Is Investing in Senior Communities a Good Idea?

With one of the largest demographic populations, baby boomers bring a unique niche to the investor’s marker. However, is investing in a senior community beneficial? Consider these strategies:

Types of senior citizen investments

Since there are numerous kinds of elderly care communities, the opportunities you have are endless. Primarily, the three kinds of investments include:

  • Independent living

Independent living houses function almost like a standard apartment complex. When it comes to investing in an independent living facility, there are a couple of benefits. For one, independent living facilities are considered to be low-risk investments. Moreover, such houses have lower operating costs and are subject to little regulation.

  • Assisted living

Assisted living facilities are considered to be stable investments. Generally, such facilities generate a higher amount of revenue because of the expanded services offered. Similarly, since they are need-based facilities, they have steadier occupancy rates. Such facilities also occupy the largest share in the senior housing market.

  • Communal housing

Since communal housing involves many individuals living together, the amount of revenue generated is more. Plus, communal housing is preferred by many.

Benefits of investing in senior communities

  • Quality healthcare

Apart from a warm and pleasant climate, senior communities are also often located close to either a college campus or an active city. This means you’ll find numerous activities nearby along with high-quality healthcare. In fact, retirement communities are generally situated near top universities that are famous for stellar healthcare programs.

  • Easy to make a successful marketing plan

Investing in a retirement home in a senior community involves targeting a particular market. Since you know that residents must be at least 55 or older if they want to rent or purchase your property, you can come up with a marketing plan accordingly. You can develop a plan that will appeal to the demographic.

  • Increased demand

Most houses in any community are suburban houses, and suburban houses are most suitable for young families. Without a caring family member or a network of young and helpful neighbors, senior citizens living in suburban houses can feel isolated and incapable of maintaining their property. Consequently, there is an increased demand for affordable and safe housing that provides adequate services for senior citizens. So, investing in a senior community is full of opportunities.

4 Strategies New Real Estate Entrepreneurs Can Use to Maximize Profits

Investing in real estate does not guarantee a profit, nor does it offer assurance that the entrepreneur, or investor, will not lose money.  It does, however, offer the wise new real estate entrepreneur the opportunity to make a profit while lowering the chance of losing money.  What then is the difference?  Why do some new entrepreneurs experience more success than their counterparts?

The answer probably rests on two words – Investment Strategy. Far too often, new real estate investors, or newbies, begin their investment career without a clear plan on how to succeed.  They hope and often pray that they are making wise decisions without a well-conceived real estate investment strategy.  Rather than following a proven roadmap on real estate success, they seem to jump from one approach to another.

If your future investment strategy is going to have the highest probability of succeeding, it is vital that you educate yourself with real estate investing in general, and then choose which investment approach fits with your mindset, talents, time, experience, and perhaps most importantly – your finances.  Don’t short change yourself by settling for education from unexperienced and unqualified “so called experts.”  Rather, find a mentor or educator that can explain and guide you through the basic real estate investment strategies.

Your personal goals and ambitions will have a direct bearing on the best real estate investment strategy that makes personal sense for yourself.  If you are interested in passive income without major time requirements, your choice might be entirely different from that selected by a hands-on handyman who loves to fix up and restore properties. When making your choice between different strategies, be realistic in matching investment criteria to your personal assets, talents, and time constraints.

Once you have done all this, consider choosing one of the four following investment strategies that entrepreneurs have used successfully across the country and across the globe.

 

Strategy #1 – Rental Properties

Investing in rental properties is a great way to create semi-passive cash income where your tenants “in effect” are giving you money every month to pay down or to eliminate the mortgage debt required to purchase the property.  If your primary goal is to build a positive regular cash flow, then rental properties can make a great deal of sense.  There are three major caveats you must consider when selecting rental properties as your investment strategy.

The first is simply “secure financing.”  It is a well-documented fact that there are more and more young and middle-aged people entering the housing market.  With this added influx of potential renters, it seems logical to assume that rents are going to continue to escalate over the coming few years.  But, there is no guarantee that this situation will continue to exist long-term.  If you enter into a financing agreement on the purchase of a rental property that locks you into extremely inflexible or high interest payment terms, it may very likely be your downfall if the housing market changes.  Don’t agree to financing terms that can damage positive cash flow or lock you into unrealistic payment terms.

Second, location has always been rule #1 when investing in real estate – and that goes double for rental properties.  Quality renters who will pay their rent on time and protect your property will always look for properties that show well and meet their family objectives.  They may want to be near schools, shopping, or entertainment venues.  Your success in keeping high occupancy rates will dramatically increase when you choose properties based on location.

Third, you are becoming a landlord with all of the responsibilities associated with it.  Being a landlord may mean that you now will have major time constraints because of the management responsibilities associated with rental properties.  This is especially true when the entrepreneur decides to own multiple rental properties.  This management obligation can be diminished with proper management training or by engaging a qualified professional management team.

SEE ARTICLE: 5 Keys that Can Open the Door to Professional Real Estate Management

As an entrepreneur you will need to evaluate and decide if you are most interested in traditional long-term rentals or the recent success of short-term rentals.  Both choices offer the potential of positive cash-flow and long-term appreciation.  Short-term rentals have increased world-wide in recent years due to the success of companies like Airbnb, but there are also caveats with this option.  More and more cities and local zoning authorities are blocking or even stopping short-term rentals.  If you follow a well-designed plan from proven experts, you will be much more able to avoid the perils associated with this phenomenon.

 

Strategy #2 – Buy and Hold

The buy and hold strategy is based almost entirely on the principle of “appreciation.”  Over a long period of time real estate has proven to appreciate at a rate equal to or in excess to the rate of inflation.  This means that as time passes, the property will continue to increase in “real value.”  There is no guarantee that this historical data will increase at any pre-determined rate, nor will it always increase in a consistent manner.  There are many factors that enter into the equation of real estate appreciation.  These include everything from location and access to market and zoning changes.

Yes, it appears that property will continue to increase in value, and providing you have selected the right property under the right purchase terms – you can probably expect appreciation to occur.  But the buy and hold strategy is much more than just buying the right property, you also need to be able to hold the property for an extended period long enough to recover your investment and make a profit.

This means that you may be forced to cover interest and mortgage payments incurred when purchasing the property – without any income to offset the payments.  Thus the “buy and hold” strategy poses the major challenge of being a long-term investment. If real estate appreciation slows or evaporates in the short-term, you will still be locked into a longer-term investment.

In order to maximize your chance of success with the buy and hold strategy, always focus on purchasing property at “below market price.”  This may seem impossible, but just the opposite can be true when you search for foreclosed properties, pre-foreclosure properties, and extremely motivated sellers.  When you pay close attention to the true reasons a seller is selling the property, and have adequate financing, then buy and hold strategies make a lot of sense.

 

Strategy #3 – Find, Fixup and Flip

The concept of finding undervalued properties in a state of disrepair and then restoring the property to a higher value through well managed repairs can lead to success if the investor is able to flip the property in a short period of time. This strategy can lead to a fairly substantial profit if a few simple guideline rules are followed.

First, the potential property must be able to be repaired without expensive total remodeling.  It is critical that the entrepreneur who engages in this strategy understand building, repairing, and restoring construction.  You don’t want to purchase a property without a realistic estimate of what the repairs will cost to complete.  It’s always wise to get more than one estimate of bids on the repairs before the purchase is closed.  Maybe you feel qualified to do the repairs, but, get some bids to protect yourself.

Second, you must have ready cash available to complete the purchase and to do the repairs.  If you have cash available through savings, this is optimal, but if that is not the case, you may need to secure short-term financing.  Oftentimes, this type of financing comes with higher interest rates and short-term payoffs.  This being the case, you need to be able to get the repairs done as rapidly as possible in order to avoid paying all your profits toward high financing costs.

Third, curb appeal should be an overwhelming factor when rehabbing the property.  Curb appeal has been shown to be one of the most important factors in attracting new buyers to a property.  Chances are that many buyers may have seen your potential “fixer upper” in its present state and might not be immediately interested unless they can quickly visualize a new and different property.

Be aware, the fixing up and flipping houses is definitely not a strategy for the completely passive type real estate investor.  With timing and financing so important, the real estate entrepreneur will need to be actively invested in deciding on the repairs, getting them completed, all while remarketing the property to new buyers.  On the other hand, if you have the ability to find the right property, fix it up in the right manner, and flip it to a new buyer in a matter of weeks, the returns can be quite good.

 

Strategy #4 – Wholesaling

Wholesaling property is based on the concept of an investor getting a property under contract and then finding another buyer, all prior to actually closing on the property.  In essence, the real estate wholesaler can make a profit on the property without actually owning the property.  It may sound illegal, but if it’s done properly it can provide the new real estate investor with substantial profits.

In order for this strategy to work, the investor must be able to find properties that are substantially under market value.  Oftentimes, these are properties that need repairs, are close to going into foreclosure, or even in foreclosure.  The wholesaler must understand the local real estate market and be able to act fast.

Even beginning investors who have received quality training have found wholesaling to be a profitable way to invest in real estate – all without even owning the real estate.  There are a few simple things to remember about wholesaling that make the strategy simple to understand and implement.

First, the entrepreneur or aspiring wholesaler must have the ability to search out and identify potential wholesale properties.  As noted earlier, the property must be undervalued to actual market value.  This requires the entrepreneur to understand the market and to be able to look beyond apparent property conditions.  These properties and often identified as potential “fixer uppers”.

Second, the entrepreneur must have a buyers list.  This is a “book” of individuals who invest in real estate and love to have people bring them deals.  You can find such people through real estate investing clubs, title company contacts, and personal acquaintances.  It may take time for you to build a buyers list, but once you have helped other people make money, then these same people will come back to you looking for more deals.

SEE ARTICLE: 6 Reasons Why Wholesaling Makes Sense for Real Estate Entrepreneurs

Third, the entrepreneur must leave a potential profit for the person who will actually step in to complete the purchase.  Remember, a smaller percentage of a real deal is worth a lot more than a huge percentage of a deal that doesn’t close.  If you always keep in mind that your end buyer must make money before you do, you will always make more yourself.

Fourth, time is of the essence.  Unless you have the money and expertise to find a deal, estimate true cost of repairs, and immediately find a final buyer, wholesaling will be a hard strategy.  However, if you learn from an expert or qualified mentor, the strategy can bring great rewards.

Real estate investing can bring both short and long-term profits providing the investor has the time, money, and expertise to follow proven investment strategies.  The more realistic you are in determining your true goals and objectives, the higher your returns will be when choosing your favorite real estate investing strategy.

6 Reasons Why Wholesaling Makes Sense for Real Estate Entrepreneurs

Wholesaling real estate is commonly described as the strategy of putting a piece of property under contract with the intent to assign the contract to another buyer.  This type of real estate purchase approach is generally used with distressed properties where the real estate entrepreneur doesn’t plan or fixing up or rehabbing the property.

In order to profit from this stratagem, you will need to put the property under contract at a lower price than the potential market value.  In doing so, you allow the final buyer to make a profit when the property is upgraded or renovated.  The key to effective and profitable wholesaling is your ability to find properties that can be purchased at below market value.  We call properties in this condition distressed properties.

In almost all cases, the sellers of these properties are extremely motivated, and as such, will likely be willing to dispose of the property for a substantially reduced price.  Many, if not most, of these properties require cosmetic repairs, remodeling, or substantial cleaning in order to bring the property up to full market value.  Someone will have to do the upgrading or repairs, but that person is not the wholesaler.

The wholesaler finds the deal, evaluates the repairs, secures a ready buyer who is willing and capable of doing the repairs, and then sells or assigns his or her position to the end buyer.  In doing so, the wholesaler can make an immediate profit from the transaction.  There are no guarantees that you can make a profit when buying and selling real estate and wholesaling is no different.  However, if you, as a real estate entrepreneur, follow a proven strategy, do the proper due diligence, and get the proper education, wholesaling can make a lot of sense.  Let’s review six important reasons why this is true.

 

Reason #1 – Great Way to Learn and Start Real Estate Investing

Wholesaling real estate is certainly one way to profit from real estate and in order for it to work, it is essential that you are committed to real estate as an investment vehicle.  It is assumed that you will incorporate the proper mindset, have a positive attitude, and be willing to learn from the experiences of others.  You may be new to real estate or you may be a seasoned investor, but regardless of your personal situation, you can gain a great deal of additional knowledge about investing in real estate, negotiating with sellers, and understanding the local real estate market, when you follow the principles of wholesaling.

Real estate in every geographical area has unique characteristics.  As a real estate wholesaler, you will become extremely familiar with the local market.  In order to evaluate deals as to whether they make economic sense, you will need to become competent in determining market values, understanding basic repair and renovation expenses, and adapt at communicating one-on-one with sellers, brokers, and professional title companies.  This may seem like daunting undertakings, but it will happen as you learn and actually start doing something.

Wholesalers also need to learn basic direct marketing techniques as they apply to real estate.  These techniques include everything from drafting flyers, designing signs, and writing letters to home owners.  Successful wholesaling entrepreneurs also learn to use the Internet and how to effectively use websites.  All of this becomes much easier when you follow step-by-step guidance from successful mentors.

Part of your education and learning experience will come from learning how to locate the motivated sellers and distressed properties.  Some real estate wholesalers start by focusing on foreclosure and pre-foreclosure properties.  You can also work with existing multiple listing properties (MLS Properties) once you learn how to distinguish potential motivated sellers.  Remember that you are looking for properties that can be brought under contract at under market value.  There are MLS properties than can be purchased for substantial discounts, but you must learn to understand why individual owners might be extremely motivated to sell.  One caveat, all of these properties are visible to everyone, which makes it more difficult to negotiate the best deals.

Don’t be discouraged if you don’t find the ideal property listed on MLS.  There are lots of other ways to find and locate the distressed properties.  You can start by actually driving around and looking at properties in your locality.  If there are vacant houses, homes with untended yards, and properties in need of repair, these are potential wholesale properties.  This market familiarization process is all part of learning about your local real estate market.

For Sale by Owner properties are also wholesale opportunities.  These sellers may be willing to discount the property in order not to pay a real estate commission.  Real Estate auctions are also possibilities, but you will need to secure cash in advance as almost all auctions require immediate cash payments.

Finally, you will need to take a pro-active role in finding motivated sellers.  You may begin by placing signs (bandit signs), distributing flyers or using direct mail to advertise that you buy houses for cash.  Part of the wholesaling strategy is to secure the property by contract and then to assign this contract to a cash buyer who will act immediately in order to purchase at below market value.

SEE ARTICLE: Building Your Credibility as a Wholesaler

It is highly recommended that you get as much education and training on wholesaling as possible.  Make sure that your training is provided by reputable and experienced trainers.

