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Don’t Invest in Weird Properties Just Because the Deal Excites You
Here’s a lesson I learned the hard way. Don’t ever buy weird properties that prevent a fast sale or a fast occupancy. Now, here’s my story, one mistake I honestly made and even sharing this makes me gag on a piece of humble pie.
The first property that I bought using the subject to method where I buy the property and the house is transferred to me, but the loan stays in the seller’s name. I was extremely excited to do this deal. It was my first subject to deal. And the house was odd in regards to it’s lay out and in hindsight, I probably should not have bought this property. It’s was one headache after another.
But the main thing was the property was weird, but I didn’t see it at the time because I was so excited and ready to close the deal that I just completely overlooked some of the things that were weird about the property.
Don’t ask me how I did this because one of the main things that I overlooked about the property was in one of the bedrooms, there was a spiral staircase going down through the hardwood floor into the unfinished basement, which more or less could not be finished. There were too many obstacles - the ceiling’s were too low and (to mimic a very funny Seinfeld episode), yadda, yadda, yadda.
So, there was a spiral staircase going through the floor. It wasn’t poorly constructed, but nevertheless it pretty much removed one whole bedroom from the home and I had more problems getting people to want this home because more or less, it’s a two-bedroom home.
And people are getting very, very picky nowadays. They want more bedrooms, more bathrooms, more room, and you can’t blame them. But I was so excited to get this house under contract for subject to and I just wanted to close it and I was ready to go. And I just completely overlooked the fact that this house was just plain weird.
So, more or less, that property was a pain in my side. So, the take away from this is stay away from functionally obsolescent homes, homes that are weird, homes that are in busy areas, homes that are small, homes that are next to a railroad track, next to a highway, next to commercial centers, in bad areas, different things like that.
Buying weird properties that have different negative nuances around them similar to these will prevent you from getting the property occupied or getting it resold.
So, you almost have to take a look at it from an outsider’s point of view sometimes. Am I going to be able to fill this property quickly? Am I going to be able to get it sold quickly? Are there any surrounding or any other inside or outside influences or nuances that will prevent me from being able to satisfy my exit strategy with this property?
So, I’ve made that mistake. Hopefully, you will learn from this and not make the same mistake that I did.
One reason I can help you in real estate investing is to share my mistakes so you don’t make them. Yes, I’ve had a few. You will, too. But having someone who can help you avoid the costly ones and get through the minute ones is key. Check it out here:
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Find a Good Real Estate Attorney
You need to take the time, effort and energy to find a good real estate attorney that will work within your real estate investing business. This attorney should be able to work with your creativity and will work with your questions to come up with solutions to any and all problems or concerns.
There are a lot of real estate attorneys out there. There are a lot of people that want your business, but you cannot work with everybody. A general rule of thumb that I like to use is if I don’t think that I can go to lunch with somebody and have a good conversation at a lunch table, it’s probably not somebody that I want to do business with. I want to be able to sit down across the table with this person and have a decent professional conversation about business and maybe a little conversation outside business as well. You need to find a good real estate attorney that understands you, that understands your creativity and that will work with you.
There are a lot of real estate attorneys out there that do not understand what we, as real estate investors do, and therefore, because they don’t understand what we do, they simply think that what we’re doing is wrong or illegal and they tell us, “No, you cannot do this.”
Well, if somebody tells me no, then I want them to prove to me it won’t work. If a real estate attorney tells me no, then I want them to show me why this is wrong, why something is illegal and provide the written documentation stating such. I’ve had that told to me many, many times. But then I go and I find another real estate attorney that tells me, “Sure, you can do this. We just need to do this, this and this.”
So, whenever somebody tells you no, don’t obviously just assume that it’s no because it’s not in most cases. It doesn’t mean it’s wrong just because a real estate attorney says it is, professionals aren’t always right just because they claim to be, make them accountable to what they say. It’s just like getting a diagnosis and having different doctors have various ways to treat the illness. That’s why so many times you hear others recommend getting second opinions. So, spend the time to find somebody that you can work with successfully who can understand what you’re doing and work with you to find solutions to problems when problems occur.
