Archive for Real Estate Investing

Real Estate Investment Group Portland – Local Economy Shows Strength – Press Release

PORTLAND, OREGON — While the national housing market remains depressed, a real estate investment group Portland takes advantage as local house prices for June 2012 have remained at 2005 levels.

The semi annual housing report as prepared by the Fed Branch of San Francisco shows that much of Vancouver and southwest Washington maintain elevated foreclosure risks as compared to Oregon, where property pricing is starting to stabilize with sales price increases in property values.

The report matches real estate investor experience. “Portland housing prices are steadily improving as demand for rental property continues increasing,” notes local real estate investing veteran John Sheldon, owner of How to Invest in Real Estate Portland, a successful, locally-focused real estate investing group.

Rental properties are not remaining on the market long, and this demand is causing an increase in both rental rates and property sale prices. While the country has seen a rise in foreclosures, lender moratoriums may have provided homeowners with some relief as foreclosure proceedings are slowing down in Portland.

Real estate has long been regarded as the most secure investment to stand the test of time. National and international investors are selecting Portland, Oregon to buy real estate as they seek to secure their portfolios. Personal financial development gurus including Robert Kiyosaki and Tony Robbins advocate that real estate investing is an undeniable priority in order to offer financial balance to any portfolio. Sheldon adds, “This is the best time to seize the opportunities offered by the real estate market. It is crucial to realize that assets such as stocks, real estate, businesses and commodities function separately. When your stocks crash your other assets maintain strength; people will always need oil, food and housing.”

For a real estate investment group Portland, Oregon’s housing inventory still offers significant discounts. Investors continue to find valuable gems and bargains that are quickly converted into stable and passive rental income sources. Investors looking for instruction, training, assistance and mentorship locally may find benefit in the interactive support offered by a Portland real estate investing group.

How to Invest in Real Estate Portland offers real estate instruction and training through free webinars and one-and-one and small group mentoring. The group can be reached at (503)539-9094. Experienced and aspiring property investors in Portland can visit John Sheldon’s free training and partnering site at http://howtoinvestinrealestateportland.com.

Real Estate Investment Group Portland – Local Economy Shows Strength – Press Release

Portland Real Estate Investing: Power of Know, Like & Trust

Wow, I had some great interaction directly with a seller that I feel is important to share with others involved in Portland real estate investing.

[dropcap color=”color-default” font=”arial” style=”normal” size=”scmgc-3em”]1[/dropcap]st  I got a call from Bill, who was referred to me by a friend. Bill is somewhat of a motivated seller. When I first talked to him over the phone, he started telling me of a rental that he owns not too far from Intel campuses in Hillsboro. He’s in the process of evicting the tenant.  

He starts telling me that he owes about $85k on a place that is worth no more than $120k.  Not too exciting, as his $1100 monthly rent, does not provide any true cash-flow above his $800 monthly payments, taxes and insurance. We only talked 2-3 minutes real estate at all.  I began asking him general questions, that got Bill talking about things in his life that have nothing to do with his rental or real estate at all for that matter.  

By the end of the 20 minute phone call I knew all sorts about his life.  He was traveling the following week to Vancouver BC and Seattle area to help with a civic-service organization that he has been active in for 38 years.  I specifically probed further in this area, as I could sense it was his true passion and this lead him to open up to me.

This made it very simple to find out more about his life, finances etc. He retired about 10 years ago.  His daughter took over the business that he owned in Tualatin that still occupies a building that he owns free and clear.  As tenant in his commercial building, Bill’s daughter pays him a nice monthly income that affords him to live very comfortably.  He owns his home free and clear. AND… next door to the rental we spoke of originally, he owns another identical rental, [highlighter color=”blue-vibrant” ]except this one is free & clear.[/highlighter]  

After setting the stage above, it was very simple for us to plan a face to face meeting after he returned from his trip.

[dropcap color=”color-default” font=”arial” style=”normal” size=”scmgc-3em”]2[/dropcap]nd We met at a Sherry’s restaurant last Friday for more of the same.  

This meeting was not to analyze the opportunity.  This meeting was to further my relationship with Bill.  We scheduled 45 minutes for this meeting.  A full 40 minutes of this meeting was filled with Bill talking further about his life, lead by a few key questions by me. This is not rocket science once you get the correct mindset.  So Bill continued more about his civic-service organization, his wife, all 3 of his adult children, his grandkids and more.  