 

Reason #2 – Eliminates Need for Credit and Large Personal Capital Investment

Every seller will require that the property is paid for.  Motivated sellers will still need a buyer that can solve their problem with cash or financing.  We can’t ignore the fact that cash will be required to purchase the property.  However, you won’t need a large amount of cash to put the property under contract.  Rather, you will need an earnest money deposit.  The actual cash to close the sale will come from your “buyer.”  This “buyer” will be the one who will actually complete the closing.  You, as the wholesaler, will provide the earnest money deposit.

In addition to the fact that you won’t need a large capital investment in order to complete your end of the transaction, you won’t need to rely on your credit to secure financing.  Your “buyer” will complete the transaction WITHOUT USING YOUR CREDIT.

Be aware that you must ensure that your contract to purchase the property must be assignable.  Generally, all contracts can be assigned unless specified otherwise.  However, you should explicitly state that your contract is assignable.  Be upfront with the seller and let the seller know that you may be using a partner or other investor as part of the purchase agreement.  Rather than hide the fact that you may have a partner or other investor, let the seller know that you may not be the person who actually takes title.  It’s important that the seller understands that the property is being sold, not that you may not be the final name on the deed.

Greed will kill a great deal.  You must allow for the seller to solve their problems, allow the “buyer” to make a profit, and earn a profit yourself.  A part of something is much better than a lot of nothing.  This simply means that you need to find sellers who are motivated to sell at below market value for any number of reasons, and then find a “buyer” who will step in and close the deal in order to make a profit.  When you receive your wholesale training from a trained expert, pay special attention to establishing values.

Before we go further, you must learn to construct good deals that allow for realistic profits.  Buyers from your buyers list will not act unless they firmly believe that they will be able to earn a profit.  They need to rely upon actual numbers as to what the property will be worth after repairs and renovation, and they must have a reliable estimate as to what those repairs will cost.  If you have actual numbers, you will be in a position to make a deal that works for you, the “buyer”, and the seller.

How do you find buyers who will step in and provide the cash to close the deal?  You must develop a good organized buyers list.  These are people who have the cash or credit to immediately act on a good deal.  Great training from qualified experts can provide valuable resources.  You can start with advertising for buyers with a website or craigslist.  You will need to develop a professional plan.  Many wholesalers join real estate investment clubs and network with other real estate entrepreneurs as a way of meeting “buyers”.   Don’t forget about friends and family as potential “buyers.”

 

Reason #3 – Teaches Negotiation Techniques

Wholesaling is a person-to-person business and you will need to learn proven negotiation tactics and techniques.  The more training you can receive on dealing with negotiation, the better your success will be in real estate wholesaling.  In every real estate negotiation, the seller wants one thing and the buyer wants something else.  Your goal as a negotiator is to find the common ground that will structure a great deal.

SEE ARTICLE: The 6 Key Elements for a Successful Real Estate Purchase Negotiation

Each time you meet with a seller or property owner you are in the process of learning how to negotiate.  Everything starts with learning why the seller is selling, or if the property is not actually for sale yet, why would the owner consider selling.  Is the property in foreclosure or does the seller have some immediate cash requirement?  There may be any number of reasons why the property is available, but you need to know the most important ones.  The more you know, the more money you might make.

As you gain experience talking to sellers, to “buyers”, and to other investors, you will gain confidence – both in what to say and what not to say.  It’s important to allow all parties in a real estate negotiation to come out ahead.  The moment you become to self-centered or greedy, the deal will vanish.  J. Paul Getty once said, “You must never try to make all the money that’s in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won’t have many deals.”  As you learn to follow this advice, your personal confidence will naturally improve.

The negotiation process is all part of understanding why the seller is selling.  Once you know what the seller’s true objectives are – the sooner you can find a way to solve them.  As you learn to become a problem solver, you will quickly become a better negotiator.

 

Reason #4 – Entrepreneur Can Build a Powerful Success Team

Every successful real estate wholesaler learns that success comes with having a powerful support team.  This team may help in determining renovation costs, establishing true market values, providing legal advice, structuring proper and successful closings, and building a list of “buyers.”  You may want to do all of this yourself, but it just won’t work.  You will need the help of others, and wholesaling will help you build a powerful support and success team.

A success team will communicate with each other and provide accurate information.  Each member of your team will support and contribute towards an eventual success.  Because every deal relies heavily on establishing a final market value of the property, you will want to find an appraiser who is credible and experienced.  The appraiser can assist you in not only establishing a present value, but an after-repair value as well.

It’s critical to be upfront with the title company when completing any wholesale transaction.  You will need to work with a title company that understands what you are doing, how you are structuring the deal, and how the assignment of contract (or double closing) will work.  The title officer must know what to say when setting up the closing and working with all the parties – seller, “buyer”, and yourself.

You will also need to work with contractors and cleaners.  You may not actually do the contracting work, but you must know actual costs to finish the work.  In most cases, you may need to do some cleaning and initial work to present the deal to your buyer.  Actual realistic estimates and bids will help tremendously in your negotiations with your “buyer.”

Finally, you will need to establish a great buyers list.  This will be your stable of money people who will be anxious to step in and make a profit from your work in structuring the deal.  If you learn to structure win/win deals where both you and the “buyer” make money, you can soon have a list of people waiting to work deals with you.

 

Reason #5 – Can Reduce Risks

It’s already been established that we don’t have to have a large cash investment in order to effectively do real estate wholesaling.  When you eliminate the need for a substantial cash investment, you automatically reduce your risk of personal financial problems.  When you have to generate a huge cash investment, you oftentimes borrow excessively or create other financial problems.  Wholesaling can eliminate this problem and risk.

Another risk we eliminate by wholesaling is the risk of damaging your credit.  Your credit rating is valuable and every time you take on additional debt by borrowing, you are raising your risk.  A major benefit of wholesaling is the ability to structure a deal without borrowing money.

If you were to rehab the property yourself, you are susceptible to the risk associated with cost overruns and excess expenses.  Because you have assigned the contract to another party (the buyer), this risk is also eliminated.

 

Reason #6 – Can Create an Immediate Positive Cash Flow

We all want a positive cash flow, and most of us want that cash flow to start immediately.  When you learn to wholesale real estate and have an organized list of buyers ready to step in and complete a win/win deal, cash flow can start right away.  You are assigning the right and obligation to purchase the property, and this automatically allows you to make a profit when the assignment takes place.

The property owner or seller also can benefit from a quick closing of the property itself, which generally solves the problem the seller had with the property.

Real Estate wholesaling is a proven strategy that can benefit the seller by providing immediate cash for the property from the “buyer.”  It is also a great way to make a profit when you structure a win/win deal.  There are motivated sellers with distressed properties who actually need your help, there are “buyers” looking to make a profit, and you can succeed by structuring great deals.  The best way to make all this happen is to find a credible and qualified mentor or trainer who will guide you step-by-step in making real estate wholesaling a viable strategy.

How to Build a Successful Real Estate Investing Team in 5 Easy Steps

Teamwork has always been recognized as one of the primary reasons why some business ventures succeed while others falter and sometimes fail altogether.  This is certainly true when entrepreneurs decide to invest in real estate as a way to improve their financial lives.  Unfortunately, many inexperienced investors start their real estate career without a clear idea of how to build a support team.

Your real estate support team should consist of many different people who fill roles similar to the players on a championship basketball team.  Just as the point man calls the plays and sets up how the ball is moved down the court all the way to the hoop, the real estate entrepreneur will develop the plan, guide the other members of the team, and ultimately be responsible for the success of the investment.

You are the real estate entrepreneur and you will be responsible for the success of your investment career, but the journey becomes much easier if you learn who should be on your investment team and what roles these individuals will assume.  Michael Jordan is recognized as one of the most prolific and well-respected champions ever to set foot on a basketball court.  In an interview, he once said, “Talent wins games, but teamwork and intelligence win championships.”

Every real estate investor will have different goals and will also choose different strategies to accomplish those goals.  What successful investors have in common is the ability to surround themselves with a support or investing team that is united in purpose and works toward well-defined goals and objectives.  Let’s look at 5 easy steps you can take that will help you build a successful real estate investing team.  We can call these the 5 D’s for team building success.

 

Step #1 – Decide on Your Personal Real Estate Investment Strategy

Everything starts with a well-thought out real estate strategy.  Prior to jumping in to the real estate arena, you need to decide which strategy or strategies you are going to pursue.  There are multiple strategies available for investing in real estate.  Perhaps you are most interested in finding potential rental properties and then building a portfolio of properties.  If this is your goal you will need to understand all the responsibilities that come with being a landlord.  On the other hand, you might be more interested in locating “fixer up properties” and then rehabbing them and making a profit.  It doesn’t take long and you will see that there are a number of real estate investment strategies that make sense.

Once you decide on the basic real estate strategy you are going to follow, you will need to establish some basic objectives in terms of timing.  The more specific you are when setting these preliminary objectives, the easier it will be to accomplish them.  Unless you set realistic timetables, it will become very difficult to stay focused, and if you lose focus, you will also become discouraged.

SEE ARTICLE: 6 Easy-to-follow Steps That Can Stop Disappointment from Turning into Discouragement

 

Step #2 – Define Your Team Roles

Having a basic understanding of where you want to go is important, but now you need to be more focused on what exactly it will take to make it happen.  If you are like other real estate entrepreneurs, you might be a little overwhelmed by the scope of the task and the amount of work that needs to be done.  There are properties to find, inspections to be made, appraisals to be arranged, repairs to be coordinated, financing to be secured, closings to be coordinated, and the list seems to go on and on.

If you try to do everything yourself, it’s entirely possible that you will miss your timetables and more often than not, actually fail to accomplish your goals.  Now it’s time to consider bringing in extra help and set up an investment support team.  These individuals won’t necessarily be employees, and in fact most of them won’t be.  They will probably be professionals in other fields that will help you by simply doing their regular work.

Let’s look at a few roles that these other professionals will fill.

  • Realtors and Brokers. It’s inherent that you will need to become extremely familiar with the real estate market and a good realtor or broker will help you do that.  You will need to be very open and straight forward with your realtor so that you are both on the same page.  Once the realtor knows what you are looking for, the search for the right properties becomes much easier.  It is highly recommended that you consider engaging a good “buyer’s agent” who will work on your behalf and not for the seller.  There really is a difference.

SEE ARTICLE: “5 Key Factors that Will Help You Understand the Importance of a Buyer’s Agent

  • Real Estate Attorney. A good real estate attorney will help you accomplish three main objectives.  First, your attorney will help you structure deals that work for both parties.  It is imperative that you find an attorney who understands your goals and who will work to find solutions and not just problems.  Second, your attorney can protect you from unknowingly signing a document that puts you in peril down the road. And finally, your real estate attorney can help you follow procedures that make negotiation much easier when dealing with the other parties to your transactions.
  • Financing Professional. This individual might be a loan officer or bank official.  It might also be a mortgage broker.  Not only will this member of your team be familiar with the different financing possibilities, but he or she will also be fully informed of your financing needs as well as credit problems.  The more familiar this person is with your financial requirements, the better deals you’ll be able to make.
  • Insurance Agent. You may need property insurance, rental insurance or even business liability insurance.  Insurance serves a real purpose when investing in real estate.
  • Accountant. You may think that you will only need an accountant when you develop a portfolio of investment properties, but this is just opposite of the truth.  You need an accountant on your team who can help you structure deals within your financial capabilities.
  • Title Company. A great working relationship with a quality title company will help you secure title insurance and set up closings.  When problems arise, and they will, a good title company can help solve those problems and avoid failed closings.
  • Networking Person. You may need a “bird dog” or individual who will do specific jobs for you.  This person may work on commissions or be an employee, but he or she will need to network with the remaining members of your team.

 

Step #3 – Draft Qualified Team Members

Once you have identified the key positions on your potential real estate support team, you need to find the individuals who will fill those roles.  You may start by networking with other real estate investors in your area and asking who they use for insurance, title work etc.  They will usually be happy to share that information with you when you are asking for the names of quality professionals.  They may share with you information on realtors, but remember that you are interested in finding realtors who will work FOR YOU.

You can also talk with people you personally know in banking and insurance for help in finding people who will fill those roles.  As more and more of your friends and associates know about your desire to invest in real estate, it will be easier to solicit recommendations for people or companies to become part of your support team.

Identifying the key people to fill the roles on your team is only part of the solution.  Now you need to talk to them and let them know what your investment strategy is and to show them how they will benefit by becoming part of your team.  When you succeed, other members of your team will also succeed.

You need to spend time with the potential members of your team and let them know how you are going to work with them on win/win solutions.  It’s not just about your becoming successful.  When you succeed, they succeed.

 

Step #4 – Delegate Responsibilities

Never forget that you are the leader of the team.  It’s your real estate investment strategy and it’s up to you to make things happen.  The only way you are going to accomplish this is to delegate responsibilities.  Delegation is important for efficiency.

If you assign a task to a member of your team, you need to allow them to accomplish it.  While you are establishing a team, you need to learn which members of the team take responsibility and run with it.  The only way this will happen is for you to let go and then allow the member of your team to follow thru.  This may sound like you are just stepping out of the way, but the opposite is true as long as you start with explicit instructions on what you want accomplished.

Let’s consider the idea that you are asking your realtor (who is a potential member of your team) to find the best properties that might be used for rentals in a certain geographic area.  Start by including exact requirements for the properties as far as price, number of bedrooms and baths, and proximity to good schools.  Your list of requirements could be fairly extensive, but make sure it is complete.  Now give your realtor time and see what they come up with.  You are delegating the responsibility to the realtor, now you need to step back and let them assume that responsibility.

Once you delegate a responsibility to a team member, you will need to follow thru and see that the team member accomplishes the task.

 

Step #5 – Don’t Take all the Credit

If you want the members of your team to continue to support you and work with you, you will want to show your appreciation for their efforts.  This appreciation can be expressed through both words and actions.  If you make a great deal on a real estate property and certain members of your team performed a needed role, don’t forget to share some of the rewards with them.

When you remember that you are guiding the team and performing the role of the point guard on the basketball court, it becomes much easier to recognize the contributions of the other members of your support and investment team.  If the point guard hogs the ball and fails to get the ball to the team member ready to make an easy basket, the score is never made.

Henry Ford had a dream and a vision that evolved into one of the largest and most successful companies in the country.  He understood the value of working together as a team.  He is quoted as saying, “Coming together is a beginning, keeping together is progress, working together is success.”  His view of teamwork can be the catalyst of building your successful real estate investing team in 5 easy steps.

5 Key Factors that Will Help You Understand the Importance of a Buyer’s Agent

Every new real estate investor soon comes to grip with the realization that the purchase of a property can be a daunting and sometimes complicated process.  Does everything start with the actual offer on the property?  Sadly, the answer really starts much sooner.  Before you ever purchase a property, you need to be able to determine if the property in question is the best property and if the price you are willing to pay is the best price.  Assuming that it is the right property, the price then becomes even more important.

