If you are interested in getting into the real estate field, you should familiarize yourself with some of the most lucrative deals of the modern era. As we are all aware of, there are millions of real estate deals that have made 2x, 5x, and even 10x returns.
Then there are those absurd flips. The deals that make sense only on paper because they are downright impossible to imagine. In this article, I will analyze three of these crazy deals.
Atlantic Retail Partners – Turned $500,000 Into $100,000,000+
Lowell, Massachusetts is located about 30 miles northwest of Boston. The city is perhaps best known as the home of UMass Lowell. It’s an old Mill town on the Merrimack River. Think of a typical old-school New England city. That’s Lowell.
Before we move on, the description below is how I have been told of this legendary flip. I am going to skim over and summarize a bit, but if you want the longhand (and probably somewhat more accurate) summary, check out this article.
In 1980, a company called Wang Laboratories decided to buy a site and build a large office building for their company. Instead of buying in an expensive area like Boston, they decided to stretch their investment in Lowell. Therefore, they spent about $60 million (roughly $200 million today) on a monster campus with multiple towers, an auditorium, etc. This is like the 1980s version of Google’s or Facebook’s campuses in California.
By the early 90s, Wang Laboratories was not doing so well and entered bankruptcy. So, they put the campus up for sale via an auction. The rumor is that at the auction, no one actually wanted to bid on the property. Consequently, the auctioneer started dropping the price; $10 million, five million, two million etc. They got down to $525,000, and a small group of investors threw up their hands, not expecting that their bid would meet the reserve. Shockingly, the bid was accepted. They then negotiated with the city of Lowell to lower the tax bill and started filling up the property. Plus, they got a nice line of credit from the city for renovations. Before the dot-com bubble burst, they sold it for $100 million. Today, the complex is known as Cross Point Lowell.
Paul Trousdale – Created the Trousdale Estates
Paul Trousdale was a real estate icon. His story is a classic rags to riches. He started with virtually nothing and by the time he died in 1990 he had built over 25,000 homes in Southern California.
One could argue his greatest legacy in real estate will be the creation of the Trousdale Estates. In 1955, he bought the former ranch and turned it into perhaps the most lucrative subdivision in the United States. Of course, he had to convince the Beverly Hills City Council to do so. You can read more about his background here.
To put things into perspective: There were 532 original lots (some sources say 539) in the Trousdale Estates. With a median estimated sale price of nearly $12,000,000, the entire Trousdale Estates section of Beverly Hills currently has an estimated market value of about $6.3 billion.
Charles Vance Miller – Flipped $2 into $100,000
This deal took place around the time of the Great Depression. Miller, a successful attorney, speculated on some land that was next to the eventual Detroit-Windsor Tunnel. If we adjust for inflation, this flip required an investment of roughly $31, and paid out about one and a half million.
That is like getting a job at McDonalds, quitting during the first day’s lunch break and investing your paycheck that comes in the mail a week later. A few years later, you then have enough to buy a Ferrari F8, a home for the median home price in the USA ($324,900), pay taxes on both purchases, invest the rest and subsequently collect about $30,000 in interest in perpetuity, more than you were making at McDonalds. My only question is, why didn’t you hang around McDonalds for a few more hours?
Charles Vance Miller is a controversial character. After his death, he made a competition out of his estate: His money would go to the woman in Toronto who could give birth to the most amount of kids in a ten-year period. Some say the stunt was to showcase the importance of birth control, others say the guy was just crazy. If you are interested in learning more, NPR did a good radio story on him.
Lessons We Can Learn From Lucrative Real Estate Deals
An important point needs to be made: Before you can find success with real estate investing, you need to understand the fundamentals of the business. I have created a resources page where I review many of the useful spaces either on the web, or in print, where you can learn more about the industry. For the vast majority of people, I have encountered, it is going to take at least a year to have the skills to take the lead on a deal.
On the flip side, many people will tell you that you need money to get into real estate and that returns are slow coming: While both statements are generally accurate, they do not get to the point. If you want a super stable investment, you might as well invest in bonds. Want a little more risk? Perhaps an index fund that tracks the S&P 500.
Real estate operates in an entirely different silo. You can minimize your risk by buying into a real estate investment trust (REIT). You can take a little more risk and buy some multi-families to rent out, or you can buy some land for $1,000 an acre in Montana and pray for a miracle. The point is clear: You can either gamble or invest in real estate. But the more skills and knowledge you acquire, you may be able to achieve rates on your investments that most would consider only possible through gambling.
I have seen people make outrageous returns in real estate: People with no real qualifications that would otherwise be working minimum wage jobs. What they did have was an interest in the trade and an understanding of where they could add value in a deal.
You are not likely to get mega-rich by buying a few 4-cap three-families and renting them out. In There Will be Blood (2007), Daniel, an oil tycoon, did not make big money by installing a single oil well, he created an empire. Just like Daniel, you need to calculate your own risk tolerance. In essence, the more you are willing to learn, both in the real estate world and about yourself, the more likely you will feel comfortable enough to put yourself in a situation where things can work out in your favor.