BIG PROFITS IN SMALL TOWN REAL ESTATE By David A. Chodack When Roger Hett's wholesale novelties business went under in 1977, he and his wife Karen had no idea it was the start of a big future in real estate for them. They had to sell almost everything, including their custom built home in Fort Worth, Texas, in order to raise capital and pay their debts. Then they moved to Edna, Texas, a small town on the Gulf Coast, to make a fresh start . One of the first things the Hetts learned about Edna was that there was a severe shortage of good single family homes for rent. They used what cash they had as a down payment on a convenience store and an older house on the "wrong" side of town, and set about getting their lives back on the track. Two years later, in 1979, they started investing when they bought two run-down houses and a vacant lot across the road from their store. In each case, they made a low down payment and the owner carried the balance. About this time, Karen came across an ad for The Monopoly Game by Dave Glubetich. She admits she thought she was taking a chance on a possible rip-off, but sent for the book anyway. She reasoned that if she got just one good idea, it could be worth the price of the book. "When it came, I was pleasantly surprised to find it had real substance. I read through it, and I learned a lot," Karen says now. She certainly did. Today, less than three years later, the Hetts have a rental income of over $40,000 a year, and enough depreciation and write-offs to shelter about half of Roger's salary from the family corporation which now owns their convenience store, a carwash, and a laundromat. Roger runs the store and their corporation, while Karen handles a lot of their real estate dealings. She reads, subscribes to Impact Reports and Update Newsletter, attends seminars, and shops carefully for properties. She .looks for good terms, good prices, and opportunities for profit. Most of her buys have been low down payment VA or FHA assumptions, or owner carry-backs, at prices and/or terms, which bring a positive cash flow. Another technique Karen has been using is to borrow the full cash price of a run-down , low-priced house on a ninety-day bank loan. Within the 90 days the Hetts renovate the house and then take out a new mortgage based on the improved value. With careful pre-purchase cost estimates and the right property, a new 80 percent mortgage will pay off the 90-day loan, repair costs, and even put some money in your pocket! A variation on this is to get the seller to carry the first mortgage and accept a 90-day note for the down payment. Then, when renovations are finished, take out a new second mortgage to cover the down payment note. The Hetts attribute much of their success to being in the right place at the right time. They were simply looking for a small town with a good environment for their children and a business Roger could get into when they chose Edna. It turned out to be a fortunate choice, and with hindsight they can analyze the sort of small town that's good for investors. Edna was a dying town for 20 years but has recently started to grow again. It's within easy commuting distance of a variety of jobs in the oil fields, a nuclear plant, a chemical company, and the agricultural industry. There's a shortage of rental housing, a growing population, and renewed health and expansion in the business district. In addition, a state recreational area is being created around a nearby dam project, which is expected to draw around a million visitors a year . Roger and Karen have found some advantages in small town investing. There is little competition, and it's easy to hear about good buys as soon as the owner starts to think about selling. The natural conservatism of long-time residents can be a stumbling block to the use of unfamiliar , highly creative financing methods, at least in the beginning. But dealing fairly with people and building a good performance record quickly makes the small-town investor known as the first person to talk to when anyone in town has property to sell. BACK TO REAL ESTATE ARTICLES PAGE CONTRACT WIZARD HOME PAGE TAX SALE RICHES HOME PAGE MORTGAGE MAGIC HOME PAGE |