It’s entirely possible that you have heard of a “buyer’s agent” and been a little confused.  Many new real estate investors mistakenly believe that if you automatically call the number on a listing sign, you will have an agent that will work in your behalf.  Nothing could be further from the truth.  That agent has signed a contract to work for the seller and to do everything in his or her power to represent the seller.  Nowhere in such listing contract does it say that the listing agent will work to represent the purchaser of the property.

It’s time to understand just how important a good, well-qualified, and knowledgeable buyer’s agent can be.  The term “agent” comes from the concept of “agency” which generally means an action or intervention to accomplish a certain result.  Thus, a buyer’s agent refers to the action of purchasing a property for the benefit of the buyer.  When you engage a buyer’s agent you are engaging someone who is going to work for you, negotiate for you, and stand in your best interest.

As a real estate investor, you should ask yourself if you really need a buyer’s agent.  In order to answer that question, step back a moment and ask yourself these three questions:

  • Do you want to lower the purchase price of the subject property?
  • Are you confident that you can negotiate the best purchase price possible?
  • Do you know who is representing you in the transaction?

Once you answer those questions, you will probably come to the conclusion that you might need additional help to secure the best deal.  That help can come through a well-qualified buyer’s agent.  If you are ready to become a better real estate professional who secures the best deals, you need to consider the following factors about a real estate buyer’s agent.

 

 

Key Factor #1 – Understand the Benefits of Using a Buyer’s Agent

There are major benefits a real estate investor can receive when using a knowledgeable and well qualified buyer’s agent.  The only real negatives generally appear when an investor has chosen an agent who is not knowledgeable or qualified.  With that caveat in mind, let’s look at several ways a buyer’s agent can benefit you, the purchaser of the property.

  1. Locating the best property. The first thing you need to do is to decide what type of property or real estate strategy you are going to pursue.  Are you going to search for “fix up property”, “potential rental property”, “raw land”, or some other type of property?  You need to determine exactly what type of property you are searching for.  Once you have done this, you will need to pass on this information in specific detail to your selected buyer’s agent. (Later in this article, we’ll discuss how to find and identify a good buyer’s agent.)

Your buyer’s agent needs to be able to distinguish between your wants and needs.  You should let the agent know exactly what you are trying to accomplish.  When you do this, your buyer’s agent will schedule appointments to view the properties and should be able to provide you with advance information regarding both the properties preliminarily selected along with critical facts about the neighborhoods.

  1. Negotiate the offer. This is a major benefit for you, the purchaser of the property.  The buyer’s agent will act as a third party and eliminate uncomfortable situations between yourself and the seller.  Keep in mind the fact that the listing agent of the property is contractually bound to represent the seller of the property.

The buyer’s agent can suggest appropriate starting offers and terms that might be acceptable to the seller.  In all likelihood, these terms might not be the price and terms that the listing agent is offering.  A good buyer’s agent will have researched other sales in the neighborhood and be prepared to have reasons for the price and terms you are offering.  This negotiation is generally made directly between your buyer’s agent and the listing agent.  Once the offer is accepted, the buyer’s agent can help and assist in drafting up the final closing documents.

  1. Recommend and find other real estate professionals. Depending upon the exact strategy that you will be employing, it is very possible that you might need the help of a well recommended contractor, mortgage broker, real estate attorney, appraiser, property inspector, mover, or other professional.  Your buyer’s agent should be knowledgeable about these individuals and be able to provide resources to help close and finalize the purchase of the property.  Having this information in a timely fashion will help you overcome obstacles that often appear when purchasing property.  It may be something in the home inspector’s report, be an appraisal problem, or some other setback.  When you have knowledgeable experts at hand, you are in a position overcome setbacks or obstacles that derail your investment strategy.

SEE ARTICLE: How to Convert Stumbling Blocks into Stepping Stones

 

Key Factor #2 – Understand the Difference Between a Buyer’s Agent and a Seller’s Agent

You must not believe that the buyer’s agent and the seller’s agent are one and the same.  They are not. When you use the seller’s agent (the listing agent) to negotiate on your behalf, you are positioning yourself in an untenable situation.  The buyer’s agent is working for the purchaser of the property, while the seller’s agent (the listing agent) is working for the seller.  Yes, you want to buy the property and yes, the seller wants to sell the property.  The difference is that you want to purchase the property at a price and terms that make sense for you, while the seller is trying to maximize the sales price on the same property.  In most cases, these goals are not the same.  The seller’s agent is bound by fiduciary responsibility to represent the seller, and not you.

Who do you want representing you?  Do you want the seller to know the absolute highest price you will pay before you even present the offer?  If you elect to use the seller’s listing agent to negotiate for you, you have already lost the negotiation issue.  Let’s take an example from the real world.  If you owned a rental property and your tenant was injured while repairing his motorcycle in your garage and sued you because your garage didn’t provide enough safety equipment, would you want the tenant’s lawyer representing you as well as your tenant?  I’m sure the answer would be a resounding “no”.  The same thing is true when negotiating with a seller.  You don’t want someone bound to and reporting to the seller to be representing you, the buyer.

 

Key Factor #3 – Determine How to Find a Good, or Even Great, Buyer’s Agent

Before you look for a good buyer’s agent, you must decide if you want to use one.  Once you make this decision, you must become very selective in the process.  What you don’t want to do is to choose someone who is not qualified or knowledgeable.  You want to find someone who understands the role he or she will play in the property purchase.

The first thing we recommend is that you immediately disregard the listing agent as a potential buyer’s agent.  The listing agent is legally bound and responsible to the seller of the property.  With this being the case, how can that individual represent you as a buyer’s agent?  You can be choosy when selecting the buyer’s agent.  You may receive recommendations to use your sister’s uncle or some family relative.  While it is difficult to say no to these type of recommendations, it is usually wise to do so.

What you are looking for is someone who truly understands the role of a buyer’s agent and is prepared to fulfill the responsibilities that come with this opportunity.  You can search online for “buyer’s agents” in your specific locality.  It is also possible to get recommendations from other friends who have purchased property using a buyer’s agent.  We suggest that you get several recommendations and then interview these individuals and find out how knowledgeable they are.  During the interview process, try asking these questions of each individual:

  1. Do you accept listings? If the agent does accept listings, this means that he or she is automatically working for the sellers of those properties.  Great buyer’s agents specialize in working with buyers and don’t accept listings from sellers, thus avoiding conflicts of interest.  If the agent accepts regular real estate listings, the agent is basically saying that he or she is working as a dual agent.  Does this sound like what you want?

A final note about agents who work as “dual agents”.  It is not illegal to have an agent work on your behalf as well as for the seller of the property, but when you do, you are competing against yourself.  When an agent agrees to show you a property where he or she is the listing agent, that is exactly what you are doing.  Many real estate professionals have found it more profitable to contract with a buyer’s agent and have that agent contact the listing agent.

  1. What type of properties do you specialize in? In order to increase your success in real estate, you need to find a buyer’s agent who both understands your specific real estate strategy and has had experience in finding these properties.  When your buyer’s agent has past experience, the learning curve will be shortened.
  2. What neighborhoods do you specialize in? You want to find an agent who is familiar not only with the type of property you are interested in, but, knows the area very well.  Hopefully, you will find an agent who has both the experience as a buyer’s agent, but also has experience on a personal basis.
  3. Are you working part or full-time? You need to understand from the beginning how much time the individual will have to devote to scheduling and showing you properties.  If the agent is working only part-time, ask very specific questions as to the availability he or she will have to working with you on your schedule.
  4. What references can you provide? You would be well-served to have references from other real estate purchasers who have used the agent.  You might also ask for references from other professionals like appraisers, mortgage brokers, or home inspectors.  Once you get a list of references, follow through and talk to each of them and ask their professional opinion of the agent.

 

Key Factor #4 – Understand How the Buyer’s Agent Gets Paid

The first question that often comes to mind is “Who pays the buyer’s agent?”  In most cases the fee paid to the buyer’s agent comes from the actual sale of the property.  When the property owner lists the property, he agrees to pay a real estate commission of 5 to 6 percent of the purchase price of the property.  The fee is paid through the listing broker and is generally split 50/50 between the listing broker and the buyer’s agent broker.

Most people say that the seller is paying for the buyer’s agent because the money for the buyer’s compensation comes from the sale of the property.  When you analyze the situation more closely, you recognize that the actual money comes from the payment made by the purchaser of the property to the seller.  Yes, it comes from the seller, but only after the buyer has actually paid the money to the seller.

Professional buyer’s agents have a contract they sign with you, the purchaser, of the property.  This is done when you engage the professional buyer’s agent and is called and Exclusive Buyer Agency Agreement.  The contract between yourself and the agent specifies what he or she will do on your behalf.  Before you sign such an agreement, make sure that you are satisfied with the agent.  The buyer’s agent will work for you.  You must be satisfied that he or she is just what you want.

The agreement is generally for three to six months and can be cancelled by yourself if you are not satisfied with the agent.  Many of these agreements have a clause that states you will pay a minimum amount (often $2,500) from any purchase arranged and negotiated through the buyer’s agent.  This fee comes from the listing commission paid through the seller of the property.  In the case of properties offered “For Sale By Owner”, the fee could be paid separately, or the buyer’s agent may get the seller of the property to pay the fee.

 

Key Factor #5 – Understand the Role of a Credible Professional Buyer Agent

There is an organization that is known as “The National Association of Exclusive Buyer Agents” and is known as (NAEBA).  This organization is a membership organization of buyer agents.  The organization selects agents who don’t accept listing contracts with sellers as the listing contract makes them responsible to the owner and creates an immediate conflict of interest.

You can search for the best buyer’s agents in your specific area by using a search engine and searching for the terms:

  • Real Estate Buyer’s Agents
  • Buyer’s Agents
  • Professional Buyer’s Agents

Try matching the terms with your specific locality and you will find buyer’s agents in your area.

A final word to the wise.  There are always two parties to a real estate transaction – the buyer and the seller.  As a buyer, you want the best price possible on the best property available, according to the best terms you can negotiate.  Consider strongly searching out a knowledgeable and professional buyer’s agent to accomplish your goals.

 

6 Reasons Why Wholesaling Makes Sense for Real Estate Entrepreneurs

Wholesaling real estate is commonly described as the strategy of putting a piece of property under contract with the intent to assign the contract to another buyer. This type of real estate purchase approach is generally used with distressed properties where the real estate entrepreneur doesn’t plan or fixing up or rehabbing the property.

In order to profit from this stratagem, you will need to put the property under contract at a lower price than the potential market value. In doing so, you allow the final buyer to make a profit when the property is upgraded or renovated. The key to effective and profitable wholesaling is your ability to find properties that can be purchased at below market value. We call properties in this condition distressed properties.

In almost all cases, the sellers of these properties are extremely motivated, and as such, will likely be willing to dispose of the property for a substantially reduced price. Many, if not most, of these properties require cosmetic repairs, remodeling, or substantial cleaning in order to bring the property up to full market value. Someone will have to do the upgrading or repairs, but that person is not the wholesaler.

The wholesaler finds the deal, evaluates the repairs, secures a ready buyer who is willing and capable of doing the repairs, and then sells or assigns his or her position to the end buyer. In doing so, the wholesaler can make an immediate profit from the transaction. There are no guarantees that you can make a profit when buying and selling real estate and wholesaling is no different. However, if you, as a real estate entrepreneur, follow a proven strategy, do the proper due diligence, and get the proper education, wholesaling can make a lot of sense. Let’s review six important reasons why this is true.

 

Reason #1 – Great Way to Learn and Start Real Estate Investing

Wholesaling real estate is certainly one way to profit from real estate and in order for it to work, it is essential that you are committed to real estate as an investment vehicle. It is assumed that you will incorporate the proper mindset, have a positive attitude, and be willing to learn from the experiences of others. You may be new to real estate or you may be a seasoned investor, but regardless of your personal situation, you can gain a great deal of additional knowledge about investing in real estate, negotiating with sellers, and understanding the local real estate market, when you follow the principles of wholesaling.

Real estate in every geographical area has unique characteristics. As a real estate wholesaler, you will become extremely familiar with the local market. In order to evaluate deals as to whether they make economic sense, you will need to become competent in determining market values, understanding basic repair and renovation expenses, and adapt at communicating one-on-one with sellers, brokers, and professional title companies. This may seem like daunting undertakings, but it will happen as you learn and actually start doing something.

Wholesalers also need to learn basic direct marketing techniques as they apply to real estate. These techniques include everything from drafting flyers, designing signs, and writing letters to home owners. Successful wholesaling entrepreneurs also learn to use the Internet and how to effectively use websites. All of this becomes much easier when you follow step-by-step guidance from successful mentors.

Part of your education and learning experience will come from learning how to locate the motivated sellers and distressed properties. Some real estate wholesalers start by focusing on foreclosure and pre-foreclosure properties. You can also work with existing multiple listing properties (MLS Properties) once you learn how to distinguish potential motivated sellers. Remember that you are looking for properties that can be brought under contract at under market value. There are MLS properties than can be purchased for substantial discounts, but you must learn to understand why individual owners might be extremely motivated to sell. One caveat, all of these properties are visible to everyone, which makes it more difficult to negotiate the best deals.

Don’t be discouraged if you don’t find the ideal property listed on MLS. There are lots of other ways to find and locate the distressed properties. You can start by actually driving around and looking at properties in your locality. If there are vacant houses, homes with untended yards, and properties in need of repair, these are potential wholesale properties. This market familiarization process is all part of learning about your local real estate market.

For Sale by Owner properties are also wholesale opportunities. These sellers may be willing to discount the property in order not to pay a real estate commission. Real Estate auctions are also possibilities, but you will need to secure cash in advance as almost all auctions require immediate cash payments.

Finally, you will need to take a pro-active role in finding motivated sellers. You may begin by placing signs (bandit signs), distributing flyers or using direct mail to advertise that you buy houses for cash. Part of the wholesaling strategy is to secure the property by contract and then to assign this contract to a cash buyer who will act immediately in order to purchase at below market value.

SEE ARTICLE: Building Your Credibility as a Wholesaler

It is highly recommended that you get as much education and training on wholesaling as possible. Make sure that your training is provided by reputable and experienced trainers.

 

Reason #2 – Eliminates Need for Credit and Large Personal Capital Investment

Every seller will require that the property is paid for. Motivated sellers will still need a buyer that can solve their problem with cash or financing. We can’t ignore the fact that cash will be required to purchase the property. However, you won’t need a large amount of cash to put the property under contract. Rather, you will need an earnest money deposit. The actual cash to close the sale will come from your “buyer.” This “buyer” will be the one who will actually complete the closing. You, as the wholesaler, will provide the earnest money deposit.

In addition to the fact that you won’t need a large capital investment in order to complete your end of the transaction, you won’t need to rely on your credit to secure financing. Your “buyer” will complete the transaction WITHOUT USING YOUR CREDIT.

