Some property investors are like fishermen–some share their secrets while others do not.
And, while many of the most popular rules to get a run-down home ready for sale are common–including fresh paint, new carpet and interior cleaning–it’s interesting to hear what absolutely works for small-time players with a proven track record.
Neal Hargrove, 39, spent 15 years as a professional wrestler with the World Wrestling Federation. He made a very good living in the ring as Reno Riggins and plowed most of his financial rewards into residential real estate. He now owns 16 residential properties–some he will turn over for a quick profit while keeping others he will retain for a retirement nest egg.
“I was always the guy on the mat getting pinned,” Hargrove said. “I was known in the industry as a ‘star maker’ because my job was making a star out of guys like Andre the Giant and Hulk Hogan. Of course I got hit in the head a lot, and may not be the sharpest knife in the drawer, but I still know how to make a buck buying property.”
Hargrove and other small-time property investors belong to a blossoming club. According to the National Association of Realtors, more than 15 million people own rental property in the United States, and that number is growing. Additional property purchases (other than the primary residence), mostly for investment purposes, accounted for more than one-third of all single-family home sales in the country last year.
Hargrove’s bread-and-butter acquisitions are single-family homes in blue-collar neighborhoods. While specific areas can dictate some buy-sell circumstances, here are his Top 5 tips and suggestions:
- Stick with single-family homes. Multi-unit buildings are the targets of investors who often do not want to pay retail. Single-family homes have a greater pool of buyers and “you can put a little lipstick on them and take them to the dance.”
- Steer clear of one-bedroom homes. Typically, the demand for them is considerably less than other homes and room additions can be too expensive to pencil out into a profit.
- Go for base hits, not home runs. There are too many savvy investors now in the home-buying game. See if you can invest $10,000 in improvements to net $25,000 in profits.
- Get in and get out. Hargrove has a four-person crew that averages 21 days on rehabilitation.
- Go over-the-top on curb appeal. If it’s ugly from the street, potential buyers won’t even spend their time to come in the front door.
The reasons for becoming a landlord are many, but the challenge of managing the property is what keeps most would-be investors out of the market. Whether it is the result of an inheritance, the desire to hold on to a first home, or portfolio diversification, most small-time landlords face the challenge of managing investments with such antiquated systems as the shoebox full of receipts, hand-written ledgers, intricate folder systems and homemade spreadsheets.
Hargrove likes to keep things simple but he has a definite need to be organized. While he “flips” some of his purchases for a quick profit, he also keeps many as long-term rentals. He uses a computer software program that handles not only costs for labor and materials but also his monthly rents and maintenance fees that he can easily print out at taxtime. He chose Quicken’s Rental Property Manager because he felt he could learn the program quickly.
“There’s a lot of good computer programs but I had used some basic Quicken stuff and didn’t to spend a lot of time reading manuals,” Hargrove said. “I need to spend my time fixing up properties and making deals–making money and not trying to figure out how to operate software.”
What would be his suggestions to other investors who may want to consider real estate as a part-time project?
“Forget about the home runs,” Hargrove said. “Focus on hitting doubles and singles.”
Tom Kelly’s new book, “Real Estate for Boomers and Beyond: Exploring the Costs, Choices and Changes for Your Next Move,” (Kaplan Publishing) is available in retail stores, on Amazon.com, and in local libraries. Tom can be reached at firstname.lastname@example.org.