Walk into any business in America and take a look around. Ignore your surroundings; I want you to zero in on the people. You can tell a lot just by looking into the eyes of the employees. The average worker – whether a $7.00 per hour fast food worker or a $75,000 per year mid-level executive – has one thing in common. They all have the same glazed over look in their eyes. Why?
They have no motivation, no direction, and no purpose. They're almost literally sleepwalking through life, working just hard enough not to get fired. In essence they're living two lives. One life puts food on their table and – if they're lucky – pays for gas and everything else they need to survive. The other life starts Friday afternoon at 5:00 and ends Sunday night shortly before they go to sleep. For a brief moment in time their eyes have life. They're living for the weekend.
You've chosen a different path. You had hope for a better future for yourself and your family. So you opted for the independence of real estate investing. The boundless opportunity to earn what you're worth and not what a market segment report says your time is worth. Yet, you may feel yourself falling into the same trap. Here's how to claw your way out and rise to the top.
You've read countless real estate rags to riches stories and they've shown you that more is possible than you're achieving right now. These stories all have one thing in common: Anyone that succeeds in real estate or in life succeeds not primarily because they come across a secret never before discovered technique that allows them to succeed. They succeed because they get up off the couch and get started.
It doesn't matter if you still work a full time job and invest on the side or you've had some investing success. Dust off your dreams, refine or redefine your goals and work your plan. This is an exciting time in real estate. Millions of dollars can be made if you take action today. Don't wait for next week to do what you should be doing right now. You've heard the expression, "Winners never quit and quitters never win." An updated statement should be, "Winners never quit and quitters never start."
What is your plan? If you're not sure, figure it out. Go back to your foundation and start doing something proactive on a daily basis to propel you closer to real estate investing success. Look at some listings or drive by a few properties you'd like to look at. Get the ball rolling. As you start moving, you'll feel the fire coming back into your eyes. You'll start getting excited. Ride that wave of excitement and see how far it can take you.
Make an offer on a few properties. If you hear the word "no" don't automatically assume that you're personally being rejected. Ask plenty of questions and listen to the answers. Most of the time the owner will choreograph a solution that will make the purchase possible. Will you succeed every time? Yes you will. If you define success as learning something that will help you on future deals I guarantee you will succeed every time. You won't close every deal you try. But each experience will show you a new perspective and give you additional insights that could help you devise an alternative that might be acceptable to that particular seller. If it doesn't work, file the experience away in your mind for the future and move on to the next deal. That small success will eventually result in a property in your portfolio and a check in your bank account.
Whatever you do, take the positive energy you've gained and keep moving. An object at rest tends to stay at rest; an object in motion tends to stay in motion. Move on to the next property and challenge yourself to see how far you can take the process. Success is just around the corner. If you're parked, you'll never find it.
Success is simple; mediocrity is hard. You read that right. Mediocrity is hard. It's a difficult existence to sleepwalk through life knowing that it doesn't get any better than it is right now. It may be difficult to hoist yourself up off the couch, but it's a whole lot easier than going through life knowing that all you have to look forward to in the next 40 years is a ride in a hearse and a million years of pushing up daisies.
Instead, live up to your full potential as a real estate investor. Achieve your dreams, change your income tax bracket, and give yourself the kind of life you've dreamed about. Not a life of mediocrity, but rather, a life of distinction that allows you to be and achieve everything you have hoped and planned for: A life you can call your own – a life you can spend with those you love.
Wednesday, May 13, 2009
Making Money in Today’s Real Estate Market
If you have ever thought about investing in real estate, now is the time. You may be thinking that since the real estate market is in the tank at the moment and that it can’t possibly be a good time to get into this market. But you couldn’t be more wrong! There are more foreclosures than ever right now and that presents a ton of opportunity for us investors who have been waiting for prices like what we are now seeing.
I know the media is out there saying the sky is falling. However, there are many successful investors quietly sitting back and laughing as they make money hand over fist. Let me let you in on a little secret that all successful investors know...The time to buy is now!
