Immersion Method of 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 sixteen 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 Guru’s - 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, and the people, and the opinions of others. 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. 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. Three 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 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 ask 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 that 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. 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 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. Today, three years later, the building is 90 % occupied and at 9% cap rate is 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, knowledge will make you deals.
I will give you another, quite different example. One and on 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. I bought that condo for $604,000. The condo will be complete in another six months. That same condo is selling in the newest building for $750,000. I tied up the first condo with only 10% down. My $60,400 is now 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.
I couldn't agree more. Being relatively new to this, it's great to hear the real-life examples. Great article, GFous !
Your the Man Gfous. Total immersion, absolute concentration to the subject at hand is essential if you want to be great at any activity. Real estate is no exception.
Wonderful article! It is very inspiring for
those of us who wonder if there are real
deals out there. It seems to me that with
your total "immersion", perseverance and
drive you have created win=win=win situations for all. When you refurbish the
building, increase the cashflow and give
the occupants better management it is only
logical and fair to congratulate you.
Your article inspired me to try harder.
Thanks so much!!!
Thanks for all the comments above. I too enjoy reading real life examples.
But I must say you guys inspire me to come up with another deal to share.....
Stay posted for the "Bus Terminal Aquisition." My all time favorite RE deal.
Gregg
By the way - if you read my tag line" - "If you wait for all you ducks to get lined up you will never get in the water." You might think this is contrary to my immusion technique. But you never have all the facts, you never can get all the data, you can never feel totally prepared - sometimes your gut will tell you wether the deal should go forward or not.
Many investors suffer from "analysis paralysis" and while they are figuring things out, someone else scoops up the deal.
Get the property under contract so you can immerse yourself and only lose the deal when YOU want to lose it.
Gregg
I am interested in real estate rehabs for the winter in Florida (we reside in CT). Do you have an area of Florida to recommend? A conference? Any help would be greatly appreciated. We have been rehabbing single family homes but are willing to consider anything. Thank you,
Wendy
Although I stopped being "obsessive" with anything, sometimes ago, I do have to agree with others that your article is both motivating and inspiring. Great story. Two tombs up!
Great article!
A follow up comment. Since the original article was posted i sold and now I close on that first offfice building on March 1 and will roll the $865,000 into another deal - this time land.
I will then release this land in phases to another company I own that will develop the land for condos. I will do this as a tax deferance strategy (1031 and then capital gains) and defer taxes as I raise the prices of the parcels released. This will effectively reduce profits of company two and allow me capital gains rates on the recaptured exchange.
Gregg