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10 real estate investor mistakes
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10 real estate investor mistakes | Portra Images/Getty Images

10 real estate investor mistakes

Once the market starts to rebound, investing in real property also becomes a more appealing idea — either as a career or a great side job. Like any other endeavor, though, there’s a right way and a wrong way to go about it.

Bankrate spoke with established, full-time real estate investors and with professionals, such as bankers, to identify the types of traps into which real estate investors most often fall.

 

1. Planning as you go | Hero Images/Getty Images

1. Planning as you go

Andy Heller, an Atlanta-based investor and co-author of “Buy Even Lower: The Regular People’s Guide to Real Estate Riches,” says lack of a plan is the biggest mistake he sees new investors make. They buy a house because they think they got a good deal and then try to figure out what to do with it. That’s working backward, Heller says. “First, you find the plan,” he says. “Then you find the house to fit the plan. Pick your investment model, and then go find property to match that. Don’t find the strategy after you find the home.”

The problem is that most people look at real estate as a transaction instead of as an investment strategy, says Doug Crowe, a Chicago-based real estate investor and speaker. “People fall in love with a property,” says Crowe, who is managing director of Springboard Academy, the nation’s only real estate academy for investors. “I say, ‘Who cares about the property?’ I fall in love with a motivated seller.”

The number is the number, and you don’t go above that, he says. The best way to solve the problem is to have lots of activity and make offers on multiple properties. Then you don’t care which one you get — as long as the numbers work out in your favor.

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2. Thinking you’ll “get rich quick”

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2. Thinking you'll 'get rich quick' | Plume Creative/Getty Images

2. Thinking you’ll “get rich quick”

That kind of wrong-headed thinking is fueled by “these self-appointed gurus who have infomercials and make it sound so easy to get rich in real estate,” says Eric Tyson, co-author of “Real Estate Investing for Dummies.” It’s not easy. It’s a good long-term investment, but so is putting your money in a mutual fund, which is a lot easier. “These gurus don’t talk about all that hard work. You have to be smart, you have to be willing to work, and you have to understand your risk tolerance.”

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3. Playing Lone Ranger

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3. Playing Lone Ranger | Westend61/Getty Images

3. Playing Lone Ranger

A key to success is building the right team of professionals. At the very least, you need good relationships with at least one real estate agent, an appraiser, a home inspector, a closing attorney and a lender, both for your own deals and to assist with financing for prospective buyers.

In the remodeling and maintenance segment of the business, the team includes a plumber, an electrician, a roofer, a painter, a heating and air conditioning, or HVAC, contractor, a flooring installer, a lawn maintenance service, a cleaning service and an all-around handyman. You can’t build a business as an investor if you’re spending all your time fixing leaky faucets and putting up ceiling fans.

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4. Paying too much

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4. Paying too much | Thanasis Zovoilis/Getty Images

4. Paying too much

Heller says the biggest reason investors don’t make money is simple: They pay too much for the properties. “The profit is locked in immediately once the investor buys the property,” he says. “Due to mistakes in the analysis, the investor pays too much and then is surprised later when he doesn’t make any money.

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5. Skipping homework

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5. Skipping homework | Jena Ardell/Getty Images

5. Skipping homework

You wouldn’t think you’re qualified to perform open-heart surgery without years of education and training. Yet, many wannabe real estate investors don’t think twice about taking their financial lives in their hands without even cracking a book. Educate yourself before you put your family’s financial security on the line. Read articles, check out books from the library and look for a local chapter of the National Real Estate Investors Association. Speakers at monthly meetings cover everything from buying foreclosures to screening tenants.

If you can’t find a local chapter, find out who owns a lot of rental properties in the area, call him up and offer to pay for an hour or two of his time to find out whether this is a good career for you.

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6. Ducking due diligence

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6. Ducking due diligence | Geber86/Getty Images

6. Ducking due diligence

Investors often have to move very quickly on their deals. That doesn’t mean they sign a contract and write a check without plenty of research, though. That’s where a lot of newbies trip up, says Houston-based real estate agent Laolu Davies-Yemitan. They don’t do their due diligence about the deal, the costs or the market conditions, and they wind up draining their personal savings because the house needs extensive repairs or they can’t sell it. “Sometimes, new investors are buying property just based on the idea that the property is going to appreciate,” he says. “Usually, they don’t have any information to substantiate that.”

