Surviving and Thriving During a Recession
With Percy Nikora, Co-Founder
It goes back a while. I started in the early 2000s ... Actually, let me take a step back. Throughout my life, I'd always been exposed to some form of real estate. Luckily, my father was a successful businessman, and he always had real estate. I didn't really understand, necessarily, the value of that real estate, but he used to use it as part of a diversification strategy and a wealth-building strategy.
As I started to make some money myself, I started to understand some of the benefits that come along with that. So, initially, as I said, just for diversification, started to look at real estate. As 99 percent of the people who start looking at investing in real estate, the only real estate that comes to mind, initially, is single family houses; providing a home for a renter or somebody. That's where we started to focus.
We had a family friend who was based in Florida who was finding these deals and flipping the houses, renting them out. So, I was funding that for a little bit; started to get a sense of what works, what you should look for, which deals makes sense, which do not make sense. Then, as we started to do that, started to buy some real estate locally, in my area. Through that time, we also went through the 2007-2010 real estate bubble. Luckily, our- I'd already started selling stuff prior to that, so we were fine; but I was waiting on the sidelines knowing that, okay, this is going to dip again, and when the market starts- when I think the market has bottomed out, we'll start buying again.
What happened is, in Florida, the property prices just started to skyrocket all of a sudden. Banks were giving us two times, three times the value that we had initially purchased the properties for. So, I'm like, okay, this is not going to last very long. When the banker's calling you up and chasing you to give you a loan when you haven't even asked for it, to me, that seems a bit odd.
We started to notice the market starting to come- the prices coming down a little bit, so we sold ... Again, we probably made twice our money. We could have made maybe three times, but when it started coming down, we said, okay, let's take a break, knowing that every market has a cycle, and a lot of it is around timing of that cycle. So, we said, okay, let's sell some of these properties right now; we'll wait for when the time is right.
Around 2010-2011, when we started to see a lot of REO - what is called Real Estate Owned - which is when the banks foreclose and take the properties back, we started to buy some properties for cash from the bank because a lot of these properties would not qualify for mortgages. So, we were able to make some great offers with cash that a person looking for financing would not have been able to get financing on that property.
Banks, at that time, just wanted to get this off their books, so it was good time and good way to get some properties that, again, needed work. We would buy it; do the work; refinance it. Again, that was all still focused on single family. Then, when you get to a certain point ... I had a construction crew; I had [inaudible] focusing on fixing.
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