With 5 minutes left in our scheduled meeting, I decided that we should talk a little about the properties.  As I did that, he started asking me about my kids, that’s how comfortable and in-the-flow Bill was feeling at this point.  We went about 5 minutes overtime, as I reviewed my original notes about the property with Bill and added to notes and understanding about the two properties.

I told him that I would do a drive-by of the properties and get back to him this week to talk further.

People tend to do business with those people that they know, like and trust. This is true in Portland real estate investing as in most any transaction.

One of the most famous and certainly simple books to read on this subject is “How To Win Friends and Influence People” by Dale Carnegie.  This is a must read for everyone and I highly suggest it to all.  Even if you have read it a few years back, read it again and review it often.  It is great input not just for business, but for life in general.

[divider type=”dots” width=”small” align=”aligncenter” clear=”clearboth”]

Whether or not I end up doing business with Bill, this is already a successful relationship for me. I have further expanded my sphere of influence, as I suggest is the premier form of marketing in creative real estate.

Regarding the Properties 

My initial thoughts are to help him unload the leveraged property by selling it to me at about what he owes so that I can break even or hooking up with a realtor to sell it retail.

THE KEY is that I will help him get rid of the leveraged property, so that I can then purchase his free & clear one with seller financing that provides a clear positive cash flow. 

[box color=”blue-vibrant” type=”round” icon=”star”]I may then wholesale this property, clearing $7,500 from another local investor who is looking for this type of Portland real estate investment.[/box]

Any questions?

To Your Success!

John

Portland Real Estate Investing: Power of Know, Like & Trust

Real Estate Investing Issue: Weekly Wednesday Update 12/07/11

Real Estate InvestingReal estate investing is one of the most popular and profitable ways to earn a great income. Usually, this is preferably in the form of passive income from investing existing money into businesses or assets. Real estate is a relatively secure option for investment, especially compared to the more volatile practice of investing in shares. We usually expect the market value of property to change quite slowly, barring a huge unforeseen swaying force.

As an investor, it is important to research the location, history, and market predictions to ensure you are putting your money, time, and effort into the best possible investment. Over time, as you repay the loan you can consider a larger amount of the asset to be yours, while ideally collecting rent as the property grows in value.

However, before taking the leap into real estate investing, it is important to first consider some of the main positive and negative points involved. First, it is most often a safe, long term investment, so is popular with people who are not looking to take much risk as well as want a solid investment to carry into retirement. The second great thing is the ability to put tenants in your property and collect rent. Of course this carries risks of attracting bad tenants and property damage, ideally a large amount of your loan repayment can be offset by this income.

Another reason real estate investing is popular is the fact that it is a real, tangible asset that you can physically inspect, allowing for a greater feeling control. Lastly, there are many great options to claim tax deductions, thus increasing your overall cash flow. You can claim the interest on your loan repayments, costs in maintaining and traveling to the property, as well as depreciation on your asset.

Despite investing in real estate being quite an attractive idea, there are a few possible things to consider. Although it is true that properties are less volatile, if it did and you wanted to sell off your asset and make a loss, it still may take several months to find a buyer unless you are willing to sell significantly below the market value.& Secondly, it is a real possibility that you may for periods of time be unable to find tenants, meaning you have to be prepared to make loan repayments completely out of pocket, in addition to other expenses.

And, there is also the risk of bad tenants. Lastly, real estate investing is often an enormous investment and will encompass a lot of your resources. Therefore, if things were to go bad it would have a larger negative impact compared to investing in several different, smaller options. Lastly, in addition to repayments and interest, there are maintenance costs and insurance, and periods of vacancy where no rent is collected. You must be prepared to pay all of these out of pocket or risk financial repercussions.

In conclusion, although it can be quite a lucrative and safe investing option, there are some pros and cons to consider before you decide to take the leap into real estate investing.

Marketing Makeover for Maximum Real Estate Money

Marketing Makeover for Maximum Money

Effective Marketing Can Multiply Your Return On Investment

There have been a few times in my real estate investing career where it seemed as though out of nowhere, the referral/networking lead funnel just dried up. Disappeared. I wasn’t doing deals for months at a time. A month or two I just consider a vacation. Four months starts to make me nervous.

