Is Your Cup Half Full Or Half Empty


August 2009
Vol 32 No 11                                                  

          Let’s take a look at the empty half first?  We’re far enough along in this recession to seriously examine where we are going and how prepared we are to reach our goals.  More to the point, are we certain that those optimistic goals we set a few years ago are still attainable?  We in the house business have historically relied upon the combination of easy credit, leverage, appreciation, income, market demand, and tax shelter to create wealth in the form of equity. Is this still valid?  

          Many of these benefits are fading away today.  In many areas, in order to sustain the market demand, sellers are being forced to cut prices and rents; and each price cut comes directly out of the equity that was so carefully created.  Although new home buyers and owner occupants are being tempted with low interest rate loans, non-owner occupants are having a hard time finding the credit they need to continue to acquire homes either for resale or to hold as long term investments.  Government promises of bank and owner bailouts, difficulty in being able to evict non-paying tenants without lengthy legal proceedings, and the threat that the tax code is going be revised to make more of our income taxable are making it much more difficult to attain the profit margins we recently enjoyed.  

          What about the full half?  In the short term, we are facing many challenges that must be overcome; but in the long term, the future holds even greater promise for those who continue to be active.  Statistics tell us that the average American family moves every 7 years or so.  To do this they must sell their homes.  Millions of new buyers will buy their homes at today’s low prices.  In a few years there will be a cornucopia of opportunity for real estate and mortgage brokers, those who Option houses for sale, and those who take title subject to new low interest rate loans to hold houses for income and long term appreciation.

         In the interim, a multi-billion dollar backlog of unsold homes in the hands of builders, lenders, HUD, and pre-foreclosed owners must be liquidated.  Instead of sitting on the sidelines waiting for prices to rise, those who buy and sell houses even at lower and lower prices can still make a lot of money.  Although inventory turn over has slowed and profit margins reduced, we are still able to turn over houses we have bought in about 4 months or so for enough profit to motivate us to continue to actively seek out houses to buy, and buyers to sell them to.  

         Those who are in areas where there is less opportunity to buy houses should take a sharp look at the mobile home market; particularly mobile homes that are situated on individual platted lots.  Owners of owner occupied mobile homes have a hard time selling primarily because, as a general rule, brokers are focusing solely on stick-built houses.  Owners are reluctant to pay for expensive ads.  This leaves the field wide open for entrepreneurs who buy mobiles at discount, clean them up, and resell them into the market using 103% financing under the HUD Access program.  To qualify for this, homes must have been manufactured after July 1976, only been moved once from the dealer to the lot, and be sited on approved foundations.  There’s relatively little competition in this area, and with the numbers of new manufactured homes steadily shrinking, the market for used homes is strengthening.

         Today the house business continues to generate income and profit for me.  At today’s prices, it can for you too; but only if you’re willing to make a change.  If you are among those who are discovering to your dismay that the security promised by your employer and your 401K plan have largely disappeared; or are seeing your employer’s business failing; or are vulnerable to down-sizing in a corporate merger; it’s time to plan your next step now while you have time.  I was forced out of my job into the house business by Nixon’s recession.  Within just a few years, by taking advantage of the real estate slump and taking title, subject to existing loans, with very little cash, I was able to retire on rents as a landlord.  Making your own career adjustment is what I want you to focus on in this month’s letter.  


        Today, a lot of people have lost their jobs.  Many worked hard most of their adult lives to build a successful career.  They tried to learn all they could to update their qualifications by going to school and attending seminars.  Suddenly, everything seemed to change.  The things they thought they knew about their job no longer seemed to apply.  Their experience didn’t prepare them for the situation they now find themselves in.  Friends who had comprised their support group have melted away as they have fallen farther and farther behind financially.  Now they feel lost; isolated; shunted aside by life; not knowing where to go from here.  

          Millions of wage earners and entrepreneurs today are suddenly discovering that they have become obsolete in today’s changing world.  If it hasn’t happened to you yet, how do you know it won’t in the future?  If you lost your job and there were no others like it, what other job would you be qualified to hold?  Where would you find it?  How would your salary compare with that of the job you last held? How would you pay your bills and support your family at that pay level?

          A few weeks ago, a Job Fair was held where I live.  A new shopping center was preparing to open up.  Employers were looking for sales people, security guards, clerks, administrative assistants, maintenance personnel and custodians.  Supervisors were needed at various levels of management positions as well as staffers with professional qualifications and prior experience as Bookkeepers and Accountants, Human Resource Managers, Buyers, and Retail Sales Managers.  