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7. Misjudging cash flow

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7. Misjudging cash flow | Hinterhaus Productions/Getty Images

7. Misjudging cash flow

If your strategy is to buy, hold and rent out properties, you need sufficient cash flow to cover maintenance. “People think they can get a property manager,” Tyson says. But many have never interviewed a property manager and have little idea about how they work.

Most managers, for example, are reluctant to take on one single-family home or a duplex, he says, preferring larger complexes, and fees of 7 percent to 10 percent of the monthly rent are common. “It’s a huge expense,” Tyson says. “I can put my money in a mutual fund and it costs a half-percent a year.”

Davies-Yemitan agrees. It’s not uncommon for a property to sit on the Houston market for 90 to 120 days before it’s leased, he says. Meanwhile the owner has to pay the mortgage, the taxes, the insurance, the cost of advertising and homeowner or condo association dues, he says. If the owner hasn’t budgeted for that, an asset can quickly become a liability.

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8. Lowering the volume

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8. Lowering the volume | Dougal Waters/Getty Images

8. Lowering the volume

If you’re working on one deal at a time, Crowe says, you’re doing transactions, not running a business. You need a steady pipeline of prospective deals; sufficient volume will weed out the marginal deals and let the good ones rise to the top.

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9. Painting yourself into a corner

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9. Painting yourself into a corner | Ezra Bailey/Getty Images

9. Painting yourself into a corner

Many people buy a property and get stuck with it because they only have one exit strategy. They’re going to sell it or they’re going to rent it out. What if it doesn’t sell? What if the rental market stalls? Always have two, if not three, ways to get out of any deal. For example, if plan A is to rehab the house, put it on the market and resell it, then plan B could be to offer a lease-purchase to a buyer. Plan C might be to hold the house and rent it out. And as a plan D, there is the wholesale option, which would involve selling to another investor at a below-market price. Hopefully, you’ll still make a profit, but at the very least, you’ll cut the losses you’re taking every month in carrying costs.

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10. Miscalculating estimates

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10. Miscalculating estimates | Jacob Lund/Shutterstock.com

10. Miscalculating estimates

Crowe tells his new rehabbers that after they’ve done their homework, they should double the amount of time and money they think it will take. If they can still make money then and they might be able to rent it out, it’s a good deal.

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Posted:Nov. 14, 2016
Original Article

Lifestyle businesses require a great deal of thought. This is because they have to be designed to bypass many of the issues most businesses face.

secretmoneymachineThe first time I started to think seriously about a lifestyle business was when I read an older book titled, “The  Incredible Secret Money Machine” by Don Lancaster. I bought this book used through Amazon many years ago and have read it several times. The book outlines a lifestyle business designed to be a “secret” money machine.

From this book, I outlined how I wanted my lifestyle business to operate.

Here’s what I built into my business:

1. I must have 100% control. The business shouldn’t have any partners and have a minimum of outside influences. There should be no reporting to others, no competing with others, and little time hassling others.

2. The business should have multiple income streams. The best lifestyle businesses have hundreds of smaller sources of income so that they don’t become dependent upon one or two large sources of income.

3. The business should be engineered for present and future banking. My mentor, Dan Kennedy, taught the importance of future banking and I wanted this built into my business. Present banking means you get paid now. Future banking means you get paid in the future. I wanted my business to provide income today and tomorrow. Our present effort must provide several future pay days.

4. Put nothing between me and my customers. This means no sales people and no customer service.

5. The business should not require a retail location or an office. This means no fixed overhead. No product inventory. No expensive fixtures. No copy machines. All the money typical businesses invest into these items should stay in the business’s bank account.

6. The business should have .25 employees. This employee is .25% of me. I only want to work a few hours a day at most. Most businesses require .97% of the owner. Employees are a waste of time, money and mental energy. Employees also add the hassle of paperwork, tax and other regulations.

