NuWire talked to Robert Locke, a full-time realtor and investor in the Atlanta area since 1985. One of only 28 Master Property Managers in the U.S., Locke received his real estate license in 1973 and founded Crown Management in 1980. Locke, a Certified Trust Specialist, works with investors and personally invests as well. His key strategies include lease options, buy-and-hold rentals and creating relationships with local builders.
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NuWire: Can you share with me how you got started in investing and why you chose real estate?
Locke: I was in the securities business. I was a stockbroker. I was doing all the stock and bond business.
I realized about 30 years ago, about halfway through my life, that people were sitting back as investors, as owners of houses, and just making a ton of money over a long period.
So, I took a course back in 1978. The name of the seminar was "Making it Big on Little Deals."
Betty [Locke’s wife] and I have bought about 300 houses over the years. We’ve bought the wrong stuff many, many times. We’ve learned an awful lot of lessons by screwing it up.
Now, we tried rehabbing. There’s a lot of money to be made in rehabbing. If you own a tool belt and know how to use it, you can buy houses—that’s more of a business—fix it up, rent it, sell it, refinance it. I think that’s more of a business than it is an investment.
Our model was to buy good single family homes and sit on them for 10 or 15 years and let them go up in value. Let the tenant pay down the mortgage. Manage the physical condition and then sell it or exchange it after 10, 15, 20 years, and that’s really where our big money has been made.
NuWire: What is it about investing that excited you in your own personal life?
Locke: I love the art of the deal. I get my energy, and I get fired up, when a property presents itself where you learn to evaluate the people and what their circumstances are and what their needs are, the property itself—what is it worth, how much fixing up does it take, is it [on] a good lot, is it in a good neighborhood, is this an area of town that I want to own real estate in—and then, the knowledge and experience of how to craft that deal.
NuWire: Tell me about any other areas that you’re invested in aside from real estate.
Locke: I was pretty good at the stockbrokerage game, and the thing that bothered me about the stock market is I was always reacting. I could never predict.
Who could’ve predicted the day before yesterday that the market would fall 400 points? Who could’ve predicted that? And even if you could’ve predicted it, you couldn’t control it, and it was a business that I had no control over.
A single family home I can get my head around, and I can control it. I can buy in good subdivisions. I can and have [for] many, many years gone out and cleaned the carpets and painted the walls and kept the shrubbery trimmed and put up the fence and painted it white.
There are so many ways I can control investing in real estate that I could not control in the stock market.
And so, to me, it has to do with being able to have some very direct influence over my investment future by being able to select things, properties, select good neighborhoods, buy houses where there are distressed people, not distressed houses, take care of that house for 10 years.
I own every tool imaginable. I don’t go out and rehab as a choice—don’t get me wrong—but I could have a direct influence year by year by year on what was happening to the value of that house, and I like that.
NuWire: Are you involved in any investment clubs or groups?
Locke: Many. Part of the reason is I’m an educator. I can talk about real estate for about nine days straight without hardly taking a breath, so I like to train and teach and coach. Georgia REIA in Atlanta is the largest trade association of real estate investors in the nation.
There are many other REIAs. The term REIA kind of denotes an industry of real estate investment associations. There are four or five in the Atlanta market.
There are tons of them throughout the United States where investors are getting together who kind of love the real estate buying business, and they trade secrets, and they sell each other services, and they work together. They make deals.
There’s an entire industry out there of REIAs, of investment groups. They meet monthly. They meet quarterly. They put on annual conventions, and I end up being a speaker in many of those conventions and workshops and things like that. So, yes, I’m not only involved, but I’m involved an awful lot at the education and training level.
NuWire: Are you invested in any other states besides Georgia?
Locke: I am not…I think this is a terrific market to own real estate in. I want to stay in a market where I can buy constantly $150,000, $200,000 houses.
I want to put my money in an area that if I’m going to manage it, I want to know what I’m buying. I want to know the area I’m buying in, but the hardest part of this business is not buying houses.
Anybody can go out and buy houses. We have investors coming into Atlanta. They go into a new home community, and they buy a house. How difficult is that? It isn’t.
What’s hard is the management, and if you’re in California, and you’re going to buy a house in Atlanta, [who] you need to hook up with first is a good property manager…that’s the person that’s going to make or break your deal.
And so, I’ve got a bulk of business here. I know the north end of Atlanta. We have managed in most every community in the north end of Atlanta. We know the better communities. We know the better builders and have relationships with them that are 20 years old.
Buying is the easy part. It’s the fun part. Anybody can get their head around buying a house.
The key ingredient is not buying it; the key ingredient is managing it right. And so, as a property manager, I want to buy—I want to invest in houses in Atlanta because I have a management division that will manage it right, and that’s key to me.
NuWire: Can you tell me a story about your biggest success in investing?
Locke: I don’t want to make that too specific because everybody likes to tell their best deal, and it makes great seminar fodder, but most of your listeners out there know that you get into real estate, and you hold it for [the] long-term.