         Over 7000 applicants stood in line for hours to apply for 600 positions that had to be staffed.  Local TV channels carried the event.  Job applicants primarily came from the local area.  Many had been unemployed for as much as a year.  They clearly wanted to get back to work; yet few seemed to have spent very much time trying to stand out from the crowd.  Most of those who were looking for work wore casual street clothes.  Some wore ear-buds and were listening to music.  They were obviously not concentrating on how they would present themselves in their interview.
          A complaint among interviewers trying to find people to fill the jobs was the shortage of educational qualifications, pertinent experience, people skills, and attention to dress and grooming.  Few applicants seemed to have researched the job they were seeking; or seemed capable of explaining specifically how the services they could provide would justify the costs of their wages and benefits.  Their main concerns were with employee benefits, wages, overtime pay, etc. rather than job requirements, performance incentives, and long term career possibilities.   
         When queried about the screening criteria and basis for selection of successful applicants, interviewers pointed out some facts that should have been obvious.  With ten applicants for every job, their first task was to ruthlessly eliminate those who wouldn’t work out.  Rather than looking for the best applicant, they sought to weed out the worst.  Those with incomplete applications, tattoos, multiple body piercing, and inappropriate attire were eliminated first.  Those who hadn’t researched the list of positions well enough to match available job openings to their personal and professional qualifications were also eliminated quickly.  That still left a lot of job seekers competing for relatively few jobs.      

         Those who stood out appeared to be dressed for the jobs they were seeking as though already employed.  It was obvious that they had made an effort to give a good initial impression by their appearance as well as their interest and knowledge about the position they were aiming for.  Men wore ties, with and without coats.  Women wore makeup and were well groomed.  Some carried laptops.  They seemed to understand that, as employees who would interact with retail customers, the impression they gave would enhance or detract from their employer’s image.  As a result, many of them found good jobs while others who had apparently not invested their time in their own future success wound up being passed over or settling for low-level jobs with limited career possibilities.  If you don’t want to compete for a job in a “cattle-call” like the foregoing, there’s a more palatable choice.


          Two times in my life I found myself unemployed.  The first time, I learned to write really good résumés, but went through over 200 interviews before I learned how to dress, act, and respond to questions.  The second time, when I lost my job at age 40, I realized I didn’t want to work for anybody else anymore.  My only recourse was to go into business for myself; thus, I more or less failed into real estate sales.  The bad news was that, as a beginner, I had to learn a completely new set of rules and start working without the safety net of a regular paycheck.  The good news was that, as a salesman working solely on commission, I’d be paid in accordance with my own job performance; and as I learned, I could steadily increase my income.  

          Bear in mind that I had worked for wages for decades before making the switch to being a salesman.  I was scared to death.  My only recourse was to spend every waking hour trying to learn the ropes.  I had to study all the laws that applied to selling houses.  I had to learn how to list and sell houses; then to fill out contracts and shepherd them through financing, clearing of contingencies, and settlement.  I had to find ways to pay regular periodic bills with income that came in spurts instead of from a steady salary.  And I had to convince my family that this was the best career choice I had.  After many months of trial and error, during which I killed many a budding sale, I made the transition from depending upon the whims and business judgment of corporate bosses to being the boss myself.  You can do it too; especially if your future boils down to low-level jobs with no future.  

          Many people trying to go from a salaried job into direct sales fail for a number of reasons that have more to do with their attitudes than the requirements of the job.  Being a good salesman requires a high level of enthusiasm and optimism.  You have to be a self-starter.  Nobody is going to drag you out of bed everyday and make you go to work; you have to do this yourself.  You must exude optimism and truly believe you can make a living selling houses.  You have to find customers who need the house you have for sale.  To do this, you must find a way to establish personal rapport with them.  You must believe in the house you’re selling and be able to communicate how it will meet buyers’ needs within their budget.  You have to find a way to set yourself apart from your competitors so your customers will remain loyal to you while you find them the house they need.  

          All of this sounds hard, but almost every entrepreneur must find ways to do it in order to build a business.  It takes time.  I started as a salesman and opened my own one-man brokerage on a shoestring as soon as I could.  The first year my annual income barely exceeded that of my former job.  As I learned more about the business, I made more money.  By the second year I tripled my former salary.  By the third year I was buying, fixing and selling more houses that I’d optioned, than those I listed.  The fourth year I became a “buyers’ broker”; being paid 10% of the purchase price for any house I bought for an investor.  The fifth year I closed my brokerage office and retired on rental income from 38 houses I had kept as rentals.  

