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How the Rich Invest In MN Real Estate August 5, 2007

Posted by minnesotarealty in MN Realty.
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Perhaps the rich are frequently successful because they have been taught not to skimp on the basics. Many people who see real estate investing, for instance, may assume that successful people are simply very, very lucky or that they have been born with some innate knowledge of money and investing.

That simply isn’t the case.

What the rich do, and what every successful Minnesota real estate investor does, is prepare. The successful investor does his homework.

“The ABCs of Property Investing” author Ken McElroy tells the story of a client of his that became a client only after making an utter mess of his investment. McElroy and his company manage properties for investors. Ideally, an investor hires a property management firm immediately, instead of trying to manage the property himself from another city. That is what this guy did. He soon found out that the time commitment to do such a thing was unreasonable.

That wasn’t his only mistake. The owner hadn’t even bothered to visit the property before making the purchase, so he had no idea it was full of criminals and deadbeats. He hadn’t bothered engaging a team of experts who would have gladly told him to steer clear of that neighborhood, which was also full of criminals. It was a bad place, and he should have avoided it. In fact, he could have avoided it very easily if he had simply done his homework.

It is easy to imagine how much money he spent rehabilitating the building—money he would have saved just by budgeting for the experts he needed. There was no way to fix the neighborhood in which the building was located; therefore, the building would never fetch top-dollar rent.

More often than not, the savvy businessman cannot afford NOT to hire the experts.

Rich investors also tend to have an amazing amount of focus. That’s why they’re rich. They choose a target and they narrow their scope until zooming in on one piece of property. They already know what type of property they’re interested in. In fact, they may specialize in apartment buildings or hotels or what have you. They always keep in mind what neighborhoods interest them and the age range of buildings they are willing to consider.

If their first choice of neighborhoods doesn’t yield anything that interests them, they try their second choice, and so on. But they always keep in mind the acceptable parameters.

One thing being rich teaches people is that money talks. They know you don’t have to wait until a For Sale sign goes up in order to try to buy a property. If an interested party can take the current owner by surprise, it is sometimes possible to get a good deal on a property that isn’t even up for sale. And there are no competitors to drive up the price.

The rich do seem to live in a different world. For them, resources aren’t scarce. They won’t worry if a deal doesn’t go through because they know another is right around the corner. A person who is hoping to improve his life significantly through investing may worry that he let one get away.

McElroy says it is best to remain detached, to assume every negotiation will end with the potential investor walking away from the deal. Most deals simply aren’t deals, he said. The savvy investor knows that it is dangerous to get attached to the idea of closing the deal.

The rich know this stuff, not because it is innate knowledge, but because they have been taught, or else taken the time to learn. Anyone can learn how to invest like the rich. It just takes research and practice.