What saved my bacon each of those times was one word: marketing. In my free video “Seven Biggest Mistakes in Portland Real Estate Investing” we covered some important aspects of how marketing can improve your results. What I want to talk about with you here are three specific strategies and tactics you can use to make the marketing you use work better for you, to generate a higher quantity of quality, profitable deals.

Three Marketing Optimization techniques are:

  1. Define your difference
  2. Know your prospect
  3. Target your marketing message

Define Your Difference

It’s not nearly as crowded as it was back in the early 2000’s, but there are still a lot of us investors working in Portland. Don’t be surprised to find that the prospect you’re visiting with has just met with someone you know (or don’t know), or has plans to, very soon. When we’re faced with a lot of competition, it becomes exceedingly important to define our unique proposition. What we do or who we are that is different, memorable, and hopefully important to our seller.

As much as you might hear otherwise, very few people always sell for the highest price or always buy for the lowest price. Relationship, perceived value, experience, convenience, reputation and more can all play immensely important roles in determining whom the seller ultimately decides to do business with. So determine what’s different about you and make sure you communicate it in your branding and messaging.

Know Your Prospect

Everyone has their unique situation and needs, and part of our job as investors is to uncover that and make sure our solution solves their problem. That being said, different types of deals are best suited for people in certain categories. For example, offers to buy a property and pay for it over time are often best directed at seniors who are less concerned with buying another house and more concerned with the shrinking ability of their social security checks to pay their bills and long-term care needs.

So think about the type of investing model you’d like to specialize in. Consider the way it works, or the problems it solves. Think about what type of people as a class might have those types of problems most often or most urgently. And then get to understand them better. Research and learn more about their beliefs, values, and habits. Determine what prompts them to take action and feel good about it. In so doing, you will be better poised to focus on their benefit, which allows you to make a more powerful, convincing, helpful offer.

Target Your Marketing Message

In the free video I talk about how you want to fish where the fish are. At the risk of being redundant, I want to bring this up again, because it’s so important. If you are trying to sell water to people who live on a freshwater lake, you’re likely to have less success than selling that same water to people who live in a desert with no well. Target your message to those who are interested.

So you’ve identified your business model and know who is likely to need and want what you have to offer. Focus your financial resources on making sure as many of those people as possible get your marketing message. On the other hand, you want as few people as possible who don’t fit those criteria to get your message. It will reduce your costs, reduce complaints (from people who shouldn’t have gotten your marketing in the first place), and increase return on investment of your marketing dollar. And when you get more bang from your marketing buck, it empowers you to market to those people again and again. Over time, they become aware of you, become familiar with you, and eventually become comfortable to do business with you.

Of course there are many more steps to creating effective, profitable real estate investing marketing. There are whole four-year graduate degrees just focused on this stuff. The reality is that many people, even when they understand the importance of marketing, are not capable of effectively executing. This is one of the reasons we created our email marketing campaign, where we partner with qualified investors or would-be investors and actually do the marketing for them, communicating with their email database in a way that builds relationship and credibility and attracts deal referrals like a 10-pound magnet attracts paper clips. If you’re interested in learning more about how to invest in real estate Portland-style using effective marketing, you can give us a call at (503)539-9094 or visit our website.

No matter how you get it done, effective marketing added to your mix of consistent real estate investing behaviors will give you greater consistency and quality of deal flow. Effective real estate investing marketing will certify your income and substantiate your dreams of wealth and success, and is worth 10x, even 100x, the time, money, and effort you will invest to incorporate it into your business. Take action and prosper.

Marketing Makeover for Maximum Real Estate Money

Working with Realtors – Real Incentive to Wreck Your Deals

Working with Realtors - Charlie Brown: Realtor Charlie (detail)

Working with Realtors

In my free video “Seven Biggest Mistakes in Portland Real Estate Investing” I talk about the double-edged sword of working with realtors, because of what you need from them vs. what you have to be careful of. In this article, I want to give you two insights you may not have considered about why many realtors are subtly encouraged to undermine your deal evaluations and suck profits out of your real estate investing business.

If You Look Good, You Feel Good

Many realtors consider themselves very special people. After all, in Portland tens of thousands of home buyers are working with realtors every year, seeking advice and guidance on the biggest purchase many will ever make in their lives. Like doctors, lawyers, and politicians, sometimes that authority goes to agents’ heads, and inflates their ego. Many even lose the sense of themselves as salespeople, and begin to think of themselves more as professional advisors, when in fact only the most sophisticated realtors know even the basics of what the average investor learns.

