Nothing Down for Women The Smart Woman's Quick-Start Guide to Real Estate Investing
By Robert G. Allen
Free Press Copyright © 2007 Robert G. Allen
All right reserved.
How Losing My Job Turned Me into a Millionaire
from Karen Nelson Bell
You're probably anxious to get right into the how-to section of this book, but if you'll allow me a few short minutes, I'd like to tell you some of the humbling (and possibly inspiring) experiences I've had along the road to real-estate riches. If you'll hang in there with me for the next few pages, I promise you nitty-gritty investing action coming right up.
In this intro, you'll see how things in life can go so right and then so wrong, and then so right again. The rebound factor has been extremely important in my own life, and maybe if you are having a tough time right now, you'll find a story familiar to your own that will help in the big picture. If you're having financial challenges, I've been there. If you're having relationship challenges, I've been there too. If you're having other personal difficulties, you'll see you're not alone. I've had plenty.
In just a few pages, you'll be diving into details of real-estate investing, but right now I'd like to show you why I believe I've earned the right to be your mentor.
This story has two parts: (1) how I lost my job and got inspired to try real-estate investing, and (2) exactly how I made that first million. (Nobody ever asks me how I made the second.)
Have we met?My full name is Karen Nelson Bell, and you might have seen me somewhere on the Las Vegas Strip performing as a pianist-singer-dancer since 1967. Because I had been raised on classical music, my parents were shocked when I went to Vegas on vacation and immediately got a job opening for comedian Don Rickles in the famous old Casbar Lounge at the Sahara Hotel. Later I enjoyed playing piano and touring with singer Paul Anka for two years, and then performed under the stage name "Kelly Stevens" for a decade in a successful lounge group (our first album resurfaced recently and sold out on the internet). After touring all over the world, I started working as a musical director in the eighties. Then in the nineties, I was hired to create the first country show in Las Vegas at the Aladdin Hotel, "Country Tonite."
If you ever got by to see the show, you know we had a lot of fun! I loved my job, and I thought it would last forever, since I was the creator and ultimately became the producer/director as well. However, I was still an employee working at a J.O.B. (Just Over Broke), working for the people who actually owned the show. When you work for someone else, you end up using your talents and energies to make someone else rich. In fact, the show I had created out of thin air made millions and millions of dollars for other people!
How Losing My Job Made Me a Millionaire!
I thought my job was secure because I had such a high-up "important" position. What I never considered was that the owners might sell the company and that the new buyers had their own producer/director. I did resign, but only moments ahead of a pink slip! I have the privilege to say I resigned or retired, but the truth is that out of work is still out of work, no matter which way you got there.
My late husband, Duncan Guertin, had been working for the show too, doing multimedia productions. So not only was my job gone, Duncan's job was gone too. In short order, we had shifted from having two nice paychecks and the illusion of affluence to being out of work. We had been living a "rented lifestyle."
Multiple Streams of Income
That August, we went to San Diego for a week, and our idea of a nice trip was always to take a few books and go reading somewhere in nature. We each took three books to the beach, and mine were Harry Potter and the Sorcerer's Stone, Who Moved My Cheese?, and Multiple Streams of Income. Well, books can change lives, and Robert G. Allen's hit Multiple Streams of Income changed mine. When I read it, I thought he had written it straight from him to me. I called his office and alternately begged and demanded that Mr. Allen take me on as a protègè. Something deep in my soul knew this was going to be a great adventure.
I joined his Protègè Program on November 1, and I threw myself into the studies. Everything my teachers suggested, I did without question. I learned the formulas and systems cold. Duncan and I slammed ourselves full bore ahead into putting those formulas into practice, and after resigning from our jobs on January 1, 2001, by March 9 -- only 129 days after we became protègès -- we became millionaires, acquiring over $1 million in equity (the difference between the value of what you own and the cost of what you owe on it).
Since then, I've worried that my story doesn't have enough "downside" to it. It seems like I don't really have a true before story; I only have the after story. After all, when I started, I was doing very well. I had a job I loved and was in fact passionate about. I made what I thought at that time was pretty darn good money. I didn't realize that it was an illusion. I actually had very, very little to show for those years of doing well.
What I did have was a wonderful sense of my own importance. Little did I know that it really was a false security.
When I lost the title of director . . . when I lost the title of producer . . . and when I stopped being a musician on a daily basis . . . it was as if someone had come along and erased me. I have experienced identity theft in the normal sense, when my credit was used by someone else pretending to be me. I can tell you firsthand that the experience of losing my work identity was a thousandfold more debilitating.
We are all so wrapped up in what we do, that what we do becomes who we are and defines us. My identity was "the producer," "the one you go to when you need help," "the one who had jobs for everybody." My identity was "the one who won awards for creating standing ovations and created happiness for audiences of all ages."