Be aware that you must ensure that your contract to purchase the property must be assignable. Generally, all contracts can be assigned unless specified otherwise. However, you should explicitly state that your contract is assignable. Be upfront with the seller and let the seller know that you may be using a partner or other investor as part of the purchase agreement. Rather than hide the fact that you may have a partner or other investor, let the seller know that you may not be the person who actually takes title. It’s important that the seller understands that the property is being sold, not that you may not be the final name on the deed.

Greed will kill a great deal. You must allow for the seller to solve their problems, allow the “buyer” to make a profit, and earn a profit yourself. A part of something is much better than a lot of nothing. This simply means that you need to find sellers who are motivated to sell at below market value for any number of reasons, and then find a “buyer” who will step in and close the deal in order to make a profit. When you receive your wholesale training from a trained expert, pay special attention to establishing values.

Before we go further, you must learn to construct good deals that allow for realistic profits. Buyers from your buyers list will not act unless they firmly believe that they will be able to earn a profit. They need to rely upon actual numbers as to what the property will be worth after repairs and renovation, and they must have a reliable estimate as to what those repairs will cost. If you have actual numbers, you will be in a position to make a deal that works for you, the “buyer”, and the seller.

How do you find buyers who will step in and provide the cash to close the deal? You must develop a good organized buyers list. These are people who have the cash or credit to immediately act on a good deal. Great training from qualified experts can provide valuable resources. You can start with advertising for buyers with a website or craigslist. You will need to develop a professional plan. Many wholesalers join real estate investment clubs and network with other real estate entrepreneurs as a way of meeting “buyers”. Don’t forget about friends and family as potential “buyers.”

 

Reason #3 – Teaches Negotiation Techniques

Wholesaling is a person-to-person business and you will need to learn proven negotiation tactics and techniques. The more training you can receive on dealing with negotiation, the better your success will be in real estate wholesaling. In every real estate negotiation, the seller wants one thing and the buyer wants something else. Your goal as a negotiator is to find the common ground that will structure a great deal.

SEE ARTICLE: The 6 Key Elements for a Successful Real Estate Purchase Negotiation

Each time you meet with a seller or property owner you are in the process of learning how to negotiate. Everything starts with learning why the seller is selling, or if the property is not actually for sale yet, why would the owner consider selling. Is the property in foreclosure or does the seller have some immediate cash requirement? There may be any number of reasons why the property is available, but you need to know the most important ones. The more you know, the more money you might make.

As you gain experience talking to sellers, to “buyers”, and to other investors, you will gain confidence – both in what to say and what not to say. It’s important to allow all parties in a real estate negotiation to come out ahead. The moment you become to self-centered or greedy, the deal will vanish. J. Paul Getty once said, “You must never try to make all the money that’s in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won’t have many deals.” As you learn to follow this advice, your personal confidence will naturally improve.

The negotiation process is all part of understanding why the seller is selling. Once you know what the seller’s true objectives are – the sooner you can find a way to solve them. As you learn to become a problem solver, you will quickly become a better negotiator.

 

Reason #4 – Entrepreneur Can Build a Powerful Success Team

Every successful real estate wholesaler learns that success comes with having a powerful support team. This team may help in determining renovation costs, establishing true market values, providing legal advice, structuring proper and successful closings, and building a list of “buyers.” You may want to do all of this yourself, but it just won’t work. You will need the help of others, and wholesaling will help you build a powerful support and success team.

A success team will communicate with each other and provide accurate information. Each member of your team will support and contribute towards an eventual success. Because every deal relies heavily on establishing a final market value of the property, you will want to find an appraiser who is credible and experienced. The appraiser can assist you in not only establishing a present value, but an after-repair value as well.

It’s critical to be upfront with the title company when completing any wholesale transaction. You will need to work with a title company that understands what you are doing, how you are structuring the deal, and how the assignment of contract (or double closing) will work. The title officer must know what to say when setting up the closing and working with all the parties – seller, “buyer”, and yourself.

You will also need to work with contractors and cleaners. You may not actually do the contracting work, but you must know actual costs to finish the work. In most cases, you may need to do some cleaning and initial work to present the deal to your buyer. Actual realistic estimates and bids will help tremendously in your negotiations with your “buyer.”

Finally, you will need to establish a great buyers list. This will be your stable of money people who will be anxious to step in and make a profit from your work in structuring the deal. If you learn to structure win/win deals where both you and the “buyer” make money, you can soon have a list of people waiting to work deals with you.

 

Reason #5 – Can Reduce Risks

It’s already been established that we don’t have to have a large cash investment in order to effectively do real estate wholesaling. When you eliminate the need for a substantial cash investment, you automatically reduce your risk of personal financial problems. When you have to generate a huge cash investment, you oftentimes borrow excessively or create other financial problems. Wholesaling can eliminate this problem and risk.

Another risk we eliminate by wholesaling is the risk of damaging your credit. Your credit rating is valuable and every time you take on additional debt by borrowing, you are raising your risk. A major benefit of wholesaling is the ability to structure a deal without borrowing money.

If you were to rehab the property yourself, you are susceptible to the risk associated with cost overruns and excess expenses. Because you have assigned the contract to another party (the buyer), this risk is also eliminated.

 

Reason #6 – Can Create an Immediate Positive Cash Flow

We all want a positive cash flow, and most of us want that cash flow to start immediately. When you learn to wholesale real estate and have an organized list of buyers ready to step in and complete a win/win deal, cash flow can start right away. You are assigning the right and obligation to purchase the property, and this automatically allows you to make a profit when the assignment takes place.

The property owner or seller also can benefit from a quick closing of the property itself, which generally solves the problem the seller had with the property.

Real Estate wholesaling is a proven strategy that can benefit the seller by providing immediate cash for the property from the “buyer.” It is also a great way to make a profit when you structure a win/win deal. There are motivated sellers with distressed properties who actually need your help, there are “buyers” looking to make a profit, and you can succeed by structuring great deals. The best way to make all this happen is to find a credible and qualified mentor or trainer who will guide you step-by-step in making real estate wholesaling a viable strategy.

Investment Opportunities in Vero Beach, Florida

Having just finished a two day one-on-one training in Vero Beach, Florida, I discovered some great investment opportunities.  These opportunities will present themselves in many areas across the United States and throughout the world.  The common factor being an explosive market in a high-end neighborhood.  Vero Beach is unique in that it is located near the Atlantic Ocean and sits between the ocean and inlet bays and canals which create the ability to have docks in one’s backyard with water access to the ocean.  There are many smaller older homes in the neighbor with exceptional potential to be torn down and rebuilt into new larger estate homes.  Many retail buyers with the necessary means are looking for a location on the water but do not want a tiny old home, nor do they want to be involved in a major remodel.  What they want is a brand new modernly built home of reasonable size with all the updated amenities on a property in the right location.  The opportunity for an investor is that the difference in price of a small outdated home and a new undated home is staggering; as much as $500,000 to a million more in price, making it very profitable to add a new roof or second story and upgrade all the finishes or even to demolish the existing home and build a new structure from the ground up.

The typical older home in the Vero Beach area costs between $400,000 to $800,000 depending on whether it is located on the water and a newly built home goes from $800,000 to 2 or 4 million depending on its size, location and view.  The building costs in the area are between 200 and 240 per square foot and the resale price can be as high as 650 per square foot, leaving plenty of room for buying the property, demolishing the house and building a new structure.  Here is an example of a typical project:

Purchase an existing older small home on a Bayfront property with dock for $650,000 to $800,000.  Demolish the home for $25,000 and rebuild a new 4500 square foot structure at $220 per square foot for $990,000.  Then resale the home for $2.9 million.

Price of home:                                                    $2,900,000.00

Land cost:                                                – $800,000.00

Cost to build home:                                   -$990,000.00

Demolition cost:                                        – $25,000.00

Realtor fee (5%):                                      – $145,000.00

Closing and holding cost (5%)                   – $145,000.00

Financing for construction loan:                  – $60,000.00

 

Profit:                                                        $735,000.00

 

The initial investment with be to buy the house with cash and pay buyers closing cost. The building can be financed with a construction loan, including the demolition cost.  Everything else with be paid from the proceeds of the sale of the property.

Return on Investment is the profit of:                 $735,000.00

Divided by the initial investment of:                   $840,000.00

NOI equals:                                                       88%

 

Not a bad return for a 10-12 month project.

7 Elements of a Great Work Ethic for New Real Estate Investors

New real estate investors quickly learn that investing in real estate is far from easy.  Success is possible, but it is almost totally dependent upon the ability of the investor being able to acquire a strong work ethic.  The term “work ethic” is commonly described as having a belief that hard work and diligence have a moral benefit and demonstrate a high value in strengthening character.

Your ability in developing a great work ethic will ultimately determine the degree of success you obtain in real estate investing.  Regardless of whether you decide to invest in rental properties or determine to find good fix up properties and flip them for a profit, the work ethic you demonstrate to buyers, sellers, or other investors can be paramount in reaching your real estate goals.  This being the case, let’s examine 7 specific elements of a great work ethic and apply these elements to real estate investing in the economy of today.

 

Element #1 – Taking Responsibility for the Work from Start to Finish

Once you determine which specific strategy you are going to follow in your real estate investment endeavor, you must assume the role of principal leader.  Yes, you may have partners and investors that are part of your team, but you are responsible for your actions and for the work of your team.  You may hire competent individuals to assist you in finding properties, performing fix up and repairs, appraising, doing inspections and a myriad of other tasks, but it is still your responsibility to ensure that the work is done and done correctly.  You can’t assume that other individuals are doing what you asked them to do unless you check on them and review what they do.

As the responsible party, you must always be aware of what the other members of your investment team are doing.  When we talk about being responsible from start to finish, we are indicating that we won’t blame others when something doesn’t go as planned.  If you have hired a contractor to repair a sidewalk and you don’t give exact instructions on how the work is completed, and then you aren’t satisfied with the end result, don’t blame the contractor.  You must be involved and give specific instructions if you want specific results.  When you blame others when you haven’t given adequate and detailed previous instructions, you are showing the world that you have the exact opposite of a good work ethic.

Responsibility is often referred to as the state or fact of having the duty to deal with something or having control over someone.  This control doesn’t imply that you are mean or belligerent to others, but rather, that you are the final decision maker and the one who bears the blame or the rewards for the results that occur.  When you fully assume the role of responsible party, you are accepting the consequences of your actions and decisions.  However, with responsibility comes the ability to take action and direct changes when circumstances dictate.

In order to make changes, you must learn all you can about the real estate strategy you are going to follow.  The more you know, the better equipped you will be in directing others toward joint real estate goals.  As you develop the ability to assume the mantle of responsible leader, your real estate success can and should also increase.

 

Element #2 – Demonstrating Honesty in all Areas of Your Investment Strategy

Honesty means much more than just returning borrowed tools from your neighbor.  A truly honest person is recognized as being honest in all areas of his or her life.  If you aspire to be an honest person, you must first understand what honesty is in business, and specifically in real estate investing.  Honesty is basically defined as the straightforwardness of conduct along with the absence of lying, deceit, cheating, theft and the list can go on indefinitely.

A truly honest individual will always be trustworthy, loyal, sincere, and fair.  When you apply these traits in investing in real estate you quickly realize that you aren’t going to deceive another party.  When you are selling a property, you are not going to hide obvious defects in the property, nor are you going to say things that are not true.  Your ability to state the facts as you know and understand them will help you acquire properties that pay both short and long-term dividends.

Some new real estate investors may be tempted to overstate figures and facts, and when this happens, failure is soon right around the corner.  Always be truthful in your disclosures and in your goals and objectives.  When you do this, you will find that people trust you and will behave as you would want them to.

It’s been said that honest people don’t hide their deeds.  In real estate you can expect people to trust you if you do what you say you are going to do.  This level of trust then becomes reciprocal.  James Altucher once said, “Honesty is the fastest way to prevent a mistake into a failure.”  Almost all real estate investors make some kind of mistakes.  When it happens, own up to your mistakes and be honest with other people who may be involved.  When you do this, you are almost always rewarded in the future with respect from others who cherish your ability to be honest and straightforward.  If you make appointments and are running late, be honest and let the other people involved know of your delays.  The more honest you are with others, the greater respect you will receive, and this respect will directly affect your ability to achieve success.

 

Element #3 – Displaying Self-Discipline in Your Investment Strategy

Naturally, you must have learned and adopted a specific investment strategy before you can begin the process of being disciplined in following it. If you are interested in finding great rental properties, you must spend the time learning what are the attributes of such properties. There is a difference between short and long-term rentals, and you must first understand what these differences are.  Some rental properties are geared toward young families, while other properties are much more suited towards larger families.

Disciple means that you are willing to spend the time and effort in following through with your goals and aspirations.  Applying this to finding the right rental properties means that you will spend your time and efforts becoming more knowledgeable about market conditions and properties.  Being disciplined means that you have the strength to withstand hardships and setbacks as they occur.  And they will occur at one time or another in your real estate investment career.  Perhaps you will have a deal that doesn’t go happen as planned.  When this unfortunate event occurs, what will you do?  Will you give up or will you evaluate your mistakes and move forward?  You must have the fortitude to overcome setbacks and see them as stepping stones.

SEE ARTICLE: “How to Convert Stumbling Blocks into Stepping Stones.”

This ability to master self-discipline is best achieved by adopting clear goals and following simple steps.  In other words, develop an execution plan.  Know in advance what you will do in unexpected circumstances.  Planning for the unexpected prevents unexpected results. The more time you take in following pre-planned strategies, the better your short and long-term results will be.

Self-discipline has been defined as “the ability to control one’s feelings and overcome one’s weaknesses, or the ability to pursue what one thinks is right despite temptations to abandon it.”  In real estate investing this temptation to abandon a strategy is far too common.  Oftentimes investors become tempted to give up because of the amount of time and effort required to achieve tangible results.  When you are discouraged because you haven’t found the right property for the right price, hang in there and put in the extra effort required to achieve the results you are looking for.  As you learn to control your feelings and move forward when discouragement happens, you will develop more and more self-discipline.  When this happens, you will become more successful in your investment strategies.

 

Element #4 – Being Respectful to all Your Associates

Respect is something earned and not given, and when you learn to show respect to others, you will earn respect in return.  This is especially true when you are developing a real estate investment team.  How you deal with the people you come in contact with will directly impact how successful you will become in real estate.  These one-on-one contacts include interactions with real estate agents, property owners, buyers, and real estate professionals.  As you interact with these individuals, you should always show them respect through your words and actions.  This respect is demonstrated by the regard you give to others’ feelings, wishes, and beliefs.  The first time you show disrespect by disregarding the feelings and beliefs of others, will be the first real estate failure you encounter.

Some of the simplest ways of showing respect to others are through easily learned skills.  Start by learning to listen to what is being said.  This is more than just staying quiet while words come out.  True listening implies empathy towards the other individual.  The words “silent” and “listen” have the same letters, but have totally different meanings.  When you truly listen to another individual you are trying to understand what the person is feeling and implying, not just the words.  As you develop this skill, you will develop the ability to receive and interpret messages.

