“If you don’t own a home, buy one. If you own a home, buy another one. If you own two homes, buy a third. And, lend your relatives the money to buy a home.”
-John Paulson
MY STORY
In 2013 I owned, with the intent to renovate and sell, seven houses in San Diego and Riverside counties. Of these, I have one remaining under contract; one listed for sale and one last one that we are finishing up some work on. So, yes, when I’m not trading forex, I’m one of those annoying flippers who drives up prices in neighborhoods and makes it so you and granny can’t afford a house.
In addition: I caused the market collapse (presumably single handedly – even though I lost a lot of money in it); am a slum lord (obviously); make money by oppressing other people (one of my favorites by the way – and I still don’t really get it); didn’t build my business; and am an individual of general ill repute. I wouldn’t hang out with me.
Or at least that’s what I’ve been accused of before.
In reality, I buy properties that retail clients don’t want and can’t afford. I have owned properties in six cities and three states. I’ve seen and been involved in some real beauties. I’ve bought houses without kitchens or bathrooms; with holes in the roofs; with improper foundations (one without a foundation); with graffiti on the walls and so on. I bought a house once that was 60% + destroyed by a lightning strike. Not only did it not have a roof it had only 10 sq ft of drywall left in the entire 2,400 sq ft structure. So, you would be hard pressed to show me something I haven’t seen. Once in a while I find something new, but not often.
Usually, I do alright but sometimes I break even and it is possible to lose a lot of money in this game if you don’t know what you’re doing. And that’s what the radio commercials and cheerleading seminars don’t teach you. They all say you can make something ridiculous like 50,000 in 90 days with no money out of your pocket and part time. You can do the first two. But it won’t be a part time gig. It is a lot of work.
I’M A SPECULATOR
In short, I am a speculator in a risky business. I speculate on the future price and marketability of fairly large illiquid assets which I purchase in distressed and undesirable condition with the intent to resell in the shortest timeframe and highest return possible. I make a lot of decisions under a great deal of uncertainty. Right now, I’m not an investor. I tried that for a few years it didn’t end well. Currently, I own one rental house that I’ve seen probably four times since I bought it. So that hardly counts. This means, just like in trading the market, I make a decision to buy a property based on my understanding of the current market conditions and my educated guess regarding the near future real estate market.
[Would you buy this house as an investment? Tim Kosen did.]
Of all the clichés in this business the most accurate is the faster you move the more money you make. In fact, the only mistakes I made last year were in not completing two of the houses fast enough. Because, the longer you take to stick a property back on the market, the more risk you have. Sometimes you have upside risk and the market appreciates. But, the downside in holding cost, opportunity cost, market exposure (and break-in risk / cost) seldom compensate for the gamble of holding a property any longer than necessary.
The best way to learn about something is to find someone who knows what they’re doing and is willing to share their insights. While I am still a little short on the former, the latter can be a lot of fun.
STAY TUNED
Over the following several months I will be writing a series devoted to real estate investing and more specifically one following my most recent purchase. Just like when some trading fella puts his trades out there for all to scrutinize, I’m going to do that with my next swing trade. (Except a lot of my numbers can be verified through public record). I don’t know how this will turn out. Obviously, I hope to make a few dollars on this project. On the other hand, I might not. In some ways, this is one of my more risky trades. But then again, sometimes the harder deals work out better than the easy ones.
My next trade is a 5,000 sq ft house on 3.6 acres north of Dallas Texas in a town called Argile.
I closed on it December 31, 2013 and we start construction today.
This video is a little rough, but take a look and stay tuned for weekly updates
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Check back each Monday on TraderPlanet for the next installment of Kosen’s “real estate trade.”
