Negative Comments Should Never Define Your Financial Destiny!

Negative Comments Should Never Define Your Financial Destiny!

Life is difficult especially if you allow negativity to control your actions.  Far too often, we allow people’s opinions to define our expectations.  This is also true in the real estate investing world. As Response’s Director of Real Estate Education, I am constantly made aware of negative comments that can derail a blossoming real estate career.

In our world of high-speed Internet and with the growth of social media, it is easy to lose focus and get distracted from your personal financial goals.  This sometimes occurs when family, friends, or associates question your financial decisions.    If you allow these uninformed opinions to control your actions, you might soon doubt your decision to change your financial future using Response’s powerful training, tools, and resources.

Recently I had the opportunity of attending an NBA playoff game with several of my close friends.  While there, we talked about which Hall of Fame Players had influenced basketball the most.  Before the discussion ended, we had moved the conversation to the basketball players who had most impacted our lives.  After listening to my friends give their opinions, I said that Michael Jordan was the most influential player in my life.  When asked why, I responded with a quote from Michael Jordan himself.  He said, “If you accept the expectations of others, especially negative ones, then you never will change the outcome.”

This is especially true in the real estate field and establishing personal financial goals.  When your friends and associates offer ill-informed negative comments, they strike right at your emotional center.  Regardless of the fact that the negative comments are generally based on rumors and falsehoods, they can have an impact on your real estate decisions.  Perhaps you are ready to make that first offer, but your brother-in-law offers the comment that he read several negative comments online about investing in real estate education.  What do you do?

Let me give you a three-step process to keep you centered on real estate success.  First, and most important, you need to ignore mean-spirited feedback and responses based on false information.  Consider the comment of your “brother-in-law” about negative feedback he saw online.  Remember that comments found online are only opinions  and are often based on faulty or missing information.

The second step is to re-commit to working toward your personal goals.  You made the decision to pursue real estate education as a vehicle to achieve your financial objectives.  This education can change your life, but a specific action plan must be included with those goals.  So, step back and take concrete action to convert your education into a roadmap for financial success.

Step three Share your dreams with like-minded people.  It is critical that you associate with people who have a positive attitude.  These are the people who will rejoice in your success as you move forward.

Real estate investing is a key to wealth.  Andrew Carnegie said it best when he stated, “Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.”  Unfortunately, there are many people who have not come to this same conclusion.  When they offer negative comments and try to influence you to abandon your real estate goals, they are not your friends.  They are not your supporters.  Take their advice for what it is worth – nothing.  Your financial future is in your hands.  Negative comments should never define your financial destiny.

 

Calculating Cash on Cash

Calculating Cash on Cash

Knowing what you are earning on an investment is important in order to determine if you are making money or losing money. Understanding the type of investment you have is also vital. Knowing what is going on with an investment helps you make better financial decisions.

There are many ways to calculate investments. In this article we will concentrate on determining the Cash-on-Cash that an investment property will produce. What is Cash-on-Cash? Cash-on-Cash is the amount of return we make on an investment, usually our down payment. We take the money we have put in to the investment and calculate the amount of return we receive on our cash. As mentioned above, we will use the Cash-on-Cash method when using a mortgage to buy a property. What we are going to do is calculate our rate of return on our down payment, rehab or both.  Let’s look and see what kind of money we are making on a deal.

The house we are going to purchase will be sold to us for $200,000. We will put $50,000 down which is 25% of the purchase price. We get a loan for $150,000 at a rate of 3.8%. Our payment will be $699 per month. The rents on the house are $1,300 per month. In addition, the following expenses must be accounted for. A property manager will typically cost 10% of the gross rents, but we are going to manage the property ourselves because it is local and this will increase our rate of return. Vacancy will be 5% of the gross rents. Maintenance and upkeep will be $50 per month or $600 for the year. In addition, the property taxes are $775 per year. The homeowner’s insurance will cost $400 per year.

 

 

Let’s see what all of this looks like:

Rents                       $15,600 per year

Less Vacancy                 $780 per year

Less Mortgage             $8,388 per year

Less Property Taxes       $775 per year

Less Insurance                 $400 per year

Less Maintenance         $600 per year

Net Income                   $4,657 per year

 

Now, we are going to determine the Cash-on-Cash return we will be making with this property. We determine this by calculating the following:

$50,000     your down payment

$4,657     net income the property produced

To determine our rate of return on investment we would do the following:

4,657/50,000 is 9.3%

 

This 9.3% is the rate you have earned on your $50,000 down payment. Before you decide if you are going to buy a property, you can determine if your Cash-on-Cash return is something you would be happy to have. Remember, Cash-on-Cash is determined if you are financing a property. If you pay cash for a property, there will be another way to determine your investment rate. That will be talked about another time.

It’s a Numbers Game

It’s a Numbers Game

Every aspect of real estate investing is a numbers game, and you have to be okay with that. From the number of properties you look at to finding the right deal, to the number of offers you put in to getting one accepted, to the number of realtors you go through to finding a good one, and on and on. It’s all about the numbers.

 

I often hear clients say, “I can’t find a good realtor,” or “I can’t find the right properties,” or “I can’t get a property under contract.” When I ask how many realtors they have talked to or worked with, they say something like, “I have worked with 3 or 5, and I just can’t find a good one.” When I ask how many offers they have put in they say something like, “We have put in 5 or maybe 6 offers and still can’t get one accepted.” This can lead to discouragement, which can lead to frustration, which can lead to giving up.

 

This is one reason many people are not successful at investing in real estate. You have to do what it takes, and if going through 8 or 10 or more realtors is what it takes, you have to be willing to do that. If it takes submitting 20 or 25 offers to get a deal under contract, you have to be okay with that.

 

One of my most used words in real estate investing is, NEXT. Next property, next realtor, next contractor, next lender, NEXT.

 

Sure, some people get lucky and find the right realtor right off the bat or they run into the perfect deal that goes under contract, but that is the exception. How many does it take to find the right one? It takes as many as it takes, and you need to be okay with that.

 

In real estate investing, you will always be shopping for the right deals and the right people. Find ways to stay focused on doing what it takes. Learn to use the word NEXT with a smile. Avoid any negative self-talk. You can do this! Keep at it, and happy shopping.