7. The business shouldn’t require a great deal of upfront money to get started. “Money machines expand fastest and best when they bootstrap and pyramid their own output on their own terms. They key is to to keep a sense of scale and start out as simply and cheaply as possible.”

8. Cashflow is EVERYTHING. “For a viable money machine, you should accept no less than a 200-percent annual return on cashflow. For instance, in a given year, if you have a total of three thousand dollars in expenses, it should be offset by at least nine thousand dollars worth of income. This leaves you with two nickels generated for every old nickel put up. Now, a 200-percent annual return on investment seems an impossible dream to traditional financial people. But we aren’t talking about anything traditional or big business. We’re talking about your secret money machine.”

9. Use the “Black Widow Effect” to build the business.A black widow spider usually spins a web and waits for the next meal to drop by. Now way does she go out and try to sell her next meal into coming over for canasta. The same basic idea is a good tactic for your money machine. Whenever and wherever possible, let people come to you and seek you out, rather than vice versa.”

10. Keep a low profile – “secret” money machine. In building my first two large businesses, I flew way above the radar. I turned myself into a “mini” celebrity in order to generate leads for the business. You may be reading this article because of my previous “mini” celebrity marketing. Flying above the radar opens the doors for numerous problems. These problems include people stealing your intellectual property, competitors saying nasty things about you, possible legal challenges, and more.

11. No expensive or complex marketing. Any business requiring expensive marketing isn’t the ideal lifestyle business. Complex marketing funnels require a great deal of time and money. These should be avoided completely. (Yes, I know… I spent 15 plus years creating these expensive marketing funnels. I know first hand how much time and money is required. This is why I wanted to avoid them in my ideal lifestyle business.)

How does your current business rank on these rules?

If you’re breaking any of these rules, is there a way for your to redesign your business into a lifestyle business? What can you do differently to make your life easier?

NOTE: The text in italics are direct quotes from Don Lancaster’s book.

Thursday, 2 Jun 2016 | 9:26 AM ET

It looks so easy on TV. Buy a bargain-basement house, pull up some nasty carpet, re-tile the bathroom, paint away the wall stains and sell it for a hefty profit.

It’s not, however, all those popular shows that are driving the flipping market today. It’s pure and simple prices — and profit. There is a severe lack of good quality, turn-key homes for sale, and that has created a seller’s market across the nation, even for those reselling homes.

After cooling off in 2014, home flipping is on the rise again — its share of all home sales is up 20 percent in the first three months of this year from the previous quarter and up 3 percent from the same period a year ago, according to a new report from RealtyTrac, which defines a flip as a property bought and resold within a 12-month period.

While flipping today is nothing like it was during the housing boom a decade ago, when investors used risky mortgages, it is reaching new peaks in 7 percent of the nation’s metro markets, including Baltimore, Buffalo, New Orleans, San Diego and even pricey Seattle.

Dana Rice, real estate agent and home flipper, at her latest project in Bethesda, Maryland, a very small colonial, within walking distance to shops and Metro.

Diana Olick | CNBC
Dana Rice, real estate agent and home flipper, at her latest project in Bethesda, Maryland, a very small colonial, within walking distance to shops and Metro.

“While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets,” said Daren Blomquist, senior vice president at RealtyTrac.

That’s because flippers today largely use cash — 71 percent did in the first quarter of this year. Compare that to just 27 percent who used cash at the height of the housing boom. That helps keep most flippers conservative, but it also exacerbates the problems for entry-level homebuyers, who are facing one of the tightest housing markets in history. They simply can’t compete against all-cash buyers.

Usually flippers look for distressed properties either in the foreclosure process or already bank-owned. These are not always listed on public sale sites. There are fewer of those today, so flippers are moving to the mainstream market, creating that new pressure.

“A telltale sign is when flippers are acquiring properties at or close to full market value. Those markets are so competitive that even the off-market properties flippers are looking to buy are not selling at much of a discount — and there may be very few distressed properties available,” said Blomquist.

