7 Dark Roses - Free Audio ebooks

Naturally, everyone would like to be the first kind of

investor. The trouble is that not too many people have large

amounts of capital they can invest and allow to lie more or

less fallow for long periods. Also, there aren’t many people

who can foresee a boom early enough or gauge its duration

with sufficient accuracy to take advantage of it.

One man I know correctly anticipated the post-War

housing shortage and bought several large apartment

houses at comparatively low prices in 1943. In 1950, he was

offered 80 percent more than he had paid for the properties.

“I’m going to sell out,” he announced to his real estate

broker. “I’ve made a fairly good income on my investment

over the last seven years, but I figure I had best take my

profit now. I don’t believe that property values can possibly

go any higher than they are.”

“I think you’re making a big mistake,” the broker cau-

tioned. “If I were you, I’d hold on. Property values will go

considerably higher in the next few years. You’re going to

miss a wonderful opportunity if you sell.”

The man ignored his broker’s prophetic advice and sold

his apartment houses in 1950. He has been regretting his

decision ever since. Today, the properties are worth at least

three times what he paid for them in 1943.

Many investors have made the same error during the

current real estate boom. They sold out prematurely

because they were convinced the peak had been reached or

that it would be reached within a very short time. They

feared the consequences of the bust they were certain

would follow. Their reasoning and their fears were based on

past experiences or on recollections of the histories of such

ill-starred real estate booms as those which drove real

property prices into the stratosphere in Florida, California

and elsewhere in the 1920s.

I, personally, do not believe there is any similarity

between those booms and the one which began at the end of

World War Two and is still continuing today. The great real

estate balloons which were in

flated—and then burst so

disastrously—during the Roaring Twenties were almost

entirely fueled by purely speculative buying and selling.

Despite all the frenzied activity

of property trading, there

was little genuine desire for ownership on the part of the

speculators. In those days, a piece of property could—and

often did—change hands dozens of times, but not because

anyone anywhere along the line actually wanted to own

land, build a home or operate income property. Each

momentary “owner” of a piece of property had but a single

thought in his mind—to sell as soon as he could and to

make as large a profit as possible.

For example, there were an estimated 2000 real estate

offices and 25,000 real estate salesmen in Miami, Florida,

alone in 1925. Theoretically, they sold property—ranging

from single lots to huge tracts of land. In actual practice, all

that most of them sold were “binders.” The buyer paid a

small percentage of the agreed sales price of a property and

received a receipt which constituted a binder; the property

was then his until the next payment fell due 30 or 60 days

later. The overwhelming majority of buyers sold their

binders just as soon as they could realize a profit on them.

With prices spiraling wildly, they seldom had to wait more

than a few days—or at most, a few weeks—before finding

another feverish speculator who would give them more

money than they’d paid.

There was more truth than humor in the following tale

that made the rounds at the height of the 1920s* Florida

land boom. According to the story, a Miami realtor had

taken a prospective buyer out to look at a dismal and

utterly useless swamp tract. The client stared at the

forbidding landscape in dismay.

“No one could ever build anything on this land!” he said.

“It’s worthless!”

“So what?” the realtor shrugged. “Land down here ain’t

for ownin’; it’s for tradin’ . . . !”

The post-World War Two real estate boom is entirely dif-

ferent from those which took place during the Twenties.

There is a solid demand for building sites, for homes, com-

mercial and industrial sites and buildings and income prop-

erties. The people and the firms who are in the market for

such properties are serious buyers. They want to buy or

build houses, stores, factories—or whatever—for their own

use or for the purpose of leasing or renting them to others

in order to earn income for themselves. In short, they really

want to

own

the properties they buy. The number of out-

and-out speculators today is, as far as I can see, negligible.

Current real estate prices aren’t high because they have

been driven up by irresponsible speculation, as was so often

the case in the past. Prices have risen because a constantly

increasing population with money to invest has created—

and continues to create—a great demand for real property

of all kinds in almost every part of the country.

I, for one, do not anticipate any major break in real

estate values in the foreseeable future. Some soft spots may

develop here and there and there may be tendencies to

oversell or overbuild in some areas, but I believe the over-

all trend in real estate will continue to be up for a

considerable time to come.

Of late, the companies in which I hold substantial in-

terests have made sizable investments in real estate. The

Tidewater Oil Company Building on Wilshire Boulevard in

Los Angeles was completed not long ago at a cost of nearly

$10,000,000. This building is de

signed for expansion after

restrictive zoning regulations now in force have expired.

The new 15-story Skelly Oil Company Building in Tulsa,

Oklahoma, also represents a $10,000,000 investment. The

even newer 22-story Getty Oil Company Building in New

York City involved an investment of some $14,000,000.

I would imagine that the real estate investments these

companies and I have undertaken in recent years provide

convincing demonstrations of the confidence my associates

and I have in the reality of real estate values.

Investors can find many potentially profitable

opportunities in real estate today. They must, however,

know what they are doing before and after they invest their

money if they hope to reap profits. I think that I’ve already

indicated that real estate is not always the safest form of

investment for the inexperienced. This applies even to the

most common type of real estate investment—home buying

or building.

