I have been investing in real estate for years and have sold real estate for brokerages. I am fortunate enough to be the director of the subsidiary real estate company to a large construction lender. On top of that, our bank has the most aggressive preconstruction investor loans in the industry. Literally. With this trait, I get a billion phone calls from realtors, mortgage brokers, investors...all wanting the same thing: our financing. Unfortunately we don't outsource our product to wholesale brokers too much anymore but I am always curious to know what is going on in the real estate market. Now I will be the first to tell you that in the past I was caught up in booming markets where I was making hand over fist money. And I will also be the first one to tell you that all things come to screeching halts because real estate markets are local in nature and they can change with anything. With those lessons, I figured out a way to do great business, make a steady income, and keep a good reputation.

The example that I am going to use today is the Mississippi Gulf Coast. It's a crazy market. Booming like I've never seen a market boom before. The necessity for rental homes is outrageous. Incentives are being offered to investors who build houses for the workforce community. Sniff Sniff....Sniff Sniff...All of a sudden, the media gets to it and builders from around the country start moving in. Business is slow for contractors in 90% of the country, so the only thing for them to do is to go to an area, get a quick license, and make contacts.

I've seen them all. I get calls from realtors working with those builders pitching me on why they are soooo different than everyone else. The realtors and their builder puts some money together and starts advertising. They procure their first few contracts... $$$$$$ The dollar bills start flashing in front of their faces. Well before you build you need a permit, right? The permitting department is no longer where it used to be. They are working out of a trailer. Get your permit eventually, now it's time to build. To build you need suppliers and subcontractors. Uh oh... no subs... they are all tied up in the casinos or working with builders who have fed them for years and continue to feed them. It's a weekly paycheck for them. Your builder finally finds subs but they are more expensive than they thought...

I am going to stop there. This has proven to be the biggest problem in emerging preconstruction markets since I can remember. I've witnessed it in Florida, Jersey City, Alabama, Georgia, Idaho, and now Mississippi. When you are looking for a quality investment in an emerging market, ask for resources. Look at homes they have built. If they are a newbie in construction, that ought to raise the mental RED FLAG. DON'T DO IT!! Don't say I never warned you. What are the builders local connections? Do they even have any? Check out the BBB. If they are bad, this will show. Some are not even there, which is not always bad... No news is good news... on the BBB that is.

I just took a 10 minute break from typing to go in my outlook server and phone log to see how many builders/realtors called me for financing their "spec homes" in Mississippi. 27 DIFFERENT PEOPLE WITH DIFFERENT PRODUCTS...

I found maybe 2 that I would actually put my own credit and money toward. One builder has 50 buyers all lined up waiting for financing... I googled their name and the entire first page of search results contained the words "RIPOFF" "SCAM" "CLASS ACTION"... I'm not kidding you... How do these 50 people put trust in this company. My philosophy is that if it looks like a duck and swims like a duck... the thing must be a duck!! right?? Due diligence is key. Your effort is required in real estate investing. If you cannot give any effort, you will find yourself sitting at home in 2 years wondering how you could have avoided your most recent foreclosure, short sale, or just a plain headache.

I have a phenomenal product in place, and it's proven to work...I can send you to over 100 homes we have built and not one of them are vacant. My customers feel comfortable knowing that during every conversation, I tell them to go on yahoo, google, or whatever and search my name, my builder, and my suppliers. If they are not comfortable at that point, real estate investing is simply not for them. This is the second negative-type article I've written. I figured I'd get these out of the way prior to me writing on the good stuff. Stay tuned for wealth building articles and creative investing ideas!

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