Understanding the Investor’s Mindset as a Realtor

Most of your traditional buyer clients are probably very similar in what they’re looking for in a property.  They want a property that is within their budget (or below their budget), that has as many bells and whistles as possible, and that is in a prime location.  Most of your buyers want as much as they can get for a price they can afford.

When you work with buyers like this, who are looking for a residential property, you will likely discuss various finishes, square footage, and building features.  Many of these buyers will purchase based on whether or not a property feels like home to them.  Little research or thought may be put into figuring out whether their dream home is a good investment, even though their home purchase is often one of the largest investments that they will make.

Many homebuyers are accidental investors.  They’re looking for a home that appeals to their “American Dream” ideal, and they end up making one of their biggest investment decisions in the process.  Although the real estate investor is looking at the same market as Sue and Joe first-time homebuyers, the investor is looking at the market through a very different lens.  By understanding the differing mindset of the investor, you will be able to serve your investor clients more effectively.  While Sue and Joe first-time homebuyers want to know about school districts, landscaping, and kitchen layouts, your investor client is less emotional about the transaction and more focused on these particular questions in his/her decision:

  • What is the potential value in a property?
  • How much will it cost financially and in terms of resources to receive the property’s potential value?
  • What are the risks associated with this acquisition?

Typical buyers (accidental investors) may end up making profitable decisions and coming out ahead simply because their goal of finding an appealing property means that they acquired a hot property that will most likely appreciate at a steady pace.  This is the mindset of many buyers.

The strategy of real estate investors, however, is very different from this “ideal property” mindset that most of your buyer clients possess.  Investors are looking for deals.  They are looking for properties that will return more than the initial investment.  If investors lose sight of their wealth-building goal and purchase a property on a whim or because of its “bells and whistles,” they may end up making a dangerous, costly investment error that will take them a long way from their wealth-building goal.

Part 2 – Getting Started with Residential Land Development

Part 1 of this series discussed the initial steps to getting started with residential land development. We covered financing options, finding partners, and finding properties. Part 2 will pick up where we left off and teach you 3 more steps you need to take. Because we covered 3 steps in the first article, we will number the following steps 4, 5, and 6.

4. Preliminary Due Diligence

After identifying a potential property, you will need to explore the codes, zoning regulations, and development processes for the local municipality or jurisdiction. Although you can go through the process to change the zoning or use for the property, it is typically a long and painful process that doesn’t guarantee your proposed changes will be approved. It’s ideal to keep your development conforming with existing codes and regulations.

5. Obtain Estimates For The Development

You will likely need to talk to several different contractors to get bids on the work that needs to be done. It’s wise to use contractors that have done similar projects within the area. They will have more experience working with the local city. Their experience will help them understand the requirements and costs for the project in the area. In addition to getting bids from the contractors, make sure you talk with multiple city officials multiple times. You need to make sure all of the stages of the application and approval process are covered. This process can include, but is not limited to:

  • Filling out and submitting paperwork
  • Meeting with city officials
  • Various 3rd party tests and permits
  • Purchasing water rights
  • Application fees
  • Construction inspection fees

6. Negotiation

Now you should have a good estimate on the timeline and cost to execute the development. You are ready to run numbers and make an offer to the seller. One of the keys to making an offer and negotiating is understanding if there’s any part of the development process that the seller is willing to complete. If it’s a big enough project, the seller may be willing to seller finance or subordinate the property. With the amount of information needed for a development project, it’s usually a good idea to have at least one meeting with the seller to discuss as many details as possible. Then you should present an offer that contains multiple options to make the deal happen.

Three Questions to Ask Yourself Before You Start Investing

As you start investing in real estate, ask yourself these three questions:

First:

What are your real estate goals? Outlining what you want your investments to accomplish will help guide you in the right direction. When you first start, it is like planning a vacation or cross-country trip. Discuss with your spouse or partner the core reason you are investing. Is it for retirement, for your children or grandkids and/or for supplementary income? Different strategies are needed for different reasons. Some yield returns more quickly (such as wholesaling), while others are for longer-term investments (such as buy-and-hold rental properties).

Second:

What is your time commitment? How much time are you dedicating to your efforts? Is this more of a hobby or do you want it to replace your day job? You need to be honest in your assessment of timing and what you are willing to give-up or reschedule. There are limitations to your weekly obligations.