It’s the perfect time to get involved right now as a real estate investor. Lenders are currently finding themselves in situations where they have loans that are not getting paid, and home owners are being forced into foreclosure everywhere you turn. There are banks all over the place with so much inventory, they don’t know what to do with it. They simply cannot move it quickly enough. There are also thousands of incredibly motivated sellers just waiting for someone to come along and save them from foreclosure. That ‘someone’, could be you.
There are a few things that you should keep in mind before getting started:
1) Never pay too much for your investment property. There are plenty of homes available for very reasonable prices. You make your money when you buy! You should never pay more than 65% of the after-repaired value of the home. Don’t forget that you will have other costs to pay, such as holding costs, closing costs, as well as any money that you spend on the rehab of the home to bring it up to rentable or saleable condition. Bottom line, you need to be able to still turn a profit.
2) Use none or as little of your own money as possible when you purchase an investment property, if at all possible. If you are using your own money, you will be limiting your own cash flow. You can borrow money from a conventional lender and put as little down as possible, or you can also get a hard money loan for the cost of the property and the rehab costs.
3) Don’t do your own renovations. You have probably seen them on TV shows, those house flipping pros doing their own rehab work. However, you won’t be able to do more than one flip at a time if you’re doing your own work. You need a solid power team, including reputable skilled contractors who will fulfill this end of things.
4) To get great deals, buy from motivated sellers. Banks are quite motivated these days, being that they have so much inventory right now due to all the foreclosures. There is also a system to find motivated sellers out there called the Four D’s. Look for them. They are: Death, Divorce, Disaster, Disease. All of these reasons will produce motivated sellers and you will be helping these folks out who have been hit by these types of life events, by purchasing their home before they go into foreclosure.
5) He who mentions dollar amounts first loses. It’s a known fact. The first rule of negotiation is to wait for the other person to name a price. List all of the items on the rehab punch list during the counteroffer phase, as negotiating power.
6) Finally, The best thing that you can do for your own success in real estate is follow and focus on a tried and true system for investing in real estate. Find something that resonates with you, stick to it, focus on it and take action-that’s where most folks fall short. Just do it! Stick to a tried and true system and you will be making money in no time at all.
I know the media is out there saying the sky is falling. However, there are many successful investors quietly sitting back and laughing as they make money hand over fist. Let me let you in on a little secret that all successful investors know...The time to buy is now!
It’s the perfect time to get involved right now as a real estate investor. Lenders are currently finding themselves in situations where they have loans that are not getting paid, and home owners are being forced into foreclosure everywhere you turn. There are banks all over the place with so much inventory, they don’t know what to do with it. They simply cannot move it quickly enough. There are also thousands of incredibly motivated sellers just waiting for someone to come along and save them from foreclosure. That ‘someone’, could be you.
There are a few things that you should keep in mind before getting started:
1) Never pay too much for your investment property. There are plenty of homes available for very reasonable prices. You make your money when you buy! You should never pay more than 65% of the after-repaired value of the home. Don’t forget that you will have other costs to pay, such as holding costs, closing costs, as well as any money that you spend on the rehab of the home to bring it up to rentable or saleable condition. Bottom line, you need to be able to still turn a profit.
2) Use none or as little of your own money as possible when you purchase an investment property, if at all possible. If you are using your own money, you will be limiting your own cash flow. You can borrow money from a conventional lender and put as little down as possible, or you can also get a hard money loan for the cost of the property and the rehab costs.
3) Don’t do your own renovations. You have probably seen them on TV shows, those house flipping pros doing their own rehab work. However, you won’t be able to do more than one flip at a time if you’re doing your own work. You need a solid power team, including reputable skilled contractors who will fulfill this end of things.
4) To get great deals, buy from motivated sellers. Banks are quite motivated these days, being that they have so much inventory right now due to all the foreclosures. There is also a system to find motivated sellers out there called the Four D’s. Look for them. They are: Death, Divorce, Disaster, Disease. All of these reasons will produce motivated sellers and you will be helping these folks out who have been hit by these types of life events, by purchasing their home before they go into foreclosure.
