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Preface - Sometimes the hardest thing to convince people of is the truth.

In writing this book I have been acutely conscious, in ad­vance, of the fellow who will inevitably pick up the book, glance at it, and sagely remark, "If he knows how to make a million, why doesn't he do it? Why does he need to write a book?" Then he will smile as if he was just too smart to be fooled, and had punctured the balloon with one thrust of his incisive perception.

01. How It Started - Let’s get one thing straight. This book is 100% fact. There are no suppositions or "possibles" in it. It was written for a single purpose, and addressed to a certain individual. The fact that you bought the book makes you that individual. How­ever, if you are timid, or negative, this book will not help you in the least. It's all right for you to be lazy—my kind of lazy— which was the laziness of a man who was willing to work at a thing dedicatedly so that he could enjoy laziness later and longer and in delicious, sweet idleness.

02. First Buys - My first job was in a grocery store. My boss put me to work filling little cartons, each with a dozen of eggs from a crate. There were red cartons and blue ones. Both were packed from the same crate. The red were then marked 39^ and the blue ones 59ff. That was enough for me. I left the grocery busi­ness forever.

03. First Boners - From that day, I had one main purpose in my business life. I wanted to acquire enough property to give me the income and lazy life. That was my goal. There were a few more digressions into other fields of endeavor but these were tried mainly because I could at the moment find no available means to further my main purpose—the completion of my real estate portfolio.

04. Facts of Life - In the past ten years I have been called upon, perhaps 1000 times professionally and as a "friendly courtesy," to advise others on the purchase of real estate. If there has been one outstanding and common error, and there most certainly has, it has been that the prospective buyers either played down or, in some cases, entirely overlooked the most important re­quirement and element of all good real estate evaluation. It has happened countless times. The client or friend comes to me with a slip of paper bearing figures on a property. He wants me to say it's a marvelous buy.

05. Dead Wood - It was time to stand back, appraise and admit the folly of the three bad choices. No sooner did a tenant move in than he was looking for another place. Only a fool would persist and beat his brains against a stone wall by trying to make the public accept what it didn't want. So I set about un­loading the bad ones. I advertised. I talked them up. I passed the word around. Soon this produced results.

06. Best Buy - Let us draw a sad, slow curtain over the bad choices I made in those days and begin to specify the right beginning for your guidance.

I will assume you are a small investor, and that you have only $1,000 to $1,500 to invest. If you have more you can speed the process and get started quicker, pyramid more quickly, and reach your goal sooner.

07. Check First - There are three basic rules to follow in choosing the building you are going to invest in. The first permits of not the slightest deviation. It will be fatal to compromise on the point of location. Let us see how we test for this requirement.

Let us say you have been offered a building located on Elm Street. You go to see it. The time of day when you see it is even important.

08. Check Second - The second big test for you to apply to your prospective purchase is the requirement that the rents be mod­est. Here again we will have no difficulty with the extremes. Let us consider first what we mean by the word modest.

Various studies over the years have established from time to time the percentage of his income that an average workman pays for shelter.

09. Unheated Properties - There is just one more feature which we will seek in our investment picture. That is, the arrangement under which the tenants supply their own heat. It may be unnecessary for me to expound on this, but experience has shown that this one curse in property management and the processing of com­plaints, by itself, outweighs all others combined, and by some 10 or 20 times over.

10. Time is Now - In the next step in learning how you are going to get rich, you must be careful to avoid negativeness more than ever. I have been asked to start many men and women along my path. But I have noticed that if they were at all negative, it showed up in this phase of the endeavor. Perhaps the psychol­ogists would analyze this as a secret but real desire on the part of the subject NOT to get rich but to continue to wallow in mediocrity. I early learned the fable of the cave and the robe. It best demonstrates my point.

11. Still Good Buys? - A few years ago, a young housewife came to my classes to learn real estate. She had five small children. Her husband worked at a government plant as an executive. Re­cently her father had died, leaving her and her brother some $3,000 each.

Dorothea wanted to supplement the family income and her brother had agreed with her that they would learn real estate, try to enter the field with a little brokerage, and as time de­veloped, start to invest their nest egg in some real estate as partners

12. Good Buys - Now that we have disposed of WHAT to buy and how to double check its features and suitability, you know what to look for when you see a property. We next undertake the subject of how to find them. It is quite simple and easy. There are three main methods.

By far the most productive method, you will find, is persist­ent advertising. Besides watching the ads of properties for sale, you should place a small ad, using no display or large type.

13. Value Formula - Now we must get down to figures. Assuming that the property has passed your three tests of eligibility, and you feel that it is a good property for your purposes, we now learn what you should pay for it. There is no necessity to em­phasize the importance of this process. Even if you never read this book, you would certainly know that if you pay too much for a property, you are entering a deal in which you can make little or no profit.