Now that I had lost my job, I was . . . how can I say this? I was just Karen. I was Duncan's wife, and yet Duncan had lost his job too, so that identity faltered as well.
I would find myself sobbing for no reason at all. Well, actually, in my own heart, I had a reason. I was unbearably sad. It went on for months. I felt as if I were grieving over a lost loved one. Now, looking back, it was a lost loved one. I loved that identity of the "important person."
It's embarrassing to think I was so wrapped up in the impression I was trying to make. Most people hope that they can be valuable by being decent and kind. Now I had to see if I had that value in me. I understood what the millions of people who've lost their jobs through downsizing or through the change in an industry feel. When we discover that what we are, what we have, and what we do is no longer valued, it's devastating,
That is identity theft of the highest magnitude.
Exactly How I Did It (Millionaire-hood)
We did have a tiny savings set aside. We also had good credit. We had spent the last four years digging ourselves out of the hole. We were so proud to say that we had no consumer debt.
So when Duncan told me that we were going to use other people's money to buy properties, that we were going to go into debt again, I said, "Oh no we're not." It wasn't until gurus Tom Painter, John Childers, and Robert Allen ganged up on me to explain the power of leverage that I got it. Duncan tried to explain it to me, but that was like having your spouse try teaching you to drive a car. I had to hear it from Bob, Tom, and John in order to have the courage to use the equity in our house to acquire more properties.
We learned how to invest with no money and with no credit, but our little savings and our fairly good credit made it possible for us to move quickly.
When we first started, Duncan and I owned three properties. It happened almost by accident. One was the house that I had bought when I was a young woman. We lived in it together when we first got married. Then when my father became ill, he asked us to take over his house. He came to live with us, and we rented out his property. That was a Nothing Down deal. He just gave it to us. Now as I look back on it, I see it was an example of how illness can create a motivated seller.
There came a time when Duncan and I wanted to move into a home that we would create together and call all our own. When we moved into our new house, we didn't even have to get a loan, because the seller offered us her own private financing. It was that very house that gave us our nest egg with which to start investing. We got an equity line before we lost our jobs, thinking that we would never again be able to get a loan. Of course, now we know that you can get a loan whether you have a job or not. (You'll be learning how later.)
That equity line was worth just over $100,000, and we learned that you could turn $100,000 into several million dollars' worth of real estate very nicely.
During the first month, we bought a batch of business cards. They weren't especially good cards. We hadn't learned at that time how to create great ones. They were just ordinary business cards, but Duncan began giving them out as if he were on fire. He gave out more than a thousand business cards in November alone. He gave a card to a person at the doctor's office; that person gave it to a friend of hers at church. The friend from church called us up and said, "We're in trouble, we're in foreclosure, can you help us?" That was the beginning of our first-ever deal since becoming students with Robert Allen in his Protègè Program.
Let me tell you about the deal. The house was huge -- seven bedrooms, five bathrooms, three fireplaces, pool, and Jacuzzi . . . three-car garage, 5,000 square feet, a little over three years old. The seller was in foreclosure with his second mortgage, and we were able to negotiate a deal with the second mortgage holder, so that instead of paying the mortgage off at $35,000, we paid him only $13,000. We ended up refinancing the property, at which time we got $18,000 cash back at the closing. We had used money from our equity line (so it was other people's money, the bank's money) to catch up the back payments. Therefore, not only did we make the $18,000, the property had $75,000 of equity. It was worth $350,000, and we bought it for $275,000. Today, it's worth almost $800,000. That was from a little business card and word of mouth.
The second deal we did was also word of mouth, from our attorney. He introduced us to some people from Idaho who had a property on a lake near Coeur d'Alene. They had pictures of it, showing that they had been working on renovating this property. They had run out of money due to personal problems and couldn't finish the renovation. They had an appraisal for it at $300,000, and the appraiser said that if we fixed it up, it would be worth $700,000. Wow! That meant that we would have $400,000 of equity minus whatever it cost us to repair it. (There's more to the story in a minute.)
The third deal we did was the story that put us on the map. It was the story that turned us into millionaires. We found this particular house through a Realtor. She said, "You know, I think this just fits your vision. It requires somebody with the right eye to see that this is a sleeper."
The house was a luxury mansion appraised at $1.2 million. It was in a gated community on the first tee of a golf course. It had an absolutely gorgeous structure, but it had been allowed to go into complete disrepair. It was vacant, and the former owner had let the grounds become covered in weeds. Vines were growing all over the entryway. There was cheap tile in the foyer, ugly colors in the cabinetry, and orange and black marble floor to ceiling in the master bathroom. I almost went into a dizzy spell when I first saw it. No wonder it had been sitting on the market for six months. The owner was a motivated seller, because she had already moved on to a bigger, fancier mansion, and was tired of paying the $8,000-per-month payments.