5) He who mentions dollar amounts first loses. It’s a known fact. The first rule of negotiation is to wait for the other person to name a price. List all of the items on the rehab punch list during the counteroffer phase, as negotiating power.
6) Finally, The best thing that you can do for your own success in real estate is follow and focus on a tried and true system for investing in real estate. Find something that resonates with you, stick to it, focus on it and take action-that’s where most folks fall short. Just do it! Stick to a tried and true system and you will be making money in no time at all.
Let's Talk Due Diligence....It Is Vital for Real Estate Success....Right?
Wikipedia: "Due Diligence" is a term used for a number of concepts involving either the performance of an investigation of a business or person, or the performance of an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for acquisition."
Can you say with confidence in your business that you practice Due Diligence in all phases of your business? How do YOU define this in your business routine?
Buyers should be prudent and diligent right? There is typically a due diligence clause in most sales contracts. But I just know you can all think of buyers who were far from diligent. However as Realtors you educated them so that they made informed buying decisions.
Due Diligence done the right way takes considerable time and effort and I think many of us just skim over the details from time to time. Not a wise move....huge financial and personal loss could result.
**This concept clearly applies to personal relationships as well**
If you are buying real estate for investment purposes and plan to turn that home over, Due Diligence is critical to success.
But here is an interesting concept....as a Realtor, do you practice Due Diligence on your sellers, buyers and investors? If not you should. You all know there are good and bad buyers out there, those that can take up all of your time, can get you in legal trouble in a number of ways, can even be dangerous to you and your business. In this market you may be tempted to grab onto any buyer you can get your hands on.....and I don't blame you one bit! But perform some D.D. on those buyers and sellers to see what their motivation is and if in doubt, move onto the next....far better to be safe than sorry...don't you agree?
I am sure there are plenty of stories out there where lack of Due Diligence has resulted in some mind boggling and scary stories. Sure would like to hear yours. You can be of great help to others out there.
No matter what your business is, Real Estate or not...keep in mind Due Diligence. Large corporations perform D.D. routinely when they are thinking of acquiring another business and you can best believe this process can take months because the stakes are so high. Well the stakes are high for you too.
So next time that buyer or seller calls you, think about it and conduct a little Due Diligence and feel good about where that relationship is headed. The ultimate goal of course is that long term relationship and you want to feel good about that person being a part of your life for months or in many cases years to come.
You know what they say: An ounce of prevention is worth a pound of cure....
Same thing applies here.
Good luck to all of you and may your D.D. be ongoing and your businesses thrive.
Can you say with confidence in your business that you practice Due Diligence in all phases of your business? How do YOU define this in your business routine?
Buyers should be prudent and diligent right? There is typically a due diligence clause in most sales contracts. But I just know you can all think of buyers who were far from diligent. However as Realtors you educated them so that they made informed buying decisions.
Due Diligence done the right way takes considerable time and effort and I think many of us just skim over the details from time to time. Not a wise move....huge financial and personal loss could result.
**This concept clearly applies to personal relationships as well**
If you are buying real estate for investment purposes and plan to turn that home over, Due Diligence is critical to success.
But here is an interesting concept....as a Realtor, do you practice Due Diligence on your sellers, buyers and investors? If not you should. You all know there are good and bad buyers out there, those that can take up all of your time, can get you in legal trouble in a number of ways, can even be dangerous to you and your business. In this market you may be tempted to grab onto any buyer you can get your hands on.....and I don't blame you one bit! But perform some D.D. on those buyers and sellers to see what their motivation is and if in doubt, move onto the next....far better to be safe than sorry...don't you agree?
I am sure there are plenty of stories out there where lack of Due Diligence has resulted in some mind boggling and scary stories. Sure would like to hear yours. You can be of great help to others out there.
