If you're like most of us in the real estate business, it seems most people we chat with eventually get around to asking, "How can I get rich investing in real estate?" It's a question I really try to shy away from because I am convinced most people can't do it, even if their stars are perfectly aligned. They don't understand the commitment.
Nevertheless, probably like you, over the years I have read many of the books on the subject, I've seen the "systems" sold through television infomercials, and I've heard the fellows on the radio pushing mentor seminars. The latter is the scariest of all.
Honestly and in reality, answering that question is problematic. The major considerations for anyone thinking about becoming a real estate investor are 1) do I have the talent to do it 2) do I have the discretionary income and savings to finance it, 3) will I be willing to devote the time, every day, day in and day out, that is required, and 4) can I intellectually understand that real estate investing is not made for the short term investor?
When I first decided to take the plunge myself, I was a commercial real estate loan officer for a major bank. My wife was an accountant. Frankly, we were young, just getting started, and we needed to make more money. We had two of the skills that were important: number sense and a fundamental ability to analyze investments. We were both good with our hands, and her dad, who lived nearby, had been doing handyman work for years. He could help by answering questions.
After looking through many books on the subject at the public library, I found one by a fellow who by day was a telephone installer and by evening bought, renovated and rented out and managed a series of houses. The real estate had made him a millionaire.
His book was a step-by step autobiography of his real estate deals. It was a conservative and hands on approach, an approach that seemed to have very little risk.
My wife and I decided that we would become his disciples. The first edition of the book was titled How I Turned $1,000 into a Million in Real Estate in My Spare Time and it was later updated to How I Turned $1,000 into Three Million....The author was William Nickerson.
We followed his formula and bought, renovated and rented out our first house. Each time we got ready to add another property to our investment portfolio, we reread the book. Each time we had a question of how to approach a problem, we looked for his example in the book. Everything was there, even those things we had totally forgotten since we last read it.
Over the years, we bought a significant number of properties, always following Mr. Nickerson's advice. And early in that period, I resigned from the bank and she resigned from the accounting firm where she worked, and we opened our first real estate company. It was called The Old House Company, and a major reason for that business' success was that our own history as mom and pop real estate investors was well known in the community. Although we sold the company in 1990, it remains in business today.
William Nickerson's formula still works, and it is still the only one of the real estate investment books, systems, or programs I ever recommend to someone who is considering beginning a sideline in real estate investing. Even though Mr. Nickerson has been gone for a long time now, his book is still available at Amazon.com in used condition, and you can buy a copy for ten bucks, maybe less.
How I Turned $1,000 into a Million in Real Estate in My Spare Time is a book that does what is the most important. It keeps your feet planted firmly on the ground.
Copyright 2007 - William S. Cherry
Christi, you'll be very glad you did, I promise. And it will even add another unintended dimension. It'll show you where those real estate investment "system" hucksters are full of bull.
Hope you like it.
Bill
Bill,
Fascinating post. And the way you present it, it is still a good source even in the changed market. I guess, I will check Amazon.
Looks like you went through the hot and slow market. Were you buying in both?
Jon,
Thanks for your note.
Like mutual funds, Dollar Cost Averaging also works in real estate investing. We bought in good and bad markets. We analyzed the investment, and if it made sense, we bought...if it didn't we didn't. I can honestly say that we were never burdened by having made a purchase because of the market condition.
We did make some mistakes, and pedaled like crazy to get out of them. Couldn't blame them on Mr. Nickerson. His advice was always true and concise.
Bill
Sounds like a great read for someone looking to start investing...
I think I'm past that point!LOL
Joan and Christi,
Thanks for letting me hear from you. I think it might be wise for every Realtor to read this book primarily as a guide to give to others who are considering putting sizable portions of their assets and credit at risk without having a clue as to what they are doing.
Bill, I wish that I had heard of this book several years ago. It is never too late to get good information. Thanks for your inspiration.
Bill, I read Bill Nickerson's book years ago. Now I think I'll get another copy to keep.
And you are right, real estate investing is a long-term play ONLY. Day traders and flippers need to go somewhere else. I'm very unhappy what they have done to the real estate market.
Bill Roberts
BTW I've missed you on my blog.
Well, Cody....welcome!
Mr. Nickerson most certainly gives the conservative fundamentals. One friend pointed out that there is a bunch of stuff that is no longer legal -- like neighborhood/tenant red lining and stuff, but that doesn't really change the system.
Also, this fellow made so much money in residential real estate that when the company that owned the Empire State Building was in trouble, he actually bid on buying it.
Billycherry
Thanks Bill! I was hoping that I would find a positive & recent post related to this book. I bought the 5 Million edition a few months ago but I was later hesitant on reading it because of the current bad news we hear on TV related to real estate. I've wanted to get involved in real estate for quite some time but then I read about all these infomercials selling guides that are scams and what not. I'm glad I got bought book because it is impossible to access it at the library. I enjoy reading off a computer screen so I plan on scanning my book into digital format for my own personal use.
-Rene
Rene, pay attention to Mr. Nickerson and forget the others. I believe you will dramatically increase your chances of success.
Let us know how it turns out for you.
Billycherry
In an earlier response you say, "We analyzed the investment, and if it made sense, we bought...if it didn't we didn't..."
I was wondering if you would share your style/philosophy or have any book/site recommendations on analyzing real estate investments?
I too have the $5MIL version of the book and found it a fascinating read!
Thanks and take care,
Allen
Allen -
I'm a bit reluctant to get very specific into our methodology because I'd feel terrible if it didn't work for you and others. That being said, here are the raw components:
If you'll recall, Mr. Nickerson's plan is to let each property pay for itself so that the income stream will eventually be his. Following this plan, your investment risk is decreasing with each mortgage payment.
Good luck.
Billycherry