Okay, there are lots of real estate attorneys out there. Go find one that works best for you. You can start by referrals. Referrals are a great source. Simply make it known that you’re looking for a good real estate attorney and eventually you’ll find one. It took me at least a half a dozen or so real estate attorneys before I finally found one that I was comfortable with.
If you work at it, if you ask around, you’re interviewing them just as much as they’re interviewing you. They work for you. You’re paying them. So, find somebody that you can work with based on everything we just talked about.
Now, here’s my recommendation on catapulting your real estate investing career. Go to:
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Happy Fourth of July!
I hope you and yours have had a great July 4th weekend. I wanted to take today to celebrate our fantastic USA and share a couple favorite pieces. The first is a tribute to those that serve and all we as American citizens should strive to do daily for each other. The other quote is why men and women serve this nation so that this past weekend we can relax and enjoy our families and Aunt Sally’s baked beans. Happy Fourth of July!
Look for more real estate investing news on Wednesday………
A Patriotic Creed
by Edgar Guest
To serve my country day by day
At any humble post I may;
To honor and respect her flag,
To live the traits of which I brag;
To be American in deed
As well as in my printed creed.
To stand for truth and honest toil,
To till my little patch of soil,
And keep in mind the debt I owe
To them who died that I might know
My country, prosperous and free,
And passed this heritage to me.
I always must in trouble’s hour
Be guided by the men in power;
For God and country I must live,
My best for God and country give;
No act of mine that men may scan
Must shame the name American.
To do my best and play my part,
American in mind and heart;
To serve the flag and bravely stand
To guard the glory of my land;
To be American in deed:
God grant me strength to keep this creed!
You have to love a nation that celebrates its independence every July 4, not with a parade of guns, tanks, and soldiers who file by the White House in a show of strength and muscle, but with family picnics where kids throw Frisbees, the potato salad gets iffy, and the flies die from happiness. You may think you have overeaten, but it is patriotism. ~Erma Bombeck
Assumptions Kill Real Estate Investing Deals and Goals
You probably heard what assuming does for you and me. But, so many are guilty of making assumptions all the time and in real estate investing when you are working with buyers and sellers, making assumptions can kill a deal or prevent you from closing a deal. When you are investing, you have to be very clear about your position particularly when you are talking numbers and assuming what a seller’s minimum sales dollar is or what a buyer’s maximum purchase price is will only lead to trouble.
Investors who make assumptions on what a seller is thinking or what a seller would do or might do if they say this or say that. And making assumptions is a big mistake because what you would do in a situation could be completely different than what your seller or buyer would do in a situation.
So, do not make assumptions for them. Do not base what you think they may or may not do on what you would or would not do. We all think differently, that is why when trying to get an answer from a buyer or seller you need to ask the same question multiple ways until you get the answer to your specific question. Don’t jump to conclusions; make the individual give you their answer.
In reality, there’s really no explanation as to why people do what they do. There’s no good explanation as to why people kill themselves or why people hurt other people or, the list could go on and on.
I’ve had people walk away from thousands of dollars that they put as a non-refundable option fee to purchase a property. There’s no explanation for it. So, don’t try to make decisions based on your assumptions for what other people would do.
Run your business with guidelines and then let your sellers, let your buyers make decisions based on the offers that you make them. Do not make assumptions for them because what you or I would not do, they will very likely do.
If somebody asks you, especially realtors might ask you, “Well, who’s going to give you their property and then stay on the mortgage?”
“Well, obviously not you, Mr. Realtor, but I have dozens of other people here who do.”