No matter what your business is, Real Estate or not...keep in mind Due Diligence. Large corporations perform D.D. routinely when they are thinking of acquiring another business and you can best believe this process can take months because the stakes are so high. Well the stakes are high for you too.
So next time that buyer or seller calls you, think about it and conduct a little Due Diligence and feel good about where that relationship is headed. The ultimate goal of course is that long term relationship and you want to feel good about that person being a part of your life for months or in many cases years to come.
You know what they say: An ounce of prevention is worth a pound of cure....
Same thing applies here.
Good luck to all of you and may your D.D. be ongoing and your businesses thrive.
Learning To Say No
Let’s face it, making a bad deal is far worse than not making a deal at all. It may be difficult to walk away from a deal, but very necessary if an investor is not getting the deal he/she desires. The ability to reject a deal if it is not up to your standards and requirements is a useful tool to have in order to avoid a potential pitfall. When negotiating a deal, it is essential to have a game plan in place. By doing so, you can negotiate from a position of strength. A mental attitude of being prepared to walk away if you cannot make the numbers work is vital.
Before negotiating with the seller you should know where you money is coming from. Is your deal being financed through a bank, a private mortgage broker, or from seller financing (which puts you in a weaker position than the seller because you opt to become more dependent on them).
An investor should also know exactly know why the seller is selling. Find out what you could potentially be getting into in regards to this deal such as if the house has any structural damage or any financial problems attached to it. Familiarize yourself with exactly what it is you are buying and what is the target property’s stand alone value. What is the property worth “as is” right now. You should also discern how the seller would need payment. Is the payment is to be received in one lump sum or payment over time with the offer of a good interest rate.
The idea of making a deal should only be entertained only if it could be potentially profitable. It should be workable for the buyer and the seller. Walk away if the intentions of the seller are unclear. The guidelines of the agreement should be carefully defined and understood by both parties involved. Also, it is imperative to include a Material Adverse Change (MAC) clause. This aims to give the buyer the right to terminate any agreement before its completion or the ability to re-negotiate the terms of the agreement if information is found out during due diligence that is detrimental to the target asset.
As a buyer, the bolstering of due diligence results in avoiding a possible bad bargain. The MAC clause offers buyers an "out" legally and refers to events in the time frame from the announcement of deal to the closing date of the deal. If new evidence that could hinder the long term value of the property is presented, you can opt to walk way or re-negotiate.
Knowing your priorities and what is important to you is also valuable. Walk away if a deal compromises your integrity or if you feel that you are getting involved in an agreement that you feel is dishonest, unethical, or immoral…trust your instincts. Another element to consider is what you have to gain from the deal. Does it have long term potential or is this sacrificed for short term gain? Immediate gratification is not worth mortgaging your future or having the property investment not offer a future profit.
Be clear on the top price, or maximum purchase price, you are willing to pay when final negotiation has been conducted. Be familiar with the current retail market values in the area. Estimate how much you will be paying for repairs, closing, holding, and selling costs, profit potential and factor them into to the overall equation. Knowing the competition, all costs, and the capabilities of the property will allow for a more educated decision.
Having an exit plan is also very important. For example, if you plan to flip the house, do you already have investors in place do you have investors already? If you do end up walking away what would your alternatives be? If alternatives are better than the deal at hand, walking away would be in your best interest.
Before negotiating with the seller you should know where you money is coming from. Is your deal being financed through a bank, a private mortgage broker, or from seller financing (which puts you in a weaker position than the seller because you opt to become more dependent on them).
An investor should also know exactly know why the seller is selling. Find out what you could potentially be getting into in regards to this deal such as if the house has any structural damage or any financial problems attached to it. Familiarize yourself with exactly what it is you are buying and what is the target property’s stand alone value. What is the property worth “as is” right now. You should also discern how the seller would need payment. Is the payment is to be received in one lump sum or payment over time with the offer of a good interest rate.
