Fears of a major market correction are yet again in the news, this time triggered by data released by the National Association of Realtors on August 23rd which reported that sales of previously owned homes just hit a two year low. Prices are starting to flatten in many markets and for-sale signs are languishing on front lawns longer. Find more information at the National Association of Realtors website, or view the full report here. Total existing home sales were down 4.1% from June, and were 11.2% below the July of 2005.

Investors should keep in mind that real estate markets are regional by their very nature, but a major correction in overheated markets (CA, FL, AZ and NV, etc) may have implications nationwide in terms of consumer confidence, economic growth, and interest rates. 

Vacation! I’m aboard the beautiful Rhapsody of the Seas on a seven night Western Caribbean Cruise: Galveston – Key West – Grand Cayman – Cozumel – then back to Galveston. But, alas, these days Wi-fi is everywhere – one of the constant reminders to me of how technology is changing all of our lives.  So I’ll likely make or post or two while we’re at sea. And lest you think I’ve got my work-life balance wrong rest assured I’ll be spending some time by the pool, but I rest a little easier if I spend a few minutes each day following business back in the real world. Ok – better sign off before my wife catches me with my laptop open.

Avoiding burnout in investing. As promised here’s the first of four principles I wanted to discuss:

Principle #1: Look before you leap
Many real estate investing courses are just personal motivation seminars with a thin veneer of real estate education. These courses may serve some use if they cause you to take charge of your financial future, but you don’t want to go charging into battle without the right tools. 

In the example I offered the other day the seller’s primary mistake was that he underestimated the amount of effort that it would take to remodel the two properties. He nearly had the work finished by the time I came around, but by them he was tired of spending time and money and was ready to move on to something else. It’s easy to underestimate rehab costs when you’re bidding on a property. Don’t let your optimism lead you down the wrong path. 

When a good deal pops up you’ll often have to act quickly, but even when under a deadline there is still time to conduct a basic economic evaluation. Compare the cash outflow (mortgage plus taxes and expenses) to the cash inflow (rental income) to get an idea whether or not you should expect the property to break even on a month-to-month basis. And things break, so don’t forget to include a reserve fund that should be around 1.5% of the property value per year. The best way to maintain your peace of mind is to invest in properties that offer an adequate return, and this will require you to do your homework.   

Looking before you leap is what EquityScout is all about. We’ll give you the tools that you need to understand the rewards (and risks) before you put that offer in. We’ll talk more about the EquityScout tools in future posts, but for now stay tuned for the second key principle to help avoid investor burnout.

According to census figures there are almost nine million single family rental property units in the United States, and more than twice as many units in multi-family units. The vast majority of these are owned by individual owners (as opposed to corporations). People like you. 

Another interesting figure is that of these owners, almost a third report that they would not buy property again.  Real estate is one of the most solid paths to building a sound economic future, but it’s not for everyone. So – why so many burned-out landlords?  Well there are a lot of answers to that question, but in the next few posts I’d like to touch on some principles that might help investors to maintain a healthy work-life balance.  

A couple of years ago I passed a for-sale-by-owner sign in front of a small patio home in an upscale subdivision of West Houston. I wasn’t particularly interested in this neighborhood, but when two months later I noticed that the sign was still there I called the number and left a message. 

Not sixty seconds later my phone rang. It was the owner, wanting to know when I’d like to see the property. Since I was in the neighborhood I responded “...well how about now?”

The gentleman who showed up had a weary, shell-shocked look to him.  Everything about his posture and mannerisms indicated that he was a member of that most blighted of species: the burned out real estate investor.  Turns out he also owned another property down the street. Both were vacant. As he told me about the properties his eyes sent me a clear signal: “make me an offer…please!” So I offered to take them both off his hands, and we closed a couple of weeks later at 20% below market value. 

Deals like this are out there if you keep your eyes open. But over the long term they key is to be the guy looking for the bargain, not the guy looking to unload a property at below market value because it’s causing you a headache. 

In my opinion there are four key factors to keep in mind, and following them will help you keep your sanity (and give you the energy to keep building your portfolio). I’ll talk about each of them in turn in coming posts. 

Welcome to EquityScout.com, an online community for real estate investors. I’m glad you’ve found us, and I’m glad that you’ve found this blog. I’m Christopher Smith, and I’m the founder and Managing Director of Paladin Equity LLC, the parent company of EquityScout.com. I hope you’ve visit this page from time to time – this is an area that I’ll try to use to give some insight on what EquityScout is all about.

And I hope that you reciprocate. I want to hear from you.  Peter F. Drucker, a great thinker in business and management theory, consistently admonished business leaders that to remember that every business exists for one reason: to serve a customer.  This is a message that I’ve paid attention to. You can reply to any post in this blog simply by clicking on the links at the bottom of this page, or you can email me directly at csmith@equityscout.com (note: please enter “EquityScout blog” as the subject – this will help keep your message from getting swept into my spam filter.)

This is an exciting experiment for me. I’m a real estate investor myself, and EquityScout.com is the result of my own frustration in trying to find an intuitive, user-friendly and powerful tool for evaluating real estate investment opportunities. The product simply didn’t exist on the market – until now. 

Behind EquityScout.com there’s a dedicated team of professionals working to create a product that meets your needs. If you like what you see here then tell your friends. And if you don’t, then tell us.  You’ll see; your voice makes a difference. 

In this space I’ll be posting ideas and thoughts on real estate investing, observations on current events in the field, insights into the workings of our company, and tips on how you can be more effective as an investor.  We’re glad you’ve joined us. Check back often to see what’s new.