          I learned a lot about myself and about business during this time.  First of all, when you’re in business for yourself, every day you take off can not only deprive you of an opportunity to make money, but also increases the workload when you return to work.  In short, I said goodbye to vacations, weekends, and days off.
My 40-hour workweeks became a memory.  While my wife held things together in the office and answered the telephone at home, I worked the neighborhoods clear into the night; listing, showing, selling, and closing house deals.  I calculate that my wife and I each worked over 90 hours a week for five years before we were finally able to quit. In the final analysis, this was well worth it.  I was able to retire at age 45.  Somehow my two teenagers survived it all and helped out when they could.  

         Most businesses fail during their first three years because of lack of money.  By deliberately electing to remain a small company without any debt, inventory or employees, I avoided the distractions and stress that many new businesses need to cope with.  Fortunately, real estate brokerage and Options_ enable one to do this while generating a lot of money from sales.  


          FEAR has robbed more people of success than any other factor.  Fear is what freezes a deer in the headlights.  Fear is what makes a person aim low to avoid failing instead of trying to get to the top.  Fear of rejection keeps people from making low or creative offers and aiming for higher profits.  Fear of the future is what motivated me to settle for a mediocre career in the Air Force rather than becoming an entrepreneur at an early age.  To avoid going out on their own, fear drives people into college to get a degree in a specialty that they never work in.  

          The irony of being controlled by fear is that its basis is almost always created in the mind as we imagine the worst possible consequences of the decisions we make rather than the best possible results.  Fear comes in all shapes and sizes:  Fear of rejection.  Fear of loss of a job or a promotion.  Fear of failure.  Fear of disapproval.  Fear of change.  Fear of making a decision.  Fear of government harassment, lawsuits, or physical abuse.  So, ultimately, while reasonable caution is a good thing, irrational fear of the un-knowable, un-seeable future is not.  It’s an emotional choice that people make who don’t understand changing events, aren’t willing to find out more about them, and aren’t willing to confront them head on.

          The difference between taking blind chances and taking calculated risks is knowledge and experience.  When a professional takes a stroll across Niagara Falls on a tightrope, what seems like a terrible risk to observers amounts to a walk in the park to him; because he knows what he is doing, and has done it before.  The same principle applies to buying, financing, selling, fixing, and managing houses.  Why do you suppose so few brokers actually buy/sell/rent their own houses versus entrepreneurs?  I think it’s because listing, selling, and managing houses for a fee incurs no risk of money or credit; while investing and lease/Optioning does.     

          As a broker, I knew more about houses than my customers. I did all the work from listing to settlement.  Despite my expertise, I settled for a fraction of the profit that I was making for others simply because I didn’t want to risk investing my own money.  I readily gave up half of the profit I could have made. When I realized this, I made a big change:  I began charging 50% of the profit, payable only when I sold the property.  My income tripled overnight.  Later, with very little money and no customers, I used short-term Options to control properties until I could sell them.  As I gained experience, I began closing on some of my Options and keeping houses as rentals.  Sometimes I Lease/Optioned properties.  My income and equities grew by leaps and bounds.  If I were starting over today, I’d do exactly the same thing.  In today’s market even greater profits are attainable.      

          When you’re out of work and there’s nothing to lose, taking a chance on yourself isn’t nearly as risky as quitting a good job to go out on your own; thus there’s very little to fear.  Fortunately, I had gotten a Salesman’s license a year or so before losing my job, so nothing prevented me from going into real estate sales; but I had to be practical.  I set a Go/No-Go point for the next three months as to how much money I had to earn listing and selling houses in order to continue to avoid a regular, low-level job.  Because I really didn’t want to ever be fired again, I worked like a fiend to meet my goal, and I was able to continue on in the house business.   Once I proved I could make a better living, I never looked back.  

          Getting a real estate license is not such a bad idea.  It requires minimal study or expense and can provide income if you lose your job.  If you don’t like real estate, a Mortgage Broker’s license is about as easy to get.  If you do this while you’re still employed, you can shorten the time between losing your job and beginning to earn money.  You’ll also enhance your employment opportunities because many States require that businesses that provide real estate or financial services have at least one broker on the payroll.  It also eliminates restrictions on Master Leasing and flipping Options on houses that some States impose on non-brokers.

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