The idea of making a deal should only be entertained only if it could be potentially profitable. It should be workable for the buyer and the seller. Walk away if the intentions of the seller are unclear. The guidelines of the agreement should be carefully defined and understood by both parties involved. Also, it is imperative to include a Material Adverse Change (MAC) clause. This aims to give the buyer the right to terminate any agreement before its completion or the ability to re-negotiate the terms of the agreement if information is found out during due diligence that is detrimental to the target asset.
As a buyer, the bolstering of due diligence results in avoiding a possible bad bargain. The MAC clause offers buyers an "out" legally and refers to events in the time frame from the announcement of deal to the closing date of the deal. If new evidence that could hinder the long term value of the property is presented, you can opt to walk way or re-negotiate.
Knowing your priorities and what is important to you is also valuable. Walk away if a deal compromises your integrity or if you feel that you are getting involved in an agreement that you feel is dishonest, unethical, or immoral…trust your instincts. Another element to consider is what you have to gain from the deal. Does it have long term potential or is this sacrificed for short term gain? Immediate gratification is not worth mortgaging your future or having the property investment not offer a future profit.
Be clear on the top price, or maximum purchase price, you are willing to pay when final negotiation has been conducted. Be familiar with the current retail market values in the area. Estimate how much you will be paying for repairs, closing, holding, and selling costs, profit potential and factor them into to the overall equation. Knowing the competition, all costs, and the capabilities of the property will allow for a more educated decision.
Having an exit plan is also very important. For example, if you plan to flip the house, do you already have investors in place do you have investors already? If you do end up walking away what would your alternatives be? If alternatives are better than the deal at hand, walking away would be in your best interest.
Sunday, May 10, 2009
Know Your Real Estate Laws
The real estate business is fraught with scams, fraud and unethical practices. As such, it is a highly-regulated business. As a real estate investor, you are treading on areas of law which you should be familiar. A good real estate attorney will help you along the way, but you should stive to educate yourself as well. At a minimum, you should be aware of the following:
Landlord-Tenant Rules
What exactly does it take to evict someone? How much does it cost? How long does it take? Can I serve notices myself, or do I need a process server? Are there special housing rules that apply in my city? Is there a limit to the amount of rent increases I can ask for? Is there a limit to security deposits? Do I have to give interest on a security deposit to my tenant? How long can I hold a security deposit after the tenant leaves? Is there a minimum grace period before I can charge a late fee?
Legal Documents
What form of contract, deed, mortgage, note, lease, etc are commonly used in my area? Are there special forms required for licensed real estate agents? Am I required to use these forms if I am an agent acting as a principal? You should learn the local forms and how to custom-tailor them for your needs. A good attorney and my Nuts & Bolts of Creative Real Estate Transactions course will help.
Recording Rules
Where do legal documents get recorded? What are the filing fees? What format must the documents follow? Is there a transfer tax? Contact your local title company or the County recorder's office for information.
Disclosure Laws
What must be disclosed to a buyer or tenant about the property? Lead? Asbestos? Rapists in the neighborhood? You can usually find this information by contacting your local real estate investor's association.
Interest Rate Limits & Other Loan Regulations
What is the limit for charging interest until it becomes usury? In most states the limit is 21%; a few states have no limit. Once you loan money or sell houses on credit with owner financing, you may have to comply with Federal Regulation Z (Truth-in-Lending), the Real Estate Settlement Procedures Act (R.E.S.P.A.) and other state counterparts.
Fair Housing
Can I discriminate against certain groups when I rent my property? Obviously, you cannot discriminate against people based on race, religion, sex, age, etc. However, some state and cities have more peculiar restrictions, such New York City. where you can't discriminate against lawyers!
Licensing Laws
Learn Real Estate Agent Licensing Laws. In some cases, your practices as an investor may be treading close that of an agent. Check with your state licensing agency for more information. If you are rehabbing homes, you may need to comply with building regulations and be licensed as a homebuilder or developer. Also, be aware of Consumer Protection laws that regulate high-pressure sales, foreclosure purchases, sale-leasebacks and other distress real estate transactions.