Examples of these markets include San Antonio, where Blomquist says flippers are actually purchasing at a 7.8 percent premium above estimated full market value, as well as Austin, Texas; Salt Lake City; Naples, Florida; Dallas and San Jose, California.

Despite the premium to buy, flippers are still seeing growing gains in profit. Home flippers realized an average gross profit of more than $58,000 in the first quarter of this year, the highest since the third quarter of 2005, according to RealtyTrac.

Real estate agent Dana Rice and her husband flip houses in the tony D.C. suburb of Bethesda, Maryland. Prices there are well above the national median, and there are few distressed properties. Instead, they target old, small fixer-uppers. Even those command a hefty purchase price up front, but they can also offer big rewards.

“I didn’t want a teardown. There is so much character in this part of Bethesda,” said Rice. “I don’t think that everybody wants a brand new build. There is a hole in the market because not everyone wants to do a renovation. If you put a little bit of effort in, these numbers can be huge.”

Rice purchased her latest project, a very small colonial, within walking distance to shops and Metro, for $680,000. She expects to put half a million dollars into the renovation, adding both square footage and high-end finishings; she is confident that in this competitive market she will see an 18-25 percent return on investment.

“It’s like birthing a baby. … If you’re overpriced, you’re dead in the water.” -Dana Rice, real estate agent and home flipper

“It’s like birthing a baby,” she said, noting that she will wait to list it until she feels the market is just right. “If you’re overpriced, you’re dead in the water.”

The lack of inventory is certainly a double-edged sword for flippers. Their initial investment price can be high, and flippers are often competing against local builders, who may want to tear the house down and put something up that is twice the size. On the other hand, not everyone wants or can afford a huge, new, expensive home, and that gives flippers the edge.

“The key here is that there is particularly a dearth of listed inventory in good condition,” said Blomquist. “That is the inventory flippers are competing against when they sell.”

Seller Financing

In some situations, sellers are lining Lending Standards, Seller Financing. CFPB
Finalizes Loan 2013, The Consumer Financial Protection Bureau
www.realtor.org/topics/seller-financing – 2012-03-15

Seller Financing May Be Worth Exploring | Realtor Magazine

In today’s stymied real estate market, lenders are more cautious about making loans and sellers are more inclined to agree to carry financing to sell their properties more quickly. Here’s a look at how installment sales could work for your clients.
realtormag.realtor.org/law-and-ethics/law/article/2008/12/seller-financing-may-be-worth-exploring – 2008-12-01

Get Seller Financing to Work for You | Realtor Magazine

Seller financing has been a hot issue in recent real estate news due to the changes in regulations, specifically in the Dodd-Frank Act. Here’s what you need to know to incorporate this method into your business strategy and be the best advocate for your clients.
realtormag.realtor.org/law-and-ethics/feature/article/2015/04/get-seller-financing-work-for-you – 2015-04-06

Seller Financing: Background

Seller financing is subject to new rules following the passage of financial reform legislation. Know these changes in order to serve sellers better.
www.realtor.org/topics/seller-financing/background – 2012-01-17

My Account

Seller financing plays an important role in financing the sale of real estate, especially when credit is tight. This paper summarizes the impact of two federal laws that affect seller financing. Seller financing plays an important role in financing the sale of real estate, especially when credit is tight. This paper summarizes the impact of two federal laws that affect seller financing.
www.realtor.org/reports/seller-financing-impact-of-the-safe-act-and-the-dodd-frank-act – 2012-01-12

Sales Clinic: Expand Your Market with Seller Financing | Realtor Magazine

Are there any creative ways to sell a home that will maximize the salesperson’s value? —Timothy Baker, RE/MAX Affiliates, Naperville, Illinois If you want to be a top salesperson, you always have to be on the lookout for new and creative ideas to set yourself apart from the pack.
realtormag.realtor.org/…/feature/article/1999/12/sales-clinic-expand-your-market-seller-financing – 1999-12-01

