This Issue: Five Strategies that Outperform "Fix and Flip" in Today's Real Estate Market

You've read the new stories. Record numbers of houses are sitting on the market unsold. Prices have sagged. New housing starts in October 2006 fell 17.9 percent behind October 2005. And to make the situation worse, interest rates are high enough to scare away buyers.

When you add up all those factors, it becomes clear that this is no time to expect to sell properties quickly for top dollar. That, in short, is why it's time to set aside the "fix and flip" approach for  real estate investing until the current market turns around.

But some strategies allow you to not only outperform the current soft market, but turn its downside to your advantage. Here's how to take advantage of them.

• Strategy One: Buy, fix and hold. To put this plan to work for you, buy properties at their current deflated value, fix them up (without overspending), rent them out until the market strengthens, then sell them for a good profit. This approach can also be applied to properties you already own. That allows you to generate rental income from properties that you will sell later on when the market turns around.
• Strategy Two: Become active in slump-resistant locales. There are more out there than many investors expect. For example, you can still make money building or renovating houses in upscale commuter towns near most major cities. Or you can collect substantial rental income from properties near college campuses or near hospitals where interns and members of the hospital staff need apartments. This focused approach outperforms the standard real estate advice that tells you that a certain state or city is "hot" or "cold," because you are targeting "hot pockets" that are highly slump-resistant.
• Strategy Three: Get more aggressive about buying available properties. You can become involved with real estate investing with soon-to-be-foreclosed, or foreclosed properties. And there are other approaches, too, such as asking local realtors to help you identify sellers who are willing to offer you owner financing, cover your closing costs or offer other incentives.
• Strategy Four: Offer rent-to-buy options for properties you would like to sell. Rent out your properties and offer your tenants an option to rent to buy. (A portion of the rent they pay each month is applied toward their down payment when they buy the house at a pre-determined time.) The tenants benefit from buying your property without paying a large down payment. You benefit by locking in your asking price and by getting motivated tenants who are less likely than most to break leases or abuse your property. Discuss this option with your attorney. 
• Strategy Five: Target niche buyers. One successful developer tells me that she is making great money in the current market by acquiring inner-city single and multi-family houses, fixing them up and selling them. ("Many people who live in inner cities are honest, hardworking citizens who are eager to own property," she states.) And a real estate agent who specializes in ultra-luxury condos tells me that the current slump hasn't put the slightest crimp in the finances of her many ultra-rich clients.

You can mix and match those strategies too. For example, you can buy a house from distressed sellers before it is foreclosed - and then lease it back to them. The sellers get needed cash and you get a property at a rock-bottom price.

So are there ways to keep profits strong in the current destabilized market? Absolutely. Just be sure your number-crunching and other skills are keen enough to help you recognize opportunities and avoid deals that are too risky. You can learn what you need to know, quickly, in Trump University's Real Estate Investors Training Program.

Michael Sexton is President of Trump University.

Why is Madonna jumping on the celebrity foreign baby adoption bandwagon?

Meg Ryan adopted a baby girl from China. Ewan McGregor adopted a child from Mongolia. And, of course, there's the poster mother for foreign adoptions - Angelina Jolie - who has one child from Cambodia and one from Ethiopia.

Now Madonna is trying to adopt a baby boy from Africa.

Don't get me wrong. I think it's great that celebrities are calling attention to the plight of all these children in poverty-stricken countries. It raises the profile of the countries and of adoption in general.

But the situation sure invites criticism. Often, it can seem like the stars are going over and picking out a child they like much like they'd go and choose a handbag or some other stylish accessory they would buy in a store. And it seems that they get to avoid a lot of red tape and have an easier time with adoption than non-famous people.

In any event, I hope it works out for Madonna. But there are lots of great children here in the United States who need to be adopted and maybe we should start here.

Donald J. Trump, Chairman of Trump University, shares his insights in Trump University's Real Estate Investor Training Program. Classes are now forming.

We have a lot in common. We both started reading books about real estate when most of our fellow students were only thinking about buying cool cars.

After we graduated college, we pursued our real estate dreams in different ways. Gary put his energy behind acquiring properties, while Donald gravitated toward development.

But when we got together last year to work on the book Trump University Real Estate 101, we learned that we shared some common traits. In sum, they could be termed The Trump Mindset for Real Estate Success. It is a mindset that is explained in depth in that book.

What parts make up that mindset? Let's take a closer look.

A Thirst for Knowledge

We're both voracious readers. We continuously open our minds to new ideas and new information about real estate - and about the world at large too. We also share a love of motivational self-help books, because we are both positive thinkers.

A Mastery of Details

Positive thinking won't help you if you haven't sweated the details. To develop real estate in New York City, for example, Donald has needed to know just about everything about zoning, contractors, architects, air rights, unions, tax law and thousands of other details. Donald says, "People often comment on how quickly I operate, but the reason I can move quickly is that I've done the background work first, which no one usually sees." Without in-depth knowledge, which comes from curiosity and education, you will never make a fortune in real estate.

Responsibility

You need to make decisions. You listen to the opinions of experts, of course, but you can never allow your advisors - even the best of them - to make the important decisions for you. That is your job.

High Standards and Impeccable Integrity

This is another way of saying that your goals should not just serve you, but other people too. Dishonest people are out there. They will urge you to cut corners or do things unethically. Stay above that. Don't let them influence you.

A Drive to Make Deals

To get to the top of the real estate world, you need to make deals: deals with property sellers, property buyers, contractors, and so many others. Real estate progress is made in deals. That's why it is important to spend time with some of the classics on the topic, like Donald J. Trump's now-classic The Art of the Deal.

Donald J. Trump is Chairman of Trump University. Gary Eldred, PhDis Professor of Real Estate at Trump University.

Now's the Time to Get Started . . .

To learn more about making your mark in real estate, enroll in Trump University's Real Estate Investor's Training Program. Classes are forming this week.