The Peebles Path to Real Estate Wealth E-Book

R. Donahue Peebles

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 283

Veröffentlichungsjahr: 2008

Beschreibung

You can still find plenty of good deals in a failing real estate market by applying the advice in The Peebles Path to Real Estate Wealth: How to Make Money in Any Market. Multimillionaire teal estate mogul R. Donahue Peebles makes it possible for you to always win in real estate, provided you have the right knowledge and exercise good judgment in the deals you make. Start with small investments and work up to bigger, more profitable properties; before you know it, you'll be a smart investor earning large profits!

Leseprobe

Table of Contents

Title Page

Copyright Page

Introduction

PART ONE - A RECENT HISTORY OF THE REAL ESTATE ROLLER COASTER

CHAPTER 1 - The Big Bang: The Post-2000 Real Estate Explosion

CHAPTER 2 - The Great Flood: The Oversupply of Housing

CHAPTER 3 - Down Time: The New Buyer’s Market

PART TWO - FUNDAMENTAL TOOLS FOR REAL ESTATE INVESTING

CHAPTER 4 - Information Please: Where to Find the Data

CHAPTER 5 - Adding It Up: A Crash Course in Valuation

CHAPTER 6 - The Big Guns: Finding Help from the Government

CHAPTER 7 - Money Talks: Negotiating with the Lender

PART THREE - CREATING WEALTH IN THE NEW LANDSCAPE

CHAPTER 8 - Boom to Bust: Making Money in Down Times

The Real Winners

On the Street in D.C.

CHAPTER 9 - Fundamental Values: Buying in the Right Regions, Cities, and Neighborhoods

CHAPTER 10 - Specific Observations: Making the Deals

CHAPTER 11 - Techniques, Tactics, and Tricks: Useful Tools to Make Money

Auctions

Buying from the Bank

Credit versus Cash

Buying from Investors and Builders

CHAPTER 12 - Outside the Residential Box: Investing in Commercial Real Estate

Leveraging, Price, and Options

Beyond Housing

PART FOUR - SAVING YOUR BACON (How to Avoid Getting Swept Under by the Subprime Tide)

CHAPTER 13 - Be Like the Rich: Change Your Way of Thinking

CHAPTER 14 - Showtime: Dealing with Your Lender

CHAPTER 15 - Know When to Fold: The Time to Walk Away, and How To Do It

Index

Copyright © 2008 by R. Donahue Peebles. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Peebles, R. Donahue, 1960- The Peebles path to real estate wealth : how to make money in any market / R. Donahue Peebles, with J.P. Faber. p. cm. Includes index.

eISBN : 978-0-470-43251-8

1. Real estate investment-United States. I. Faber, J. P. (James Paris), 1954- II. Title. HD255.P44 2008 332.63’240973-dc22 2008012234.

Introduction

The Opportunity of Setbacks (Why I Wrote This Book)

I started my real estate career in my twenties, working as an appraiser of low- and middle-income housing for HUD in Washington, D.C. That was in the late 1970s, during one of the worst real estate crises to rock this country. Despite those troubled times, by the mid 1980s I was developing my first office building and on my way to becoming a multimillionaire. Later, when the real estate market again crashed in the early 1990s, I invested heavily. Today I have a net worth approaching $400 million.

I am writing this book at a time when the real estate market is once again down. Most people would call this a bad real estate market, with prices dropping. For me, it is a market full of opportunities.

When I started working in real estate during that down market of the late 1970s, interest rates were at 20 percent. Times were tough, but it meant lots of work for me as an appraiser. I spent the ensuing years developing my real estate valuation skills and developing local business and political relationships. By the mid 1980s I had evolved those skills and contacts sufficiently to lay the foundation of my wealth, developing my first high-rise. It was not until the early 1990s, however, that I began to build a true real estate fortune.

This was in the midst of the last great real estate crisis in America. During this time the real estate industry faced a severe credit crunch, right when values were declining due to oversupply; the credit crunch expedited and exaggerated that decline. These factors combined to create the largest transfer of wealth in our country’s history, when the big Wall Street firms decided to take a look at distressed real estate. It was then that the first private equity or vulture funds were formed by some of the largest investment banking firms in the world. They saw great opportunity and had access to the capital to take advantage of the situation.

I also built my fortune through buying well in those difficult years. It was a time of great opportunity for buyers who had two things: access to money and a strong stomach. I had both. My real estate appraisal business had grown into a real estate tax appeal business, which provided me with excess cash flow to invest, and I possessed a great appetite for taking calculated risks. (The operative word here is “calculated”!)

Today we have a situation that is presenting almost as good a buying opportunity as the last real estate crisis, certainly on the residential side. Once again we are flooded with too many homes, with prices that rose to unsustainable heights. Compounding the problem are millions of overblown mortgages for houses no longer worth as much as their loans, or with monthly payments that are no longer affordable by their owners.