What that translates into is an unwillingness to do anything they perceive as “salesy,” including making “lowball” offers. Many of these realtors feel that it is more important to look good, like they’re bringing only big spenders, than it is to actually generate the multiple sales that are inevitable when dealing with an active investor. These realtors will tell you that they cannot or will not present your offers, though they are required to. They will tell you that the offer will be refused, with no knowledge of the seller or their requirements. They will often require you to raise your offer, and new or hesitant investors often will. Imagine shaving thousands or even tens of thousands of dollars of safety margin and profit from otherwise good deals because of working with realtors of this type.

I Make Money if You Lose Money

This is perhaps the most insidious element of working with realtors more focused on their success than true win/win transactions. As I mention in the video, realtors have no skin in the game. They’re not paying to be part of the transaction, and there’s no risk to them if the transaction fails. But it goes one step further.

The realtor is paid a percentage of the purchase price. The higher the price, the higher their commission. If they can encourage you to increase your sense of the value of a property to where you are willing to raise the purchase offer by $10,000, they will increase their income by $150 to $600. It may not seem like much incentive, but if they do that for 20 transactions in a year, that’s an extra $3,000 to $12,000 in their pockets. Even the most honest person is going to be tempted by that kind of self-driven raise, right?

However, their raise translates to an increase in your buying costs (if all 20 of those purchase transactions were with you) of $200,000 in that year. A good portion of that pure profit income that you gave up. That could be the difference between barely breaking even and living the lifestyle you and your family deserve. See how quickly that can add up?

How Can Working with Realtors Benefit You?

The good news is, not all realtors are cut from the same cloth. In fact, some realtors are, have been, will be, or have the mindset of, investors. They understand that investors can reinvigorate a local community, increase property values, bring new residents and new tax revenue, and give potential home buyers a chance at the great American Dream. They believe in you and what you do.

And they also realize that even though they may not make the maximum dollar from every transaction, they will do a lot more transactions with you than the typical buyer or seller who does a transaction every two to five years. This translates into less work pounding the pavement and looking for listings or trying to find buyers for the listings they’ve got sitting stagnant. Everybody wins.

So how can you find and start working with realtors of this variety? Ask around. Check with other local investors who are successfully working with those types of realtors. Look for them in local investors’ clubs. They’re there, and chances are, they won’t be hard to find. And when you find a good realtor who understands investing and is willing to support you, treat them as the true asset they are, and you will find that your business blossoms along with theirs, and you will make the money you want and create the lifestyle you dream. Take action and prosper.

Working with Realtors – Real Incentive to Wreck Your Deals

Negotiating on the Phone – Why We Try and Die

Negotiating on the Phone

Negotiating on the Phone Is A Bad Idea

Phone sales work. There is a very high-income niche of the stock brokerage industry in which the sales reps almost never meet their clients in person. Maybe you’ve even received a call from someone offering you a high quality recommendation and then asking if you’ve got $10K or $25K you’re ready to invest in that recommendation now.

So why doesn’t negotiating on the phone work in real estate investing? Why can’t you call a prospective seller in Portland and just qualify them and ask to buy their house on the phone?

Well, you can actually. But you just have to expect a very, very, very low success rate. Why? In my free video “Seven Biggest Mistakes in Portland Real Estate Investing” I talk about the pure power of communication lost negotiating on the phone. You can discover how improper use of the phone can dramatically reduce your ability to buy profitable real estate in the video there.

In addition to the lost power of communication, I recommend strongly against trying to hunt for property over the phone for three reasons I’m going to share with you now:

  • A higher level of distrust of “phone strangers”
  • The physical nature of real estate
  • The caller’s hidden reasons for attempting the transaction by phone

Mother Always Said to Never Talk to Phone Strangers

On the phone, it’s not like meeting a stranger in person.

Think about your typical reaction to a stranger calling you. Aren’t you immediately just a little cautious? Who are they? Why are they calling you? Especially if they’re calling you at home, in a very real if unconscious way, they’re an uninvited guest. Even if they’re calling regarding an ad you’ve placed in Craigslist, chances are at some level you’re trying to figure out if it’s okay for that person to come to your home … come into your home.