There are plenty of skeptics out there who are too scared to try new and creative ways to buy properties and therefore make the assumption that no one in the world would agree to anything less than the same old boring way of investing. To all the skeptics, there are nearly 4.5 million people in Kentucky where I invest in real estate. There are about 600,000 properties that have at least one mortgage and close to 300,000 that don’t have any mortgage. Now, that means there are about 1 million properties that I can market and try to buy and the odds of finding a motivated seller willing to try creative ways to make a win-win situation for them and me are favorable. If I work with even just 1% of them, that’s 10,000 properties for potential deals. Let’s take it one step further and for the sake of crunching numbers, I’ll make it easy and say I make 10K profit on just 1% of the 10,000 properties (100 properties bought and sold), that’s a cool 1 million dollars in the bank. If I make the assumption that I can’t find a motivated seller out of those 10,000 properties then I can’t even begin to start realizing the million-dollar bank account.
So, don’t make decisions based on assumptions. That’s all I’m trying to say with this point. What do you think about those odds? I welcome your comments.
So, let’s make some goals together, check this out:
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Technology for Real Estate Business – Friend or Foe?
Today I want to discuss something that really annoys me and lots of business professionals are guilty of doing and it’s a huge mistake. There are too many people attached to their cell phone, their e-mail, and their computer. Real Estate investors fall into this category as well. It’s amusing to me when I’m in a public restroom and the guy next to me answers his phone while he’s using the bathroom!
To me it doesn’t make sense. You’re telling me that you could not wait to pick up that call until after you finished using the bathroom? If you’re reading this post and you’ve been guilty of that, hopefully you will start to change your ways because it’s sucking the time out of you. Plus, you do not impress anyone by talking business in a public restroom, restaurant or department store. In fact, it comes across as very unprofessional and disorganized if you can only do business somewhere where you can’t be entirely focused on the business. Make sense?
Really, I think that these cell phones and these e-mails and these computers are great. Don’t get me wrong. In fact, I use them and we use them in my business all the time and without them we would be lost. But these electronic business necessities are also a tremendous procrastination tool and they need to be turned off once in a while and you need to go out and get dirty.
If sellers and buyers are calling you and asking you questions about a house or calling you because they’ve got a house for sale and it’s going right to your cell phone, then something is wrong with the structure of your business. You need to recognize that.
Whether you believe me when I tell you this or not, you do not need to be accessible every second of the day. You may think that you need to be accessible every second of the day, but you do not. I don’t have a problem with people using e-mail and cell phones and computers in their business. I mean, they’re phenomenal tools. But if you’re going to use them, use them wisely. Do not let them secretly force you to procrastinate.
If you’re going to check e-mails, I would advise you to check e-mails later in the day. Check them during your lunchtime. Do the important things that need to get done in your business first, and then check your e-mails. It’s okay if phone calls go to a twenty-four hour voice mailbox. It’s okay if they go to a live operator system.
Think about some of the things that you can do to help manage your time better, because once you recognize how valuable and important your time is, you will soon start to recognize that you need to spend more of it doing things that are productive. A lot of times cell phones and e-mails and computers do not result in productive time. It’s easy to get caught up in just using the device and not accomplish what you initially set out to do which was check something off your to-do list.
Recently, one of my staff shared a conversation she had with one of our VIP members. This member is actively pursuing real estate investing, has a couple deals in the works and is excited about the opportunities ahead. The only problem is this individual is struggling to make the most use of time. While working throughout the day, being tied to the computer and phone, time has the upper hand. You need to have systems, you need organization and you need to stick to it. Setting up the systems will take a little focus in and of itself, but once you have something in place you will be amazed at how much you can accomplish in a short amount of time. Part of doing this is getting away from the phone and emails from time to time. And for goodness sake, when you run errands, have lunch with a friend, are in line at the bank, using the restroom, don’t answer the phone!
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Investing Mistake: Borrowing from Equity
A HUGE mistake that a lot of real estate investors make, whether they’re beginning or seasoned investors is they borrow money from the equity in their properties to pay the bills, and think that that money is profit. Well, listen up friends because I’m the guy to tell you and burst your bubble right now that that money is NOT profit. Borrowed money is not income.
If you’re robbing Peter to pay Paul, then you better fix what’s broken before this problem gets worse. Borrowed money is not your money. Profits only come from the sale.