Ways to Protect Yourself Under Seller Financing | Realtor Magazine

TIP: Instead of taking back an installment loan, per se, have the buyer purchase an annuity or some zero-coupon bonds in your name. These can often be bought at deep discounts to eventual payout, lowering the sale price, but guaranteeing you a higher future return.
realtormag.realtor.org/…/sell-your-business/article/ways-protect-yourself-under-seller-financing

NAR Submits Comments on CFPB’s Proposed Seller Financing Rules

On Oct. 15, 2012, NAR President submitted comments to the CFPB on its loan originator proposed rule. On Oct. 15, 2012, NAR President submitted comments to the CFPB on its loan originator proposed rule.
www.realtor.org/articles/nar-submits-comments-on-cfpbs-proposed-seller-financing-rules – 2012-10-19

Sellers Can Fill a Void | Realtor Magazine

If you’re working with sellers who have seen offers collapse because buyers can’t get a mortgage loan, you might want to suggest they consider offering some variation of seller financing.
realtormag.realtor.org/law-and-ethics/law/article/2011/07/sellers-can-fill-void – 2011-07-01

Seller Financing: The SAFE Act

In 2008, President Bush signed the Secure and Fair Enforcement of Mortgage Licensing Act or SAFE Act, which requires licensing and registration of loan originators.
www.realtor.org/topics/seller-financing/the-safe-act – 2012-03-15
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Looking for something else? Search the archive for many resources created before 2009.

 

Field Guide to Lease-Option Purchases

(Updated April 2016)

Lease-option agreements* are common when acquiring personal property—such as dishwashers, washing machines, automobiles, and TVs—but are not as common for the acquisition of real property. Lease-option agreements are generally utilized in residential real estate acquisition when a home buyer would like to purchase a home, but needs to repair her credit rating in order to secure a promissory note and mortgage. The lease-option agreement allows a buyer to lease a property for a set period of time—typically between 1-3 years—with the option to buy the property at a contractual future date. “The negotiated option is typically a percentage of the price for example, one to five percent, and is credited, along with the rents and a rent premium, to the purchase price if the lessee buys the property. If the option to buy is not exercised, the buyer will lose the option fee and rent premium.” (Real Estate Law (link is external), p. 227). Read the articles below to learn more about this alternative real estate financing option. (H. Hester, Information and Digitization Specialist)

*Also known as lease-to-own, rent-to-own, lease/purchase, lease with an option to purchase, or real options.


E – EBSCO articles available for NAR members only. Password can be found on the EBSCO Access Information page.


Lease to Own: The Basics

Is rent-to-own the future of housing? (link is external), (HousingWire, Jan. 14, 2016).

Investors Bank on Rent-to-Own Comeback (REALTOR® Magazine, July 29, 2015).

How do Lease Purchase Agreements Work? (link is external) (SFGate, n.d.).

How Do I Get a List of Rent to Own Homes? (link is external) (realtor.com®, July 25, 2012).

How Do I Find A Rent To Own Home In Bristol, Pennsylvania? (link is external) (realtor.com®, May 10, 2012).

How Do I Find A Realtor To Explain The Rent To Own Option? (link is external) (realtor.com®, Apr. 6, 2012).

Lease-to-Own Contracts (link is external), (UCLA School of Law, 2012).

Lease options are back: proceed carefully (link is external), (Realty Times, Oct. 25, 2011).

Sale-Leaseback Transactions: Price Premiums and Market Efficiency (link is external), (Journal of Real Estate Research, Apr.-June 2010). E

Informal Homeownership in the United States and the Law (link is external), see page 132. (University of Texas School of Law, 2010).

How lease-options benefit sellers, buyers … and their REALTORS®? (link is external), (CRE Online, n.d.).

Thought about lease-to-own transactions?, (REALTOR® Magazine – Speaking of Real Estate blog, Aug. 6, 2009).

Renting to Own (link is external), (realtor.com®, n.d.)

Case Studies & Examples

A Valuation Framework for Rent-to-Own Housing Contracts (link is external), (The Appraisal Journal, Summer 2014). E

Lease-to-own deals offer options in sluggish Tampa Bay housing market (link is external), (St. Petersburg Times, Oct. 23, 2011).

Can I get a lease option with bad credit? (link is external), (realtor.com®, May 5, 2011).

