Dyches Boddiford

Marietta, GA Years Investing: 24 Number of Deals in 2004: 40 Career Deals: Hundreds

Units Owned: Owns industrial land, timber land, and commercial properties, as well as "plenty" of residential rentals

Areas of Expertise: Discounted mortgages; distressed property; and development

Real Estate License: No

It's every employee's worst nightmare: the Friday afternoon staff meeting after which no one needs to come back on Monday, the day when your paycheck, your sole source of income and financial stability, vanishes overnight. It's the day your company downsizes, and despite years of stellar performance, you and your coworkers are laid off.

Atlanta investor Dyches Boddiford was called into the president's office for one of those meetings in 1991. But for Boddiford, who already had spent a decade building his real estate portfolio, losing a vice presidency in a computer company was not a nightmare but an opportunity: it was the push he needed to go to work for himself as a full-time real estate investor, a move he had wanted to make for a while.

"I got up Monday morning, had a shower, shaved, did everything like I was going to work," he says, "but instead of getting into my car, I just went down to my little home office and started hitting it full-time."

Because Boddiford had built more than one stream of income, he could keep afloat when his primary income dried up. Not one to let a lesson go by unlearned, Boddiford varies his approach to real estate investment deals and never depends on a single investment strategy to fit every situation. While the former sales executive concentrates on rental properties in middle-class neighborhoods, he is no stranger to lease options, fixing and flipping, owner financing, and developing resorts and manufactured housing lots.

"Having a toolbox of strategies allows me to pick the one that is right for the deal rather than trying to make every opportunity fit into one cookie cutter," he says.

As the Atlanta real estate market goes through its inevitable cycles, that toolbox enables Boddiford to adjust to its whims. In general, he believes that there is no "right" time to

buy but firmly believes that different strategies work better at some times than at others. "Time in the market is more important than timing the market," Boddiford says.

For example, while Atlanta recently had a soft rental market, the city still enjoyed solid sales and healthy appreciation. Boddiford looked for the first time into buying properties through conventional mortgages. His reason? The interest rates. Boddiford had bought virtually all his previous properties through cash or owner financing. However, with interest rates at historic lows, he reasoned that the low-rate mortgages would themselves be an investment that he could later sell through owner financing once rates moved back up. But, he says, "no matter what cycle the market is in, you always need to buy the property right on price and/or terms."

Boddiford also applies this flexible approach when evaluating his investment portfolio. Once a year he sells off his weakest-performing properties, which he determines by ranking them according to a variety of criteria: how hard they are to rent, the desirability of their neighborhoods, and how much maintenance they require. Once he determines the 20 or 30 percent that do the least for him, he figures out a way to use a tax-deferred 1031 exchange to leverage his money into a more profitable property.

To develop this kind of dexterity with the tools of real estate, Boddiford advises new investors to invest in their education first. "In the real estate area, you're going to pay for an education one way or another," he says. "You've got two options: you can go to classes and learn from other people and their mistakes, or you can go out in the real world and make your own mistakes. And it's always less expensive and less time-consuming to learn from somebody else."

For his own education, Boddiford took real estate licensing courses at the local community college and, of course, talked to other investors. But just as he warns against skimping on education, he warns just as strongly against getting so caught up in the books and courses that you forget to buy anything. At some point, he says, you have to take the plunge. That's what Boddiford did: after an intensive six-month search, he bought his first three properties on three consecutive days and, true to form, using three kinds of financing. In other words, at least some of your education has to come from your own experiences.

"The worst thing you can do is learn continually without putting some of it into practice," he says. "It's called 'analysis paralysis.' Beginning investors get paralyzed by thinking they have to learn everything about every strategy. But you don't. You just have to learn enough to get started."

But as in Boddiford's case, once you get started, there's no limit to the kinds of deals that can be made. Boddiford's new tactic is manufactured housing and coastal development. But as he says, "there are so many areas I could move into. That's what I love about investing in real estate."

Renata Circeo

Atlanta, GA

Years Investing: Owned rentals for 16 years; serious investor for 4 years

Number of Deals in 2004: 5

Career Deals: 21

Units Owned: Five single-family homes; two duplexes; six condos; and an 18-unit apartment building

Areas of Expertise: Buy, & Hold; fixer-uppers; and middle and high-end homes.

Real Estate License: Yes

Many beginning investors have to combat their share of naysayers as they launch their real estate investment careers. Usually the biggest critics are people who aren't investors but are quick to say, "Tenants are a pain" or to make ominous predictions that you'll "lose your shirt."

Keeping other people's fears from infecting your drive to invest can be a challenge. An even more challenging situation, though, occurs when the person doubting you is your own father. That's what happened to Renata Circeo when as a young college graduate, she approached her father—a buy-and-hold investor in single-family houses—about a loan for the down payment on her first condo.

