The Beginning – My First Property Investment

I had just arrived home on military leave and was looking forward to a little rest and relaxation.  I didn’t really want to go anywhere, but I played along saying, “Sure, when do we leave?”

“Your Dad and I are leaving on Friday. For a hundred bucks they’re going to fly us to Orlando, pick us up at the airport then drive us to the hotel and then wine and dine us all weekend. All we have to do is look at some land they have for sale. What a deal. It’s only 100 bucks, come on, why don’t you come with us?” Mom was selling me.

“Only 100 bucks? They’re paying for the hotel? Really?” I questioned.

My mother went on to explain, “Yeah, and they’re picking up our meals too. They want us to buy land. But, you don’t have to. We don’t have any intentions of buying any land, but a weekend in Florida for 100 bucks is too good to pass up. You should come. I’ll call right now and get you a ticket.”

I was caught up in the excitement. “I’m going. Book me.”

Did you buy Land?

By Monday morning we were back in New Hampshire and Mom, Dad and I were proud Florida land owners! I kept joking with Mom and Dad about the salesmanship – by the time Sunday afternoon came around , I would have bought anything these guys were selling! I had no idea what I was doing but that’s how I got started in real estate. It was probably the one of the best moves I could have made. I could have said “Thanks for the great weekend, but no thanks to the land offer.” And I would have had a great weekend but that would have been the end of the deal. But, instead, by saying “Yes” to the deal, I’m still benefiting from that fun filled essentially all expenses paid weekend in Flordia.

Should You Go to Florda this Weekend and Buy Land?

Am I telling you to run off to Florida this weekend and buy land? No. But, I am telling you my simple story about how I got started in real estate. Is it high finance wheeling and dealing? Absolutely not. Is it years spent in Harvard Business School studying the history of real estate throughout the ages? No. It was a small itty bitty opportunity and my willingness to grab it. Was it a good deal at the time? I wouldn’t say so. But, was it a good deal over time? Definitely. That’s one of the big secret benefits of real estate that I’ve found – it’s very forgiving. If you are patient, you’ll win eventually. But, if you’re jittery – like the person who digs up the planted seeds before they’ve been given a chance to grow – you can lose your shirt.

So let’s hear the details.

My mother was in real estate in 1984 when I went home to visit. She was selling houses in our small town in New Hampshire (NH). The trip to Florida deal came about because a big NH developer was working a real estate project in Citrus County Florida. My Mom and Dad only wanted to go for the “free” weekend. I don’t believe they had any interest in getting land in Florida.

After arriving at the Orlando airport, we were greeted by our sales staff and escorted by van west towards the Gulf of Mexico. The journey ended about 19 miles from the coast where we got settled into our hotel.

The hotel was very charming. Nice old style architecture with very glamorous looking furniture and large windows. I felt like the clock jumped back about 100 years to a time when folks were a bit more relaxed and they enjoyed the finer things in life. The initial impression was very favorable.

We went to our rooms and freshened up and a few hours later were whisked off to a lovely dinner at the development site restaurant. It was here that I received the best after dinner speech I’ve ever heard. It was given by Mitch, our salesman host, who said, “Waiter, bring me the check.”

Saturday morning we woke up at a leisurely hour and had a beautiful breakfast. Mitch joined us for a coffee and then took us in his big car for a look at the properties for sale. It was this part where the doubts started to kick in.

As Mitch toured us around we couldn’t help but notice all the sandy lots. I thought Florida was supposed to be green and under water. But, all I could see was big sandy lots with roads running at square angles.

“Can you picture what this place will be like in 10 years?” Mitch tried to create a postitive image for us.

“Yeah, sure. It’ll look like a giant golf course – the only one in the world that’s all sand traps!” I pondered sarcastically to myself.

Mitch carried on without skipping a beat, “With houses on all these lots. Beautifully, landscaped … Can you see yourself owning one of them? And, of course you’ll have bought when the prices were low. The folks who wait will be paying top dollar!”

I listened and wanted to believe but it was hard. I’m not much of a green thumb but it looked to me like you couldn’t even grow noxious weeds on this land. It looked like desert to me. I was imagining myself buying a lot and then showing people back home the pictures of my astute new real estate acquisition. They’d look at me like I lost my marbles, “You paid money for that?” Then, I snapped out of it and realized I didn’t have to buy anything. “This is just a weekend lark; don’t worry about buying any land.” I told myself.

Mitch showed us a couple of 1 acre lots in the lower priced areas and recommended them as perfect for our needs. I’m not sure what our “needs” were, but he seemed to know. I suppose that’s what makes someone good at sales – they should help their customer come to the right buying conclusion. Some sales folks are too pushy; we all know that doesn’t work. Some back off too quickly – that can be just as disastrous. Mitch was striking a nice balance. Let’s pause to talk about this balance for a moment then we’ll come back to the one acre lots.