The home builder or buyer should take great care in

selecting the site or house he buys. He should, for example,

acquaint himself thoroughly

with the zoning regulations

which govern building and the use of property in the neigh-

borhood or section in which the property he wishes to buy is

located. It’s not enough merely to ask the real estate

salesman or the neighbors. Many a happy family has

moved into its vine-covered dream cottage only to wake up

one fine morning and discover that a glue factory or

sewage-disposal plant was being built next door.

The home builder or buyer should also know something

—and the more the better—about building. He should be

able to judge—at least within reasonable limits—whether

or not a house is built well. If he doesn’t know about such

things himself, he should most certainly have someone who

does

know make an inspection of the house for him before

he buys, or keep an eye on the

progress of construction if he

builds.

As for the professional or semiprofessional real estate

investor, in order to have any hope of success, he must have

knowledge of a vast range of subjects running the alpha-

betical gamut from architecture to zoning laws. He should

also retain a much-better-than-average lawyer. If it’s true

that possession is nine points of the law, it’s equally true

that nine tenths of the problems involved in the possession

of real property are legal ones.

It’s not possible to list any specific, universally

applicable rules to guide the real estate investor. There are

far too many different types of real property—ranging from

single lots in uninhabited areas to entire complexes of

residential, industrial or co

mmercial buildings. The rules

investors follow—or should follow—vary widely according

to the type of property involved, the use which is to be

made of it and local and even individual considerations.

Nonetheless, there

are

some general rules and pointers

which provide a valuable checklist of things to do—and not

to do—for anyone who is thinking of making an investment

in any kind of real estate.

Make a thorough study of the real estate market and

its prospects in your area before you buy. Naturally, you

should seek to buy when prices are low and the indications

are that values will rise. Always take into consideration

such

factors as the rate of population increase and the general

prospects of business in the area. There is no quicker way

to lose money in real estate than by investing it in property

located in declining areas.

Know or learn as much as possible about every

aspect of the particular use to which you intend putting the

property you wish to buy. In other words, don’t buy a house

unless you’re certain that it’s suited to the requirements of

your family and that it’s well built. Don’t plan on having a

house built unless you know something about building—or

at the very least until you’ve found an architect and a

building contractor in whom you have complete confidence.

Don’t consider buying, say, a motel unless you know

enough about motel management to have a fair chance of

operating it profitably—or agai

n at the very least, until you

know enough to efficiently supervise anyone you hire to run

the motel for you.

Deal only through licensed and reputable real estate

brokers. Beware the fast-talking, high-pressure real estate

salesman who promises everything—verbally. He is

probably a fly-by-night who doesn’t much care what he sells

you or anyone else.

If you buy a property with a view to improving it or

building on it, be certain that you have adequate capital or

are able to obtain adequate financing to complete the

project.

If at all possible, always obtain at least one

impartial, third-party appraisal of any property before you

buy it.

If buying a building of

any kind—be it a Cape Cod

cottage, 1000-room hotel or Willow Run-size factory—have

it inspected carefully by qualified and disinterested

architects or builders before entering into any building

commitments. If buying an existing income property such

as an apartment house, have the owner’s books checked by

a disinterested accountant. If

the owner of the building or

the income property balks at such inspections, look out.

Whether you’re in the market for a cabin site or a

skyscraper, shop around widely and cautiously. Unless you

happen to run across an irresistible bargain you must snap

up immediately, take your time about making up your

mind. Don’t allow yourself to be stampeded into paying any

deposits or binders until you’re absolutely certain you’ve

found the property you want. Remember that the purchase

of real property usually involves heavy capital investment;

don’t take unnecessary chances with your money.

Make certain you have the best available legal advice

before signing any agreements, contracts or other

documents. I do not mean to suggest that there is anything

dishonest or misleading in the majority of such documents.

On the other hand, few laymen are able to follow the

labyrinthine mazes of legal terminology which are used in

them. To avoid misunderstandings, it is always best to have

an attorney translate the “whereas”-studded fine-print

clauses into coherent everyday English. Even seasoned real

estate investors sometimes fail to have this done—and the

ensuing squabbles between buye

rs and sellers usually wind

up in courtrooms.

Always insure the title to any property you buy. Even

the most meticulous title search

may fail to turn up all the

pertinent facts about the histor

y of a property. The cost of

title insurance is negligible. The expense of fighting a

lawsuit

over a clouded title can be staggering—as many real estate

investors, I among them, have discovered to their regret.

10.

Once you’ve bought your property, treat it as a

long-

term investment, not as a short-term speculation. You’ll

find

that—99 times out of a hundred—you’ll make much greater

profits that way. In fact, if yo

u wish to make money in real

estate, always think in terms of investing and never in

terms

of speculating.

These ten pointers do not, by any means, comprise an

all-inclusive guide to successful real estate investment. Nor

does the individual who follows them—however faithfully—

have any guarantee that he will make a profit when he

invests his money in real property.

But, I believe that the person who observes these rules

goes a long way toward eliminating a significant portion of

the most common dangers inherent in any transaction

involving real property. And that, in itself, is sufficient to

give him a head start on the road to successful real estate

investment.