Ed Mitchell and I have been friends and real estate partners for many years. Our first real estate deal was in Billings, Montana, more than 20 years ago when we purchased a fully improved lot (I’m sure you have heard me tell that tale in many of our educational CD’s and books!). Since that time, Ed has shown to be an indispensable resource and valuable asset for USTLA in many different ways.
Ed’s knowledge of property evaluation is due to his former business as a property appraiser; these skills help Ed as an amazing mentor to our students throughout the country.
Due to his breadth of knowledge and wisdom, I sat down with him for an interview with the intent to share it with you today. Please enjoy!
Q. What made you decide to become a USTLA personal mentor?
A. Tony and Saen asked me to become involved with the company about 20 years ago. And as my role increased, I thought of other ways that I could be of value to students. So when I was approached about the one-one-one mentor’s role, it seemed like a natural fit.
Q. What do you feel is the biggest mistake a novice makes when selecting a property?
A. Not knowing where the pitfalls are is a common mistake. Not checking properly on any government liens or getting eyes on the property to actually see it. A photo is one thing, but a lot can change in the year or even the month since that photo might have been taken. Many people simply rely on third party entities, too, like Zillow or Realtor.com, as their basis for an evaluation. Nothing against them, but you need to know how to do the proper research.
Q. What is your own system for appraising a property deal?
A. I believe that getting the proper comparables, or comps as we call them, is essential. There are five critical criteria that you need…square footage, date of sale, location, construction or architectural similarities and bedroom/ bathroom count. You get these by looking at recent sales in your area of interest.
Q. Is there any advice that you can offer about applying these criteria?
A. Well, the Fannie Mae guidelines are a good place to start. In other words, the comps should be no more than six months old, the square footage comparison should be within a 15% range of the place you’re evaluating. For instance, if the property is 2,000 square feet, the comps should be between 1,700 and 2,300 square feet…the closer, the better. The location should be less than a mile away, preferably no more than a half-mile. And, of course, the home’s construction and number of bedrooms and bathrooms should be very similar.
Q. What’s the single most important thing your student should get from a session with you?
A. The key is for a would-be investor to recognize the value of being organized and having a consistent, workable system in place.
Q. How do they know if their system is a good one?
A. It all comes down to the analysis. Whatever your system, you need to apply it so that it allows you to analyze a property in multiple ways. Let’s say you want to buy it and flip. Well, that’s great, but what if that doesn’t pan out. Then you need to also know the economics of renting it out, leasing it with an option to buy, things like that. In this business, there are always some variables in play and you have to be prepared for all of them.
Q. Can you tell us about a recent investment success that you’ve had?
A. Here’s an interesting one because it came together a little differently than I had planned. I used my tax list to locate a 216-unit apartment complex, but I ended up purchasing the property before it became a deed sale because I was at the right place at the right time and got it at an excellent wholesale price. So it’s really just a matter of working your leads, day in and day out. You have to be consistent and grind it.
Q. What makes the USTLA approach so effective?
A. It’s the vast amount of knowledge that the USTLA people bring to the table and the commitment of always applying that knowledge in ways that will help our students. No other company has USTLA’s investor resources, or all the great distribution channels such as property lists, DVDs, CDs, online seminars and very strong networking. With USTLA, whatever information you need, it’s thoroughly covered.
Q. What advice would you give to students just getting their feet wet in this business?
A. I would stress establishing your own system that works for you and being very consistent with your research. The more knowledge you have about a certain property, the more confidently you can move forward to add it to your portfolio. It’s also important to look at this business from a macro standpoint…it’s not how much you do each month, but how much you do in a year. If you apply these principles, it will just be a matter of time before you see results.
Tony Martinez is the Founder and Chairman of the US Tax Lien Association, which is an organization that is committed and dedicated to helping others achieve total financial freedom through the power of investing in Tax Lien Certificates. With over 30 years of expert experience, Tony is the world's #1 authority on the subject of creating enduring wealth through the little know strategy of investing in Tax Lien Certificates, which gives anyone the opportunity to earn guaranteed fixed rates of returns of 18% – 36% interest per year, and acquire valuable real estate for approximately 10% of market value.