Now you’ve got a better sense of what your prospect is going through when you call them. They’re going to be suspicious and likely unwilling to give you all the details. After all, at this point in the game, you know a lot more about them than they do about you, and nobody likes to be at such a clear disadvantage.

The Hands-On Nature of Real Estate

The fact is, stocks are in a way made for phone sales. Very few people really understand money, and once money is stashed in a savings account, retirement fund, or portfolio, it’s all conceptual. That’s one of the reasons for the credit card crisis. People can’t see the money leaving their hands, so they tend to be less adept at handling it. So to have a voice without a face talking about concepts that barely mean anything to them is all sort of par for the course.

Exactly unlike that, real estate is very tangible. You can see it, touch it, smell it. So suddenly that faceless voice is not talking about some concept you barely understand and don’t connect with anyway. That voice is negotiating on the phone with you, trying to take your home. And if that voice is trying to take your home over the phone for half of what you think it’s worth, you’re going to get defensive. Maybe even angry. How could this possibly go well?

The very best way for that prospect to connect you to their home is to enter it as an invited guest. In my trainings we spend a lot of time on how you can create that effect, but basically, you want to begin the process of letting them get to know, like, and trust you on the phone, and then get the appointment. A fantastic resource I recommend often is How to Win Friends and Influence People by Dale Carnegie. It’s a classic guide on helping people to know, like and trust you so they’re willing and even eager to do business.

The Investor’s Easy Out of Negotiating on the Phone

By far, I believe this is the real reason investors are not more successful by phone. It’s simply that the phone is a cover-up to shield the investor. In my own experience and in talking to other investors I’ve discovered that too often, we get on the phone and get pulled into the prospect’s world. We answer all the prospect’s questions, even when it’s not the right time and place, because it’s easy. We avoid rejection and get to seem like the expert. In reality, we’re giving them more and more ammunition to say “not interested.”

It’s ironic. In trying to avoid rejection, we create it.

And of course there’s the other part of this. Maybe you’ve been the one receiving a call from a telemarketer who seems totally and utterly confident and relaxed. It puts you at ease and makes you more likely to complete the call. On the other hand, you’ve probably received a bunch of calls where the caller sounded like a robot, or pushy, or uneasy. Chances are, you responded by being quick to get off the phone. Just like that, if you begin negotiating on the phone and your actual intent is to avoid getting with the prospect in person, they will hear it at some level, in your choice of words and how you speak, and they will deny you.

The Fix

I’m not going to tell you that it’s necessarily quick or easy, but there are a few steps you can take to become great on the phone:

  • Get clear that your purpose on the phone is to get a face-to-face appointment
  • Spend a little time getting to know them as a person and letting them get to know you as a person
  • Have or develop a script that you practice until you are comfortable with it, including your responses to inevitable questions that can derail the call
  • Be prepared to get on the phone and practice, practice, practice with real prospects to get good

The phone is a necessary and critical part of how to invest in real estate in Portland. If you are willing to avoid negotiating on the phone, get clear on your purpose and put in the time, your phone skills can give you a leg up over the competition and firmly establish your ability to create the income and lifestyle you desire and deserve. Take action and prosper.

Why We Try and Die Negotiating on the Phone

Business Structuring – Making Money? Now Cover Your Assets

WARNING: DO NOT READ ABOUT BUSINESS STRUCTURING UNLESS YOU HAVE COMPLETED AT LEAST TWO SUCCESSFUL TRANSACTIONS

Business Structuring at IBM/Tabulating Machine Co. organization chart

Business Structuring Follows Profit

I’m not trying to be mean with the warning. I just don’t want you to waste your precious time focusing on things in the wrong order. Try dialing a phone number where you dial the area code AFTER you’ve dialed the 7-digit local number and see what happens. Order counts. I’m mentioning this topic now because chances are, once you’ve started actively investing, you’re going to start hearing horror stories of loss due to lack of preparation in business structuring.

So, let’s take a look at a few ways to structure your business to protect your family and personal assets from legal and financial liability, and to minimize your tax burden. Please note that I’m not a licensed CPA or attorney. I’m just sharing some of the things I’ve become aware of in my time as an investor. When you’re ready to CYA, I strongly urge you to get qualified help from a good local lawyer, accountant, and financial planner who understand Portland laws and tax structures. Here they are.

