Introduction to Investing in San Diego Real Estate

Real Estate Investing is not nearly so difficult as you might think.  As a matter of fact, with the right tools and a good advisor, real estate investing may be the safest, simplest way to accumulate wealth.  At least… that’s what I thought before moving back to San Diego.  I had been an options trader on the floor of the Chicago Board Options Exchange and before that a licensed, Series 7 stock broker.  I came out of an industry where assessing value, analyzing investments and managing risk were how we spent our days.  It was exciting and educational and stressful.  I eventually decided to move home, get licensed and advise clients in a less demanding atmosphere.  Heck, I thought to myself, I have a degree from Princeton and a fifteen year background in finance, real estate and investment.  Helping clients with their real estate investments should be nice and relaxing.  

I could not have been more wrong.  I was shocked by the antics I saw: the way investment property values were reached and opportunities were compared, the way financial planning was virtually ignored altogether, the way clients were treated as an afterthought in the rush to close transactions!  In the securites business you’d lose your license for doing things that are considered common and ethical in the World of Real Estate.  I thought there would be an endless supply of clients ready to make their fortune investing in real estate and there weren’t.  Do you want to know why?  Because it’s the Wild West out there!  It reminds me of a line from that great movie-western Chisum:  “There’s no law west of Dodge and no God west of the Pecos.”

Lawyers, Guns & Money
That line is not entirely accurate.  I know we have God out here because I listen to clients and agents constantly saying things like, “Oh God, please let this close,” or “Oh my God I can’t believe we missed that deadline,” and my personal favorite: “Dear God, why won’t anyone call me back.”  But laws… that’s another story.  What we’ve got is a bunch of cowboys running around, calling themselves “real estate advisors” and no real system or structure for the Small Cap Investor.  The first time I saw this it hit me: when you enter into a transaction it’s like stepping out on to the streets of Tombstone.  You might enjoy a fine, sunny walk or you might stumble into the OK Corral.  The only way to proceed is with an agent who’s one terrific gunslinger; protecting you as you walk down the dusty street.  Now that system works well enough when it comes to buying or selling your own home.  Especially because there are a lot of really caring, moral, professionals in real estate - agents who always, without fail, put your needs ahead of their own.   Besides which, most owner-occupied transactions aren’t based on money or long term risk/reward so much as emotion and short-term marketing.  But if your objective is to successfully invest in real estate, you can’t afford the Wild West Show.

Before I move on, please allow me to be clear: this is not the agents’ fault.  They just don’t have access to the training or the conceptual framework required to give investors the attention they need.  You see, they’re bombarded with systems for marketing and generating leads, but there’s no widespread acceptance of the tools for real estate investing.  This state of affairs, as I said, is not the agents’ fault.  It’s very difficult to know what you don’t know… when you don’t know it.  My main purpose in writing this series is to help investors make clear, profitable decisions.  But I hope it will also serve the agents who want to specialize in and cater to Small-Cap clients.  The number one action an agent can take to ensure their long term success is gain a level of expertise and so stand out from the crowd.  In the marketing seminars I lead for agents they are taught this simple mantra: “Differentiate or Die.”  (I know, I know, it sounds a bit dramatic.  But that’s how ideas get remembered.)  In the rest of this series I will use the term “investor,” but these concepts are equally important for the agent to understand (maybe more so). 

The Future of Investing in San Diego Real Estate

In future articles I am going to discuss Investment Property Valuations (there are actually four values), and the role Arbitrage plays in every transaction we contemplate.  We’ll look at the effects of Volatility as well as the pros and cons of Fixers, Flips and Turn Key.   I’ll explain strategies for beating out the competition in a Multiple Counter situation and what your Drop Number is and how it affects your Highest, Best Offer.  You will learn the four keys to Investment Analysis, the concept behind the Infinite Investment Strategy and whether Partners or Investors may help you.

Before we do all that, I think it’s important to understant exactly who a Small-Cap Investor is.  That is the subject of the next article.  Thank you for reading the Introduction to Real Estate Investing 101.  I look forward to your comments and questions.

Filed under: INVESTORS , Real Estate Investing, San Diego