We decided to offer the owner a lowball bid, just to get her used to the idea that she wasn't going to get a lot of money for this house, since it needed so much in the way of repairs. It was a gigantic luxury fixer-upper.
We went in with our first offer of $805,000 on the $1,200,000 house.
Instead of a counteroffer, she said, "Um, OK."
What a shock to us to find that she accepted our offer! Oh, my gosh! Now what would we do?
When we finally closed on that deal, we realized that maybe, just maybe, we had crossed the million-dollar mark in equity.
The day we signed was March 9, which happened to be the day of our twelfth wedding anniversary. When we walked out of the escrow office, having finished signing the papers, I turned to Duncan and said, "You know, honey, I think it's possible that we might have a million dollars in equity right now. Wouldn't that be some special anniversary present?! Let's go home and find out."
We put together a little spreadsheet of what properties we had bought. We discovered that if you included the house we lived in, we had crossed the million-dollar mark. It didn't mean that we had a paycheck yet. It didn't mean that we'd made up the income we lost from our jobs yet. But we were millionaires. It had such a beautiful sound to it. What a great anniversary present that was! The traditional symbol for the twelfth anniversary is silk, but I think it should be changed to houses! In fact, the symbol for the forty-first anniversary is land, and for the forty-second, it's real estate!
For the next few months, we lived off of the cash-back-at-closing checks that we had received from both properties: $18,000 from the first property and $16,000 from the million-dollar mansion.
We put an ad in the paper saying that we needed $100,000 to renovate a luxury home, and we received many responses. I was amazed that people wanted to give us money. I hadn't realized they were so happy to be making 12 percent interest instead of keeping their money in a 1 percent CD at the bank. We began fixing up the house, which became our new job.
I don't think there are any gurus out there teaching that you should live off of your cash-back-at-closing checks. You should actually be reinvesting that money back into real estate. But we were in a desperate situation. We still didn't have cash flow, so we moved out of the little house we were living in (the one I had bought so many years ago) and moved into the big seven-bedroom house, knowing that we could rent out our smaller home for a good profit. By March 9 we had gone from having the house we lived in, my dad's house, and my old house to having six properties! We lived in one, rented three, were renovating the mansion, and were getting ready to renovate the one up in Idaho.
Then the worst possible thing happened: We found out that the appraiser in Idaho had issued a fraudulent appraisal. The property wasn't actually worth $300,000. It wouldn't have an after-repairs value of $700,000. No, it was actually ready for demolition! Demolition!
The people had lied to us, and because we didn't have a team in place in Idaho, we had no way of knowing that the photographs lied. What we thought we were going to turn into a wonderful vacation property, a vacation business, making tons and tons of money, was actually a terrible mistake.
Replacing lost income from our jobs was now a huge, pressing issue to us. We were able to walk away from the Idaho disaster with about a $10,000 loss (and with our dignity and pride severely tarnished). We realized then that the only mistakes we had made so far happened when we violated what Robert Allen had so clearly instructed. He always says to buy properties within a fifty-mile radius of your own hometown. Furthermore, he suggests that you get acquainted with the particular zip code of a particular five-mile radius. Get to know it extremely well. We had violated that rule, and we were paying the price.
A side note: I think we got cocky because we had done so well in one aspect. Bob says that you shouldn't become discouraged in the beginning of your investing career if you get turned down on your offers at first, and that you don't get to be discouraged until you've made at least one hundred offers. Well, we got a yes to our first offer, a yes to our second offer, a yes to our third offer, and a yes to our fourth offer. It wasn't until the fifth offer that we got a no, and then it was followed by a long string of yesses. I'm sure those statistics made us think we were infallible. Wrong!
Later on that year, when we finished renovating the big mansion, we discovered we'd violated another one of his rules, which was to buy houses in the price range that people can afford. Right when we were ready to sell the big house and reap our $300,000 in profit, the tragedy of 9/11 took place. What happened on 9/11 changed so many people's lives in such devastating ways, that as I look back on it, our problem of not being able to sell a house was infinitesimal compared to the pain and suffering brought on by that terrible day.
We were stuck with an $8,000-a-month payment that we had no way of paying except to continue eating up the $100,000 we had borrowed for the renovation and carrying costs. Finally, in November we were able to find someone who would lease-option the house, and we leased it for exactly the amount of our payments. At least we didn't have to pay the mortgage ourselves now. But it was very scary. When that renter turned out to be a very naughty renter who never again paid on time, we learned what it's like to have an alligator (investors' slang for a property that eats you alive).
Shortly after that, we began investing in more reasonably priced properties, and we quickly gained back what we had lost from the Idaho disaster. We had gone down below the million-dollar mark and then risen back up again. Very quickly thereafter, by the end of the first year, we had a dozen properties.