Business Structuring Types

  • Sole proprietorship
  • Partnership
  • Limited Liability Company
  • S Corporation
  • C Corporation

Sole Proprietorship

This is the most common, and cheapest, form of business structuring. It allows you to use a legal business name, and that’s pretty much it. There is no financial or legal protection of any sort. If there’s a problem, it comes down on you, your savings, your home, your car, your boat, and any and every other personal and real asset you own. However, you can start writing off business expenses, including a home office.

Partnership

Two or more people come together and share in the risks and the rewards of the business. Many single-property projects that are called joint ventures are in fact partnerships built around a single property. This is one of the reasons why you will see numerous investors who are in completely separate joint ventures with other investors. Each property is inside its own partnership agreement or other corporate entity.

Limited Liability Company

Many people mistakenly refer to this as a “limited liability corporation” but in fact an LLC is more like a partnership than a corporation. LLCs have become very popular in recent years for real estate investors, as they are less expensive and often require less administration than corporations, but still provide excellent liability protection.

S Corporation

The S corp is the “Small” version of the C corporation. It’s simpler to administrate than a C corp, but harder than an LLC. Similarly, the financial tax benefits kick in at a higher revenue level than an LLC.

C Corporation

The Daddy of all business structures, the C corp has the highest administrative burden, but generally provides the greatest legal and financial protection. Of course, you need to be generating something like $100K a year before this even becomes an option for most investors.

The best way to determine the business structuring right for you is to ask yourself a few key questions and share the answers with your mentor, attorney, CPA, financial planner, and marketing team or consultant (believe it or not, how you set up your business can affect how well you get found in Google, and how you market your services). After you’ve gotten all their feedback, then you can weigh the information and make the best decision for you.

Here are a few questions to consider, in no particular order (remember to invite input from your professionals as well):

  • How good are you at maintaining records?
  • Will your properties ever be occupied by tenants?
  • Will you be joint venturing/partnering with other investors, and if so, how often?
  • Will you be working from home, or from an office?
  • Do you own your own home or any other significant personal or real assets?
  • How much will you make from investing this year?
  • Will you be using your own funds to invest, and if so, what financial vehicles are the cash in?
  • Are you looking to get found online by prospective sellers or buyers?
  • Will you be engaged in construction or remodeling, personally or through subcontractors?

Proper business structure is only one side of preparation. In my free video “Seven Biggest Mistakes in Portland Real Estate Investing” at HowToInvestInRealEstatePortland.com I also talk about the members you want to have on your real estate investing “dream team.” So make sure you’re making money in real estate first. Then get your business structuring in order, make sure you are surrounding yourself with the best teams to protect your assets and to take your business forward, and you will enjoy peace of mind as well as wealth of household. Take action and prosper.

Business Structuring – Making Money? Now Cover Your Assets

Deal Analysis: Profit Lessons from a Traffic Light

Deal Analysis: Profit Lessons from a Traffic Light

Deal Analysis Can Protect Profits

The biggest mistake I see novice investors make in Portland is that they do not do proper deal analysis, including profit planning and exit strategy assessment. That’s jargon for saying they take deals where there’s not enough money, or there’s no safety net in case their one way of getting out of the property goes sideways.

In my free video “Seven Biggest Mistakes in Portland Real Estate Investing” I go over a number of the different exit strategies.  I’m not going to add substantially to that now, but here is a quick list of property and exit strategies:

  • Property Strategies
    • Do nothing (sell “as is”)
    • Quick cosmetic improvements (“rehab”)
    • Major cosmetic and material improvements (“remodel”)
    • Reconfigure for additional bedrooms, bathrooms, or units to increase sale value or NOI (“net operating income”)
    • Raze improvements to the ground
    • Raze and rebuild on existing foundation (still considered in most jurisdictions to be a remodel)
    • Raze and rebuild entirely new
    • Subdivide lot into two or more legal lots
  • Exit Strategies (for land or land/improvements combination)
    • Sell retail through realtor
    • Sell retail FSBO (“For sale by owner”)
    • Sell wholetail (discount from retail value)
    • Sell wholesale (deep discount to allow for rehab or remodel costs and resale)
    • Sell on contract
    • Lease option (“Rent to own”)
    • Rent/lease

You can mix and match property and exit strategies to come up with an almost endless variety of ways to get out of a deal profitably. We consider dozens of scenarios in our weekly webinars.

