23 May Real Estate Investing with Richard Anderson – #CREPN 46
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Podcast
by J. Darrin Gross
Richard Anderson and his wife started investing in real estate with a duplex and grew to thousands of square feet in commercial real estate.
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Before real estate, Richard learned from his grandfather who suffered some significant losses in the stock market crash. He taught Richard about investing in the stock market and specifically about two stocks: Disney & Woolworth.
The first real estate investment
In a few years Richard had enough for a downpayment on Seattle duplex with owner financing. The duplex needed some work, but he and his new bride were now invested in real estate.
They lived in one unit and rented out the other. They were thrifty. Richard did all of the construction work, electrical, plumbing, carpentry and his wife, tended to all of the landscape and gardening.
The sale price was $10,000, and the seller carried a note for $9,000.
Four and a half years later they had saved some money and sold the duplex for $15,500. Not a bad return almost 50% return in less than five years.
The Next Deal
The next property was a 13 unit townhouse style apartment building with a courtyard. He and his wife now had two small children, so he converted two units into one unit for additional living space.
The property needed work, but that was something he could do.
- Purchased for $100,000
- $ 10,000 down
In the first year, he spent twice his investment on upgrades as the property making improvements including a new roof. Over time, they converted the 13 units into condominiums and moved on to their next property.
What gave him the confidence to go from a duplex to thirteen units?
The lessons he learned from his grandfather, made Richard a cautious investor. After some thought, Richard came to the conclusion, if a depression occurred and he lost everything, what’s the difference if you owe $1,000 or $100,000?
Since then, Richard and his wife have invested in; Retail, Restaurants, Apartments and Warehouse from Washington to Florida and several points in between.
Challenges:
Early on at the original duplex, Richard was mowing and managed to hit the hose bib causing the water main to leak for the duplex. He got several bids for the repair, but had no money to pay for the work. With no money, but plenty of ability, and willingness to get wet and dirty, he dug the hole, found the junction and threaded the pipe to make the repair.
It is problems like this that test a property owner. The first time it happened, Richard was certain the world would end. After making a successful repair, he gained the experience and confidence to get through it.
The crash of 2008 was tough, even with properties only leveraged to fifty percent. When values are reduced by 50%, and you have a lot of vacancies, it is easy to see how so many investors go under.
Future:
After forty five plus years of investing in real estate, Richard and his wife are selling and turning things over to their kids.
The internet is taking over the brick & mortar. It is estimated that the demand for retail space will be fifty percent less than the retail sq footage needs of today. While many have downsized, there will still be a need, but just different. Location is always key. The size needs will change.
Advice: Residential housing especially low and middle class will always be in demand. Location is always key. Know your market. Find the direction where progress is going.
Unless you have a lot of money you need to know how to do the work; electrical plumbing, carpentry and have an eye for what looks good.. This is how you create sweat equity.
Know the laws. Do your turns as fast as possible.
Invest in properties with income. Acreage and undeveloped property are more risky, unless you have the cash needed to wait for a potentially big reward.
It doesn’t take much to start.
If you can find a property in need of repairs, you can learn how to do the work.
Tax structure has changed. It is really getting difficult unless you are super rich.
There is still a ton of opportunity in America to make things happen.
Get Educated:
“I wanted to go to college, but never did. When I decided that I wanted to go into real estate, I read every real estate book in the Seattle Public Library, twenty seven at the time and took some classes. Some were not realistic, but I learned some concepts that helped me learn how to run my business.”
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