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Immersion Investing

Immersion Investing

Immersion is a technique I use in my investing. It works for me and it may work for you. Actually, I am a total immersion guy. I immerse myself in any task that I deem worthy of total and complete knowledge.

I will get to my definition of immersion in a moment. But, since I am talking about real estate investing, let me first establish credibility. I have been investing in, selling and or brokering real estate for over twenty years. I am a landlord, a developer, a speculator and a buy and holder. I have a high net worth and a high income. I have accomplished this through real estate. I am not a “guru” or a publisher. The only thing I may want to sell you is some real estate.

I have read many of the Real Estate Guru’s books- the good, the bad, the scammers and the pros. In fact, when I was studying real estate, I absolutely immersed myself in the field. I bought my first property weeks after my first course.

Now let’s talk about the definition of immersion. To immerse yourself into a project means to totally surround yourself with the facts, the fiction, the numbers, the smells, the attitude, the long way around, the short cuts, the people and the opinions of others. If I am looking at a property, I do not stop until I know everything there is to know about the seller, the property, the neighborhood, the tenants, the furnace, the color paint in the closet, the bank, etc. I will go at different times of the day different days of the week. I will walk to the property. I will talk to anyone associated with the property. When I am satisfied, I will know more about that property or project than most people involved in the transaction.

Most of us love real life examples. Let me give you one. Years ago, I stopped at my daughter’s office to pick her up for lunch. She had a new job at an office complex at the south side of town. At that time, I had 23 residential rental properties, two commercial properties, and some land deals. There was a for sale sign on the complex. I knew the realtor that had it listed, and, in fact, had purchased two other properties through him.

The complex consisted of three buildings and seventy suites. It was a wreck. The building smelled bad, looked bad, and I was told it was 60% occupied with angry tenants. I was told by the broker that the complex was out of foreclosure and owned by the bank. The asking price was $1,100,000. Three days later I offered the bank $1,000,000. We settled on: $1,050,000 on the following terms: due diligence was 45 days. Bank held the note at 6%, with .05 increases every year for five years, and then the loan ballooned. The key to my offer was that there would be no payments or interest for four months after closing. The bank accepted my offer. I IMMEDIATELY moved in and immersed myself in the building. I lived with the manager. I talked to every tenant. I met with every contractor that ever worked there. I talked to ex-tenants. I went at night. I came on Sundays. I made sure that when my due diligence was up, I still wanted to buy the place.

When I went to closing, there wasn’t anything that could surprise me about this building. I knew so much more than the owner knew! You see, by the end of due diligence, I knew that the building was more like 75% occupied and would cash flow very well. The management was so bad, it was not collecting all of the rents. Tenants were not paying and the bank just assumed occupancy was low based on rent receipts. I also knew that the building, while in bad shape, could be made to shine. Three years later, the building was 90% occupied, and at 9% cap rate was worth $1,900,000. (I love this country!)

Immersion is knowledge to me. Knowledge is absolute king. If I do not have the expertise, I will not have the confidence. In negotiating, confidence rules. This is true whether we are talking real estate or automobiles. Immersion will get you knowledge, and knowledge will make you deals. If you do not immerse yourself in your task, you had better have someone on your team that does.

I will give you another, quite different example. One and a half years ago, I sold a waterfront condo my wife had lived in for two years. We bought it for $515,000 and sold it for $850,000. (If you are asking why I sold it, read the previous sentence). Here in Southwest Florida, waterfront condos are appreciating at an average of 17% a year. I said to myself, “There has to be a way to make money in waterfront condos.” I immersed myself in that idea. Within weeks, I bought a condo in a waterfront community called Burnt Store Marina. You see, I bought it PRE-CONSTRUCTION. It was priced at $604,000. That same condo was selling in the newest building for $750,000. I tied up the first condo with only 10% down. My $60,400 was then worth $206,000, less selling expense.

I immersed myself in Burnt Store. I became an expert. I have since bought all or part of five more condos there. I also became the most prolific broker for the community – outselling all but one of the INSIDE SALES PEOPLE THAT WORK IN THE COMMUITY EIGHT HOURS A DAY! I did this because I immersed myself in Burnt Store and the concept of making money with pre-construction condos. At the community, I am a regular fixture. Knowledge is king. I got the knowledge by immersing myself in the concept and working it from every angle until I knew it would work.

Immerse yourself in your next project. Don’t be a spectator, be a player. Don’t be an outsider, get way inside. From that vantage point, you will be a winner.

Let me put my expertise to work for you. Let me help you reach your real estate investments goals. You will not be disappointed.