Consider meeting with a seller and asking him why he is selling the property.  You may be tempted to just listen for the price, but there should be much more.  You need to understand the reasons for the sale.  When you do this, you will make a better deal and will also show respect to the seller by listening to the reasons for the sale of the property.  You could also encourage the other person to reveal more and more information.

The more encouragement you offer someone else in revealing information, the more respect you are showing.  As you learn to do this, you will also develop better one-on-one relationships.  Encouragement implies giving support, confidence, and hope.  Once the other individual feels this level of support, the better he or she will feel about you as a person and a potential partner of some kind.

 

Element #5 – Showing Professionalism in Your Actions

Professionalism is a word used far too often and far too often misunderstood.  By definition the word implies confidence and skill.  And, yes, you do want to be a professional in your real estate investment endeavors.  How then do you develop and demonstrate confidence and skill as a “NEW” real estate investor?  Since you are new in the real estate investing world, confidence may still be lacking.  However, you still have certain skills.  Perhaps you have developed the ability to speak clearly.  If this is the case, demonstrate it.  Do a self-analysis and determine areas where you have skills and demonstrate and use these skills.  How you dress can also demonstrate professionalism.  If you are looking for investment partners, dress appropriately.  It’s often been said that how you dress impacts what you achieve, and this can certainly be true in real estate.

Professionals do what they say they are going to do.  If you want to be perceived as a professional, you must do the same thing.  If you set an appointment for a certain time, then keep it.  If you say you are going to show the seller of a property financial information that explains how you are going to pay for the property, then do it.  If you tell a potential buyer of a property that you will show where there was a leak in the roof, then show it.  Simply stated, do what you say you are going to do.

 

Element #6 – Exhibiting Teamwork when Developing a Real Estate Team

It is extremely doubtful that you will achieve success in real estate all by yourself.  You will undoubtedly need a team of some kind.  You may involve friends and family as investors. These could be silent or public partners.  Maybe you will include real estate agents and attorneys as part of the team.  Additionally, you may want to have a good financial partner as part of the team.  In a short period of time, your team could include many individual people who have different skills and talents.  How you develop that team will be crucial to the success of your real estate adventure.

Having the team is important, but how you operate the team is much more critical.  This is what we call teamwork.  The definition of teamwork is the combined action of a group of people, especially when effective and efficient.  Your real estate team must be both effective and efficient.  The failure of the team to exhibit this quality is the best definition of ineffective teamwork.

Teamwork implies a common goal achieved by collective efforts.  It is imperative that your team work together.  The only way this happens is when you lead it effectively.  This starts when you make teamwork a priority and reward the efforts of both the individuals and the team.  Your goals and the team goals must be one and the same.  When you are working together, you will achieve success.

Two qualities that are very important are trust and communication between team members.  If you are searching for the right rental property and are using a buyers agent, then you must communicate with the agent exactly what type of property you are searching for, and then trust the agent to locate potential properties that fit your criteria.  Ken Blanchard once said, “None of us is as smart as all of us.” This is certainly true when developing a team that works together in real estate.  When you rely solely on your own decisions, you are eliminating the power of teamwork.

 

Element #7 – Taking Pride in the Quality of Work

Work is the foundation of success in real estate.  Work is what fuels the engine that drives you toward your goals and aspirations.  As you complete goals, you should take pride in your accomplishments.  Others will see what you accomplish and value your efforts.  When you take pride in doing good work and accomplishing your goals, you are exhibiting the benefits of a great work ethic.  It’s only when you value what you do that you’ll be able to do what you dream of doing.  Learn to enjoy every facet of your real estate journey.  When your work becomes joy, your work ethic will increase.  Pride in the quality of your work is the deep pleasure or satisfaction that comes from accomplishing goals and achievements.  The key is the word “quality”.  Only when we meet our expectations can we truly say that we have achieved quality.

A great work ethic is something every real estate entrepreneur should desire.  When you develop these seven elements, the goal of a truly great work ethic is now attainable.

Cash Flow in an Up and Down Economy

Cash flow: for some it is the thing they can never figure out; for others it flows like well water.

How do you set up cash flow? How do you keep cash flow coming in? What properties can bring in cash flow?  Cash flow can be set up through single-family homes, multiple unit properties and commercial properties. The focus for this article is on commercial property storage units.

Storage unit facilities come in varying sizes and layouts, from a small, single row of units to a multi-acre facility that has indoor and outdoor storage capabilities.

Storage units are able to survive in high and low economic times because of people’s need to acquire “stuff.”  In good times, people need a place to store the extra stuff they have. In lean times, downsizing happens so people store the stuff they cannot part with.  As a storage facility owner this is all great news, along with the fact that I will not need to unclog any toilets or worry about the eviction process.  If someone does not pay for their storage unit, the unit will be locked and the unit owner will typically be given a 30 to 45 day notice. After that the unit will be put up for auction.  At the auction, the unit will be opened and people can look, but not go in the unit itself. The unit goes to the highest bidder. Typically the unit needs to be emptied by the end of the business day.

Now, when evaluating cash flow from existing storage units, there are multiple considerations to make:

-What is the current occupancy rate? How do the prices compare to close by competition?

-What is the mix of size of units in the area? How many units are available in competing facilities?

-What type of storage is being offered: outside, RV, inside, climate controlled, small vehicle?

-Are there mixed-use facilities in the area: car wash attached, mobile home or RV park adjacent, vehicle rental facility or moving supply store?

-How long has the facility been in operation?

-How close are the nearest competitors?

This is a short list of things to check on a cash flowing commercial property, specifically a storage facility. As with any type of commercial property in a city, we want to make sure the city is still happy to have the facility operating within city limits. Talk to the planning and zoning commission to find out what the city’s 5-year plan is and how they see your facility playing into it.

I have seen facilities that went back and forth with the city for five years on what was needed and how the facility should look before the building was approved —it took four phases. But because planning was completed before the second phase of development, the facility was fully rented during phase one.  Understanding what your objective with your property is for the next five years will help you plan ahead and help your cash flow, even in a down market.

3 Ways Entrepreneurs Can Use Crowdfunding

Whether you’re just starting a business plan or you’re already coming up with new ideas to grow your business, financial instability may always be a struggle. It’s not every day that you get support from people around you, especially if money is involved. Great ideas can go unheard or unfulfilled for many reasons, which is why you many need to look for other sources for your funds. Some businesses look for investors to sit on their board of directors and invest in their company, some look into banks or lenders to acquire a loan for their funding, and others look into crowdfunding.

Crowdfunding is the process of sharing your business/project ideas to the public with the goal of getting some support. You discuss your idea with people who could possibly be interested and willing to give small dollar contributions. The more people you get to believe in your project, the more support you get and the larger amount of money you raise.

This can be done in various ways. One of which is through rewards. You market your business idea online and offer rewards to your backers in return. The rewards can come in various shapes and sizes. They can include a personalized gift, a certificate, or any material memorabilia. Or, they can also come in the form of discount coupons, bragging rights, and such.

Crowdfunding can also be done based on equity. It’s quite similar to investments but it has a unique set of rules and terms. Backers can be offered equity stake in your business in exchange for the amount that they will give to your business as support. And, like many other investors, they would expect this investment to grow over time with the business. Or, it can be lending-based where backers lend the funds to put your business ideas into fulfillment but they expect the exact amount of the investment in return after a certain period of time.

These are only some of many ways crowdfunding can be practiced to help you collect funding for your business ideas. As long as your ideas are worthy and feasible, you’ll never lose support.

Creative Ways of Financing Your Business Project

Creative Ways of Financing Your Business Project

Getting a business off the ground costs approximately $2,000 up to $5,000 for home franchises and $3,000 for micro-businesses, according to Business News Daily. True to the words of Sol Luckman, “It takes money to make money.” The sad reality is that despite having brilliant billion-dollar business ideas and all the data in your favor, sourcing finance to start or finish projects can be quite taxing, especially for emerging entrepreneurs with little-to-no credibility. For this reason, budding entrepreneurs should take a minute to understand the changes in business funding over the last decade and come up with creative ways of securing the money bags for their business projects.

Social Media Marketing

In a world where people look to social media platforms like Facebook, Instagram, Snapchat, and Twitter for advice on how to eat, drink, live, dress and act, social media marketing can be instrumental in securing funding for business projects. How so? Well, for starters, marketing on social media platforms enable you to reach investors from the large pool of 2.77 billion Internet users in the world. Advancing your business via social media can also be done through influencer marketing. This is where you pay or partner with an influencer who has a huge following to post about your products or services and why people should invest in or buy them.

Going live and posting videos on your social media feeds is another way to help secure funding. Doing so creates awareness about your project, grows a fan base and promotes brand loyalty thanks to the fact that visual content is shared 40 times more than written or audio content. This fan base could help support you financially. Additionally, once investors see a huge number of people like and re-share your content, they will be more than eager to finance your project.

Participating In Saving Challenges

Saving is one of the best ways to create a fund pool for starting, expanding or finishing any business project. This is because it comes with zero baggage, seizure threats or debt.  Participating in any of the many saving challenges on the Internet is a fast, guaranteed way to source finances for your business idea over a defined period of time, say 52 weeks. These challenges state the time duration and the amount of money you will raise over the stated time. It is then up to you to find ways to source the money to deposit weekly, biweekly or monthly depending on the challenge. This could be through formal employment, side hustles or hiring out one’s talents and skills.

Approaching Angel Investors

Getting access to a good investor in this Internet age has become simpler. Getting them to invest in your project, therein lies the rub, as they are bombarded with constant requests. Social proof, a well-planned out business strategy, and specific objectives on how you’ll get your project finished are things that will give you an edge over all other applicants. Additionally, you want to look for an angel investor in your field. Having an angel investor who has succeeded in the same field as yours means they are in a position to connect you with all the power players in the field from suppliers to manufacturers and authority contacts. They also have invaluable insights on what might or might not work and you will, therefore, have your work cut out for you.

Sometimes, traditional methods of sourcing funds like bank loans, peer-to-peer lending, venture capital, grants and crowdfunding fail. During such times, think of out-of-the-box ideas to generate the money needed to complete your project. Social media, angel investors and saving challenges are a great place to start.

 

6 Easy-to-Follow Steps that Can Stop Disappointment from Turning into Deathly Discouragement for the Beginning Real Estate Investor

6 Easy-to-Follow Steps that Can Stop Disappointment from Turning into Deathly Discouragement for the Beginning Real Estate Investor

When you first start any new activity, it is entirely possible that you will experience pitfalls, set backs and even disappointments.  This is almost inevitable for most new real estate investors as they attempt to duplicate the success of others.  However, long-term discouragement that can cripple your investment efforts need not be the final result of real estate expectations that don’t come to pass as planned.

The words “disappointment” and “discouragement” may sound alike, but that is certainly not the case.  Disappointment comes from unfulfilled or broken expectations and is generally a short-term effect.  Discouragement, on the other hand, happens when you can no longer see the light at the end of the tunnel or when you abandon hope.  As a new real estate investor, you are setting out on a path toward success, and success is a continual process.  As you progress towards your goals and objectives, you will encounter both small and large things that may disappoint you and possibly lead towards discouragement.  Our goal is to learn from these disappointments and avoid discouragement.

Let’s suppose that you have decided to go into the business of finding good properties that can be used as rentals.  You have read and studied about the requirements for such properties and decide to find your first rental property.  After reviewing advertisements and using your spare time to drive and survey the area in which you want to invest, you notice a For Sale sign on a property with the number of the listing agent.  You note down the number and make a call to see the property.  After meeting with the listing agent, you are convinced that this is “the right property.”  You have studied how to fill out an offer to purchase, but you elect to have the agent you met at the property help you fill out the offer.  As you are making the offer, the listing agent says there is another offer on the property and maybe you can outbid them.  Before long, you have gone through a couple of different counter offers and you were outbid.  You lost the property and are extremely disappointed, but should you be?

Ask yourself, “What went wrong?  What could you have done differently?”  Now is the time to become proactive and change those things you can control.  The real question is, “How do you change your attitude and what specific strategy can you take to ensure that a simple disappointment, like a rejected offer or a lost property, doesn’t lead to long-term discouragement that can bring death to your new real estate investing business?”  Let’s examine a simple strategy of six steps that can make all the difference in the world.

Step #1 – Identify What Went Wrong

This identification process contains three individual elements: review, describe, and record.  Unless you can identify exactly why something happened that lead to disappointment, you will never be able to make the changes necessary to stop disappointment from happening again and again.

  1. Review exactly what happened. Before you can understand how to solve any problem, you must know exactly what the problem is and how it happened.  As a new real estate investor, you must know what strategy you are following.  There is a difference in finding a property that works as a fix up property and one that might be ideal for a rental.  You must also be acutely aware of why the problem occurred.  Why were there multiple offers on the property?  Did you wait too long or did you fail to follow a proven strategy in locating the property?
  2. Describe in detail the problem that occurred. In our example of being outbid because of multiple offers, there were multiple reasons why you may have lost the property.  Let’s start by examining what happened when you first saw the property.  You immediately called the listing agent and made an appointment to see the property.  What’s wrong here?

The listing agent is not your friend and he or she certainly doesn’t represent you.  By law, the listing agent is representing the seller and will do all in his power to get the very highest price possible for the seller.  Because the agent is representing the other party in the transaction, you have no control in the negotiation process.  In effect you were bidding against yourself.  Finally, the price you might have paid for the property was probably too high.  If you are forced into paying more than the current market price for the property, you are already in a losing position.

As you are doing an analysis of why a problem occurred, make sure that you are realistic in that review.  Don’t hide behind sayings like, “It was not my fault.”  The truth of the matter is that it might have been your fault from the time you decided to look at the property.

Record your findings.  It’s true that we can learn from our mistakes, but unfortunately, we often hide or forget those mistakes.  When you actually write down what happened and why it took place, you have something you can refer to.  I like to call these mistakes “min failures.”  They are not major failures because you can correct them.  Dale Carnegie is recognized as a foremost authority on self-improvement.  He once said, “Develop success from failures.  Discouragement and failure are two of the stepping stones to success.”  There is real value in recording these mini failures.  You can use this record to create an ongoing learning experience because identification of a problem truly is the first step in this all-important strategy.

Step #2 – Describe Corrective Behavior

Understanding what went wrong is important, but if you can’t correct the mistake, it will surely happen again.  When it does, you are on the road to long-term discouragement.  Identifying the problem should allow you to come up with possible solutions to the specific problem.  These are the corrective steps you can take to get past the disappointment and avoid long-term discouragement.

Let’s go back to our earlier example of losing a property to a higher bid.  What corrective steps could you take if you were to start over again?  In essence that is what you are going to want to do – start over again and find another, and perhaps better property.  In your journal or record, open up your mind and explore all the different ideas.  First of all, you are going to want to ensure that you have an agent who is going to work for you and not for the seller of the property.  Second, did you spend enough time finding the right property?  What could you have done differently?  Take the time and try and come up with multiple ideas and explain why each one might have been a better solution.  Be specific and give the reasons behind the choices.