What we’ll focus on here and now is a simple way to make sure you’re paying attention to effective deal analysis. It’s called the traffic light strategy.

I did not invent this, but I have used a version of it in my own investing for years. It’s a pretty simple system and it works just like a traffic light:

GREEN – You have at least THREE exit strategies that will all pay you your minimum five-figure paycheck. (By the way, YOUR minimum five-figure paycheck could be anywhere from $10,000 to $99,000. I personally recommend that my students and partners NOT use $10K as their figure.) GO! GO! GO!

YELLOW – You have TWO exit strategies that will pay your minimum paycheck. Proceed with caution.

RED – You have ONE exit strategy that will pay your minimum paycheck. DO NOT PROCEED.

If you keep this simple formula in mind, it will be very difficult for you to lose money on a deal. If you combine this with the other strategies you’ll learn on this site, in your emails, and in our membership club, you’ll be practically bulletproof. Won’t that be nice for a good night’s sleep? Do your proper deal analysis, make sure you’ve got multiple exit strategies take action, and prosper.

Deal Analysis: Profit Lessons from a Traffic Light

Gurus – A Loaded Gamble

Gurus - A Loaded Gamble

Gurus - A Loaded Gamble

How much have you spent on training with “gurus,” real estate investing trainers traveling the national circuit? Hopefully less than $20K. Ideally less than $5K. I personally have invested over $100K in guru education and have discovered the advantages and very real disadvantages up close and personal. Let’s talk about the good, the bad, and the ugly of guru-centered real estate training.

The Good of Training with Gurus

A few of these guys and gals have decades of experience in the trenches, in the real world. They’ve done deals and fought their way up to super success, often from humble beginnings. They know how to win with real estate. When they teach, it’s from real experience.

And when you do something in the same way as them with the same kind of seller, you will often enjoy very similar success.

More importantly, if you listen between the lines, you can begin to interpret their beliefs, their philosophies, and the advantages and disadvantages they worked with. These are often the things they don’t spend much time talking about that you can learn the greatest lessons from.

For example, if one of those gurus tells you that doing a 120-unit deal is the same as a duplex, that may cause you to think one way. But what if you discover that that very guru didn’t do his first 120-unit deal until he had 20 years of solid experience in real estate? He had built connections with construction crews and administrative teams … and key decision-makers in the city’s land use and permitting departments … and financing. What if, after all this, he STILL had multiple partners on his first few larger deals? You might think another way. Probably a more empowered, realistic way. And the fact is, the gurus often say one thing, but their own experience is completely different. They’re not lying intentionally often. There’s another reason why they say things that seem incompatible with their own experience. Let me explain.

Say you’re out of shape and an Olympic power lifter tells you that picking up a 500 pound barbell and throwing it over your head is easy as long as you do it the right way. Chance are, you’d look at him and think, “Sure it’ll be easy, just as soon as I’ve got all your muscle.” And you will be empowered with a realistic perspective. But if you ignore his muscle and training and team of coaches and just try to pick up that barbell, you will not only be sorely disappointed, you will be sore, and quite possibly injured.

But you can’t see the guru’s “muscles” because they’re between his ears. He doesn’t even consciously see them anymore. He rarely comes on stage with his parents, friends, coaches, and crew. You almost never hear about the biting failures that taught him the lines that could not be crossed, and that motivated him to ever greater effort and success. These are truly great lessons. Not what the gurus do in real estate, but how they got there. How they think, what their support system is, the circumstances and market under which they developed their investing system. Understanding all of these will give you far greater clarity and realism in moving forward.

The Guru Bad

The guru will tell you that his system will work for you wherever you live, because everyone is the same. That’s true, isn’t it? You can drive around your own town and see homeless people, wealthy executives, seniors heading towards senior care homes, and teenagers looking for something to do. Don’t they all want the same things in life, and have the same priorities, and values?

Not even close.