I like the saying you make a decision, and then you make it right. Making a right decision is pretty hard to do…you analyze and evaluate a property, and then you buy it, and you hold on to it and you kind of make it right.
I think the best—the biggest decision that I made years ago that probably made me the most money was learning how to buy from builders.
25 years ago I met a builder. They had some standing inventory. They wanted to get rid of it, and I sweet talked that builder into selling me seven houses. It terrified me.
I was young in the business. I owned some rentals, but the idea of buying seven, eight, 10 houses just kept me awake at night. Well, I lease purchased those houses. I rented those houses. I sold those houses to investor clients of ours and put deals together.
Those seven houses, five of them we still own, and those houses we bought for $67,000. They’re worth about $225,000 today after—actually, more than that. They’re worth about $260,000, $270,000 today.
They are close in. 20 years ago they were far out. 20 years ago they were in what we call emerging areas.
I wasn’t sure I could get them rented, but they were brand new houses. They had a lot of sizzle and glitz, and I bought those seven houses, and I discovered I loved working with builders.
I think learning to buy new houses, and work with builders, and buy them when they need you to is probably the biggest goldmine I ever hit.
So, we’ve bought 400 new houses in terms of our model over the last 20, 25 years as we’ve learned to do that, and that’s not a ton. That’s only maybe 30 a year. That’s not a big deal, but in some years we don’t buy many because the market is so high.
Everything they put on the ground is sold, but in the years when that slowed down, like 2005…there’s been some bargains to buy. And I guess I would put in second position what I have made the most money at is lease purchases. We have a ton of houses out there that the investor bought for $160,000.
We lease purchased it for $189,900 or $199,900, and we have a good tenant in there. They put up $5,000 to $10,000. They’re paying their rent every month, and they act and smell and taste like a homeowner, and they are taking good care of the property and going out and getting mortgages and closing on them.
We started [lease purchasing] in 1988. We did it badly for five years, and in the early nineties we figured it out. That is an absolute money machine.
NuWire: Tell me about your greatest failure.
Locke: Well, to me, a bad deal in real estate is break even. We have never bought a house and had to sell it for $20,000 less. Because we understand property management…if we bought the wrong house, we can lease purchase it and get it out of the inventory. So, I would say the things that we crashed at was learning what not to buy.
In the beginning we thought $20,000 off a house that sits next to a retention pond was a discount, and that’s not a discount at all. We’d call that a price adjustment for an irreconcilable defect.
We bought houses on busy streets and regretted it. We bought houses where there’s a 300-foot power line in the backyard. We bought houses with real funky floor plans. We’ve bought houses on just B lots.
The builder always has the lot next to the retention pond or steep driveway or something like that, and we thought, oh, we were getting a bargain—10 percent off the price. Whoopee.
And we just realized that you’ve got to stay away from that stuff because you can’t get rid of it. You can’t correct it. You can’t heal it. You can’t make it go away. You can’t throw money at it and change it in any way.
So, we have found stay off the busy streets. Stay away from the retention pond lots. Stay away from the steep driveways. Buy a good, vanilla, "the American dream" single family house. It’ll always make you money.
NuWire: If you could give a new investor some advice on investments, what would you tell them?
Locke: I would tell them to start with somebody who’s done it. What we see all the time is investors go out to a new home subdivision because they’re knowledgeable. They’re smart. They think they understand it, and they walk into a new home subdivision, and they buy a house right off the shelf from the subdivision agent.
And the subdivision agent will give them the wrong advice, like, "This house will rent for $1,200 a month," and then, they’ll come into the property manager afterwards, and they’ll find out that $950 a month is the right number.
And we find that happening over and over and over—investors working with real estate agents who are not investors, investors working with real estate agents that don’t own any rentals. The number one mistake I think investors make…is working with the wrong people to buy the house.
They need to go find somebody that has bought rental houses for 20 years—somebody that has made their mistakes on their own dime, people who have screwed it up enough to figure out what the right model is.
Whether that’s a property manager, a realtor—however you define them—work with somebody that really has done it and has gone through their learning curve so the investor doesn’t have to pay for that learning curve.
NuWire: Where do you see yourself in the next five to 10 years, and what are your future goals for your investments?
Locke: Well, I’m 61, so I’m trying to figure out how to get out of the business…I am actually at the time of my life where many of my properties are going free and clear. I’m kind of at the stage of wanting to mentor the people in my shop here to be able to carry on the Crown model and the Crown name.
NuWire: Do you have anything else that you want to add about yourself as an investor?
Locke: This is a blast. I’ve got a lot of friends who are saying, "Robert, when are you going to retire? When are you going to retire?"
My wife is a painter. Asking her to put a brush down and quit would be like cutting off her left arm. It’s a passion for her. Asking me to retire and get my head out of this would be the same way. Love it…I’m passionate about it.
We’ve made a ton of money in single family homes, and—it is great fun. It has been a great run. We get better at it every year. Investing in real estate is just—it’s a great lifestyle. It’s been a terrific life for us.