Pushy Salesperson:

The pushy sales person may win the battle but usually loses the war. We all know the type; they want to sell you something no matter what. They drive a hard bargain and won’t take no for an answer. The problem is the customer leaves feeling bad about the transaction – whether they bought or not. Leaving customers with a bad feeling is not good business – do you agree? How can anything good come from this type of interaction? Even if the customer made a good purchase, do they want to do business with this sales person again? I doubt it. And, worse yet, what if the customer feels it was a bad purchase? You get the idea. Common sense says it’s bad business practice to be a pushy salesperson.

Pushover Salesperson:

The pushover salesperson can be just as disastrous as the pushy type. How so you say? Well, if the deal is bad and the customer doesn’t buy, then all’s well. The pushover won’t talk you into it. But, what if the deal is good? Again, the pushover won’t help you make the correct buying decision and you may miss the deal. How can that be good for you? How is the salesperson doing you a favor by not assisting you in making the right decision? They’re not. They’re doing you a disservice and one that could ultimately lose you lots of money. Let me give you an example.

Setting:  1998 Los Angeles California.  I’m traveling through on business.

“I can’t believe the house prices in LA.” I said with a sigh.

“Yeah, they’re outrageous. I’m glad we bought years ago. We could never afford the house we’re living in now if we had to buy it today.” Was the excited and quick response from Linda, the office administrator.

I was traveling through LA and as always, I was checking out the real estate market.

Then out from another office popped another lady and she told us her story.

“Back in the early sixties, my husband came home on day and told me they were selling lots in Manhattan Beach for $5,000. He was all excited and was even talking about buying two of them. Before he could get another word out of his mouth I told him, ‘Who in their right mind would pay $5,000 for a lot in Manhattan Beach?’ My husband has never let me forget those words. Lots in Manhattan Beach are going for nearly half a million bucks today!”

What could I say?

Did they make a bad buying decision? I think most people (even the couple above) would say, “Yes!”

Who would you rather have in a situation like this, 1) An enthusiastic, knowledgeable and assertive (not aggressive) sales person to assist you in making the correct buying decision or 2) A pushover sales person who just lets you make the wrong decision? Your call.

Back to the one acre lots.

Mitch stopped the car right in front of a nice patch of sand … oops I mean land. Mom, Dad and I got out of the car and walked slowly around on the sand bar. I let my feet drag slightly across the ground and let the sand fall all over my sneakers. It was fairly entertaining for me to contemplate how silly it would be to buy any property on offer here. Then Mitch started to ask questions.

“If this was your lot, where would you put your house? Would you go for a three bedroom or would two bedrooms be enough?

I just listened. No answers from me. Remember, I wasn’t buying. But, Mom and Dad were polite enough to entertain his questions.

“Oh, we’d probably just get the land and not worry about a house until later on down the track.” Mom said offhandedly.

“That’s right, not ready for a house just yet.” Dad chimed in.

I was listening and these remarks were working on me and working in Mitch’s favor. “Sounds like Mom and Dad are thinking about buying some land.” I surmised. “No they can’t be – who would buy this stuff? They’re too smart for that. But, if they want to get some land, maybe I should too? Well, doesn’t matter anyway, I don’t have the money. If they want to get something, that’s their business. I’m staying out of it.”

I remember having flashes of how cool it would be to own a piece of land. Then I would own something tangible. A place to build a house someday. But, here in this sandlot? I don’t thing so.

That Saturday evening we went out for a wonderful dinner at Andre’s, the development site restaurant, and had a dreamy meal. Mitch picked up the tab again. I was impressed again. Have you ever noticed how food and drink taste just that little bit nicer when someone else is paying? I was beside myself, because normally, I’d never go out to a nice dinner – too much money. I was making about $220 every half month as an Air Force “two striper.” Granted, I lived in the barracks and had a meal card, so my expenses were very low. But still, there probably weren’t many people around who would consider that a big paycheck. So, things like nice dinners out on the town were few and far between and I certainly appreciated being “treated.” His hospitality certainly put me in the mood to listen.

We sat around the table after the meal and talked.

“Can you picture yourself with a nice three bedroom home, beautifully landscaped gardens and sitting by the pool relaxing? The words rolled of Mitch’s tongue like silk.

Yes, I liked that picture. Yes, I wanted that.

“You folks are interested in value right?” We just stared without answering waiting for him to continue (is there any other answer but yes?). “Well, you won’t find better prices than what you’ll get down here. Both land and building costs are near the lowest in the nation. You’ll get a lot more for your money down here. Is value for money a priority for you?

By the time we finished our discussion, I’d mentally bought the land. The only thing saving me was I didn’t have the $1,200 down payment. So, I thought I was free and clear of having to make a tough decision. It’s easy, no money, no land.

Sign the papers

The next morning, we rose from a restful sleep and after another enjoyable breakfast, headed over to the sales office. I wasn’t sure why we were there because I wasn’t going to buy anything. Maybe Mom and Dad were going to buy. Anyway, we were seated around a table and Mitch came in smiling with paperwork in his hand.