Landlord-Tenant Rules
What exactly does it take to evict someone? How much does it cost? How long does it take? Can I serve notices myself, or do I need a process server? Are there special housing rules that apply in my city? Is there a limit to the amount of rent increases I can ask for? Is there a limit to security deposits? Do I have to give interest on a security deposit to my tenant? How long can I hold a security deposit after the tenant leaves? Is there a minimum grace period before I can charge a late fee?
Legal Documents
What form of contract, deed, mortgage, note, lease, etc are commonly used in my area? Are there special forms required for licensed real estate agents? Am I required to use these forms if I am an agent acting as a principal? You should learn the local forms and how to custom-tailor them for your needs. A good attorney and my Nuts & Bolts of Creative Real Estate Transactions course will help.
Recording Rules
Where do legal documents get recorded? What are the filing fees? What format must the documents follow? Is there a transfer tax? Contact your local title company or the County recorder's office for information.
Disclosure Laws
What must be disclosed to a buyer or tenant about the property? Lead? Asbestos? Rapists in the neighborhood? You can usually find this information by contacting your local real estate investor's association.
Interest Rate Limits & Other Loan Regulations
What is the limit for charging interest until it becomes usury? In most states the limit is 21%; a few states have no limit. Once you loan money or sell houses on credit with owner financing, you may have to comply with Federal Regulation Z (Truth-in-Lending), the Real Estate Settlement Procedures Act (R.E.S.P.A.) and other state counterparts.
Fair Housing
Can I discriminate against certain groups when I rent my property? Obviously, you cannot discriminate against people based on race, religion, sex, age, etc. However, some state and cities have more peculiar restrictions, such New York City. where you can't discriminate against lawyers!
Licensing Laws
Learn Real Estate Agent Licensing Laws. In some cases, your practices as an investor may be treading close that of an agent. Check with your state licensing agency for more information. If you are rehabbing homes, you may need to comply with building regulations and be licensed as a homebuilder or developer. Also, be aware of Consumer Protection laws that regulate high-pressure sales, foreclosure purchases, sale-leasebacks and other distress real estate transactions.
It's Still Location, Location, Location
Contrary to what many creative investing courses may tell you, the old standby "location,location, location" still matters. I've seen both courses and speakers attempt to dispel this adage because the technique being promoted miraculously makes physical location a non-issue. I was foolish enough to buy into it. You don't have to.
If you're wholesaling, does location matter? Certainly. If you've spent any time in this area, you quickly realized that some areas are better than others not only for locating deals, but for moving them as well. True, you're not looking for the end buyer, but what about the rehabber who will buy the deal from you? That investor will have the best success selling the property as a retail property or filling the property as a keeper if it's in a desirable location with convenient amenities, good schools, etc. This should be an important consideration for you if you want to attract serious rehabbers and a large number of them. Yes, if you've got good numbers, you can still get the deal done, but why make it harder than it has to be? Supply the market what it wants.
Where you happen to fall in the investor food chain doesn't change the location variable. Regardless of whether you're bird-dogging, optioning, wholesaling, rehabbing, owner financing, lease optioning, short selling, etc., at some point there has to be an end user with some cash to make it profitable.
As always in real estate investing, there are no hard and fast rules. One caveat to the location issue might be if you're in a scorching seller's market and you sell everything for cash. The challenge in that situation is when you're buying since in you're on the wrong side of the market. Perhaps it requires working harder, smarter, etc., but when you locate a deal, it doesn't really matter where it is because your business model is in and out. The only trick there is knowing when to begin to weigh location a little heavier as the market cycles back to a balanced market or a buyer's market.
But what if you like to keep some properties and offer creative terms such as owner financing or lease options? Again, in a strong seller's market, it's not that big a concern because it's true that your phone will ring off the hook. You get to decide how many hoops you want your end user to jump through. It's great to be able to funnel prospects to voicemail, a web site, and require them to fax a copy of their driver's license and an application before you even speak to them. Been there, done that.