What you are doing is moving from a reactive situation to a proactive one.  Just by doing this, you will become more positive, but even more importantly, you will become more realistic.  Writing it down will help you remember what to do when the time comes.

Step #3 – Change Your Mindset

Simply by following the first two steps of this strategy, you are becoming a more positive person.  You are in effect starting to change your mindset.  When you adapt your thinking in a more positive manner, you are moving to a positive mindset.  When you have a positive mindset, you are able to control what happens around you.

The first thing you want to control is the environment in which you live.  Don’t become a negative person who wallows in self-defeating thoughts and actions.  If there is anything around you that influences you in a negative manner, you need to get rid of it.  That may mean that you need new friends and associates.  Negative thoughts feed on other negative thoughts.  Anything you can do to rid yourself of these negative influences will benefit you.  Willie Nelson, the country singer, once said, “Once you replace negative thoughts with positive ones, you’ll start having positive results.”  He may not have been the greatest philosopher, but he certainly had wisdom when he left that thought.

Once you start thinking in a positive manner, you will be able to see clearly in the fog of depression that often accompanies disappointment.  In a short period of time you will be able to have a positive mindset.  When this happens, you will begin to express the traits of a new positive mindset:

  • Optimism. You will have the willingness to make an effort in your real estate strategies and to take a chance instead of assuming your efforts will fail.
  • Acceptance. Soon you will acknowledge that everything doesn’t turn out exactly as you thought it might.  This allows you to step back and then move ahead in life and in your real estate strategies.
  • Resilience. You will have the ability to get back up when things in your real estate adventure seem to knock you down.  When you meet stumbling blocks, you will smile and realize that next time things will go better.
  • Gratitude. You will appreciate the opportunities you are given and be thankful for learning from them.

The important thing to remember when adopting this positive mindset is that you should never “go it alone.”  Loneliness is the enemy of a positive mindset.  The last thing you want to do when meeting a disappointment is to separate from the world and believe you are alone.  Find friends and associates who are willing to build you up and support you in those times of mini failures.  Consider working with other real estate entrepreneurs and possibly coaches and mentors.  If you have the opportunity to attend live training events with other real estate entrepreneurs like yourself, do so.  It is a great way to create friendships with positive minded people.  It is also an opportunity to learn real estate investment strategies from experts who have gone through similar disappointments.

Step #4 – Explore Your Options

Now that you have recorded your alternative options and begun to think in a more positive manner, you are ready to change outcomes.  It’s time to control what is going to happen in the future.  The old saying “If you get thrown from a horse, get up and get back on” is true in the field of real estate investing.  You may need help getting back on the horse, but the ride will be worth it.

Once again, you must be realistic in why your disappointment occurred.  As you come to grips with why you were disappointed, you may have the tendency to move toward discouragement with real estate.  This is a negative thought and should not be part of your new positive mindset.  However, if you find yourself in this situation, consider asking for help.  Start by using all available educational options that discuss and explain your specific real estate strategy.  If you were going to invest in rental properties, make sure you understand all you can about how to find, fund, and purchase the right properties.  Continue your studies to find out everything you can about landlord experiences.

If at all possible talk, to other investors like yourself.  Spend the effort to meet with professionals who can guide and mentor you.  Once you decide to engage a professional mentor or coach, make sure that they have both the experience and the knowledge to help you on your journey to success.

Now, go ahead and make concrete goals and objectives for moving ahead in your real estate adventure.  Be specific with timetables and exact objectives.  If you are going to engage a buyer’s agent, write down exactly how you are going to find the right agent in your area.  Whatever the task, write down how you will go about completing it.  Every option or goal should have a specific action step involved.  The very act of describing future behavior ensures that positive results can occur.

Step #5 – Focus Your Behavior Through Personal Action

Your initiative will create positive results.  It really is up to you to move the ball forward and to ensure that your real estate goals are achieved.  Up to this point, you have identified the problem and found corrective options, but now it’s time to actually make some changes.  It’s time to complete your goals through personal action.

There are specific reasons why direct personal action is crucial to your success when starting to invest in real estate.

  1. Action activates information. You can gain all the knowledge imaginable from multiple sources, but the knowledge will remain silent and without meaning until it is activated by action.  Only when you personally take action will the knowledge be changed into results.  Only through direct action can real estate knowledge come to life.  This is especially true when solving real estate investment disappointments.
  2. Action helps eliminate techniques that don’t work. Your time is valuable and you must be able to focus on things that work.  Trial and error is only valuable in real estate if you take action and do something.  Yes, there are times that things don’t work, but unless you take action and try, you will never know.
  3. Action create positive habits. The strategy of eliminating discouragement in real estate is a process and that process is based upon developing positive habits, and these habits can only be developed when action is involved.
  4. Action builds self-worth. As you accomplish anything in life, your confidence grows.  When investing in real estate, this new confidence helps you move forward, while at the same time it creates a value in your accomplishments.  Success is built upon action and personal real estate success is built upon personal action.

Step #6 – Understand the Past, But Always Move Forward

Disappointments should be the key to learning, not the foundation of failure.  You must be aware of exactly what went wrong, but once you determine the cause, don’t dwell on past outcomes.  Your goal is to live both in the present and to move toward the future, not to continue to worry about events in the past.  Now it’s time to focus on learning how to improve your real estate success by eliminating the causes of those setbacks.

Be specific about making changes.  It’s not enough to say “I’ll do it differently next time.”  Rather, you need to be able to say exactly HOW it will be different.  Recommit to taking positive action.  Make your goals realistic and then publish them and let others know what you are doing to change your life.  When you tell others about your future goals, this will give you the incentive to take positive action.  Perhaps even more importantly, you won’t want to disappoint your family and friends.

As you start to have success, reward yourself with each small achievement.  You’ve done the work, now it’s time to start collecting the rewards.  If you find a property below market value that fits your investment criteria, that is a success, even if you personally don’t purchase it.  Go ahead and treat yourself to something as it is a step in the right direction.  Even better, reward yourself by making an offer on the property (through your personal buyer’s agent).

Above all else, eliminate emotion from your investment decisions.  Never believe that you “must have” any property.  Such a belief will lead to more discouragement than anything else.  When emotion in real estate is eliminated from the equation, answers will always make more sense – and yes “CENTS.”

Don’t let disappointment turn into discouragement that can destroy your real estate future.  Try this strategy of six simple steps and eliminate discouragement from your investment outlook.  Real estate investing can become a vehicle for financial success but achieving that success will be a process.  When you learn from your disappointments and leave discouragement behind, that process can truly be the key to your future.

There is NEVER a Bad Time to be a Real Estate Investor

There is NEVER a Bad Time to be a Real Estate Investor

I had the privilege of beginning my investing career working with the Father of Creative Real Estate, Dr. A.D. Kessler.  Dr. Kessler had the wisdom of over five decades as a real estate investor and had seen several cycles of real estate ups and downs.  One of my favorite lessons from Dr. Kessler is: “Fortunes have been made in real estate investing in good times, bad times, and in-between times.  There is NEVER a bad time to be a real estate investor.”

After adding my 21 years of real estate investing to Dr. Kessler’s vast experience, I have realized that he was correct in this statement.  And now as I work with many other investors, it is my opportunity to remind you that investing works best when you add a long-term perspective to the short-term one.

What goes up must come down, and what goes down must come up.  These are the cycles in the real estate market, and no matter what the brilliant financiers and masterminds behind the Fed’s manipulation of interest rates may do, these cycles are still going to play out.  The “crash” in 2008 was going to happen with or without the issues of subprime or dishonest hedge funds. It may have happened with a little different timing, or a little more gradually, but it was the result of prices rising beyond the ability of many buyers to purchase properties.  And when it bottomed out, a reversal needed to occur because too much money was sitting dormant—it was “burning a hole” in people’s pockets.

I have the opportunity of speaking with numerous investors every day.  Many are new to the process and concerned because the current market is moving rapidly. Prices are going up, and there are housing shortages in many areas around the country.  This is what is called a “seller’s market.”  These investors are concerned because it is more difficult to make deals on properties at low investor prices.  For them, they are having a bad time in real estate investing.  It is harder to get good deals.   The funny thing is that if it was a buyer’s market it would be easy to get the deals, but it would be harder to sell the properties at a good profit.  Gosh, it starts to sound like you can never have the ideal market.

My perspective learned primarily from Dr. Kessler is that it’s always a good time to be a real estate investor, and we just need to learn how to work with things as they are.  The secret to success in a seller’s market is to become a Master of Marketing to find properties. Every business understands that they need to do marketing to find customers—the life blood of business.  In real estate, our marketing is to find properties, and to find people who want properties.  And the savvy real estate entrepreneur recognizes that they need to put together a diversified and effective marketing plan to find these properties and buyers.  In a seller’s market, it is easier to find buyers than properties, so we need to create a successful marketing plan to find properties.

Unfortunately, many new investors think they can simply line up a real estate agent, let them do all the work and go home and watch “Dancing with the Stars” and wait for the properties to roll in.  Well that will get you what most investors are getting—very little.  That isn’t a marketing plan, and every business in the country would fail if they only had one way to generate customers.

I’ve had the opportunity to work with some of the most successful investors in the country—the ones who write the books and have the television programs.  I’ve helped edit their books, and even been on their tv programs.  So I also had an opportunity to ask how they find properties.  Do you know what their answer has consistently been?  “Every which way we can!”  They know that in real estate, like every other field, there is no magic pill—no magic way of finding properties.  They cite online classified ads, multiple real estate agents, wholesalers, other investors, property managers, driving for dollars in neighborhoods, door knocking, attorneys and insurance agents, resubmitting on rejected offers, foreclosures and pre-foreclosure lists, calling on rental properties, probate properties, and many other methods as the ways to find properties.  Most importantly, they all have a marketing plan with at least a dozen or more methods that they use regularly, and they track their results.

Every investor must treat their investing as a business or it will wither and die.  Marketing can never become an afterthought. It must be front and center in your investing time. The allocation of time blocks must be created and used effectively.  If you need additional lists of ways to find properties, contact our office. We have lengthy lists that you can select from to create your marketing plan.  Let me ask a few questions to see if you have begun to think creatively about how to “turn over more stones” to find off-market properties.

  • Have you contacted any property managers to see if any of their clients are buying or selling?
  • How many neighborhoods have you driven through in the last two weeks to look for properties that are for sale?
  • Do you work from lists of foreclosures or pre-foreclosures to follow up on properties through direct mail, phone, or knocking on the property’s door?
  • Have you spoken to any probate attorneys to see if there is a way you can assist people with estate properties that they are handling?
  • Have you spoken to any administrators or marketing directors for assisted living or nursing homes? They often have potential residents who cannot move in until “mom or dad’s” house is sold.
  • Do you have online sources that list properties for sale and also properties for rent that you check daily?
  • How many wholesalers have you linked up with to see if you can do co-wholesaling together, where one of you brings the property and the other brings the buyer?
  • Are you checking on tax delinquencies in your area?
  • Do you have any bird-dogs finding properties for referral to you? I, at one time, had dozens of pizza delivery guys forwarding properties to me.
  • Do you know which areas of town have the most boarded up houses? And when was the last time you spent a couple of hours driving those neighborhoods?

Real Estate investing is not difficult, but it does takes diligence and an organized plan.  And at the root of that plan is your marketing plan.  I challenge you, on behalf of the entire program, to develop a marketing plan within the next two weeks that will have at least one dozen different methods of finding properties.  It may take longer to implement them all and establish tracking to make sure that they work, but a diversified and effective marketing plan will allow you to elevate and ramp up your success.  And if you already have a dozen, move to having two dozen methods and make sure that they are all producing successful results.

You will discover that this process alone will not only provide you with more and better property opportunities, it will also keep you so busy with success that you will forget about whether it is a seller’s market or a buyer’s market or an in-between market, and you will be many steps closer to building your own fortune!  Best wishes, and we’ll see you on the road to success!

Joint Ventures on Spec Building

Joint Ventures on Spec Building

One way to invest in real estate is to joint venture with property owners by building a new home on their property for resale.  Buying a building lot and constructing a home on it for resale is called investing in a spec house because you are building it on speculation that it will sell for a profit.

To do this, you want to look up all the vacant properties in the neighborhood of interest and find those that are paid for free and clear.  Then contact the owner and propose the idea of joint venturing with them on a project on their property.  Ask them to sell their property to a joint venture partnership for a reasonable price. You will then build a house on their property and sell it, and after paying them the agreed price, split the remaining profit.  As the managing member of the partnership, you will obtain a construction loan to pay for the house building and the owner will subordinate his or her home to the construction loan.  Through this process an investor can start a project with zero monetary invested and make half of the profit.  An example is as follows:

Owner’s property:                                                                     $100,000

Construction cost to build house:                                               $150,000

Price of the finished home:                                                        $350,000

Other expenses:

Taxes, insurance, closing costs, commission:                    $35,000

Total Profit from Sale:                                                                 $65,000

Split 50/50:                               Each partners share:       $32,500

Not a bad profit for not investing any of your own money.  Your job is to line up an architect to design the home, get a general contractor to build it and procure the construction loan.  The owner’s job is to put up his property as collateral for the loan and, in doing so, make the agreed upon purchase price and the additional profit.  Of course the more expensive the project, the more money that can be made.  Imagine the profit in a multi-million dollar home still with no money out of pocket.

Banks are completely willing to do these loans when the property is free and clear because their loan will be less than 50% of the appraised value of the home when it is completed.  Of course, if you are a general contractor, you can build the home yourself and make an additional general contracting fee.  If you are a real estate broker, you can make an additional commission for listing and selling the property.

Cheap Bandit Signs

Cheap Bandit Signs

As you drive around your city, you have probably noticed signs in strategic locations advertising a house for sale, cash for houses or someone looking for an apprentice to make monthly income investing in real estate.

Did you ever imagine that you would be putting out signs to find properties and cash buyers? And not only signs but bandit signs! What is a bandit sign?  Bandit signs are typically used to promote limited time offers to a large group of people.  However, they may get quite costly when you find that you need to replace and buy them repeatedly.

You can order them from various web sites: www.amazon.com, www.gobigyellowletter.com, www.signsonthecheap.com or sometimes you can find them at a home improvement store.  You can even go to the dollar store and pick up white signs, paint them yellow and put them throughout town.

Do you want to pick up signs for free?  Let’s think outside the box for just a moment.  Is it an election year?  Whether it is a midterm election, primary election or a full-blown presidential election, candidates have flooded the city with their election signs.  They create them by the hundreds and put them out by the hundreds. There are signs for candidates ranging from city council to sheriff to mayor or governor or president of the United States.  These signs remind us not only to vote but to vote for a particular person.  After the elections are over, where do these signs end up?  Who goes around and gathers them up?  Wouldn’t it be great to help the candidate’s election committee and pick up these signs? What a Good Samaritan you are.