A Growing Housing Imbalance (link is external), (Mortgage Banking, Oct. 2011). E

Raising Capital Through Sale-Leasebacks (link is external), (Public Management, June 2010). E

Tax Implications

Individual Taxation Developments (link is external), (The Tax Adviser, Mar. 2012). E

Comparing Accounting and Taxation for Leases: Certified Public Accountant (link is external), (The CPA Journal, Apr. 2009). E

Tax Considerations for Buying and Selling Property with a Burdensome Lease (link is external), (Journal of Accountancy, 2009). E

Government Publications & Programs

State Agency Lease/Purchase Program (link is external), (Washington State Treasurer’s Office, n.d.).

Recent State Agency Lease/Purchase Interest Rates – Real Estate Only (link is external) (Washington State Treasurer’s Office, n.d.).

Definition from Washington State:

Lease/Purchase Obligations (Real Estate) — Lease/purchase obligations are contracts entered into by the state which provide for the use and purchase of real or personal property, and provide for payment by the state over a term of more than one year. For reference, see RCW chapter 39.94 “Financing Contracts.” Lease/purchase obligations are one type of lease-development alternative.” (Financial Budget Instructions Glossary of Terms (link is external), Washington State Office of Financial Management, n.d.).

Non-Mortgage Alternatives to RE Financing (link is external) from Reference Book – A Real Estate Guide (link is external), (California Department of Real Estate, 2010).

LFC Hearing Brief (link is external), (New Mexico Legislative Finance Committee, Dec. 2007).

Instructions for the Lease/Purchase Analysis Modeling Tool (link is external), (Idaho State Leasing Dept. of Administration, n.d.).

eBooks & Other Resources

The following eBooks and digital audiobooks are available to NAR members:

eBooks.realtor.org

Smart Guide to Real Estate: Step by Step Rent to Own, (Kindle and ePub)

Investing in Rent-to-Own Property, 2010 (ePub)

Investing in Real Estate With Lease Options and “Subject to” Deals, 2005 (ePub)

Books, Videos, Research Reports & More

The resources below are available for loan through Information Services. Up to three books, tapes, CDs and/or DVDs can be borrowed for 30 days from the Library for a nominal fee of $10. Call Information Services at 800-874-6500 for assistance.

Who Says You Can’t Buy a Home! (link is external) HG 2040.5 R25w (2006).

Field Guides & More

These field guides and other resources in the Virtual Library may also be of interest:

Sale-Leasebacks & Synthetic Leases

Seller Financing

Information Services Blog

Have an Idea for a New Field Guide?

Send us your suggestions (link sends e-mail).

The inclusion of links on this field guide does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this field guide complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.

When you first get started in Real Estate, what do you have a lot of?  Enthusiasm!

What do you lack? Knowledge!

After about six months you have a lot of what? Knowledge!

But what is gone? The Enthusiasm!

I want to challenge you to not lose your enthusiasm for Real Estate investing. Please learn to do it the right way by starting slow and starting small. You can buy a Multi-unit Apartment Complex, Commercial Real Estate, Land Development; but it is all going to start with that first house. Sure you might be able to buy a hundred unit apartment complex to start out with, but I venture to say every Investor that ever did that started with a single family home or duplex. So please, start from where you are right now, get involved, make a commitment and go out there and start buying properties.

By Dan Lacasse, Mentor

When I was in my “searching for knowledge” days about nine or ten years ago, I went to a seminar where I met my all time favorite speaker, Jim Rohn. He was to put on an all day event right in my hometown of Edmonton, Canada.

It was called “Success in the 90’s.” I knew if I had an opportunity to attend and participate in one of his seminars and even possibly meet him, I certainly wasn’t going to miss my chance. I had something important to tell him, and an opportunity presented itself to do just that.

After the seminar was over I waited for him to come down from the stage where he was to mingle with his fans and even sign an autograph or two. He was much older and smaller in stature in real life than I’d imagined him to be. His white hair cut short and in a nice dark suit, he spoke to the crowd gathered around him. He spoke in that familiar low tone that for years pushed me further down the success track where he gave me the belief that my past does not equal my future. I just stood there in awe face to face with the man that spoke thru my dashboard for four straight years.

