My First Real Estate Investment

by Praveen Kumar
(Auckland, New Zealand)

I got into real estate investing by accident.

I had returned from a three year deputation to the government of Mauritius. As you get liberally paid in such assignments I had a fare bit of savings on hand.

My sister at the time was having marital problems and requested me to investment in a small boutique shop from where she could run her garments business. She also indicated to me the locality that was of interest to her.

I met a real estate agent who specialized in the area. We tried to negotiate a few shops but the prices were beyond my budget. He finally offered me one of the shops he owned. I was a bit skeptical in the beginning but settled for the purchase as my leave was running out.

All my friends and relatives told me that I had been duped by the agent and that I had paid at least 10% over the market value. I had to swallow my pride and justified the purchase to help my sister who was in financial distress.

In the next five years city of Delhi went trough an unprecedented real estate boom. The property I had purchased was in a very posh locality where the price rise exceeded the national average.

My little retail shop went up in value by over 500%in five years. It is hard to believe such a phenomenal rise in value but such was the market in mid eighties in India.

Due this experience I started converting all my other assets into real estate. They were small investments but gave me huge returns. The real estate agent who had sold me the property become my mentor and guide as I had no books to turn to in those days.

He gave me two great pieces of advice that I follow to date. His first advise to me was to 'buy cows that give milk' by which he meant buy cash flow properties where the tenant pays your mortgage and over heads.

His next advice to me was not to lose a deal that made financial sense even if I was required to pay a little extra. Similarly when selling a property accept a little less payment and leave something on the table for the other party to make the deal work. In our greed to get the best possible deal we at times lose the big picture.

Had I lost the deal on the shop where I paid nearly 10% more than the market price I would have never got the benefit of 500% escalation in value during the next 5 years.

From being ridiculed I became toast of my family and friends. Everyone was seeking my advise on real estate matters. I was a simple street smart investor in those days who was helped by the market forces.

My real education started in 1998 when the property market in India crashed for the first time. My properties lost half their value and cash flow dried up because of the vacancies. Luckily I had very little borrowings and I survived the crash.

You have to look at the big picture and the market forces when investing real estate. You can be excellent in locating great deals and negotiating a good price but if you miss the big picture you will not make big money in real estate.

There are hundreds of people who tell me these days that real estate market will never be the same. I have experience of over 30 years. The market will always rebound. So don't follow the herd who have no experience in real estate investing. These are the people who are driven by fear and will never do anything positive in their lives.

Associate with people who have made money with real estate investing. They have entrepreneurial spirit in them that drives them beyond fear. You have to overcome fear and get out of your comfort zone to become a real estate investor. The size of your wealth will always be determined by the size of your comfort zone. So expand your comfort zone.