The resulting market correction is shredding prices nationwide. Foreclosures are up, and consequently even more discounts are moving through the system.

Will prices drop further? Perhaps. But now is not the time to panic. Now is the time to hold on if you can, because at the end of the day real estate is going to endure. History has proven this; within five years of the end of the 1990s crash, real estate values recovered to exceed their pre-crisis levels. And they will do so again. Now is the time to refinance. Now is the time to buy.

My best real estate investments have always been opportunistic, based on challenging market conditions. If you want to be successful in real estate, you have to look for the opportunities within the challenges. Challenging times create fortuitous circumstances, and they are brought forth by particular setbacks. What you must do is find these opportunities as they present themselves. You just have to ask yourself the questions I asked myself during the last real estate/housing crisis in Washington: Is the real estate market now dead forever? Are people going to stop buying forever?

Most people get excited about real estate when the prices are going up. That’s when everyone is buying. My concept runs contrary to that: Buy when fewer people are buying and sell when fewer people are selling. Follow that rule, and you will make a lot of money. Chase the market, and sometimes you’ll end up getting caught; just like in the game of musical chairs, the music always stops. You lose if you’re one of the last people still dancing. It’s much wiser to have your seat well before then.

This book is about understanding the down real estate market and how to invest in that market. It’s for the small and/or entrepreneurial investors, and it’s about how they can make money, prosper, and get rich during this time period. It’s also about how to survive and prosper in the current mortgage crisis and credit crunch, including how to save your home.

More than anything else it’s about how you should think about real estate and the tools you’ll need to execute these ideas, with practical advice on everything from where to look for real estate data to how to craft the best deal once you’ve focused on a particular piece of property. You need these tools because if you want to make money in real estate, you need to know the nature of the business. You need to be educated—to know what an option is, or how an auction works or what the difference is between Sallie Mae and Freddie Mac. To be forewarned is to be forearmed.

I remember how, at the height of the real estate collapse of the early 1990s, I wished I had more money to invest, some access to real capital. Now that I do, I am moving into huge projects in Las Vegas, Washington, D.C., Miami, and San Francisco. But I only got to this place through a series of deals that started with a vacant site in an economically neglected neighborhood, then my own house, then a few small vacant commercial storefront buildings, then a couple of vacant office buildings, then a large vacant warehouse, and then a prime development site.

After that it was one opportunity after the next, and in each case it was a matter of unlocking value: a historic bank building on F Street in Washington that I bought through an RTC auction and later turned into a Marriott Hotel; the Shorecrest Hotel that I bought on Miami Beach when it was a flea trap in 1996 for $5 million; followed by the Royal Palm Hotel for $5.5 million—buildings today that would be worth $80 million; the Bath Club, also on Miami Beach, which I bought in 1998 and then quadrupled in value overnight by getting it rezoned for a luxury high-rise condominium, that would be worth $120 million today; plus an 80-acre oceanfront site that I bought in Pacifica, south of San Francisco, for one-tenth its actual value because the owners were faced with a looming threat of having to pay for environmental reclamation (a former rock quarry, now to become an oceanfront resort). Our most recent purchases are in Las Vegas, 19.3 prime acres in the gaming/ resort district for $110 million that are now worth $338 million.

These deals are the subject of my other book, The Peebles Principles, which goes over them in detail. For our purposes here, I mention them mostly to illustrate that this book is not based on abstract principles, but on real markets and real transactions.

The other reason I mention them is that all of these deals were based on setbacks or depressed market conditions or the false perception of a depressed market, including the fundamental setback of buying in a down market—and that by overcoming those setbacks I created value. That is the really important message of this book. While I made my fortune buying in down real estate markets—an opportunity that has arrived once again—I really made my fortune by paying a low price in a challenging situation. And those opportunities will always present themselves, in any market.

Remember, your first investments don’t have to be mega deals to be successful. One of my most lucrative investments was the condominium apartment I bought for my mother in 1991. At the time the market was dead, and I paid $125,000 for the property. Today it is worth $750,000. May all your deals turn out as well.

PART ONE

A RECENT HISTORY OF THE REAL ESTATE ROLLER COASTER

CHAPTER 1

The Big Bang: The Post-2000 Real Estate Explosion

Between 2000 and 2006, mortgage interest rates in the United States fell in half. That started a feeding frenzy, which sent housing prices to dizzying heights.

An investment bubble is just what it sounds like: a pocket of air, rising upwards until it bursts. In real estate, just as in other financial arenas, bubbles occur when demand for a product pushes its price well above what is rational. A kind of investment fever sets in, with one buyer selling to the next, until the final fool has paid the final inflated price: the time when the music stops and someone is left standing without a chair.