"He said, 'I know you want to get into real estate, but I think you're a little young,'" says Circeo, now 15 years older and much richer. "I said, 'I know, Dad. I just wanted to give you first right of refusal.' And I went and found another investor."

That was in 1988. After living in her first property for six years and letting roommates pay down the mortgage, Circeo bought a second house. Six years later she picked up the pace, buying another five.

Circeo's strategy is to keep the number of units she owns to a handful, because she enjoys her work in the entertainment business too much to give it up for full-time investing. With this in mind, she carefully shapes her investment strategy to fit into her nights and weekends.

"I'm a classic overachiever," she says. "And I've learned that things suffer when you spread yourself too thin."

One aspect of this strategy is to focus on higher-end properties in which she can maximize her cash flow and long-term appreciation without having to deal with a huge number of units. A firm believer in the "worst house—best neighborhood" approach, she finds run-down properties that need a little sweat equity and rents them out to stable middle-class tenants, keeping turnover and maintenance low.

Circeo also tailors her financing to fit her strategy of long-term security rather than short-term cash flow. Her technique is to pull equity out of her current holdings to buy more houses. This works especially well with the well-maintained houses in pleasant, safe neighborhoods she already likes to buy. Those houses have enormous potential for appreciation, and a little work can mean huge equity gains. Circeo says one of her best deals was her second house, a five-bedroom, two-and-a-half-bathroom that she paid $151,000 for in 1994.

"It was a beautiful house, huge yard, but not well taken care of," she says. "The inside was absolutely filthy, with holes in the wall, and the refrigerator was getting ready to fall into the basement because the ice maker had been leaking for at least two years."

But what some people would have walked away from, Circeo walked into, and her eye for a diamond in the rough paid off. A year after she bought it, the newly fixed-up house was appraised for $215,000, and by 2003 it was valued at $349,000, equity she could then pull out to buy more.

Another tool Circeo likes to use is interest-only loans, which reduce her monthly payment significantly. Even though she pays them off like 15-year fixed mortgages, this type of loan gives her the option of dropping down to the minimum payment if one of her houses has a maintenance emergency or unexpected vacancy or she needs the cash. (The risk of high-rent single-family houses is that vacancies are much more expensive.)

But even as her net worth grows, Circeo finds that many people still express their doubts about single women investing alone.

"There is still this perception of, 'Oh, don't go out and do it. Wait until you get married and have some security,'" she says.

The solution, she found, was to go to investment clubs and other events where she could build a network of strong professional women who were also going at it alone and succeeding.

"Seek those people out," she says. "Seek out the women who can be your mentors and don't let the doubters bring you down."

Jerry Clevenger

Kansas City, MO Years Investing: 9 Number of Deals in 2004: 112 Career Deals: 800

Units Owned: 53 single-family homes and 2 commercial buildings

Areas of Expertise: Foreclosures; wholesaling

Real Estate License: No

Everyone knows that money is important. However, just about everyone also knows that many things are more important than money, especially time. Nevertheless, most of us stay on the grind, unable or unwilling to take the kind of leap of faith Jerry Clevenger took in 1997.

Clevenger had a solid career in banking, rising eventually to president of the mortgage division, when he started investing in real estate in the mid-1980s. It was a fluke, actually: He was hired to ghostwrite a chapter about foreclosures and realized he could master the business easily. He started spending his free time doing research at the courthouse and hunting down leads.

Clevenger always thought real estate would be just a part-time money-making hobby until he got full custody of his two children. Suddenly, time became more important than money. Clevenger realized that even though he earned a comfortable six-figure income at his day job, it came with a six-day-a-week schedule that would leave him precious few moments with his kids. He quit his job and started investing full-time, thinking that stepping off the corporate ladder would be a financial sacrifice with emotional rewards.

"The main thing was to have time with my kids," Clevenger says. "I could be home during the day, drive them to school, and be there when they came home from school."

However, he discovered that his leap turned out to not be such a big sacrifice after all. In his first year as a full-time investor he made three times what he had at the bank. More important, being willing to sacrifice his paycheck so that he could focus on his relationships gave him both time and money.

Clevenger's investing success came through mastering foreclosures, mostly of single-family houses or duplexes. However, he doesn't just hit the courthouse steps, and he definitely doesn't go at it like the Lone Ranger, patrolling his territory for the elusive great deal. Instead, he finds his best deals by working with real estate agents who comb the market for him.

"In the beginning I thought I could do everything myself, from finding them to selling or renting them," Clevenger says. "But I went from just doing a few deals to doing a lot more deals and more profitable ones by using agents."

By developing a level of trust with a few agents Clevenger is able to pursue more complicated transactions such as REOs (bank-owned foreclosures) and short sales (buying foreclosed-upon houses for less than what's owed on the mortgage). He also can act fast. He did that in one instance when an agent who had been watching an REO property called him early one morning to say the price had been dropped from $65,000 to $39,000. Clevenger immediately faxed in an offer for $42,000, which was accepted.

