For “hands on” type investors like my­self, I have long held the notion that the best type of real estate to buy, when you are just starting out, Is something between run­down and ugly and a complete “Junker”. The degree of rundown or ugliness will be mostly dependent upon how brave you choose to be. Personally, I think the braver you can be ­the better off you’ll be with your first several acquisitions.

To start with, sellers of these kinds of properties are not in a position to be very picky about who they sell to. They can’t play “hard ball” with the price and terms like owners of higher quality, nicer looking prop­erties. The main reason is because 95 per­cent of all potential buyers are “turned off” by the rundown condition and ugliness. Conse­quently, lack of buyer competition will greatly limit the owner’s ability to sell.

How can I make It worse?

What this means is, you can almost always buy these properties for much less cash up front (lower down payments). Also, it’s likely the seller will be forced to accept much weaker terms. Lower equity payments and carry back notes are very common. Many of these deals can be 100 percent owner financing.  Ugly-Junker type properties are generally older properties, too. Many of them no longer having conventional mortgages like bank loans or savings and loan mortgages to payoff.

When they do, they are most often low bal­ance loans with good interest rates and al­most always assumable to new buyers. For “start out” investors especially, let me say this loud and clear – Owner financing is the kind you want. Owners are almost always more flexible to deal with than banks.

One very important reason to start out with this type of property is because it’s a good experiment for you. It provides you with an opportunity to learn what you can and cannot do. If you purchase a rundown house or small apartment building that’s already an existing eyesore when you buy it, ask yourself this question: How can I possibly make it worse? Even with very limited handyman skills, your efforts are still likely to make some worthwhile improvements. If you don’t do things exactly right the first time, so what! Who cares! No one but you will probably even notice. Simply do it over again until you get it right.

Finally, there is another important benefit you get which I rank about as high as the others. It’s called confidence in yourself. Once you actually experience positive money coming in, you begin to realize – “Hey, it’s me! I’m really making good things happen!”

Confidence in yourself is worth more than the money. Yet strangely enough, money builds confidence faster than any­thing I know of.