We were still living off of the refinancing of properties, which is not the right way to do it. We felt very uncomfortable when people would congratulate us on our millionaire status, knowing that we were still having cash-flow issues. It wasn't until a year later that we resolved the matter of having enough cash flow and began to have the mind-set that everything was going to be OK.
We spent the whole first year being millionaires but still being so very, very worried about money. I wondered if other millionaires worried about money. Were multimillionaires worried about money? Could you have a huge net worth and still not have enough cash at hand for the things that carried you through the month?
I heard Oprah Winfrey say that she didn't feel rich until just a few years ago, long after she had in fact become very, very wealthy. It took her that long to stop worrying about money.
Well, that's the story of how we became millionaires in four months and nine days. The record has since been broken by new investor students who made their millions in ninety days or less. I know it can be done. I could do it again too if I had to start from scratch, even faster. We know one gentleman, also a student of Robert Allen's, Greg Warr, who made his first million in one single deal.
We've all been taught that "if it sounds too good to be true, it is." But some things are exactly good enough to be true. Robert Allen's gift of explaining Nothing Down investing in ways that lay people can understand (and implement easily) isn't too good to be true. It's exactly good enough to be true. It was for me! And remember, "checks don't lie."
If you want to see a fictionalized account of a handful of our real deals, read the right side of The One Minute Millionaire. Here's what Bob and Mark wrote on page 379:
"We also want to thank the thousands of our students in dozens of cities in North America who served as the true 'guinea pigs' for this book. Specifically, to Karen Nelson Bell and her husband, Duncan Guertin. All of the fictional properties that the heroine, Michelle, bought were patterned after actual real-estate deals that Karen and Duncan did on their way to becoming real Enlightened Millionaires. Thanks, guys!"
The Devastation of Death or Divorce (I Never Dreamed I'd Be a Widow)
In the dedication to this book, I referred to my "late" husband. He left this earth too soon. Duncan was only fifty-one years old, and he had never been sick a day in his life. On October 11, 2005, he climbed California's Mt. Whitney with twenty-seven friends, and one month later, on November 11, he passed away, to climb some other mountain on some other adventure. Everyone said he was the very last person they would think could possibly be claimed by cancer. He didn't smoke, he loved to hike, he ate fairly well, and he was the single most positive person anyone ever met. He loved life, he loved helping his thousands of students to learn real estate, he loved me well, and he was poised for even more glorious adventures in his work as an investor, a developer, and a speaker. I miss him every hour of every day. If you are an unwilling widow like me, or a divorcèe, perhaps, I pray that you have some financial resources to help you through. The women who have to suffer their grief while working through financial devastation can hardly find time to mourn. They're struggling to survive at the most fundamental levels. If you don't already have some resources in place, then it is all the more vital that you carry forward with this book.
If you're married, and you haven't begun to prepare for the loss of a spouse, I hope you will be inspired (and empowered) by this book to prepare for the stormy day when you may have to cope with death or divorce. Be certain that even though your money umbrella can't turn sorrow into joy, financial security can ease the burden of the practicalities of life's tragedies. Pledge to prepare now, because none of us ever thinks the day will come.
I am so thankful that Duncan and I had already put in place the resources for our future. And thank God we had already embarked on what Bob and Mark call "enlightened wealth." We had begun putting into practice the notion that a person can actually accelerate the arrival of his or her own abundance by consistently giving to others first. Most books on money will advise you to "pay yourself first," and that's excellent advice. But I like Bob and Mark's admonition even better: Pay the universe first. Pay with money or with time, give to your church or simply to a neighbor in need.
Bob and I were talking one afternoon, and he said, "Giving your way to wealth is counterintuitive, and that's why women get it quicker than men. Women are givers. They always have been. Giving is part of their nature.
"There's a reason why many women are poor. They sometimes possess the character 'flaw' of always giving to others and never thinking of themselves. They're always thinking of others. With our style of doing deals, they can reverse that computation to where helping others enriches and nourishes them too."
Bob and I believe that your higher power, however you view that concept, knows that because you are kind and giving, you would be a trustworthy steward of "a good deal."
The last year of Duncan's life was rich and rewarding, and I'm convinced it was largely because we had come to understand the incredible pleasure in being financially able to reach out and extend a hand where it was needed. I look forward to you having the same reward.
Thank you for letting me tell you this story. These pages have been about me, but the rest of the book is all about you and your story. Let's get going!
Everybody can be great because everybody can serve. You only need a heart full of grace, a soul generated by love.
-- MARTIN LUTHER KING JR.
Copyright 2007 by Robert G. Allen and Karen Nelson Bell
Excerpted from Nothing Down for Women by Robert G. Allen Copyright © 2007 by Robert G. Allen. Excerpted by permission.
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