Repost - Ron Starr Story *** - Posted by mattc
Posted by mattc on September 12, 2003 at 11:49:26:
I found this interesting - but had to dig through
the older archives to locate it. I’ll repost.
Gee, that was a long time ago. I am a grey-beard, you see.
I was in grad school at Stanford. My grandfather, a subsistence-level farmer in OR died. My mother was already dead. So I inherited $5K. I could have bought a 1964 Cadillac for that amount of money.
But I hated paying rent. Just receipts, no asset building. So I put 20% down on a 1100 square foot “4” bedroom, two-bath house in Palo Alto. Paid about $21K or $22K for it. Nice yard, small house in lower-middle area of Palo Alto. When the loan person made my loan application he added in the $5K as part of my income for the year – as though my grandfather were going to die every year. many years later I discovered I had been cheated. It was legally only a 3-bedroom. The extra bedroom in the garage was bootlegged in without building permits. When I sold, I had to disclose it as 3 bedroom only.
I could not afford to live in that house. But I had the plan before I bought it. I rented out 3 bedrooms to other graduate students and kept the biggest room, with its own bath for myself.
After a few years, I was still living there, for free, since the rents were higher and covering the expenses. I am a grad-school drop-out.
Got married, moved out, rented the house for 15 years. Rents going up and up.
In 1978, I finished up a data analysis job for the US Govrnment equal employment opportunity commission in San Fran. I lived in a rented house in an up-scale town of Piedmont, with roommates to help pay the rent. My wife got smart before I did and got away.
Said “gee, I love doing research, but will I be 65 years old, still doing research? how will I pay my bills if I can’t get work then?” Walked past a downtown hotel in Sacramento and saw people sitting in the lobby watching TV. I knew I didn’t want that.
When visiting my father near Portland, OR, I went into a public library and looked at the real estate investing books. Read William Nickerson’s classic “How I turned $1,000 into five million in my spare time.” Read a couple of other books in the library. Went to Powell’s books in Portland and bought all the used RE books I could find. Have continued to read a lot of real estate books over the years.
Back in CA, I took classes at junior college on RE, most attendees were planning to be agents/brokers. Took about three classes from John Beck on management, small property investment, buying bargain properties. Hooked up with a fellow with construction experience. Borrowed money against my house in Palo Alto.
Started buying rundown houses in poor neighborhoods of East Oakland and fixed them up. At the same time I bought myself a modest house at a good price.
Made some money at the fixers. Really pretty good pay for how little work we did. But we were inefficient and my partner got depressed, couldn’t work well. Started working with an investor I had met at the courthouse steps when checking out FC sales. We worked the local tax sales and started having some success. Sold off the properties with the first partner.
Been at it ever since. I have made terrible mistakes, even though I read a lot of books and avoided a lot of mistakes mentioned in them. Found how how to make my own mistakes.
I didn’t work very hard. Still don’t like to work hard.
I got excited about tax sale investing and bought way too many vacant properties in the desert regions of CA, NM, and AZ. Come to think of it, I bought a poor desert property at a tax sale in NV, too. Still, sold it for 5-times what I paid for it. So I guess I shouldn’t call it a poor property.
I should have figured out a way to keep one or two of the properties that my first partner and I sold. I couldn’t figure out how to. We owed his sister and husband money, had loans on all the properties. My brother was part owner of one, and we paid him back, plus profit.
I was not a very good businessman. I like to help people. It helps as an educator for people, but I don’t negotiate very well. I really didn’t pay much attention to cash flow. Had to sell properties to pay bills.
The agreement with my second partner–he supplied the money and a very little of the work–was very one-sided toward him. I wasn’t taking good care of myself. I would never get into an agreement like that again.
Sold my Palo Alto home in 1990, just as the market there was starting downward. Sold for $315K. Now it would be worth about $750K, if I had held on to it. But only got $40K in cash out, since I had borrowed to buy other properties and pay living expenses. Went to OK to try to buy an apartment complex and do 1031 tax deferred exchange. Was not able to do so, so no 1031 exchange. Ended up having to pay over $100K in taxes to US and CA govts.
That set me back. Sold a couple of houses to pay that. Good thing I had bought them cheap.
About four years ago I got a job. At least I can pay all my bills now. For a couple of years I could not muster the energy to invest. Too bad, that was at the end of the mid '90s recession in CA and house buying was great in CA.
A couple of years ago I started picking up houses again. In Sacramento, in OK Well, my house is now worth a lot more than I paid for it. And I have properties and getting some positive cash flow from them.
But I invest part-time like a lot of people do. I have never had a lot of income, since I was not working for about 16 years there. Just surviving on real estate income.
But I try to understand what is going on. I have an investment program that I like–taxsale buying. Involves lots of research in the county records. I’m mostly still a researcher–a researcher on real estate investing now. Just try to make it make money for me. I’m on an upward path now. Got three houses in Sacramento last year and one in OK and one in TX. The last which I had to give back because of the right of redemption after the tax sale. Did get 25% return on my money after about 10 weeks. Paid for the trip to TX and OK.
Got my plane tickets for OK at the end of the month. Going to try to buy more properties at the retax sales there. And, of course, eat at the Lubys and Furrs.
What success I have I attribute to persistence and having bought in an area which has shown great appreciation. I am a medium manager, but try to never take in a bad renter. That helps. I have some wonderful renters. Many stay with me for over five years. On my most recent house, the renter and his sons helped me paint the exterior. We got the job done in less than a day. A month before that they and a couple of friends spent part of a day helping me rebuild part of the fence. Really helped get the job done fast. In fact, they finished putting up the boards after I left. I love some of my renters.
I doubt seriously that the reference in Robert Allen’s book is to me.
I think that real estate investing is great. Even not being a very good businessman and not working very hard, I have made some serious money with real estate. Lived for many years without a job. I think if you take real estate investing seriuos, you can make a lot of money. A lot of the people who post on CREOLINE.COM are doing that. I belong to the “house bum” school of investing, says Jack Reed. A parallel to the surf bum or the ski bum.
Have several houses now and hope to get more soon. Enough to have enough rental income to live on. The posts on this board have made me think more about buying and reselling quickly for cash. I don’t know, I just like to hold properties. You mean you work real hard to buy a property at a real good price and then you just toss it away? Doesn’t feel good to me.
Good Investing and Good Living*******Ron Starr********