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Donald Trump’s Property investing strategy

Yesterday I attended a free property investing seminar here in New York which was an introduction to Donald Trump’s Real Estate investing programme. Although this was a fairly basic seminar it was well worth attending to find out how one of the most successful investors in the world does it and to be reminded of some concepts which although I may already know I may not necessarily always be using. Here is my interpretation of the strategies for you:

The basic principle is that Donald Trump buys low and sells high. No surprise there, but how does he actually do it? You may wonder why he sells property rather than holding onto it. Well he does both. Donald Trump is a property investor (buy and hold) and also a property developer (whereby he makes money by purchasing, refurbish and then selling property).
None of this should be new to you. Interesting how some of the most successful people just keep it simple and take action!

1) BUY BMV: You need to buy property well below market value so that you make a profit the day you buy. Due to the falling property prices in the UK and the US, it is a buyer’s market now and so a great time to be able to buy property well below the market price. One of the key to this is understanding the true market value.
2) KNOW YOUR AREA: One you have picked the area in which you want to invest, you need to do your research and get to understand the market value and rentals in the area. The best way to do this is to use the internet and work with local knowledgeable experts such as letting agents and Estate agents who will be able to provide actual rental and sales figures.
3) FIND MOTIVATED SELLERS: Estate agents will be able to help you find some motivated sellers but you also need to attract sellers to you through your own marketing efforts using methods such as postcards and leaflets distributed in areas in which you want to buy.
4) ADD VALUE: Donald Trump is great at seeing the hidden value in an asset. He likes to buy run down property and “Trump it up”, whereby he spends money to make it look fantastic. The cost of renovation is always a lot less that the value that is added. Donald Trump maximises the use of local and government grants and subsidies to pay for renovation work whenever possible.
5) KNOW THE OUTCOME: Having done your homework before you buy the property you will know exactly what you are going to do with it. Either refinance and hold onto it if the rental stacks up, or sell it. To sell the property quickly in the current market, one would need to sell the property at a discounted price.
6) REFINANCE: Having added value to the property as long as the rent is sufficient you can refinance it to get your initial cash out of the property and to even get some extra tax free cash out of the deal if you purchased at a big enough discount.
7) USE OPTIONS: To minimise the risk Donald trump will secure a property on an option and then find a buyer or tenant before he actually purchases it

There is no doubt that Donald Trump is really smart and an excellent business man. We should remember that he started his Billion Dollar property empire by using these simple strategies on single houses. Everyone has to start somewhere and there is NO reason why you cannot be as successful as Donald Trump if you decide to be and take action to achieve you goals.
I find this reassuring that what I am teaching investors from my own experience is very similar to what Donald Trump has done and continues to do right now in what is the biggest buying opportunity in the last 20 years.
Kind regards

Simon Zutshi

6 thoughts on “Donald Trump’s Property investing strategy

  1. Karen Bannister

    Thanks Simon :-). We sometimes forget even the big guys had to start somewhere. A lot of us already know the rules Donald Trump talks about. So it’s about being proactive and persistent.

  2. DrBubb

    LOL.
    I cannot believe that you are looking to Donald Trump for property tips! He is purely a creature of bull markets, who went bust in the last downturn.

    The only thing he understands and does well is SELF-PROMOTION. The banks kept this creature alive because they decided his properties were worth more with his name on them, than if they foreclosed. If you can pull off that trick, then perhaps his advice is worth listening to- he clearly does know how to self promote, to bluff, and to exaggerate. Are these the skills than UK property investors need?

    I reckon that some deep knowledge of property cycles would be much more useful. Click on the link to a YouTube video about Fred Harrison’s 18 year cycle, and see if you agree: http://www.youtube.com/watch?v=_C-Nd_MStxU

  3. Simon Zutshi

    Hi Dr Bubb,

    Many thanks for your post. It is always good to start a healthy debate on such matters.

    I believe that one can always learn something new from other successful people. I am continually looking to improve my knowledge. Donald Trump is someone who has been very successful in business and property and is certainly someone who I am sure can teach us all a thing or two.

    I think my interpretation of the lessons that I extracted from his seminar (detailed in the first post) are sound advice for the current market downturn. I don’t agree with everything Donald Trump has done or the way he has done it but that will be the case with most experts you listen to. You always need to take away what is right for you rather than thinking what they say is gospel.

    I completely agree with you that Donald Trump is a master of self promotion but I fail to see the problem with that. The very fact that he was able to avoid bankruptcy by doing a deal with the banks must surely be to his credit. Do you think the same way about Richard Branson, who is also an unashamed master of self promotion, who has almost lost it all several times? Most really successful people are risk takers. They do things that most people would not dare to do. Occasionally successful people push things too far and get in to trouble but it is the truly successful people who get up and start over again.

    I also agree with you that knowledge of property cycles is extremely useful. The fact that the UK market is now in a downturn should be no surprise to anyone who understands the market is cyclical. The growth that has happened over the last 6 or 7 years was not sustainable and so there had to be a correction sooner or later. UK investors need to recognise that prices may take a few years to recover but that in the long term property prices will go up again. I thought your youtube video has some great points in there, but I do not agree with all of it. One big assumption in there is that you need to sell the property to make a profit. As an investor I am not very keen to sell as I prefer to Buy and hold. Thus a short term downturn for a few years is not a problem as long as one can afford the holding costs.

    If you have not seen it, you may like my article called “The Death of Property Investing”. You can download it here:

    http://www.thedeathofpropertyinvesting.com/

    Let’s open up the debate to everyone else. What do you think about this post?

    Kind regards,

    Simon Zutshi

  4. Bobby Gill

    I like to get the information and make an informed decision on what I see, hear and read.

    If it works, makes sense and feels right, I will go with it. If not, next… Take what works for you and do what needs to be done.

    Everybody should be aware of their image (self-promotion, PR) as many people deal with those that they know about, have heard of and like. The numbers are secondary.

    All the best,

    Bobby

  5. Ray Teret

    Pioneers are people who are brave, Opportunities arrive daily and many persons are blinker and often fearful and therefore do nothing about them. If you do not attempt to fulfill your hopes and dreams then you will end up filled with remorse. Go gently by all means, adopt my 3l way if you will, “Look,Listen and Learn”. Attend Simons seminars both the free ones and those you can afford, he is one of the formost informed people regarding Property in this part of the world. Buy his Book or even better his Audio series and turn your car into a mobile university. I will back Simons knowledge and teachings to the hilt. Heed him, Remember the 3l system and you also WILL be a winner, Ray Teret