“Morning folks. I’ve got all the paperwork ready. All we have to do is get it completed and the 1 acre lots are yours. Just check to make sure the lots are the same ones we looked at yesterday. The ones on East Connecticut Lane.”

I was a bit puzzled at the way this discussion was heading. It looked as if we were going to buy this land. I suppose last night we’d given the impression we were interested but I don’t remember anyone saying, “Ok, organize the paperwork and we’ll sign in the morning.” I spoke up to get a little clarification.

“Mitch, I can’t buy the lot right now because I don’t have the down payment.” I thought I had him in checkmate. He isn’t going to put up the down payment for me so, I’m safe. No sale today mate.
Mitch was no slouch. He didn’t argue or say I was wrong or any of the typical responses I expected. Instead, he answered as follows:

“I’m really sorry to hear that, because you’re going to miss out on a great deal. The prices of these lots are just going to go up. By the time you do have the down payment, the prices may go up to where you’ll have to pay double or even triple what we’re asking for them today. But, I understand. If you don’t have the down payment, then you can’t do it. Lucky for me these lots are selling like hotcakes, so it certainly won’t be a problem for me to sell this lot I got saved for you.”

Boy did that speech take the air out of my tires. Now, I wanted the land more than ever! The little response also grabbed my Mom and Dad’s attention. I think they were hooked as well. They didn’t want to miss a good deal.

The land was selling for just over $11,000 for each 1 acre block. For $11,000, I could have my own 1 acre block of land. And, even to me, this seemed like an amount of money I could handle given the 15 year payment plan they were offering. I really wanted to buy but was at a standstill until I heard my Mom offer a solution.

“I’ll lend you the down payment.” She said quickly as if it was an order and I was not to question it.

“Are you sure Mom?” I replied even though I wasn’t supposed to. I didn’t want to borrow money from my parents but this seemed like a good time to put that rule on hold. I waited for her response.

There was almost no pause or hesitation as my mother answered my probing question. But, there was a fraction of a moment where I had enough time to mentally flinch as I hoped for positive response. Her response would set the tone. Would she lift me up or make me feel like a small kid who needed Mommy’s help? I was 23 years old and did not like the idea that I needed Mom and Dad to make this purchase. I was very concerned about saving face in front of Mitch. But, the moment ended quickly as I heard the her beautiful words …

“Come on Dave, it’s only twelve hundred bucks and you’ll pay me back right?”

I repeated her words in my mind “…you’ll pay me back right?” Of course! You’re right Mom. It’s no big deal. I’ll pay you back. It’s not a problem. The way she said it was magic. Her words and tone together conveyed to me her belief. Here belief that I would pay her back. Here belief that I should get this property. Here belief that it’s right for her to let me borrow the money. She did not doubt me and that was probably one of the best gifts she could give me – her belief and trust in me. That’s a powerful gift and one that I cherish more than any material gift. I try to keep this in mind as I raise my own children.

I signed my paperwork and Mom and Dad signed theirs. We bought. The deal was done. I owned a 1 acre lot and Mom and Dad owned one. The lots were right next to each other. We were sand … I mean LAND, neighbors. We pushed our chairs away from the table and stood up as proud new property owners. This concluded my first real estate transaction. I was now in the real estate business.

Afterthoughts:

Not a very glamorous start but it’s a start. And, this is the step that I find most people don’t take, the first step. Or they wait too long to take it.

This deal represented a good way for me to get started.

First, it was fairly low risk. I could afford the $164 monthly payments without much financial pain. I also could afford to pay my mother back the $1,200 down payment I borrowed. I paid here back in less that 12 months and I threw in a couple of extra payments as well to serve as interest. I felt I owed it to Mom to let here know in a tangible way how I appreciated her lending me the money. After all, if I was willing to pay the bank interest, why on earth wouldn’t I pay some to my Mom? I rather give it to her than the bank anyway!

Next, it gave me a tremendous sense of ownership. I felt it was important for me to own something tangible. Something I could put to use. I remember the good feeling I had making the monthly payments because it felt like I was putting money in a savings account much more secure than the bank could offer. Finally, I bought with the right attitude. I felt this land would serve as a place I could build my home one day. So, essentially, it didn’t matter if the price went up or down because I wasn’t buying the land to make a quick buck. I was buying it to serve as a place to build my house one day.

Attitude can make a big difference. I was in it for the long haul. My goal was to pay it off and have my 1 acre ready for the day I would build my house. I liked the idea of having a nice 1 acre lot; plenty of room for a house and other nice things like, a pool, garden – who know’s – maybe even a tennis court!

It’s ok to think big – it’s still free; they haven’t found a way to tax it yet! Since we all have the choice of what to think about, why not think big? Can someone tell me the advantage of thinking small? If it’s simply a choice, then I’ll choose thinking big thank you very much.