What made him so intriguing was that he gave good solid information with good old-fashioned humor and wit, and I loved every minute of it. I listened to his tapes everywhere I went and after a while I started to talk like him and to this day he is still my all time favorite speaker (and I’ve heard a lot of different speakers).

A gentleman in the crowd started the conversation by asking “With so much talk about making money and trying to be successful, where would you suggest I focus most of my time and effort on in the beginning stages of my new career?”

Jim slowly looked at the crowd and then at him saying in his slow, low tone;

“Watch your thoughts; they will become your beliefs.
  Watch your beliefs; they will become your words.
  Watch your words; they will become your actions.
  Watch your actions; they will become your destiny”

and with that he grabbed a glass of water and there was a silence within the crowd, all of them comprehending what was just said.

I owe you. It was after some time with him speaking to the crowd that I made my way to the front, and it was now my turn to tell him something that was long overdue.

I introduced myself and proceeded to tell him my story that was about four years in the making. Many years ago I heard about him through an acquaintance that went on to make it big in a network marketing company.

“It was all because of Jim Rohn”, the acquaintance went on to tell me, “and after listening to him for several years my business grew to the point where I now have a wonderful life with all the toys that come with it.”

And with that he handed me a set of copied tapes. He said “Dan, I’m handing these pirated tapes over to you now, so you can go onto greatness.”

He sat down and told me a story that has forever been etched into my mind. He told me he didn’t have the money to go to Jim Rohn’s seminar in the early 80’s, so he asked a friend that was going, to copy the event on tape. When he finally got them he listened every day with out fail.

Then, many years later when he was about to receive his Gold level status in his MLM Company that he was with, he wanted to personally give Jim Rohn a certified cheque in the amount of $500 for the tapes he pirated four years earlier.

He found out that the motivational speaker was to be given a ride from the seminar to the airport by friend that had a limo. He worked out a plan to come along for the ride and present the cheque in person.

When he presented the cheque and told him his story, Jim looked at him and told him these words;

“I will not accept this cheque, because if I affected your life in a positive way, it is worth it to me for you to keep it.”

Now some eight years later standing in front Mr. Rohn myself in the late 1990’s the story was about to play out again, now for the second time. Jim reached out to shake my hand, and as he did so smiled and said “How is that gentleman doing anyway?” and I said, “He’s fine, just fine.”

I heard the crowd mumble behind me as I thanked him and offered to pay for the pirated tapes myself.

He just smiled and said, “Just go out and be successful” and with that, a woman posed a question to him and then in a flash my time with him was over. I’ll never forget it.

WHERE’S YOUR ELEVATOR SPEECH?
By Bill J. Gatten

OK, you’re on an elevator headed from the parking garage to the fifth floor and you have a man standing next to you looking up at the lighted digits above the door, who casually sizes you up and asks: “So what do you do for a living?” What do you say?

“Oh, I’m in sales.” (Meaning: “None of your business, and your not going to be standing next to me long enough to get into any details anyway, so let it go at that.”)

“I’m an investor.” (Meaning: “Envy me for 45 seconds …and think of me as someone you wish you could be…whether I am or not. And always wonder what “kind” of investor I might be…as if you really gave a hoot”).

“For a living? Oh, not a whole lot these days…how about you? What do YOU do?”

(Meaning: “None of your business. If you insist on talking, fire away it’s your nickel…Me? I’ll just pretend to listen as you babble…oops, why here’s your floor.”)

I’m a teletype operator having a bit of a struggle finding a job, what with all them photo facsimile machines out there these days. If it weren’t for my taste for Spaghetti-O’s, my wife taking in laundry and clipping coupons, I’d be SOL. How about you? What do you do?” (Meaning: “Are you a loser too? Gawd, I sure hope so because it’s awfully lonely here on the corner of Out-of-Touch-with-Realty Street and Co-Dependency Boulevard.”)

