We have a lot of mixed ideas of what “real estate” really is, yet I’m willing to bet that some avenue of real estate would suit you. In fact, I’m sure of it. Is it an empty lot that might appreciate or acres of farmland near a future metropolis? Is it a rundown house? Is real estate the site of a future Hilton, shopping center, or apartment complex? Figuring out the most successful avenue is tough.

Every person that defines success to me has engaged in some sort of real estate investing. If you’ve always thought about running your own business, real estate has to be a part of your thinking. In fact, you might find that real estate suddenly becomes the focus of your business idea.

In the state of Montana, the average income is $24,000. In one Montana community, the average home costs $280,000. An average person can’t afford a home? The thought makes me sick… yet it also makes me think, “Is there opportunity?” I think that we can find ways to break into markets that hold money potentials without shelling our entire paychecks to mortgages. Is that something you want?

Prepare your one-man battle plan

Open your closet, and dust off your many hats. If you want to win at real estate, you have to understand every level in your focus area or hire someone to do it for you. It’s silly to get a law degree just so you can understand the contracts. Yet have you ever considered getting your real estate license? I’m preparing to take the real estate exam and trust me, the info is anything but challenging. But saving around 5% on every real estate purchase might make sense.

Do you have much cash? You probably can’t operate like characters on “Flip that House”. How realistic is the image on these shows, anyway? The characters are willing to pay expensive subcontractors but not willing to break a nail.

You might not have cash to match flippers on TV. You do have that magical thing called sweat equity, though. Don’t just lead the battle; be the soldier. March in the front line, bark orders from atop your horse, and fight for yourself. An added benefit we’ve found in sweat equity? My husband loves to have endless excuses to use power tools.

Pick your target

At my office, we get a lot of rich men who want to invest their money in enormous projects like elaborate hotels and apartments around manmade lakes. Our construction company builds these items along with stadium additions and any other commercial construction idea someone might have. Do you want to be my boss, making money by managing enormous developments? And yes, he is making far beyond the average Montana salary.

Instead of being the construction company, you could be the envisioner that wants construction companies to build results. The beginning of the project costs you money. Most of the money won’t be your own, though. You’ll borrow from banks and investors. Make money off of their money once your condos or storage units are built and generating revenues.

But don’t start big

A more financially reasonable idea is the small scale. Buy crumbled buildings, remodel them and sell or rent the spaces—residential or commercial. Gain some experience in the small scale projects that can build up your credit and portfolio, then shoot for bigger if it’s your dream.

Know that success builds success

Deals are easier to make when you have past triumphs. And the best way to impress people is with your successes. If you own one hotel, you’re cool. If you own ten—holy cow! You can bet that people won’t question your authority on the hospitality industry.

The problem for most of us is that we don’t have any sort of real estate portfolio. It’s like we’re trying to get our first jobs out of college. How many interviews does that take? Make yourself look like an expert. Because I am 24 years old, most people feel uncomfortable with my ability to maintain any sort of real estate responsibility; they change their minds when I rattle off an accomplishment or two. Have they seen the map next to my computer? I’m filling it with gold stars that each represent a property in my growing empire.

Deception is okay

Contrary to my last point, you have to know when to present the aura of an expert. No one looks at me and thinks that I know how to wire a plug or build heating systems. It’s often advantageous to be underestimated. Real estate is predominately controlled by old men. Being young and female give me two edges. What advantages can you see in yourself?

If your neighbor were selling his shop and Donald Trump and I both expressed an interest, don’t you think your neighbor might want Trump’s business because a whole lot of $$ could be involved? At the same time, your neighbor might not want that property to turn into another Trump Tower so he rejects Trump and offers to me. I’m still some dumb blond girl fresh from college to him… but he doesn’t know my plans to build Katie Castle. Naiveté might just become your middle name.

Be curious

Finally, know that real estate involves risk. Yeah, yeah, I’m sure you’ve heard that before. But don’t be afraid to check stuff out. Even when we aren’t looking for an investment project, I keep on looking. The last two purchases that I have made came from being curious. Keep your eyes open. Make sure other people keep their eyes open for you, too. If they can make money from you, they will keep on the lookout for you. Money is very powerful in this industry.