14. Applied - The Value Formula necessarily has certain limi­tations in its application. It is designed only for use in real estate investments for Income. This limits its use clearly. There are several types of investments which some might classify erroneously as real estate investments for income.

When one buys a motel or rooming house, this is a going hotel-type business, not a pure real estate investment for in­come

15. The Net - Having established through the Value Formula what we can pay for a building, we must determine whether this building will "carry itself" at this price. This process now becomes relatively simple, but is necessary before we can pre­sent a definite offer to the seller. Our Value Formula has pro­duced a figure that is recommended but we cannot proceed un­til we have tested the figure for gross and net income.

16. Before Offer - You have applied the basic tests of Location, Modesty of Rents, and where possible, Self-heat. The building has passed these tests and next you applied the Value Formula. Here you learned how much the property was worth. This es­tablished a limit, with some variance permitted, of how much you could afford to pay for the property.

17. Framing Offer - To frame our offer is simple. Let us say this is a typical Aunt Toby, a fine first-try example. Here are its facts. It is a wooden three-decker. (But the tests and results work out just as clearly and simply if it is a four-apartment duplex in California or a five-unit row of singles in Philadelphia.)

Good location
Self heat by tenants
Rents modest—$75 per flat per month
Taxes are $400 per year (typical proportionate Norm in U.S.)

18. The Offer - It may be best to make your offer several times, each time raising it a little and then if not accepted, to "give it a rest." Let the seller think you are finished, and it also helps to implant the hint that you are wavering between his property and another. Now that he has turned down your offer you have washed your hands of his deal and are going ahead with "the rival." Of course it does not do to send in a higher offer im­mediately after rejection of an earlier one. That will soon give the seller the hint that if he holds out long enough he will get top price.

19. After Acceptance - When the seller signs and dates his acceptance at the bottom of our offer form, we are ready to put certain machinery into motion in preparation for taking over. Our first call is to the insurance agent.

When people buy real estate, they are notoriously neglect­ful of certain highly dangerous situations that exist. One of the most glaring is that of insurance. Often I have seen this to be so in transactions even though the buyer is represented by com­petent counsel.

20. After Taking Title - The usual thing is for new owners to acquire "new owner's disease" and you should steel yourself against it. This means that most folks who have just taken over their first or second building are inclined to give it too much attention. They seem to be unable to stay away from it, like a grandfather with his son's first-born. In the same spirit as the new grandpa, the new owner seems to stay awake nights dreaming up things he can spend for on his new baby. I have heard some rational­ize when they felt this way by some such excuse as "I just can't stand it to have that unsightly back hall. I must re-do it."

21. Straightening Tenancies - In the ownership of rental units, your entire in­come must come from tenants. You can avoid many of the mis­takes that I made if you resolve to resist temptation. The re­sulting long-run profits will be considerably increased by insti­tuting and maintaining the right rules, and attitudes between you and the tenants. The amount you clear each year can be doubled or halved, depending on your methods.

22. New Tenants - Your MIF will be considerably enhanced or depleted, depending on your methods of processing new ten­ants. There are three major effects that result from your meth­ods in this area.

First, your freedom from bother and smoothness of opera­tion. Almost every time you have a petulant tenant, you can trace it to an error in your routine when you accepted him as tenant.

23. Hold the Property - Upon taking title to the property, you will have open to you a variety of ways in which you may hold it. Some times the suggestion will be made that you form a corporation or trust.

The corporate status has many advantages and disadvan­tages. The prime advantage is the freedom from personal lia­bility and responsibility that you enjoy.

24. Tax Benefits - In the previous chapter, the state exemption from income tax of all rental income has been mentioned. There are certain other advantages enjoyed by real estate owners which have been said to be the major reason for the truth of the saying "The only way left to get rich in the United States is in real estate."

25. Sell Them - For some owners, there can be no sweeter, hap­pier life in business than the ownership of the Aunt Tobys, with the comparatively minor attention required. For them owner­ship and operation of the properties is "nirvana." They are able to live a secure life with uninterrupted income and little bother. Seasoned with just enough responsibility to give meaning to life, as distinguished from complete idleness, they can work or loaf at will. They are not tied down, particularly if they own unheated property. They can go away in summer or winter with carefree heart, leaving only someone to receive and de­posit rents and process occasional complaints.

26. Tax Angles - There are such special and unique benefits and exemptions afforded to real estate operations that it has given rise to this saying:

The tax is never a good reason for not selling real estate.

This unique advantage is not given to any other field of in­vestment. To best understand the capital gains benefits af­forded exclusively to Real Estate investment, we compare our investment with another—investment in stocks.

THE END