Creative Real Estate Investing
By Steve Gillman - 2006 - 2013
How I bought and sold my first piece of real estate is a story
I've told before, and probably somewhere on this website. But
it is worth retelling briefly here, because it does demonstrate
a couple key principles about creative real estate investing.
First, it shows that doing things in a different way can make
it easier to sell a property, and at a higher price. Second,
it demonstrates the more important principle, that smart investing
is about solving problems.
Almost thirty years ago I was working at a chain restaurant
for $3.40 an hour. Because I chose to live with my parents I
was able to save $5,000 or more. I used $3,500 of it to buy my
first piece of real estate. It was a 2.5 acre parcel thirty minutes
away from where I lived. I bought it for $3,500, paying cash.
I put it up for sale within two weeks.
One thing that I did differently, which nobody seemed to be
doing at that time, was to mark the boundaries. I knew that I
liked to see what I was buying, and it seemed likely that other
people felt the same way. I found the existing corner markers
in the leaves and grass, and used sticks painted white on top
to mark the lines between them, staying a couple feet in just
to be safe (I am still convinced that you are better off understating
the size of raw land than leaving the buyer with no visual reference).
Now came the problem-solving part. There are many people who
would love to buy a piece of land but don't have even a few thousand
dollars cash saved. To solve that problem I advertised on my
hand-painted sign, "$4,750! Only $250 down! Payments of
$100 per month." I charged 11% interest and sold at full
price within days. The small numbers were not so small to me
(and this was almost thirty years ago) and with the capital gain
and interest collected my annual return was over 20%, which wasn't
bad for a first time investment.
Buy low for cash and sell high with easy terms. I've used
that formula more than once. It isn't even selling real estate
as much as it is selling easy financing. That's why you
get to sell above the market value. I had bought the land a little
under market, because the seller needed fast cash. His problem
was solved. I sold the land a little over the market value because
the buyers needed easy terms. Problem two solved. I also did
a couple things differently from what other sellers were doing
(cleaning up the land, marking boundaries, and outlining a driveway
to make visualizing a future home easier).
Here's some other stories. I'll preface the first by pointing
out that radio stations, police departments and others need hills
to put radio towers on, but they often can't tie up their capital
to invest in such properties. That's a problem that one creative
This smart investor bought options on hilltop real estate
parcels for a few hundred dollars, then found those who needed
them, and signed long term leases. With the leases in hand, it
was easy to get financing to buy the properties. He invested
a few hundred dollars to create years of income.
Lumber mills need trees. A friend of mine helped solve this
problem by letting a company cut trees on his small property.
They paid him $4,500, and you know what? I honestly couldn't
see the difference when they were done. They only cut the prime
lumber trees and didn't thin the woods much at all. The property
is residential, and was almost certainly worth as much the day
after the cut as the day before. He lived there, but a creative
investor could buy property, sell half the trees, maybe sell
the clay or gravel too (I saw this done on another owner-occupied
property), and then re-sell the land.
Suppose a seller of an income property needs the satisfaction
of selling for a high price (hey, we all have different problems,
and this one is not necessarily as rare as you might think).
And suppose you need better terms in order to be sure the property
generates positive cash flow. Maybe you can pay more than full
asking price if he'll give you low interest financing, and perhaps
even interest-only payments for the first few years (during which
time you can improve the property and increase the rents before
the larger payments start). This is a classic win-win situation
Suppose a seller wants to pay less in capital gains taxes.
You might suggest that you can buy the furnishings and appliances
separately, so that even though he gets the same amount overall,
he has a lower price for the property itself to report on his
What do people need? Easy terms? Cleared lots? Lumber? Better
access to a piece of property? Smaller pieces of land? Condos
instead of apartments? The list goes on. When you think creative
real estate investing, think about how to solve problems and
do a few things differently than other investors.
If you found this article on creative real estate investing
useful, you may want to also read the article on creative