RE advice from the richest man in the world... - Posted by eric-fl

Posted by JPiper on March 03, 2001 at 09:08:13:

No I haven’t. “Friction” is a word that I have seen more commonly used to describe the costs of buying and selling in the stock market.


RE advice from the richest man in the world… - Posted by eric-fl

Posted by eric-fl on March 02, 2001 at 21:18:16:

I was going through some old books tonight…

Back when J.P. Getty was the richest man in the world, (and still alive) he published a collection of essays on wealth, one of them was on real estate. Below are his recommendations, paraphrased and abridged from the article:

  1. Make a thorough study of the real estate market and it’s prospects in the area before you buy. Naturally, you should seek to buy low when indications are that values will rise.

  2. Know or learn as much as possible about the intended use of the property you wish to buy. Don’t consider buying say, a motel unless you know enough about motel management to at least have a chance of operating it profitably.

  3. Deal only through licensed and reputable real estate brokers. Beware of fast-talking salesmen who make verbal promises.

  4. If you buy a property with a view to building or improving on it, make sure you have adequate financing to complete the project.

  5. If at all possible, always obtain an impartial, third party appraisal of the property before you buy it.

  6. If buying a building of any kind, always have it inspected by a qualified and disinterested third party before entering into any commitments. If buying income property, always have a disinterested accountant check the books.

  7. Shop wisely and cautiously. Don’t allow yourself to be stampeded into paying any deposits until you’re certain you’ve found the property you want.

  8. Make certain you have the best legal advice before signing any documents.

  9. Always insure the title to the property. Even the most meticulous may fail to turn up all the facts about the history of the property.

  10. Once you’ve bought your property, treat it as a long-term investment, not as a short-term speculation.

It’s interesting how, even though written in the 60’s, so much of this advice is pertinent today.

Re: Good. I definately agree with #9. nt - Posted by Stacy (AZ)

Posted by Stacy (AZ) on March 03, 2001 at 17:13:13:


J. Paul Getty’s Profit Rule #1 - Posted by Robert M. Campbell

Posted by Robert M. Campbell on March 03, 2001 at 09:56:22:

Eric -

J. Paul Getty was probably one of the smartest businessmen in history.

In fact, I am devoting Chapter 2 of my coming book (Cycles of Boom and Bust: How to Predict - and Profit from - the Rise and Fall in Real Estate Prices) to Getty’s number one rule for making “really big money” in real estate.

What was “the Billionaire’s secret”? It was to buy when everyone is selling and hold until everyone else is buying. Like all highly successful people, Getty used “contrary thinking” when the general public - “the crowd” - became too optimistic - or too pessimistic - about any investment market.

I would be grateful if you would tell me the source(s) of Getty’s real estate “rules” that you cited.

Thank you.

Robert M. Campbell

Re: RE advice from the richest man in the world… - Posted by JPiper

Posted by JPiper on March 03, 2001 at 01:18:42:

As I read through these, the advice of course is timeless. I find #10 though, the idea of “long-term investment” to be something worth thinking about today. In todays market the temptation has been to turn the deal over, get in get out, rather than to allow time to build the investment. I find it interesting to ponder Harry Helmsley (at one time the owner of the Empire State Building and richest men in the US) who stated that he had never sold a piece of real estate, or Warren Buffet, who has made billions in the stock market by buying good companies when they are out of favor, and then holding long term.

Interesting in light of Getty’s comments in #10 regarding making your purchases long term investments. Certainly there are compelling reasons to do so…not the least of which is the tax code, which extracts HUGE chunks of your equity EVERY time you sell. Interesting that in real estate this tax can be sidestepped by doing a 1031 exchange…one of the last really great tax shelters available in the US. But of course this is only available to the long term investor.

Other costs…brokerage fees, closing costs, what I would call “friction” are also present when you’re constantly buying/selling property.


Re: J. Paul Getty’s Profit Rule #1 - Posted by eric-fl

Posted by eric-fl on March 03, 2001 at 22:59:52:

The source was a paperback titled “How to Be Rich”, by Getty. It really is just a collection of various essays he wrote on wealth for Playboy back in the 60’s. Not all of them are instructional on building wealth, per se. Some are about how to handle wealth once you’ve got it, and others are simply on the state of mind and being that are conducive to wealth.

One of my favorite in this area was the one called “The Homogeonized Man”, regarding widespread cultural illiteracy. I laughed a private laugh when I read one phrase, “so we wound in a smoke filled cabaret, that was just like every other smoke filled cabaret in the world…”

Re: J. Paul Getty’s Profit Rule #1 - Posted by Eric C

Posted by Eric C on March 03, 2001 at 22:49:33:

Hi Robert -

I don’t get it. J Paul Getty said a lot of things; some, like those on the list make good common sense and others were simply drivel.

You may or may not remember that JPaul’s favorite TV show was Daktari. For that, the whole world was put on hold.

When asked about his secret (and he was asked many times), he once stated that “Some men find oil. Some men do not.”

Kind of short and sweet, wouldn’t you say?

In his later years, JPaul liked to trade his own stock and for this at least he had a method. When he saw that others (outsiders, Wall Street, etc)placed a higher value on his stock than he himself did - he sold it to them. Later, when they thought it was now worth less, he purchased it back (often from the same people).

The point is, that if you are comfortable with the value of the assets you hold, you shouldn’t be swayed by the opinions of others, especially those who have no real knowledge of your business or its assets.

You say that the real secret lies in being a contrarian? Maybe so, but in my experience everyone claims to be a contrarian yet few have the courage to truly stand for what they believe.

It takes guts to withstand all the criticism that is bound to come your way for taking unpopular stands - on investments or anything else.

Having faith in your instincts does not come easily.


Eric C

PS - but it does pay well. Yes, it does.

and sell when everybody is buying! (NT) - Posted by David Krulac

Posted by David Krulac on March 03, 2001 at 13:43:16:


selling tax free ?? - Posted by leslie

Posted by leslie on March 04, 2001 at 23:23:24:

recently i was thinking about that 1031. can it be combined with the personal residence rule?
i might not like to live in my rentals but i might trade a handfull of them for nicer digs.
could i then move in for a couple years before selling?

could i do this fast enough, to cash them all out before i die…


Re: RE advice from the richest man in the world… - Posted by Michael (tejas)

Posted by Michael (tejas) on March 03, 2001 at 07:57:04:

Interesting use of the word “friction” Jim.
Have you read Clausawitz’s theories on war?