“ Alrighty then…(as the door opens and closes) you go and have yourself a nice day now (you say to the back of the elevator door). Hear?” As you whisper to yourself, “Dang I wish I could afford a suit like that.”

Or maybe you’d answer the question this way:

“Well actually, I work here in the building during the day; but I also dabble in real estate.”

(Meaning: I’m unhappy with my plight in life and am trying to better myself without turning loose of my life ring. So don’t judge me by what my answer would have been, had I not added the ‘but I dabble in real
estate’ part.”

Or, how about this one:

“Who me? Oh, I’m a big time real estate investor.” (Meaning: “If you’re really interested in what I do, you’ll ask more questions and get me started, and, once on a roll, I’ll explain how you can benefit greatly from my services.‘ Otherwise…I believe this must be your floor.”)

Now, think about it…that person who was standing beside you for the ride is now gone forever, but may well have been someone you could have helped, and received value from in the process…if you’d only had exactly the right response handy. That fellow passenger may in fact have had a house to sell at a bargain price; he may have been an owner in foreclosure; he might have been a flip investor. He easily could have been a prospective buyer for that house you just rehabbed.

The fact is: that particular person was an ‘all-ears, one-man captive audience’ for that 45 seconds of your life.

Why on Earth didn’t you sell him something? Well, the reason you didn’t even try, was because you presumed he was just nosey; or maybe just looking for a 45 second buddy; or simply too unconcerned about you to really have asked a sincere question.

All of these assumptions may in fact have been absolutely on the mark. But the big question is: Why didn’t you use that time to your maximum advantage. Consider what just “might” have happened if you’d said the following instead:

“I help folks buy and sell homes and investment real estate in all price ranges without
cash or credit.”

There you go…7 seconds on the button.

Then if they say “Oh really?” you continue:

“Yup, if I’m buying, I pay full price, all cash or terms: if I’m selling I don’t require loan qualifying, a credit reports or big chunks of cash up front. Here’s my card. Call me.”

There’s another 10 seconds, and we’re not even to the third floor yet…if the prospect is not interested, you just stare blankly at each other until the door opens.

Now…if that fellow passenger just happened to have been a prospect (buyer or seller) and by chance you had titillated his fancy (as it were) with your pre-planned elevator speech: did you give him every chance to know who you were and what you can do for him, were he to fit one of the criterion for your business? Sure you did! But with those other lame answers that others use…could any of them have made the slightest difference in your financial life?

“Oh I’m an insurance agent: I make widows wealthy.” Nope!

You merely wasted your precious moments with that person.

So what’s the point of all this? Well let me see.

How about the point being: 1) We should all find a tall building and ride up and down in elevators all day giving one-minute elevator speeches? No! Um…

2) Elevators are a great place to find motivated buyers and sellers? No! OK then,

3) It’s all right to talk to strangers on an elevator? No!

4) If I ever caught between floor in an elev…No! No! No…
This point is simply this:
You must stop what you are doing right now and take an hour to work out your “perfect,”
sure-fire concise elevator speech. Once memorized and refined, have it ever at the Ready
when you get the opportunity for those 45-second presentations. You will be finding and
qualifying prospects everywhere you go with the minimum effort and maximum effect.
Your audience will let you know instantly whether they are prospects or not. The ones
who don’t need you and have nothing to offer you will say: “Oh that’s nice and begin
talking about what THEY do for a living (at which point you remember having forgotten
to turn off your coffee pot at home). The E.S. (elevator speech) is an absolute necessity
for those of un in this business (especially in THIS business), and it works everywhere: at
Church, at a Chamber of Commerce Mixer, at the grocery store, your AAA meeting,
when meeting your fiancée’s parents for the first time; when meeting your daughter’s
fiancée for the first time (…the latter being far worse, believe me…whoever invented
nose rings and tongue piercings is an idiot); standing in the Unemployment or Welfare

Line (…Ok, scratch those last two…with a good elevator speech, you’ll never need to do
that).
THE MESSAGE: Develop at once a brief and concise Elevator Speech: memorize it and
be ready to recite it every time someone steps up and says: “What do you do for a
living?”