Some day, years from now, you and I are going to be selling our homes. I thought we’d have two options: sell the place ourselves or hire a real estate agent to sell for us. My assumption was wrong. I’m not sure if any real estate agent will share this stuff with you, but if you decide to employ a real estate agent, you actually have a multitude of options:

1. exclusive right to sell or exclusive authorization to sell: This agency relationship is the one we’re most familiar with. In this contract, no matter who sells the property while you’re listed with an agent, the listing broker is entitled to his commission.

2. exclusive agency listing: the broker receives a chunk of the change if he sells the property. But if you sell the property yourself, you get to keep the commission. Brokers are motivated by money, so while this contract seems like a sweet deal, don’t expect the broker to invest great effort. If someone sees his ‘for sale’ sign in your lawn, that person knocks on your door, and you sell the house, the broker gets nadda. He’ll probably say “nadda” to this contract, too.

3. open listing: much like the exclusive agency listing, you get the commission if you find the buyer. You aren’t limited to one broker, though. In fact, you can offer your house to the whole town of brokers. The one who finally sells gets the commission. A competitive market! The problem, of course, is that brokers will be hesitant to work hard for you. They probably won’t spend advertising dollars on your property since anyone can sell the place. This guy, Joe, saw an ad for the house on Lolo Real Estate’s newspaper ad. Joe called his dear uncle Joe-Bob who happens to be a broker himself. Joe-Bob snagged the commission; Lolo Real Estate snagged the advertising bill.

4. net listing: This final agency agreement seems the most intriguing. You decide that you want $1 million for your house. You hire a broker and agree to pay him a everything above $1 million as his commission. He’s motivated, baby. He sells your house for a whopping $1.7 million. Unbelievable. His commission is $700,000. The problem here is a misled price—did the broker know you could have gotten more than a mil for your house? Did he mislead the buyers into adding another $700k? Who knows! …many states outlaw this agency.

So go propose your dream sales pitch. No law says that a broker must accept a listing. He can pick and chose what he wants. Yet with the glorious $1 mil houses you and I will be selling one day, how could he refuse?

Make money off of cash that you don’t even have. Leverage is this wonderful ability to borrow a percentage of your investment purchase. You obviously can’t take out a bank loan to buy stock… but real estate is a banger leverage opportunity.

You can buy a $100,000 home with as little as $5,000; the bank finances the other 95% for you in exchange for a specific rate of interest. So you’re making money off of the bank’s cash that you never even had. For this reason, real estate makes a great investment–it usually appreciates over time.

Therefore if you have little money, a real estate investment could be a fantastic way to increase your net worth.

As a kid, I thought that people had two choices for financing their homes: 30 year or 15 year amortizations (meaning an equal payment every month until the loan is paid). And how often do you ever hear of any other financing options?

You have gobs of choices.

Todd has been asking me questions about property financing, and while I’m no expert yet, the two of us have talked about some things you might like to know. Therefore, we’re taking a break from weekend homework; it’s summer after all. Every Friday will feature “financial Friday” articles where I share my knowledge and findings.

Next week, we’ll kick things off with a discussion on assuming sellers’ loans.

We talk a lot about ideas for growing wealth. And if you stop to think about it, I’m pretty sure every plan of attack can break down into one of the four:

1. Business—sell yourself, your product, your idea, or your services
2. Investing—gaining bonds, growing interest, gambling stocks and CDs
3. Real estate—I never thought of this method as a kid…own properties
4. Internet—extend the possibilities. A lot of people are making fast money on brilliant ideas. Even less classy ideas like collegehumor.com has brought in millions for its authors

Don’t spend every minute and dime focusing on one of these money makers, though. I’ve been trying to think of anyone who’s wealthy that only used one of these methods. I can’t think of a soul. Therefore, diversify your avenues just as you diversify your stock portfolio.

The problem with people is that we’re often in it for ourselves. We don’t want to do what we don’t want to do. So we pay people. Yet they still don’t do the project. What’s up?

Take for instance buying a house. The real estate salesman, your banker, and the title company have a list of projects they’re supposed to do so that you can close on the property. You’ll pay them no matter when they get the work done, which becomes a problem. They’re in no rush to get the stuff done; only you are. If they don’t have everything together for you by the closing, you might have to change the closing date… and you have to cover any late charges arranged in the contract. They won’t pay. Instead, they’ll be charging you fees for overnight shipping and hefty last-minute charges and transfers of cash.

A contract tycoon told me, “Get on them early, and get on them often.”