However, if you happen to get lazy on your screening process and put some not-so-qualified folks in your property, that not-too-desirable location could come back to bite you. You end up evicting or foreclosing on your residents or they just leave after a while. The market's changed on you and is now a buyer's market. Everybody and their mother is offering owner financing, lease purchases, free rent, free vacations, free dvd's, whatever just to attract a prospect. No longer are there any hoops for the end user, other than can you fog a mirror? Which properties will go first, second, third? It won't be the one that's a bit out of the way, in a mediocre school district, or the one where the grocery store is five miles away.
And do you really want to drive an hour to change the locks, make sure the cleaning folks did a good job, check to see if the yard's actually getting done, etc.? When you're in a strong buyer's market, this routine can become the norm. So, don't forget to factor in "proximity" to your normal stomping grounds when evaluating location.
I ask these questions to cause you to think about these issues. I didn't. I happen to still own what I call "hassle" properties that fit these criteria. I didn't expect to own them today. They were supposed to be gone long ago. After all, if you're selling with terms, location doesn't matter, right? Yeah, right.
Give the market what it wants, and ultimately, the market wants a good location.
If you're wholesaling, does location matter? Certainly. If you've spent any time in this area, you quickly realized that some areas are better than others not only for locating deals, but for moving them as well. True, you're not looking for the end buyer, but what about the rehabber who will buy the deal from you? That investor will have the best success selling the property as a retail property or filling the property as a keeper if it's in a desirable location with convenient amenities, good schools, etc. This should be an important consideration for you if you want to attract serious rehabbers and a large number of them. Yes, if you've got good numbers, you can still get the deal done, but why make it harder than it has to be? Supply the market what it wants.
Where you happen to fall in the investor food chain doesn't change the location variable. Regardless of whether you're bird-dogging, optioning, wholesaling, rehabbing, owner financing, lease optioning, short selling, etc., at some point there has to be an end user with some cash to make it profitable.
As always in real estate investing, there are no hard and fast rules. One caveat to the location issue might be if you're in a scorching seller's market and you sell everything for cash. The challenge in that situation is when you're buying since in you're on the wrong side of the market. Perhaps it requires working harder, smarter, etc., but when you locate a deal, it doesn't really matter where it is because your business model is in and out. The only trick there is knowing when to begin to weigh location a little heavier as the market cycles back to a balanced market or a buyer's market.
But what if you like to keep some properties and offer creative terms such as owner financing or lease options? Again, in a strong seller's market, it's not that big a concern because it's true that your phone will ring off the hook. You get to decide how many hoops you want your end user to jump through. It's great to be able to funnel prospects to voicemail, a web site, and require them to fax a copy of their driver's license and an application before you even speak to them. Been there, done that.
However, if you happen to get lazy on your screening process and put some not-so-qualified folks in your property, that not-too-desirable location could come back to bite you. You end up evicting or foreclosing on your residents or they just leave after a while. The market's changed on you and is now a buyer's market. Everybody and their mother is offering owner financing, lease purchases, free rent, free vacations, free dvd's, whatever just to attract a prospect. No longer are there any hoops for the end user, other than can you fog a mirror? Which properties will go first, second, third? It won't be the one that's a bit out of the way, in a mediocre school district, or the one where the grocery store is five miles away.
And do you really want to drive an hour to change the locks, make sure the cleaning folks did a good job, check to see if the yard's actually getting done, etc.? When you're in a strong buyer's market, this routine can become the norm. So, don't forget to factor in "proximity" to your normal stomping grounds when evaluating location.
I ask these questions to cause you to think about these issues. I didn't. I happen to still own what I call "hassle" properties that fit these criteria. I didn't expect to own them today. They were supposed to be gone long ago. After all, if you're selling with terms, location doesn't matter, right? Yeah, right.
Give the market what it wants, and ultimately, the market wants a good location.
Is Your Real Estate Investing Comfort Zone Being Threatened?