Friends, this is a dangerous trap that a lot of people fall into because they think that they can pull a big chunk of money out and use that money as income and cash flow for their business, but it doesn’t work that way. You have to be smart about it. You can’t expect to grow your business with refinanced properties. It doesn’t work that way.
Now, don’t get me wrong. I’m not against refinancing a property and pulling money out of it, if the property can support you doing that. One of the first couple of deals I did when I got started was actually a property where I did a refinance on it, and I did pull out some cash. But I obviously did not stupidly spend that money on stuff that wasn’t going to give me a return.
That money was for business purposes only, and I used that money to reinvest back into some of my education and some of my other investments, and that money has grown substantially since then.
I have not done anything like that since that one occasion, but I thought I needed to tell you that because I’m not against refinancing a property to pull money out, but the property has to be able to sustain what you’re doing.
All I’m saying, and the message I want to convey to you in this post is, just don’t get into the habit of borrowing money from the equity in your properties on a continual basis because borrowed money is exactly what is says: borrowed money. It’s not your money.
Don’t consider that money as profit for your business. Simply strive to run your business on the profit, which comes from the sale of your properties.
As I’m talking about property sales, here’s another tip: when you are selling properties, make sure you attract attention to your properties and market them to death. If your marketing isn’t annoying at least a few people then your marketing isn’t doing what it’s suppose to do which is get attention. A perfect example is the media, just watch the news and see how many horrid reports you will see about all the bad stuff going on - robberies, murders, and scandals. Unfortunately, the entire negative stories garner the most attention. Don’t get me wrong, your marketing shouldn’t endanger anyone, but you need to get attention and you will get negative feedback.
Just recently, I got calls about some ugly yellow signs in the yard of one of our properties. The person really thought the signs looked junky. Well, those signs accomplished exactly what I wanted them to accomplish. It made people look at the property. Don’t be afraid to stand out with your marketing, even if it’s uglier than most. You need to capture the attention and then sell the house!
So, I started on one topic and jumped straight into another, that’s a Monday for you! Are you interested in reading more about real estate investing that has more flow to it? You must go here: www.freemakemoneygift.com/Invitation.html
Focus on Revenue Especially in Real Estate Investing
As a real estate investor there are many things you should focus on while creating deals and growing your investment portfolio. A big mistake many real estate investors make is they focus way too much on cost control rather than focusing on what they should be focusing on, which is revenue. The point of this mistake, I believe, is very straightforward but it is extremely important that I ingrain in your mind.
For some reason, when times get tough and the economy slows down and markets change and people get scared, they start to really focus on cost control rather than on increasing their revenue.
Now, please don’t misunderstand what I’m saying. I’m not saying that you should not also focus on cost control and understand where your expenses are and cut costs where you can. But at the same time, it’s even more vital to the success of your business that you focus on increasing revenue.
Now, with that said there is a point that I want to make about cost control, which is that if you come to a point in your business where things have changed dramatically financially for you and you need to really focus on cost control, then if you’re going to cut costs don’t cut costs with a scalpel. If you’re going to cut costs, cut costs with a chain saw.
Now, what I mean by that is I believe that you will be a lot better off if you need to cut costs to really get rid of the biggest costs that you can first rather than trying to neatly cut away the smaller costs, if you will. Don’t just start by cutting down on your supply purchases say, staples.
If you really need to protect yourself and survive some kind of financial setback, then start cutting the biggest costs that you can afford to get rid of that will not impact the sustainability of your business, if you will.
So, back to the point at hand, which is that you will be much better off if you focus the majority of your energy trying to generate revenue to close more deals, to get more deals in your pipeline, so that way you can cash out and get more checks; you will be a lot better off if you focus on generating revenue than if you focus on cutting costs control during difficult times, and even during good times. Stop trying to pinch the pennies, and rather start trying to generate dollars.