"I immediately sold the house for $54,000, and I'd never seen it," he says. "So is that agent worth it? You bet. She gets a well-earned commission on the acquisition, and I walk out making $12,000."

Clevenger says agents are particularly valuable for new investors, who too often buy the wrong property or buy too high because they jump at the word foreclosure.

"I've found that if I advertise a house and say 'foreclosure,' I will get three times the calls I will get on any other house," he says. "People just assume it's a good deal, but that's not always true. One month there were over 600 foreclosures in our area. Out of those 600, maybe 50 of them were okay deals. Fifteen were absolutely great deals."

In trying to find the absolutely great deal, Clevenger warns investors to assess not only a property's physical condition and market conditions but also the financial condition.

"Just because it's an old mortgage doesn't mean it's a good deal," he says. "You'll find that people may have signed forbearance agreements or filed for bankruptcy. I can show you lots of those where on paper you think this is a good deal, but then when you get all the facts in, it's not."

Clevenger and his wife now own 53 single-family and two multifamily properties worth more than $4 million. He still has time to spend with his son and daughter, now college age, who benefit not only from the extra time with their dad but also from hands-on, close-up exposure to their lucrative future careers.

"They know how to repair a basement. They know how the mortgage industry works," he says. "My daughter knew when she was a freshman in high school that in college she'd get her MBA, specialize in real estate, and start flipping houses."

Don DeRosa

Atlanta, GA

Years Investing: 7

Number of Deals in 2004: 30-40

Career Deals: 100-150

Units Owned: Over 35

Areas of Expertise: Subject-to acquisitions; short sales; and fix and flip

Real Estate License: No

"There's a million ways to make a million dollars in real estate investing. Start by picking one." That's what veteran investor Don DeRosa tells his beginning students, and the former Airborne Express manager should know. He became a full-time investor in real estate by focusing on one technique at a time.

"Once I find something I enjoy, I pour everything into it and master it," he says. "Once you master it, it pushes you toward the top."

DeRosa began pouring himself into real estate investing in 1993, inspired in part by the fact that his parents had rented duplexes successfully. The first approach he decided to master was the "subject to."

"The first four properties I bought, I bought for one dollar apiece, subject to the existing financing," he says. "I gave them each one dollar in earnest money and closed the deals over the kitchen table."

But it wasn't until 2001 that DeRosa became a full-time investor. He was pushed into it when, like many investors, he got laid off from a job he didn't like as much as investing anyway.

"The day I lost my job was the happiest day of my life," he says. "I wanted to send my employer a thank-you note."

Once he went full-time, DeRosa gradually branched out from the subject to by learning the ins and outs of short sales. Of course, trial rarely comes without error, and DeRosa made his share of mistakes as he experimented with different approaches. Rehabbing, for example, proved particularly challenging.

"The first rehab I did was a disaster," he says. "I did everything wrong: I paid too much, had no due diligence, and picked the wrong contractor. But I learned a ton. It was a $40,000 mistake, but I probably saved myself a million dollars because I never repeated those mistakes again."

Nevertheless, the fact that doing something new almost inevitably involves some of those beginners' mistakes underscores the value of getting good at one thing rather than dabbling in every idea in the book and never mastering anything.

"Investing is like muscle memory," he says. "It takes less time and energy the more you do it."

These days DeRosa focuses on short-selling second mortgages. He says his tight focus helps him make the key move that separates successful investors from the rest: systematizing and automating as many of the details as possible. For example, when people call with homes to sell, he knows they need instant personal attention. But these days he gets so many calls that he has both a receptionist and a full-time answering service trained to follow scripts that flag the calls with a potential to turn into a good deal and close the door quickly on overleveraged ones that won't work.

As DeRosa spends his days looking for properties, his four assistants do the same thing, armed with spreadsheets on pocket PCs that compute the profit margin on any property. If they find one that fits DeRosa's criteria—for example, he wants to see at least $20,000 net profit and a 200 percent ROI—they are authorized to make an offer.

DeRosa says his focus also helps with one of the hardest parts of the business: getting the phone to ring. After all, building a reputation as an investor in a certain kind of deal means that people in your community know who to call when they come across that type of deal.

"You have to get leads coming in before you can make an offer and find anything to buy," he says.

After 10 years in the business, mastering one approach after another, DeRosa now has depth and breadth, along with a business so systematized that he can just about walk away and let it run on autopilot. It's a position, he says, that all investors can reach if they're disciplined about the way they build their knowledge.

"Learn one way to buy," he says. "Get good at it and then learn a second way. Then a third way . . ."

What You Need to Know About Real Estate

What You Need to Know About Real Estate

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