in real estate. That represents about seven percent of the entire list!

This is not the highest percentage on the list, other industries, such as technology, food and beverage and especially investments have more, but most of them require a specialized education, specific skill set and/or significant monetary outlay to get into the industry. With real estate, anyone can do it. This is not rocket science, however there are no people on the list that earned their fortune as a rocket scientist, but you get the point.

Real estate is not for the ignorant either. You need to have good negotiating and management skills and it does not hurt to know a little about construction.  A good head for math is helpful as well.

Investing in real estate does take a little money; after all it is called “investing”. Relatively speaking, it does not take much. The beauty of a real estate investment is the power of leverage. You can purchase income producing properties using other people’s money (OPM) for as little as a 20 percent down payment and if you get real creative it can be acquired for nothing down, but that is very rare in this market.

Using the incredible power of OPM, your initial investment can compound exponentially, maybe eventually you could even end up on The Forbes 400 list yourself. If that is your goal remember, you cannot think small. However, even for us small investors, real estate investment can lead to a very comfortable net worth.

One caution on OPM, leverage also increases the risk in real estate. We will discuss that in a future blog.

Happy Landlording

Scott Abernathy, MPM, RMP, GRI

Location, Location, Location


Location, Location, Location

“The most important things are location, location and location”. This is one of the first things you will learn when beginning to study real estate. So, if location3 is so important, how can we evaluate how good or bad it is? I recently learned a good way to start is to strap on a pair of running shoes, walk out the door, turn left or right and take off.

Last week I attended the National Association of Realtors Convention in San Francisco, California. Having never been there, I was totally lost upon arriving. I found my way to the hotel, checked in and asked myself “what do I do next”? Deciding to check out where I was and what was around me, I slipped into my running shorts, shoes and a half marathon race shirt. I peeked at the map on my iPad to get a general idea as to which way to go and chose left, toward the bay. Water always makes for good scenery while running.

San Francisco did not let me down. After logging about ¾ a mile down Market Street, through heavy traffic, stopping at every light, wondering if I was ever going to get a decent pace going, I finally found the water and the views were spectacular. Turning left in front of the Port of San Francisco I noticed a lot of fellow runners going up and down the water front. I was grateful to be away from all the traffic lights so I could do some steady running until I looked to my right. In the middle of the bay was a tiny familiar island I had seen in the movies and TV many times before. This island had no bridges to it but a large white structure was built on its rocky surface along with a light house. Of course this island was Alcatraz and I had to stop and take a picture. So much for keeping a pace.

From this point forward I stopped frequently to take pictures of either sites that looked familiar to me, such as the Trans America Building to the ultra-strange, such as a small draw bridge with a giant counterweight to lift it when necessary. I guess my interest is easily peaked, coming from Murfreesboro, Tennessee, I don’t see very many draw bridges or giant pointy buildings.

I was only planning on running five miles, but I felt like Forrest Gump, a simple minded runner exploring life anew.  Beyond every bend something else fascinated me in the distance that I just had to check out. AT&T Park where the Giants play…stop to take a picture…the cove where I’ve seen home run balls splash into the water near the incredibly optimistic people in kayaks I’ve seen on TV…stop to take a picture…marina with thousands of sail boats…stop to take a picture…across the bay was Alameda Naval Station…stop to take a picture…hundreds of seals sunbathing outside a restaurant…stop to take a picture…and of course the Golden Gate Bridge…stop to take several pictures. I did choose not to take a picture of the man dressed in a red tutu and spaghetti strap top dancing to the music in his/her head, but I did slow down to witness it. Once again, this is not something I see often back home.

As you can see there were a lot of things that fascinated me, especially the Oakland Bridge. Running toward this gigantic structure it gets bigger and bigger, almost beyond belief. As I’m running under it I notice the floor of the bridge is higher than any building in my home town, above this there are two decks for millions of cars and truck to drive on to get across the bay.  On the way to Oakland, it must go through a small developed island. When I say through, I mean though, there is a tunnel the traffic goes through to get to the bridge on the other side.

As I gaze into the bay I notice that all of the islands are nothing but giant rocks sticking out of the water. This prompted me to look down and around my feet. As it turned out, this entire peninsula is nothing but a giant rock. It is so amazing how this enormous city could be built on a huge bolder.

The next thing I know I had been running over 8 miles, it was time to take the ¾ mile trek back to the hotel before I collapsed. As fascinated as I was with the views around me I forced myself to return.

If you want to know about an area you can see all of the statistics you want, but nothing will tell you about a neighborhood like physically visiting and observing it. You don’t have to lace up running shoes to do it, but that is the best way I have found to get the lay of the land.

Happy Landlording

Scott Abernathy

 

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Reliant Realty
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