The businesses that will survive challenges in down economies and struggling times are those that continue working their revenue streams. Oftentimes, I find that truly ramping up your focus on revenue can alleviate the need to cut costs altogether. Remember, make this your mantra: Always Focus on Revenue!
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Real Estate Investing – Trying to Improve Weaknesses and Building an Empire
You may have read that title and thought what in the world is wrong with trying to improve my weaknesses and wanting to make a lot of money by building a real estate investing empire? Read on fellow investor and reflect on what I’m about to share. A big mistake that a lot of real estate investors make, and in fact a lot of entrepreneurs and just people for that matter make is they try and improve their weaknesses when instead they need to be improving their strengths.
I learned this mindset from a mentor of mine, Dr. John C. Maxwell, a very well-known leadership coach. If you focus on trying to improve your weaknesses, and if you’re really bad at something, then you are only going to go from really bad to bad. If on a scale of one to ten you’re bad and you’re a two, you’re going to go from a two to maybe a four. I mean, how is that going to help you in your business?
Now focus on the strengths side. If you’re good at something or even average at something, you’re going to go from average to good or from good to great. And again, on a scale of one to ten, if you’re a six you might be able to go from a six to an eight or nine.
So, it really does make logical sense if you think about it: If you’re good at something, focus on getting better at what you’re already good at. If you’re bad at something, stop trying to try to get better at something you’re already bad at, because you’re just going to waste time, money and energy and that’s only going to bring you down. So, focus on improving your strengths, not trying to improve your weaknesses. Identify what in your business you are really good at doing, build on that and then find someone who is good at the things you know are your weaknesses therefore, growing your business.
This leads directly into my next point, which is a lot of real estate investors try to build an empire before worrying about today’s cash flow needs. I remember when I first got into this business and how excited and passionate I felt. I was so green, I was so full of energy that I could not wait to build my empire and be like Donald Trump.
You lose sight of what’s really important on how to get there, and if you don’t take care of today’s needs and the bills that you’ve got to pay this month, then how are you going to be able to get there and create this massive empire?
So, when you run your business, the deals that you pursue need to be able to get you from month to month, quarter to quarter or year to year. And as the deals that you are doing are generating the cash flow that you need to survive on a regular basis, then you can start worrying about getting wealthy once you’ve built up some money in the bank account and you’ve got some cushion and you can start to explore and expand your comfort zone a little bit.
Don’t get wealthy before you get rich. You want to get rich before you get wealthy. You want to have money in the bank, you want to have liquid cash that you can fall back on before you worry about having this empire of properties that you have in your portfolio.
So, really you need to prioritize what’s important. I’m not telling you not to focus on the big picture of generating an empire, but I am telling you that if you want to get there, you’ve got to generate cash and worry about today’s cash flow needs rather than worry about tomorrow’s empire of wealth. Focus on your strengths in building your cash flow, then start expanding and go for the gold.
Now, let’s get started by reviewing the following tools and begin the foundation for your investing empire. Go here: www.freemakemoneygift.com/Invitation.html
Real Estate Investing – Unnecessary Money and Advice
There are plenty of people out there who think they know about real estate investing and yet after you spend some time talking to them, you realize they are blowing lots of smoke. I want to address two major myths about investing:
1. You have to have a large amount of money to start this business.
2. You should seek advice from every Tom, Dick and Harry you know before you begin investing.
A lot of new and veteran real estate investors make the mistake of thinking they need to have money in order to do this business. And that is just false. It’s not true. You do not have to have money to do this business!
If you have money to begin with, sure, it might make you sleep a little bit better at night. But at the same time, think about it a little in reverse: It might make you kind of soft, too. If you’ve got no money to begin with, then you’re no worse off. You’ve got nothing to lose.
That’s how I was when I started; I had nothing. This forced me to think creatively when it came to buying properties and create deals that were a win-win for all parties. And now that I’ve got money, I still approach every single deal that I do as if I have no money, because the last thing that I want to do is get into a habit of thinking that since I’ve got money, I can use my money to buy property.
