What is a profit potential property? Virtually
every town has lots of profit potential properties. To see how Donald
Trump acquires properties with profit potential, be sure to read
the excellent new book "Trump Strategies for Real Estate"
by George H. Ross (John Wiley and Sons, 2005, $24.95). No matter
what you think of "The Donald," Ross takes a very valuable
and objective look to explain Trump's real estate investment strategies.
This great book should be required reading for
every serious real estate investor. As an observer of Trump for
more than 25 years and as his trusted adviser for the last 10 years,
77-year-old Ross probably knows more about what makes Trump successful
than Trump himself does. The book is filled with countless examples
of how Trump acquired dumpy properties with profit potential, such
as New York City's Commodore Hotel (which became the Grand Hyatt
at Grand Central Station), 40 Wall Street (a mostly vacant, massive
office building purchased for only $1 million with an unfavorable
land lease, which Trump renegotiated to create added value), and
many others, then improved them to create higher market values,
often by adding luxury renovation touches.
According to Ross, Trump's success keys are (1)
acquire at a bargain purchase price, (2) visualize the profit potential
that nobody else sees, and (3) pull everything together no matter
how long it takes. Don't miss the Trump negotiation strategies,
which make the book so fascinating. By the way, all the recommended
books are available in stock or by special order at local bookstores,
public libraries, and amazon.com.
In today's real estate market, buying an investment
property and sitting back to wait for it to appreciate in market
value by itself is pure speculation. Instead, savvy investors like
Trump add "forced inflation" market value by adding profitable
improvements, as explained in my other special reports.
HOW TO FIND INVESTMENT PROPERTY WITH PROFIT POTENTIAL.
If you expect someone to call you and say "I've got the perfect
property for you to buy and it's sure to go up in value at least
20 percent per year," dream on. That just doesn't happen.
Instead, it's up to you as a savvy investor to
locate these profit potential properties. There are many sources,
including (1) foreclosures, (2) probate properties, (3) bankruptcy
properties, (4) run-down "don't wanter" properties, (5)
under-used properties, (6) vacant properties, and (7) fixer-upper
properties. For more details on these and other resources, please
look over my list of special reports.
Every property has profit potential if you buy
it at the right price and terms.
Personally, my realty investment problems are (1) spotting
the profit opportunities, and (2) accepting the risk, especially
if I have never done the task before, such as building a
new house on a great lot. At the moment, financially I am
quite comfortable. Therefore, my tolerance for risk is low.
If I were just starting out investing in real estate and
wanted to become very wealthy as a real estate investor,
I would "go for broke" because I would have everything
to gain and nothing to lose.
EXAMPLE: Recently, I spotted a beautiful
view lot being sold "for sale by owner" near my
home. I've had my eye on this property for years. I knew the
elderly owner who died in his home there about two years ago
at age 93. The lot even comes with an old one-story house
on it! But rather than being a "fixer-upper," I
think that house is a "tearer-downer!" It was built
around 1950 and hasn't been fixed up since then. To complicate
matters, there is a beautiful old "heritage tree"
in the courtyard. Local construction regulations would require
building a new house around that old tree. But the fantastic
view of San Francisco Bay from a new two-story house would
be one-of-a kind. A new luxury house on the property will
probably be worth $5 million based on recent nearby comparable
sales prices. The asking price for the lot with the old run-down
house is a mere $2.5 million! The two wealthy brother heirs
aren't very motivated to sell, unless they get their price.
I spent almost an hour talking with one of the out-of-state
heirs by phone. He's nice, but very tough. Is the profit potential
worth the risk? That is my dilemma. If the numbers and the
risk weren't so big (for me), I would tie up that property
in a heartbeat. Would you take on that risk and profit potential?
Fortunately, most real estate profit opportunities don't
involve substantial numbers like that (although I realize
$2.5 million is petty cash for "The Donald" and
he wouldn't even be interested in such a small profit potential).
But it's good to think big! However, if you are getting started
in realty investment, please start out with small properties.
Look for potential profits in the $10,000-and-up range per
property.
For more information on Bob Bruss publications, visit his
Real
Estate Center.