If you are already busy with a full-time job, school or the kids, then you should asses your schedule carefully. Experts and seasoned real estate investors say beginners should realistically evaluate how much time they will be able to carve out of an already full schedule.

Third:

What is your focus? Where do you want to start investing? If you need money in the short-term, then you should focus on wholesaling. If you have the time and the expertise (or the network), then you might undertake buying a fix and flip. If you want residual income, then a buy-and-hold property would be a good strategy for you.

Assessing where you are financially will also help you decide where to start. Wholesaling takes little to no money down, while doing a fix-and-flip or buy-and hold will take a significant amount of cash. Some investors do not understand that many lending institutions will only lend a portion of the funds for a purchase and will not lend additional money for repairs.

Summary:

Assessing your goals, time-commitment and financial focus will help you be more strategic in your efforts to be a successful real estate investor. Additionally, being clear on your objectives will help you focus your efforts and avoid wasting time.

How to Check and Repair Your Credit

People who never had to do anything with credit scores and then encounter them for the first time when applying for a loan can often be baffled by what they learn. A

or a school, car or mortgage loan, your credit score will help determine your approval.

Even insurance companies charge higher rates to people with poor credit history.

 

Where To Check Your Credit Score

 

It is important to know your credit score, particularly if you are planning to apply for a credit card or a loan. You can have more than one credit score and your credit score can vary when you check it. You are entitled to a free credit report from each of the three credit reporting agencies: Equifax, Experian, and TransUnion, once every 12 months. You can also review your credit score for free at www.AnnualCreditReport.com.

 

The Difference Between no Credit Score and a Bad Credit Score

 

Credit scores can be determined through factors like your payment history, amounts owed, length of credit history, total debts and recent inquiries. However, there are times when a person has no credit score. This happens when a person has never used a credit card or never had a loan payment to make.

 

There are also cases of people with bad credit scores. It is harder to improve a bad credit score than it is to build a credit score when you don’t initially have one. Bad credit is defined as a past failure to make your obligated credit payments on time, resulting in a credit score below 620.

record items, and too many inquiries.

 

Whether you have no credit or bad credit score, you need to work on improving your credit.

 

Ways To Fix Credit Scores

secured credit card is backed up by a savings account to be used as collateral on
secured credit card is backed up by a savings account to be used as collateral on
the credit available on your card and can help establish the credit rating of the

 

People who find themselves in a situation where they have no credit scores are usually advised to apply for a secured credit card to start their credit history. A

 

 

cardholder. The key to increase your credit score after obtaining a secured credit

another credit card.

 

People with bad credit scores can begin the “repairing” process by requesting free credit

company who listed the information on your credit report and wait for their response for at least 45 days. If you were successful, the bureau will make the necessary changes and alert other credit bureaus of the changes. You will be able to receive an updated copy of your credit report.

 

It is also wise to deal with past dues as it affects 35% of your credit score. There might be instances where some of your accounts are charged off but if you want to get approved for new credits and loans, settle your charged offs. Remember that you are still responsible for your charged off balance and they can make loan applications in the future hard or even impossible to get.

 

There are several free credit consultation companies who are willing to assist and advise you with ways to improve your credit history.

 

Applying for a secured credit card is also a good way to quickly rebuild your credit score, as these cards are designed to help people with a credit problem.

 

Repairing your credit scores cannot happen overnight and some negative marks can remain on your credit report for as long as seven years. That is why it is very important to maintain your credit score.

Getting Started with Residential Land Development

There are those of you who would like to pursue land development, but you lack the knowledge and courage to do so. I’ll try to help you learn a little more about it with 3 basic tips. The courage part is something you’ll have to work on yourself. Get some guts dude!

  1. Discuss Financing Options with Banks, Brokers, and Private Lenders

It’s common practice to have a discussion with a bank before buying a car or house. This helps you figure out what you can afford. It also helps you understand the shopping process and what you need to do to secure the loan. The same applies to pursuing a land development project. Find out how much money is needed for a down payment and what loan terms are available. This will help you understand what types of projects will work for you. You will also know if you need to bring on any partners. This takes us to tip number 2.