Have you ever imagined yourself putting through a multi-million dollar deal, going to closing and picking up a check with six zeros? It's the ultimate dream for real estate investors. But why must it be a dream when it can just as easily be a reality. Every day there are real estate investors making offers on high end houses just as there are real estate investors making offers on median price range houses and below. There are just a lot fewer going after the big game.
High dollar houses naturally instill fear in real estate investors as they feel if they make a mistake they will be sued for hundreds of thousands. Real estate investors perceive they need perfect credit, a high net worth and millions of dollars already to buy million dollar houses, so they exclude themselves as buyers and don't pursue high end deals. Most real estate investors feel they don't deserve to buy a million dollar house or to be talking with the people that own them. They have a self image that equates themselves with lower price range houses and the people that own them, so those are the houses they pursue.
All of these reasons are fear in one form or another, and none of them are real. The beings that own high end houses are people, and they get divorced, lose their jobs, go out of business, make stupid mistakes, have bad financial management, and do all of the things that result in financial distress and necessitate a quick sale. The high dollar properties they own are real estate, just like the two bedroom one bath house in the median price range neighborhood, It can be put under contract, optioned, or creatively financed just like any other house in any other price range.
But real estate investors avoid them, and in doing so, prevent their most heartfelt dreams from coming true. The key point all real estate entrepreneurs and investors must understand is that owners of high end houses who are experiencing problems need the solutions that well trained investors can provide. And as with all real estate deals, when done properly, everybody wins. The seller gets the house sold and some cash to move, the bank gets their loans paid off, the new buyer gets a house they love, and the investor makes a profit.
A Six (or Seven) Figure Profit!
Going after high end houses is a choice. Real estate investors can attract these million dollar deals to them by setting up marketing systems that target high end houses only, and leave the lower price ranges alone. By making high end homeowners the only people you contact with your marketing, high end homeowners are the only ones that call in response. And when real estate investors have a steady stream of motivated sellers with high end houses calling them every day, their desks begin to fill up with million dollar deals. Just like a hunter going after big game, the real estate investor who sets their marketing sights on high end deals, and persists, the moment arrives when their real estate investing dreams come true.
High dollar houses naturally instill fear in real estate investors as they feel if they make a mistake they will be sued for hundreds of thousands. Real estate investors perceive they need perfect credit, a high net worth and millions of dollars already to buy million dollar houses, so they exclude themselves as buyers and don't pursue high end deals. Most real estate investors feel they don't deserve to buy a million dollar house or to be talking with the people that own them. They have a self image that equates themselves with lower price range houses and the people that own them, so those are the houses they pursue.
All of these reasons are fear in one form or another, and none of them are real. The beings that own high end houses are people, and they get divorced, lose their jobs, go out of business, make stupid mistakes, have bad financial management, and do all of the things that result in financial distress and necessitate a quick sale. The high dollar properties they own are real estate, just like the two bedroom one bath house in the median price range neighborhood, It can be put under contract, optioned, or creatively financed just like any other house in any other price range.
But real estate investors avoid them, and in doing so, prevent their most heartfelt dreams from coming true. The key point all real estate entrepreneurs and investors must understand is that owners of high end houses who are experiencing problems need the solutions that well trained investors can provide. And as with all real estate deals, when done properly, everybody wins. The seller gets the house sold and some cash to move, the bank gets their loans paid off, the new buyer gets a house they love, and the investor makes a profit.
A Six (or Seven) Figure Profit!
Going after high end houses is a choice. Real estate investors can attract these million dollar deals to them by setting up marketing systems that target high end houses only, and leave the lower price ranges alone. By making high end homeowners the only people you contact with your marketing, high end homeowners are the only ones that call in response. And when real estate investors have a steady stream of motivated sellers with high end houses calling them every day, their desks begin to fill up with million dollar deals. Just like a hunter going after big game, the real estate investor who sets their marketing sights on high end deals, and persists, the moment arrives when their real estate investing dreams come true.
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