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Long before “Rich Dad, Poor Dad,” “Art of the Deal” and the gazillion other books on how to get rich in real estate were published, William Nickerson was the author everyone read. I recently poured over his classic “How I Turned $1,000 Into A Million In Real Estate—In My Spare Time” and think it’s still the best of the genre.
Nickerson’s formula—which he calls pyramiding—involves buying properties that need a little work, fixing them up and renting them out at higher rates. You then use the equity you build through that process to trade up to a larger property. Nickerson starts with a duplex and ends up with a 30-unit apartment building.
The first version of his book came out in 1959. I was struck by how much of what he wrote is still relevant today. Granted the first duplex he bought cost $8,500 and the initial rents were $90 a month. But the interest rates—at 5%—are about what you would pay today.
Nickerson’s description of how the housing market sunk in the Great Depression also sounds familiar. Home owners took out high-interest loans, 8% at the time, on a short term basis. The loans left them with much larger payments in five years. When the bigger payments came due they were unable to refinance and got foreclosed on.
Inbetween his financial wheeling and dealing, Nickerson spins some homey business advice. For example, never use the same Realtor you used to buy a property to help you sell it later. That’s because the Realtor will have the low price you paid stuck in the back of his mind and he’ll try to get you to accept less in order to close a deal.
In a section on leasing your apartments, Nickerson reminds the reader to never forget to say “Buy before Goodbye.” It’s another way of saying “Don’t forget to ask for the order.” Nickerson advises that when you’re showing an apartment to a prospective tenant make sure to ask questions that lure them into saying yes, such as “Would you like to move in on he first of the month?”
Nikcerson updated his book every decade or so. The $1 million in real estate became $2 million, then $5 million. He died in 1999…penniless.
Just kidding about that last part.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.