     2. Find Some Partners

Don’t let greed get in the way of bringing the right partner into your project. You’re likely to lose a lot more money with ‘rookie mistakes’ than you would lose by sharing the profit with a good partner. I use 3 different types of partners to do development projects.

  • Private money lenders will loan the money needed for the project and have some advice or resources that will help you.
  • Joint venture partners are also a great option. They invest their own money and can offer expertise and effort.
  • Other investors and developers are important if you want to pass on the project for a finder’s fee.

      3. Find Some Property

As with most real estate, a good real estate agent can be helpful in finding the right property. Search the MLS or websites like Redfin.com for properties that are oversized compared to the surrounding properties. These are the types of properties that can be subdivided into smaller lots. You can also drive around your local market and search Google Maps for oversized properties.


    Go through these 3 steps and start finding some development opportunities. You can learn and network while you go through the process. Peace be the journey.

Suggestions for First Time Flippers

Buying real estate properties for a bargain, fixing them up and then reselling them for a profit is a great way to make money as a real estate investor. This is often referred to as “house flipping” or doing a fix-and-flip.  You look for a home, buy it cheap, fix the home up, then sell it for more than what it costs you to buy and fix it up.  You can make a huge profit. There are a few ways to improve the experience or ensure you do not lose money.

Plenty of real estate savvy investors are making money with fix-and-flips, but while it looks and sounds easy to do, house flipping has some risks involved. If there are more repairs than estimated, the flipped property does not sell immediately and/or you encounter other unexpected issues, one might not break-even.

Here are several suggestions to help you be successful:

  • Get a Mentor:

Successful “flippers” educate themselves and know the ins-and-outs of the real estate market. If you are just getting started, one of the ways you can get off on a good foot is by finding a successful house flipper to mentor you. The things these seasoned investors have experienced or learned along the way are invaluable. Offer a percentage of your profit for advice if you need to. Then do your research on properties in your local area and find a house you want to make an offer on. 

  • Save Money On Materials

Buy the materials to fix up your house yourself.  Contractors do supply materials but they will mark up prices. If you buy the materials yourself, you will save money and only pay for labor. 

Because costs for materials vary, it’s best to get to know your local stores. Some stores who offer discounts to contractors will give you the same deal if they know you are an investor and plan to do more than one house. Don’t be afraid to ask for a discount.

Home Depot, Lowe’s and Costco offers great deals. Also watch for any clearance sales on materials. You can also go to second-hand stores to find great deals at a lesser price than buying new materials.

  • Save Money on Labor

Some investors buy a house during off-season. This way they can complete the job on time since contractors have less of a workload on their hands and can focus more on the job you have for them. Contractors are sometimes cheaper in the off-seasons.

Hire reputable sub-contractors instead of a contractor and run the job yourself. This will save you money because a contractor also marks up the price of the sub-contractor they hire. 

Doing some of the work yourself will also cut labor cost.

  • Save Money and Time by Using a Realtor

Once the home is fixed-up and you’re ready to sell the house (vs. keeping it as a buy-and-hold property), studies show if you use a reputable real estate agent, your property will sell quicker than selling without one. The longer you hold on to the property, the more holding cost you incur. Realtors know plenty of possible buyers and having them list your house on the MLS helps sell your property faster. While they are selling your house, you can spend your time looking for your next deal.

Overall, utilizing a few basics will help you in the process of doing a fix-and-flip. All it takes to be successful is having the right attitude and information. And getting out there and doing it.

Knowledge + Action = Results

4 Steps to Overcome Analysis Paralysis

Most beginning investors will deal with analysis paralysis or overthinking a situation so that action is never taken.  A couple of the biggest causes behind analysis paralysis are lack of confidence and fear of failure.  Beginning investors feel like they do not know enough to take action.   Here are some steps that can help one overcome analysis paralysis.