That is not the way to do it. You do not need money to do this business; you do not need to use your money to buy houses. If anything, we’re talking hundreds to do some marketing, we’re not talking thousands.
So, don’t be blinded by the fact that you think you need money to be in this business, because you don’t. If you have money, I strongly urge you to approach every single deal as if you have no money, because you will be better off in the long run for it, and you will be able to think more creatively and protect your investments that you have made in the process.
Another mistake a lot real estate investors make, in fact, that a lot of people in general make is they take advice from the wrong people. If you want to get rich in real estate, whom are you listening to?
Are you listening to your brother-in-law or your uncle who have only bought the properties that they have lived in, and the only information they know is what they hear on the news and what they’ve read in the newspaper, or are you going to try to learn from and take advice from people that are doing it every single day?
Be very careful on who you take advice from. And for the record, this same thing goes for your financial advice and your legal advice. Okay? There are tons of CPAs and tons of attorneys out there, and each one has certain specifications and each one has certain comfort levels on the way they do business.
And just because an attorney might say, “No, you cannot do this,” it doesn’t mean No, you cannot do this. If people tell you no, find out why. If an attorney tells you, “No, this is illegal,” ask him to show you the code where it says it’s illegal.
You will be surprised, a lot of times attorneys will say something is illegal or they say “No, you can’t do this,” simply because they don’t know how to do it, or they don’t know how to tell you to do it.
So, my two main takeaways from this are first, don’t take no for an answer when you’re working with financial and legal professionals. The second take-away is to only take advice from people who have walked before you. You know, it’s no secret that everybody loves to give advice and to tell you what he or she think, but unfortunately you have to discern the right advice from the wrong advice. So, be careful of those to whom you listen, and challenge the ones that tell you no!
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Real Estate Investors – Pay Yourself First and Use Your IRAs
You’ve heard about paying yourself first, right? This is typically discussed when people are planning for retirement. I want you to think about it right now as you start and/or continue building your real estate investing business. Think like a true entrepreneur. This is really important. I have said this before and here it is again: Your business exists to support you; you don’t exist to support your business. Your business exists to support you. And if you’re not extracting money from your business, then what are you in business for?
Your business exists to support you, so you need to pay yourself first. Always pay yourself first. This was a hard lesson for me to really comprehend and understand in my early days, but now I understand it. It makes sense, because hopefully you haven’t spent all the money that your business has made and that you have taken out as the owner. And if you have to, you can always loan the money back to your business.
Now one way to start thinking in that direction is to do real estate deals in your self-directed Roth IRA. If you’re not doing deals in your IRA, you’re not really seeing the true power of this business, because you can go from $1,000 or a few hundred dollars in your IRA to $20,000 like that. The majority of real estate investors don’t take advantage of this type of investing.
You just have to know how to do it. If you have not done any deals in your self-directed IRA, then I urge you to explore this and to learn about this. I did one deal in my IRA way back when I first learned about doing Roth IRAs, and it seemed like in the beginning it was the hardest thing in the world to do. There was all the legal paperwork and it went on and on, blah, blah, blah.
Well, first of all, yes, it’s legal. Secondly, I would much rather be in control of my retirement funds than having the stock market be in control of my retirement funds. So, you can option a property, you can do a simple $100 option contract on a property. It can come from your IRA, your IRA can be the buyer, and you can option a property for $90,000.
You could turn around and then you sell that property for $110,000 or whatever it is, and that $20,000 profit will go directly into your self-directed Roth IRA tax-free for life. It’s a phenomenal tool, and if you’re not using it, you are missing out. You’ve got to start getting into this revolution if you will on using self-directed Roth IRAs, because the power is tremendous.
But pay yourself first. It will help you sleep better at night. Let your business have only what it needs to have, and you take the rest. Your business exists to support you, so try to get into the habit of paying yourself first. Learn about IRAs and continue growing not only as an investor, but a wise and successful entrepreneur.
As always, I welcome your comments and insights. Please feel free to post a response. You can also review the information I have for you for FREE at the following:
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