Simply contact the candidates, both winners and losers, and offer your assistance to pick up their signs.  They will be tremendously grateful for your help and you will have an abundance of signs that are ready to paint over with bright Rust-Oleum Painter’s Touch 2X 12 oz. Gloss Sun Yellow General Purpose Spray Paint from your local home improvement store.

Feel free to set out your new and improved yellow bandit signs around the city stating that you “Have a House for Sale,” “Must Sale” or “We Pay Cash for Houses.”

 

Real Estate Investing: 4 Ways to Fail

Real Estate Investing: 4 Ways to Fail

Real Estate Investing: 4 Ways to Fail. Most investors get started in real estate with a desire to be successful and make money. However, every once in a while investors find new (and sometimes not so new) ways to fail.

Know your market — I can’t stress this enough. If you don’t know your market, you won’t know what the other homes in the area are selling for and what the neighborhood expectations are or how long it’s going to take you to off-load a property. This can be detrimental to a deal. Nobody likes paying on a vacant house that is just sitting there because someone didn’t do his or her research.

Never pay full price — Agents are paid a commission or a percentage of a sale so they like to sell homes for as much as possible. With the market being so hot right now, they are getting away with selling high. However, as an investor you should never pay full price for a property. Always try to negotiate and bring down the price. That helps give you instant equity and sweetens up the deal.

Always have a business plan — Without a plan things can become total chaos. Make sure to keep organized. A good business plan should include both strategical and tactical plans. Make sure you are tracking all possible outcomes so you don’t get caught off guard with no plan. That’s when things can go south fast.

Beware of over-improvement — Don’t be the guy that thinks if he puts the nicest, fanciest, more expensive stuff in a property that he will make bigger returns. That is actually far from the truth. Always make sure your repairs compliment the neighborhood. Make your home one of the nicer homes but don’t overdo it. A great example of this would be if your neighborhood has no garages, don’t spend a ton of money building one, as it doesn’t fit the area. Same thing applies on the inside. If nobody has granite countertops, don’t be the only one who puts them in. You will lose money in those types of situations.

 

Real Estate Investor Secrets

Real Estate Investor Secrets

It’s true that the vast majority of individuals who initially make the decision to invest in real estate soon fail.  In fact, real estate professionals have found that 95% of the people who start the process to invest in real estate never even make an offer to purchase a property.  Why does this occur?  It all boils down to one simple word – Discouragement.  On the other hand, there are a substantial number of people who decide to invest in real estate, using one or more investment strategies, and they prosper and succeed.  What’s different between these two groups of people?  The second group has learned to control and even eliminate discouragement from their mindset, while the first group hasn’t.

Let’s look at several things that successful real estate entrepreneurs have done that changed the way that they invest in real estate.  We like to call them the 7 secrets that can eliminate that dreaded discouragement for beginning real estate investors.  As you learn to incorporate these secrets into your investment strategy, you will soon recognize the benefit of eliminating discouragement from your mindset.

Secret #1 – Understand your Personal Investment Strategy

Each of us are different and we all have separate talents and strengths.  Some of us are great with numbers, while others are fantastic in developing personal relationships.  Regardless of the differences we have and the talents we share, it’s possible for all of us to succeed in real estate investing, but we need to be aware of our personal strengths and weaknesses.  The goal is to match a separate real estate investment strategy to your personal strengths.  For example, if you have a talent and skill of doing construction work, you might want to consider looking into finding fixer upper properties and flipping them for a profit.  If you are great with numbers and love working with people, you might best look into finding a rental property as your first purchase.

There are basically three major real estate investment strategies that include: rental properties, fixer upper and flip properties, and buy and hold properties.  Within these three major categories, there are multiple individual strategies.  As you begin your real estate investment adventure, you need to select your individual strategy and then begin to do the research on how that strategy works.  It is critical that you understand what to do and how to do it before you do anything.  If you decide to go into rental properties as your main strategy, take the time to learn all you can about the advantages and disadvantages of owning rental property.

Once you have a basic and sound understanding of how a selected real estate strategy works, you need to develop your own approach to the strategy.  We like to call this approach – your niche.  It’s what is going to make you special and help you make a profit from your real estate adventure.

Secret #2 – Create a Roadmap that Will Guide You to Success

Every new real estate investor should start by developing or framing a basic business plan based on the real estate strategy they have studied and chosen to follow.  This business plan is really a roadmap you can follow that will help you overcome obstacles and move towards success.

  • Set Specific Goals.  In essence, this roadmap will contain a list of short-term, mid-term, and long-term goals, all of which will guide you along the path of success. If your chosen strategy was rental properties, specific goals might include items such as; looking as specific properties in your target area, researching rental rates within the target area, identifying funding opportunities that match your credit rating; making the offer, etc.  This list of goals should be written out and be extremely specific in nature.
  • Each goal should have a timeline or timetable attached to it.  You must have a way to measure if you have succeeded reaching the goal. These timelines are not meant to be a constraint on your ability, but rather a way to motivate you to take action.
  • Create Rewards for Completing Your Goals.  Each goal is a step toward your ultimate success as a real estate investor.  Goals are nothing more than dreams if no action is taken, and if you reward yourself for completing the goal, action will usually take place.  For example, one of your goals might be to identify three specific rental properties in the target area.  Once this goal is reached, you might reward yourself with a special night out with your spouse or significant other.  The object is to create rewards that you will remember and enjoy as you reach and complete these initial goals.  If the reward you choose has meaning for you, you will work harder to complete the goal.
  • Establish Danger Points that should be avoided. Your roadmap should list things that can derail your success in real estate.  As you study and develop your personal investment strategy, you should understand all the risks involved and then work to eliminate them.  Some of these dangers signs might be:
    • Don’t over leverage your property.  It’s true that when you use borrowed money or capital to purchase a property, you can magnify your return, but, it’s also true that increased leverage or borrowing can also magnify your risk.  When you decide to purchase a property, you need to be aware of how you are going to repay the borrowed capital.  Every investor needs to control the leverage and not let the leverage control you.
    • Don’t fall in love with the property.  When you become emotionally involved with the property, you begin to make emotional decisions instead of fact based and financially sound decisions.  If you start to believe that you must have a specific property, regardless of the price or terms, you are setting yourself up for both failure and discouragement.  Wise investors always look at the numbers and base their decisions on those numbers.
    • Don’t over rehab when buying properties.  This is especially true for fixer upper properties.  You want to make to make the property as rentable or saleable as you can.  When you over rehab a property, you are spending your profis before you ever get them.

Secret #3 – Continue Your Education

Educating yourself should be a life-long pursuit, and it is extremely important for the aspiring real estate entrepreneur who wants to achieve success.  There is, however, another side benefit of continuing your education about real estate.  Discouragement often appears when things don’t go as planned.  By continuing your studies about real estate investing you will plan better and avoid those pains of anxiety and discouragement.  And when you are already discouraged because things haven’t gone as anticipated, continued education in the following ways will get you back on the path to success.

  • Educate Yourself Through Personal Study. This study can take place in a myriad of ways.  You might start by reading and listening to books written by other successful real estate experts.  Pay special attention to their stories of how they reacted when obstacles appeared unexpectantly.  In addition to discovering that you are not alone in these pangs of discouragement, you will learn specific steps to overcome the obstacles or setbacks that might be causing your discouragement.
    Your personal study should not be relegated to simply reading books.  You should also search out other successful investors and spend time talking to them about their experiences.  These discussions should always be centered first on identifying the problems they may have met, and second, on evaluating specific ways they solved the problems.  Don’t pass on the opportunity of learning about their successes in real estate.A third way to continue your personal education is to meet and greet the experts in the field of real estate.  Leverage their expertise by learning what they do and how they do it.  You may want to meet with well-known appraisers, bankers, and even surveyors.  All of these experts can give you information that will help you identify problems along with the best solutions.  The time you use meeting and interacting with real estate professionals will also teach you multiple languages.  Soon you will know how a plumber, appraiser, banker, title company officer etc. speaks.
  • Find a Mentor. Mentors may be paid professionals or they may just be other real estate professionals who have experienced great success.  When you are just beginning your career in real estate investing, take the time to meet other like-minded individuals in real estate.  When meeting these people, learn to ask questions that are based on specific examples.  You will find that when you ask knowledgeable questions, you will get real world examples of success.  You might find a mentor by becoming an unpaid intern for them.  Offer to do some of their research for them, naturally following their instruction.  As your relationship with a mentor grows, your education will also increase.
    If you have the financial capability to pay for professional mentoring, it can be worth the money you spend.  If you elect to pay for professional help and mentoring, make sure you establish the credibility of the selected mentor.  If you are paying for this valuable service, the mentor should be able to provide references and examples of how they have helped other people like yourself.
  • Attend Training Events.  If you belong to a local real estate investment organization, they will normally have access to local training.  Make sure you attend and take good notes.  These are also places where you might establish relationships with potential mentors.  There are also well qualified national organizations who can provide extremely competent instruction in the specific steps involved in different real estate investment strategies.  Many successful real estate entrepreneurs have found that the money they spent on their education was returned many times over in their personal success.
    There are also credible webinars offered online that can increase your knowledge about real estate.  When selecting a webinar, take the time to assess the qualifications and credibility of the person providing the webinar.  The more you learn, the better you will feel, and the better you feel, the quicker your discouragement will disappear.

Secret #4 – Buy Right

Every smart investor should always make money on the purchase.  This means that they are buying at market or below market.  Naturally, if you can purchase a property below market value, you have built in equity right from the start.  The question becomes, “How do you buy right?”  It starts by using the following simple steps:

  • Know Your Target Market.  If you are buying locally, spend time looking at what other properties have sold for.  It doesn’t matter what people are asking, what really matters is what people are getting for the property.  The saying “Location, location, location” is all important.  Make sure you are comparing apples to apples and not apples to oranges.  Pay attention to where the different properties are located in the area and then compare sales among true like properties.  Once you have established realistic values in a geographic area, then you are ready to start identifying prospective properties.
  • Look for Motivated Sellers. When you are ready to purchase a property, it will pay big dividends to know why the seller is selling the home.  Once you identify a well-motivated seller, you can make an offer that builds in equity for you at time of purchase and likewise get the property sold immediately for the seller.  It’s a win-win deal.
  • Learn to Negotiate. Negotiation techniques can be learned and the time you spend understanding how to negotiate will pay big dividends.  There are training courses and seminars that will help you learn how to do this.
  • Create an Exit Strategy. Many first-time buyers think the exit strategy just means how they can sell the property when they are ready to liquidate the property.  Yes, this exit strategy should be considered when purchasing the property.  You don’t want to buy a property that is a dog and will always be a dog.  You want a property that can be put in a position to be sold with good curb appeal.  Forgetting this fact, is the reason why some investors are discouraged when they are left with a property that is in the wrong location and can’t be sold regardless of the price.
    The second type of exit strategy that must be considered is an exit strategy that allows you to exit the purchase.  If you make an offer on a property and soon find out that it wasn’t what you thought it was when you made the offer, you need to make sure that your offer allows you to walk away.  The “subject to” clauses are an important part of the purchase agreement.  Discouragement can come when you are locked into a bad purchase.

Secret #5 – Follow the Roadmap

Discouragement and anxiety usually appear when the investor has gotten off course in their real estate experience.  These individuals have usually failed to meet short-term or intermediate goals.  Perhaps the individual is discouraged because they haven’t found a great under market property in their local area.  Maybe they are depressed because they haven’t secured financing.  There are numerous reasons why discouragement appears, and in almost all cases it can be traced back to not following a plan and taking action.

  • Match your Roadmap to your Market.  It’s important for you to immerse yourself in the real estate market on a local basis.  Unless you are aware of those things that influence the market, you will be in peril of making decisions that are unwise and possibly fatal.You need to know what things are driving the job market, which schools are best, and where the people are moving to.  Sometimes when you first draft your business plan or roadmap you may not be totally aware of changes that are taking place.  When you become aware of these changes, make subsequent changes to your goals and timetables.  Your discouragement may sometimes be a factor of what is happening around your property and not the property purchase itself.
  • Keep a Real Estate Journal. The best way to keep yourself on track and following your personal roadmap is to record what is happening and what steps you have taken.  It is a good idea to write your specific goals in your journal along with the timeline for accomplishing those goals.  When you meet an objective, write it down in your journal.  You will find that by recording both the positive and the negative things that take place in your real estate adventure, you will have a guide book to help you on subsequent purchases.
    Be honest with yourself when recording both the good and the bad things that take place.  Accuracy in your journal is important.  It has been found that this recording of events reaps rewards.

Secret #6 – Upgrade your Mindset

Your mind is a powerful tool and it can change how you act and how you perceive what is going on in your real estate business.  If you want to eliminate discouragement from your existence, you need to remove those obstacles that influence those negative feelings, but you must also change the way you think.

  • Eliminate Negativity in your Life. It has been proven over the years that we act as we think.  This is true in all aspects of our life and is especially true in the real estate business.  Start by doing simple things such as removing negative words from your vocabulary.  Surround yourself with positive reminders of what you want to accomplish.  If you have decided to fix up a property and flip it, then get a rendering done of what the property will look like when finished, and then put this rendering or picture in plain view.Instead of saying “If this doesn’t work, I don’t know what I’ll do,” replace it with “When I finish this property purchase, I’ll be able to create a regular passive income with that rental money.”  Start looking at what you want to do instead of looking at negative outcomes.
  • Surround Yourself with Like-Minded People. There is nothing that creates more discouragement than “naysayers”.  You don’t want to be around people who will tell you what is wrong with your ideas.  These type people never take action on their own behalf and deep down are envious of your efforts in improving your life.
  • Read Books on Positive Thinking. Books by well-known authors about positive thinking will influence how you think.  And when you start thinking different, your life will be different.
  • Consider Getting Professional Real Estate Help. If you are discouraged because you think you are alone, then maybe you just need to enlist the help of good professional rental management or the help of a good accounting firm.

Secret #7 – Take Immediate Action

It’s no secret that action creates habits and when a habit is fully adopted, the task in question becomes easier.  If you are discouraged, make the decision to do something that requires real action on your part.  If you are still waiting to make your first offer, then go out and make an offer that you don’t even expect to get accepted.  The important point is to make the offer.  And you may be surprised to find yourself in control of a great property at below market value.

One action may not be enough to get rid of the feelings of discouragement.  If you are still feeling discouraged after accomplishing just one of your short-term goals, go ahead and fulfill the action for another goal on your roadmap.  As long as you are acting, you are progressing.  Success in real estate investing is a process and action is also a process.  Make it the same process.

There is nothing that discourages discouragement more than simply taking action.  You have a roadmap to success in your business plan.  If you are discouraged, take the specific action steps you have recorded on your roadmap.  When you act, you really do change things.