  1. Remember your goals and what you would like to accomplish with real estate.  Write you goals down somewhere you can look at them on a regular basis.  If you have not set goals, you need to.  Having goals in front of you will help give you the motivation to take action.
  2. No one is going to do it for you.  This is your business so don’t count on someone coming to help.  You need to take action because if you don’t, things won’t happen. 
  3. Find your fuel.  This is a key in getting moving.  This is also different for everyone.  Why do you want to invest in real estate?  What will investing in real estate help you achieve?  Lite that fire within you, start taking action, and never look back. 
  4. Are you willing to do what must be done?  Investing in real estate is not easy.  It takes perseverance.  You will be told no over and over again.  The investors that are successful figure out how to get through whatever obstacle is put in front of them.  They are willing to do what must be done to be successful. 

Taking action with investing is the most important thing we do.  Of course we need knowledge but if knowledge never turns into action we will never make money.  It is important to understand that we will not be perfect as we get started investing and we will make mistakes, but it is all part of the learning process.  As we continually take action, we will make money investing in real estate.   

Three Common Obstacles for New Investors

The career of a real estate investor is riddled with obstacles. The very job of an investor is to find and fix problems and overcome obstacles. However, there are difficulties that can blindside new investors and stop them before they even start. This article will illustrate three common obstacles investors will face upon entering the business.

  1. First and foremost, new investors will be hit with the realization that real estate investing is not a get rich quick program. This job can be equated to running a marathon rather than a sprint. Although a person can make sizable sums of money rather quickly, a person will not get rich overnight. In order to make it long term, a person must be persistent and consistent. There must be discipline to complete the necessary tasks to be successful. Therefore, the first obstacle is to overcome the idea that you will be able to retire with little effort.
  2. The second obstacle is gathering the right people for your power team. A successful investor will need other industry professionals to help with their business. The right person for your power team is someone that will support you in what you are trying to accomplish. We need to surround ourselves with like-minded individuals and limit our interaction with negative people. There are many industry professionals that have a limiting mindset and will only serve to bring you down; therefore, these connections should be avoided at all costs. Work to bring positive and supportive people onto your power team.
  3. When a new investor jumps into the game they are usually anxious to gobble up all the information they can get. There are countless “experts” in the field that have a special way of making the business work. You can jump from video to video and article to article outlining all the “best” ways to make money in the real estate industry. This information overload should be avoided at all costs. A new investor should find one strategy and focus on it until they are comfortable enough to move forward without new information throwing them off track. It is easy to hear so much information that it places you in a state of inaction. Beware of this trap.

All new investors will encounter obstacles that are unknown until they pop up. All new investors should prepare themselves to overcome the three difficulties outlined in this article. Remember, stay focused and be consistent to meet with success.

The Importance of a Positive Attitude in Real Estate Investing

Having a positive attitude is extremely important to becoming successful in real estate investing, as it is in any successful endeavor in life.  Negative speech and thoughts can be debilitating and keep a person from accomplishing their goals.  Learn to change the way you talk to yourself and others and you will change the outcome of your life’s journey. 

For example, let’s look at the subject of attempting to get into better and healthier physical shape.  If your thoughts and speech follow the lines of, “I can never lose weight,” or “I can’t stop eating sweets,” or “No matter how much a work out, I never get more muscular,” you will create a mind-set that causes you to lose faith in the fact that with proper eating and exercise you can lose weight, get stronger, be healthier and look better.  It is important to start have the right self-talk. Try changing the phrases you repeat over and over again to, “I know I can lose weight if I eat healthy foods and exercise regularly,” “I will gain muscle if I work out 3-4 times a week consistently,” and “I enjoy eating healthy protein, vegetables and fruit, and I feel better when I do.”

This same technique works when it comes to investing in real estate.  If you keep making statements to yourself and others such as, “I can’t ever find the time to do this business,” “There are no deals to be found in this area,” “There are too many other investors in my area to compete with,” or “People will know I’m not very knowledgeable in investing when I talk to them” then stop. Change your self-talk to, “If I use proper time management I will find the time to be successful at this business,” “The more offers I make, the more deals I will create for myself,” “By being persistent, I will be the one to find the deals in my area,” and “The more times I talk with people, the more confident and knowledgeable I will become.”

Every endeavor and business adventure is a learning experience. With faith and confidence in yourself, you can be successful at the things you work hard for.  Talking in a positive manner can help build confidence and faith with which you can succeed, especially as your experience starts to prove your statements true.  Whatever you say and think will become your reality. Change the way you talk to yourself and others and you will change the direction of your life.  Now, go out and make it happen!