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If you're ready to move beyond basic buy-and-hold or fix-and-flip investing, Confessions of a Real Estate Entrepreneur is for you. Full of real-world wisdom from successful investor James Randel, this insider's guide is packed with detailed examples of real-life deals, demonstrating strategies to help you you avoid the mistakes that Randel and other investors learned the hard way. You'll learn about:

• Due diligence and researching properties
• Financing strategies that maximize your buying power
• Legal terms, issues, and conditions you should understand
• Profiting through option agreements
• The thirteen vital skills for real estate success

"Confessions of a Real Estate Entrepreneur provides all the tools for analyzing, buying, improving and profiting from the investment in income producing properties."--Jeff Dunne, Vice Chairman, CB Richard Ellis

"Jim's focus on the building blocks, the creativity, and the strategy of deal making gives readers a front row seat into this high stakes, and richly rewarding game."--Jim Fagan, Managing Director, Cushman & Wakefield

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Confessions of a REAL ESTATE ENTREPRENEUR

The McGraw-Hill Companies, Inc.

Contents

Chapter One

I graduated law school in 1974 and immediately started buying real estate (a two-family house in Los Angeles). I had no money and as "necessity is the mother of invention," I had to be very inventive. In the next 10 years I bought and sold 50 or so investment properties.

I also became an active real estate attorney and real estate broker. My assumption was that if real estate was involved, I should be able to figure out how to make money buying, selling, brokering, or lawyering it. I soon began to think of myself as a real estate entrepreneur, someone who took risks in an effort to turn time, information, and some capital into much, much more capital.

In 1985, I wrote a book titled The Real Estate Game (And How to Win It). That book advocated real estate as an investment but was limited to what I had learned up to that point in my life. In the 20 years since writing The Real Estate Game, I have continued to buy and sell. Only the deals got bigger and bigger. And I learned a lot about maximizing one's success with real estate entrepreneuring.

One of the points of The Real Estate Game was that you could use real estate to obtain wealth, simply by buying and holding. And that still is true. Notwithstanding a relatively low rate of inflation over the last five years, real estate appreciation has continued to clip along at double-digit numbers.

Over the last 20 years I have observed that whereas buying and holding is certainly a valid (fairly safe) strategy for making money with real estate, there are other—and I dare say better—ways for doing that. These are the strategies employed by the super-successful real estate players. These are techniques used by entrepreneurs who are not satisfied with a "reasonable" return on their investment. The Dow Jones may go up in a year by 10 percent, and equity investors are generally pleased with that. On the other hand, the real estate entrepreneurs I know would be quite disappointed with a 10 percent return on their equity. These people are looking for multiples many, many times a 10 percent return.

Now before we start down our path of learning, let me make one important point: real estate, as with most entrepreneurial endeavors, has a risk-reward quotient. If you are looking for risk-free ways to make a ton of money in real estate, toss this book. I have never seen such things. Certainly, risk can be quantified and minimized, but life in the real estate world is pretty simple: the greater the risk, the greater the potential reward.

In that regard, I am NOT A FAN of the real estate promoters who write books about making money in real estate with no or little cash invested. Or who hold seminars claiming to make their attendees instant millionaires. Sorry, guys, I just don't buy it.

Real estate investing is not some magic potion to riches. Yes, it's a means for making a lot of money. But it's no risk-free, lazy man's way to wealth. It's hard work. And there is definitely risk involved. But with information, diligence, determination, and calculated risk, there is plenty of opportunity to make A LOT of money.

One last disclaimer: I tell many stories in the pages to follow. All of them are actual deals that I was involved with (sometimes with names or numbers changed a little bit so as not to offend anyone) or are compilations of several similar deals in which I participated. Some of these deals make me look very smart. My intent is not chest-pounding. The point of these stories is to show you what can be done if you are a knowledgeable real estate entrepreneur. But as you will discover, I have also made my share of mistakes. And frankly, one of the reasons for writing this book 20 years after my last venture into publishing is that I wish I'd had a road map to follow that would have helped me avoid some of the real stupid stuff I have done. I hope that this book can be that kind of road map for you.

So, you in? Okay, then let's get going.

The General Premise

My belief is that in order to maximize your success in real estate investing you need to ADD VALUE to either the process by which you acquire property and/or the property itself.

The techniques that I write about in ensuing chapters are all about ADDING VALUE; in other words, finding some way to TIP A DEAL IN YOUR FAVOR. There are techniques for creative acquisition, for finding hidden wealth in a property, for using other people's money to generate disproportionate returns, for using information to create outsized commissions, and so on. Hopefully, you noticed the quotation at the beginning of this book ("Knowledge is power"). I am a great believer in that statement. With knowledge, you have the power to catapult your existing net worth to a level you may have only dreamed about. My goal is to impart some of that knowledge to you ... to get you familiar with the types of techniques that I have seen work time and again. To give you a good foundation in the basics of real estate investing so you can exercise your own creative muscles to find new, exciting, and lucrative ways to do deals. There is no one right way.

By the way, real estate entrepreneuring is gender neutral. Most of the time in this book I use the word "he" instead of "he or she" just to save space. And speaking of words, please note that at times I address real estate entrepreneurs as "players." I am using the terms synonymously.

The next chapter is a story—a true story—about friends of mine who made almost $3 million in two years on an investment of $100,000. I was their attorney, so I did not share in the upside, but that deal widened my eyes to the wondrous possibilities open to the creative and intelligent real estate entrepreneur. As such, I thought it would be a good starting point for you, as it was for me.

Chapter Two

I want to start my book with a story. A true story. It helped open my eyes to the possibilities of success with real estate once you know the principles of intelligent real estate entrepreneuring. In the storytelling, I may use terms that are not yet familiar to you; don't worry about that. We will learn about these concepts. For now just enjoy the "rags to riches" result.

Years ago two friends of mine were interested in buying a building in Shelton, Connecticut. I was their attorney. The building was 66,000 square feet, commonly called "flex" space, meaning that its style and configuration made it flexible, that is, usable for office, assemblage, light industrial, or Research and Development (R&D).

My two friends had done their homework, learning about the Shelton market and especially about flex buildings like the one they were interested in. They knew what type of companies would be interested in that type of space. They knew what rents the market was commanding. This homework had taken them no more than two weeks; they just talked to everyone in the business who would speak with them.

Although my friends have since both gone on to great things in the real estate world (making lots of money), at the time they did not have a lot of money. They were, however, both very entrepreneurial.

The owner of the building ("Owner") was prepared to sell for $5.5 million. There was a tenant...