An Essential Real Estate Reference For All Investors
BATTLECALL GUEST EXPERT: Robert J. Abalos, Esq.,
ImvestingInLand.com
William Nickerson and his classic book HOW I TURNED $1,000 INTO
ONE MILLION IN REAL ESTATE IN MY SPARE TIME has probably created
more millionaires than any other book in investing history.
It simply is a masterpiece of common sense advice, no matter what type of
investing you are contemplating.
I got my start in real estate in 1983 after reading one of the book's two
revisions. My first reaction was "Hey, I can do this too." His step-by-step
formula was so simple that anyone could follow it. I not only did but became a
real estate lawyer because I enjoyed being around properties and other real
estate investors so much.
When I began writing my Investing in Land Home Study Course, I admit I had
all the lessons William Nickerson taught me in mind. Not just how to make money
with real estate but how to convey what I wanted to teach about land investing
and real estate development in his straight forward, clear, and no-nonsense
manner.
What makes Nickerson's book so good?
His writings are crammed full with practical and real guidance on real estate
investing with a proven technique for making money that really works.
No get-rich-quick hype. No motivation speeches or excessive cheerleading. No
nothing down promises of instant wealth or easy profits.
Just tons of genuine advice real estate investors need to
hear.
Nickerson's method of making money in real estate is so common and understood
people still speak about "Nickersoning" properties more than forty years after
his original book was published in 1959.
What is are the keys to Nickerson's method of real estate
investing?
There are essentially three important lessons in his writings.
First, real estate is a means to an end, not an end in
itself. The goal is to make money with real estate, not acquire
properties for the sake of owning them.
Many novice investors lose sight with the fact that owning real estate costs
money. Many, many real estate books assert that owning lots of properties is the
key to long-term wealth, advocating a buy-and-hold strategy with some emphasis
placed on owning a large number of properties for long-term gains.
The problem is that a buy-and-hold strategy for real estate
investing doesn't work.
If you own five homes and rent all of them to tenants, you are responsible
each year for five tax bills and the maintenance and upkeep on five properties.
Hopefully you will not have a negative cash flow, or tenant vacancies, or rent
to deadbeats who destroy your homes and then move out in the middle of the
night. And can you really guess what a neighborhood will be like in ten or
twenty years and whether people will have a high demand for your property
then?
With a buy-and-hold approach your profits are limited to increases in
inflation over the years and population growth in an area and both are normally
single digit performers.
William Nickerson argues the opposite approach, one based not only in sound
theoretical principals but real world numbers.
Buy real estate in need of rehabilitation or modernization, improve the
property, then sell or exchange your investment and immediately reinvest your
profits into a larger property so you can keep repeating the process, over and
over again.
Technically, he is explaining how the greatest profits in real estate are
made on rehabbing or redeveloping properties and by constantly turning your
investments you not only have a high return-on-equity but have a constantly
growing pool of equity on which to earn those profits.
A high ROE and an ever larger pool of equity means wealth gets built fast.
Not twice as fast but fast squared.
Second, Nickerson urges a conservative program for
investors. His books are filled with promises of great wealth but
only if you do things slowly, precisely, and with great discipline. He argues
against excessive leverage, talking about 20% down payments on properties to
avoid negative cash flows. He even advocates a savings program where people put
aside $50 per month (over four years!!) to save the money for their first down
payment and even suggests they continue this savings plan while improving
properties! He explains that making money in real estate is a dirty, time
consuming, and often nasty business where people will try to take advantage of
ignorant buyers and unprepared sellers.
Contrast this conservative message against the hype of the modern real estate
gurus who preach the gospel of instant wealth with real estate. You do not need
a job, good credit, or even cash to make a fast million dollars. You can even
buy property and overleverage it and get cash back at closing! This increasingly
macho hyperbole gets many novice investors into serious financial trouble fast,
precisely the type of individuals who cannot afford to lose money in the first
place.
Never forget that Nickerson assumes that his program will make the dedicated
and hard-working investor a million dollars if worked at constantly over a
period of twenty years! His later books offer examples of people who have made
this sum of money in less time, but he never says his method will make people
instant millionaires without work or sacrifice.
And third, Nickerson's book is filled with real world
advice. He offers readers the same situations they would find in
their world. Sample advertisements that could have been pulled out of any
newspaper. Reality based properties with defects and flaws often trying to be
hidden by their owners. Brokers that try to mislead with phony price estimates
and bogus numbers. This is, unfortunately, the way the real estate world really
is. It isn't all peaches and cream. Most people are honest but notice I said
most, not all.
Contrast this almost cynical approach with the silly advice many real estate
books offer readers. Instead of shrewd and often unscrupulous owners attempting
to disguise property defects to maximize profits, we meet naive and motivated
sellers who will allow buyers without jobs or credit to purchase their property
equity on a nothing-down basis. Or better still, even loan these buyers the
broker's fee and closing costs to do so! So many real estate courses and gurus
offer a world filled with dumb and hypermotivated sellers to show how their
techniques would work in theory, but Nickerson prepared readers for what
actually exists in the modern real estate world.
Sadly, William Nickerson died in 2000. He wrote books on other subjects but
he will always be known for his original 1959 real estate masterpiece and its
later revisions like HOW I TURNED $1,000 INTO FIVE MILLION IN REAL ESTATE IN MY
SPARE TIME. His other books, HOW TO MAKE A FORTUNE TODAY STARTING FROM SCRATCH
and NICKERSON'S NO-RISK WAY TO REAL ESTATE FORTUNES are also quite good and
again preach his unique style of making money with real estate.
His books are long out-of-print and often sell on eBay and in used book
stores for $100 or more. I have a set of about twenty Nickerson books and
acquired mine at thrift stores and garage sales for $2 or so. (That is just the
value investor in me speaking.) But at whatever price, his books are a MUST for
anyone thinking about making money with real estate.
Readers of my Investing in Land Home Study Course have noted that it bears a
strong connection to Nickerson. I am quite complemented by that fact. I took his
basic lessons which I used as an investor in improved real estate for many years
and expanded them to land investing, a vehicle I have come to believe is far
superior for investing purposes than buying buildings which depreciate and
increase tax burdens. My refinements on Nickerson not only increase the
returns-on-equity he preached were necessary for building real estate wealth but
also allow for faster and less burdensome flipping, sales, and exchanges, which
increases the speed at which wealth in land is created.
The lesson of my Investing in Land Home Study Course and his book are the
same. Make money with real estate fast so you can buy larger and more profitable
properties but always do so conservatively and not by taking on more debt than
you can afford to pay. And never hype real estate investing as a get rich quick
scheme or believe that it is.
William Nickerson will always be a hero to me. I regret I never met the man
to tell him so in person but I hope I can spread his message for him through my
writings and lectures. He was certainly one of a kind.
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