 

Defining Hard Money vs. Conventional

Defining Hard Money vs. Conventional

When doing deals in real estate investing, the time could come when you need to borrow funds to buy, fix and sell a property for a profit or to buy and hold it as a rental. In either situation you can either borrowing the funds from a traditional lending institution, such as a bank or mortgage company, or from private and/or hard money lenders.

In this article I am going to break down the pros and cons associated with each, along with the details of each lending situation.

  • Traditional/Conventional Lenders – These are typically banks and mortgage brokers who require an approval process that can be very involved and sometimes extensive. It involves pulling a credit report for your current credit score, a thorough screening of your current and past financial status, and an evaluation of your total net worth and the cash value of your assets. You need to provide a number of supporting financial documents to show the lender that you are not only qualified but also highly capable to pay back the loan as well as the 10% or larger down payment. This screening process can most often take several weeks to accomplish. Despite these lending standards, an investor might choose this type of loan because of its much lower interest rate (typically below 6-7%) with much longer terms, such as 20-30 year loans.
  • Private and Hard Money Lenders – These are the lenders that real estate investors take advantage of the most. Private money lenders are typically individuals that loan their own money from their own accounts and assets. They usually charge a higher interest rate and points in accordance with what they believe is their risk in the deal. Hard money lenders are more often a group of investors that have pooled their resources to be part of a bigger group. One of the biggest reasons a real estate investor would consider borrowing from either of these two types of lenders is because of the simpler lending requirements. In the case of the conventional lenders, they first look at the financial status of the borrower more than the property. In the case of the private/hard money lenders, they look at the numbers in the deal as well as its profitability. These lenders can provide funds in less than 30 days on a regular basis and in some cases less than 14 days. This alone is one of the reasons this type of lending is so attractive to investors who buy, fix and sell properties. Despite the much higher rates (such as 8% and higher), the terms are usually much shorter and in most cases less than 12 months. Under these considerations investors that are rehabbing properties find this acceptable as they are usually on a much shorter time frame, around 90 days to 6 months, from close to close.

It is always to your advantage to look at all options when it comes to borrowing funds for deals. Always look at your budget and the direction you want to go before deciding which lender better fits your needs.

Why Invest in Real Estate

Why Invest in Real Estate

There are many ways to invest your time and money. You can invest in a variety of investment strategies with banks like bonds, stocks, annuities, interest bearing savings accounts or interest bearing checking accounts, certificate of deposits (cd), and many others. You can invest in the stock market with its large variety of investment strategies. You can invest in IRAs and other retirement funds. All of these and many other types of investments provide ways to make your money work for you.

Real estate investing also has several different strategies that you can use to get your money working for you. Fast cash strategies include buy-fix-n-flips or wholesaling. Creative financing strategies include seller financing or a lease option. Long-term strategies include buying and holding residential or commercial properties. All of these real estate investment strategies are great ways to not only make a lot of money but also to leverage your money as well as other people’s money.

There are many advantages of investing in real estate. Housing is something that everyone needs. Like other types of investments, real estate values go up and down. However, over time, the downs aren’t as low as previous downs, and the ups are higher than the previous ups. Buy-and-hold strategies have the advantage of passive monthly income, appreciation over time, equity, and tax advantages. Fast cash strategies allow you to make a profit quickly and move on to the next deal. Real estate trust strategies allow for consistent income that can be reinvested to continue growth.

Real estate investing can bring you a great return on investment whether the economy is going up or down. Choosing a real estate investing strategy that meets your specific financial goals can be safer than other types of investments, as well as an excellent way to gain true long-term wealth.

 

Real Estate Investing and Technology

Real Estate Investing and Technology

There was a day when real estate investing was done in person with carbon copy contracts. Just imagine working with a 25:1 acceptance ratio and having to go out and visit each and every property. That was the day where your CRM or lead data base consisted of a three-ring binder or notebook. This process was long and very drawn out, especially in comparison to today.

By simply logging in on the internet you are now able to access a sea of leads and knowledge. Anywhere from pre-foreclosure leads to probate or FSBO. You can also access the processes and information to help walk you through any of these transactions.

You are now able to view homes through pictures provided from online listings. You are able to run your numbers and submit your offers via phone or email.

Marketing online allows you the opportunity to reach out to a larger group of individuals and even customize it to be more direct. Don’t get me wrong, good old door hangers are still a great option, they just take a lot of time and online allows for you to keep marketing even when working on other things. This is a great and healthy form of multi-tasking.

There are tools and resources like software and programs that can be used to help with the process as well, whether it be evaluating a deal or simply data or lead organization. The number of apps that are geared towards this profession are amazing. Apps as simple as a mileage tracker can save an investor loads of time and energy that can now be used for other things.

Technology has made it so that you can invest remotely, or even simply just at home in your jammies at two in the morning. The way technology is changing this field of work is absolutely amazing and I only see it continuing to grow and continue to get better over time.

Why Invest in Real Estate

Why Invest in Real Estate

There are many ways to invest your time and money. You can invest in a variety of investment strategies with banks like bonds, stocks, annuities, interest bearing savings accounts or interest bearing checking accounts, certificate of deposits (cd), and many others. You can invest in the stock market with its large variety of investment strategies. You can invest in IRAs and other retirement funds. All of these and many other types of investments provide ways to make your money work for you.

Real estate investing also has several different strategies that you can use to get your money working for you. Fast cash strategies include buy-fix-n-flips or wholesaling. Creative financing strategies include seller financing or a lease option. Long-term strategies include buying and holding residential or commercial properties. All of these real estate investment strategies are great ways to not only make a lot of money but also to leverage your money as well as other people’s money.

There are many advantages of investing in real estate. Housing is something that everyone needs. Like other types of investments, real estate values go up and down. However, over time, the downs aren’t as low as previous downs, and the ups are higher than the previous ups. Buy-and-hold strategies have the advantage of passive monthly income, appreciation over time, equity, and tax advantages. Fast cash strategies allow you to make a profit quickly and move on to the next deal. Real estate trust strategies allow for consistent income that can be reinvested to continue growth.

Real estate investing can bring you a great return on investment whether the economy is going up or down. Choosing a real estate investing strategy that meets your specific financial goals can be safer than other types of investments, as well as an excellent way to gain true long-term wealth.

Understanding the 5 Risks of Investing in Real Estate And How to Combat Them

Understanding the 5 Risks of Investing in Real Estate And How to Combat Them

In today’s tumultuous times, investing in real estate may very well be your best bet in protecting your future while at the same time creating new streams of income.  On the other hand, real estate investments don’t come without risks and the unforeseen dangers of foreclosure and the loss of capital.  Just as there are potential advantages and benefits associated with real estate, the perils of real estate are also real.  Each real estate strategy has specific risks associated with the investment method.  Every real estate entrepreneur should take the time to evaluate both the real estate itself as well as his or her investment temperament.

There are five major categories of risk associated with most real estate strategies. When you fully comprehend the dangers, you will be prepared to confront these risks and use real estate as a tool to create wealth and establish new streams of income.

Categories of Risk Associated with Real Estate

  1. Risk of Unpredictability. The future is unknown and you can’t determine in absolute terms what will happen to any specific property at a future date. Long-term historical data has shown that real estate has appreciated, but the rate of appreciation has varied and at times has even dramatically dropped in value.  When you purchase a property, you control the asset without any ability to control outside factors which can determine the value of the property.  Even when you purchase the property you may believe that you understand all the information about it, but experience has proven this to not always be the case.  There are unexpected events or undisclosed facts that may appear.  Naturally you try to minimize these factors, but it may not always be possible to do so.
    1. Economic Downturns. Recent history has shown that when the economy stumbles or even collapses, so do real estate values.  Thousands of home owners found themselves owing more money on their homes than they were worth.  When you are upside down like this, the value of your real estate can fall dramatically.  Historically, the values have returned to their previous values and even appreciated, but if you weren’t prepared for this situation, you would have lost money.  These economic downturns can happen on a nationwide basis, but far too often take place on a local or regional basis.  If a major employer closes or moves to another location, there are naturally more properties that come on the market, which in turn can cause values to decrease.  It’s all part of the supply and demand cycles.  When demand exceeds supply values increase, and when the opposite happens, values can also decrease.  Good real estate markets are best characterized for having strong occupancies and regular increasing rents.  When a downturn occurs, occupancy rates fall and rents decrease, which in turn can lower real estate values.
    2. Interest Rate Fluctuations. The majority of real estate today is purchased using other people’s money through loans.  These mortgages are secured by the properties themselves.  These loans are based on interest rates that can change with major impacts on both cash flows and corresponding property values.  When you purchase a property, through a bank or a private lender, it is imperative that you protect yourself from interest rate increases.  Many real estate purchasers were unprepared for large balloon payments or the requirement to refinance the property under the original mortgage.  When this situation occurs and you are unable to meet the terms of the mortgage agreement, you can face the condition where you are forced to sell the property at a reduced price.  Whenever possible, you should lock in long-term stable interest rates on your loans.  Failure to do so is disaster waiting to happen.
    3. Changing Demographics. With urban development comes change and the changing demographics associated with “Baby Boomers” and other age groups, real estate values can change unexpectantly.  The demographics of a certain location may include the need for more rental housing while other demographics may suggest investing in other commercial ventures.
    4. Legal Entanglements. Because you control the asset, the real estate could become at risk through legal disputes that may occur against you.  You can also be subject to risk associated with accidents that may take place on the property itself.  Additionally, there may be zoning or similar issues that could create some form of cloud against your property.  Finally, we seem to live in a litigious society where lawsuits are far too common.  Fortunately, most of these types of issues can be combatted effectively when choosing the right professional and legal help.
  2. Risk of Negative Cash Flow. Negative cash flow can be the demise of the unwise and ill-prepared real estate investor.  When cash out exceeds cash in, you have a situation that may be short-term, but can be the start of long-term financial headaches.  There are many reasons for this condition to occur.
    1. Rental Property Negative Cash Flow. When you purchase rental property and the expenses; such as interest, maintenance, repairs, and management exceed your rental income, you face negative cash flow.  In some cases, this situation is a short-term occurrence, while oftentimes the negative cash flow is ongoing.  When this happens, you may face the problem of finding outside capital to finance the short-fall.  Failure to prepare or to avoid this dangerous situation can ruin you.  It’s critical to complete an accurate property analysis prior to purchase of the real estate.  Once this is done, you need to evaluate your personal financial situation.  Negative cash flow from rental property can be reduced or even avoided completely by using proven real estate strategies developed by professionals.
    2. Land Negative Cash Flow. Many real estate investors purchase land on the expectation of increased appreciation.  This increase may happen through inflation or when urban development encroaches on the property or zoning laws are changed.  Regardless of the reason for the appreciation in value, you may have interest or loan repayment obligations, along with other expenses such as taxes.  In these cases, you can immediately experience negative cash flow without any income to offset the expense.  Holding land for resale can be an effective real estate strategy, but you must be aware of and prepared for the potential negative cash flow.
  3. Risk of Liquidity. Real estate is often categorized as a hard asset, and as such it may be difficult to get needed cash from the property in a short period of time.  Real estate loans and the sale of the property itself can provide the cash liquidity you desire, but there is always time required to complete these transactions.  When purchasing or controlling real estate, make sure you are aware of your personal liquidity requirements as well as that of the property itself.  It is important to prepare for needed cash infusions into the property as well as to insure that you can meet your personal financial obligations.
  4. Risk of Depreciation. This risk has nothing to do with depreciation schedules for taxes and accounting.  Rather we are referring to the situation where the property actually decreases in real value.  Even though this is a less frequent risk in a good economy, it can happen.  Property values can decrease when interest rates are increasing dramatically, when there is damage done to the structures on the property, when zoning laws are adopted that decrease the uses of the property, or when the economy itself suffers.  These risks can be minimized or reduced by wise purchases and through the use of professional help.
  5. Risk of Management Problems. Almost all real estate requires management of some kind.  Rental properties require more management than holding land for resale.  Even if you are just doing a “fix up” on a property there is management involved.  Management of real estate can be done by the investor, property owner, or through professional management concerns.  The potential problems associated with management of rental property generally involve tenant problems and repairs.  As the real estate owner or controlling party, you will need to be prepared to meedd these management problems and expenses.

These risks are real and happen on a frequent basis, but there are proven strategies that can reduce these risks dramatically or even eliminate them altogether.  Here are 5 proven strategies to avoid real estate risk.

Five Strategies to Avoid Real Estate Risk

  1. Complete a Property Analysis. As an investor in real estate you must start by completing a comprehensive and accurate property analysis.  Regardless of the investing strategy you are using, you must start by accumulating accurate complete information about the property itself.  You want to understand the history associated with the property and all expenses, past and present, that can impact the value of the property.  Don’t rely on the previous owner’s representations.  Take the time to consult tax records, property management records, and local zoning and urban information.  Eliminate the unexpected by doing your ground work before purchase.  Numbers don’t lie.  Spend the time doing a complete analysis of the property using the investment strategy you have chosen.  For example, if you are going to do a rehab on the property and then rent it out, you would want to get bids on repair work, consult records on comparable properties, and work with reliable realtors.  Every property analysis must include the bad information along with the good factors.
  2. Control the Money. All real estate investments require capital of some kind.  If you are going to involve financing, make sure you get the best rates and repayment schedule that meets with your personal financial situation.  If you have the capital to invest, make sure you aren’t using funds that have to be replenished in a short period of time.  Your ability to control the money and the financing in a way that meets your investment strategy will determine if you succeed or fail.
  3. Understand your Strategy. It can’t be over emphasized how important knowledge is to real estate success.  There are a great many ways to profit from real estate strategies, and they are all different.  When you decide which strategy you are going to implement, take the time to learn as much about the investment strategy as you do learning about the projected property.  If you believe you lack information or expertise in adopting a specific strategy, find help in learning more about the real estate strategy.
  4. Get Proven Professional Help. The importance of finding professionals who can become part of your real estate team is paramount.  Theodore Roosevelt once said, “Believe you can and you’re half way there.”  The importance of his statement is as true today as it was last century.  You may believe you understand the real estate strategy perfectly and you truly are half way there.  Don’t be fooled into thinking you can go it all alone.  Use professionals to build a team that works together.  Find people who can do the things you can’t.
  5. Protect your Future. It all starts with protecting your real estate.  Use insurance to protect real estate structures and insurance to protect your title to the property itself.  You can also protect your future by insuring that you can meet your liquidity requirements.  Don’t allow lack of capital to spell disaster.

Real estate can provide a second stream of income and help develop wealth.  Yes, the risks are real, but the rewards and benefits are also real.  Your ability to recognize the risks and to take the steps to avoid as many of them as possible will determine your overall success.  It’s your discipline that will provide the key to your real estate future.  Warren Buffett is regarded as one of the world’s best investors, and he summed it up well with his comment, “We don’t have to be smarter than the rest. We have to be more disciplined than the rest.”  Use real estate as the vehicle to your future and success can be right around the corner.