Similarly, not every system works the same way everywhere. Folks in Lafayette, Georgia have very different values and culture than folks in Portland, Oregon, generally speaking. They’ve got different local and regional economies. Their primary employers are from different industries. Their average education and income and cost of living are different. Same goes for New York City, and Seattle, and Wichita, Kansas. They will not respond to the same offers as a group, in the same ways. If you think that the guru’s methods which were developed in a low-house-value area with relatively unsophisticated sellers is going to work as well in the big city with savvy, cosmopolitan types in multi-million dollar homes, you are destined for disappointment, failure, and loss.

The Ugly

Have you ever noticed how different people move through the world differently? There are shy people, and outgoing people. Intellectuals and dullards. Leaders and followers. Now think about every platform-walking guru you’ve heard of. Are you just like any of them? Do you approach people, property, or situations the same way? Do you have the same experience, or support systems? Do you believe the same things about the world or yourselves? Do you have the same friends?

It all makes a difference. And if they don’t tell you that, it’s either because they’re not honest with themselves, or they’re not honest with you.

There’s a very interesting book I might recommend to you called Outliers by Malcolm Gladwell. In it, he demonstrates very persuasively that people are not successful just because of hard work, courage, and perseverance, although of course those are necessary. Their destinies are intimately tied with who their parents and grandparents are, where they grew up, and what year, and even month they were born. This applies to professional hockey players as much as to software manufacturing billionaires as much as it does to world-class concert musicians and math wizards. It’s a good read and can open your mind in important ways.

One of the biggest myths these gurus will perpetrate – knowingly or unknowingly – is the idea that they did it alone. In reality, one of the most important elements in most successful people’s lives is the presence of a mentor, someone who believed in them and helped them every step of the way for some period of time, usually in the formative years of their professional development. That mentor taught them and encouraged them to leverage their strengths and take action, to celebrate wins and learn from failures … over and over again, until success was a habit.

For those of you going it alone, trying to take “the hero’s journey,” you will discover that the chances for success are small. I’ve learned techniques from gurus, but it was partnering with my mentors for years that made my efforts pay.

So, in summary: guru training is a sword that cuts both ways. Like everything else in life, it has its advantages and disadvantages. Being aware of and planning for both will pay you dividends in saved years of wasted effort and disappointment, and will make your trip less lonely and more enjoyable. Pair personal mentorship with gurus’ training that matches your personality and market and you will have a winning combination that will empower you to create income now, stability for your future, and a lifestyle that will be envied by your peers. Take action and prosper.

Gambling on Gurus – The Stakes Are High and the Dice Are Loaded

Hard Money Headaches: Why and how to avoid it in real estate investing

Hard Money Headaches

Hard Money Headaches

First, let me be clear: hard money is not a bad thing.

If you can do a deal that makes you a five-figure check, do it. If you have to pay someone 18% or 24% interest on the money that closes the deal, do it. You’re getting your check, let them get theirs, too.

That being said, hard money is NOT the way to build a long-term real estate investing business.

I want to talk to you today about three ways to avoid hard money and its expenses and deadlines. You’ll also discover a little-used way to actually leverage knowledge of hard money to actually put more money in your pocket, better food on the table, and greater peace in your mind.

First, a quick review of hard money. I really don’t know why it’s called “hard” money, but this is what it is: money lent – often by an individual – to a real estate investor for a high interest rate and a short period of time, secured by real estate. Interest rate is typically in the 18% to 24% range. Term is anywhere from a few days to several months. The loan is usually secured by a first position trust deed or mortgage on the property you want to acquire. Wikipedia goes into a more extensive definition of hard money here.

The upside of hard money is that it can often be acquired very quickly – sometimes as little as a few hours. Also, it does not depend on your own credit. This means if you find a deal and are strapped for cash or just don’t want to spend your own money, you can still get the deal done.

But there are other, better ways to finance a real estate transaction.

Three Ways to Do Deals without Hard Money

  • Private investors
  • Partners
  • Credit partners

Today we’re going to talk about the first three.

Private Investors

Private investors are often people with more money than time, who like the strong returns and secured loans available with solid real estate investments. Although some hold the money in cash, more often they will have their funds in retirement vehicles or stock portfolios.

Because they’re not active and experienced investors as most hard money lenders are, they’re willing to take a significantly lower interest rate, usually between 10% and 15%, with the most common being 12%. Because their money is often tied up and takes time to be available, they don’t typically have the same speed of availability as hard money.

Partners

A partner takes an active part in the deal, whether that be money, effort or both. They take a share in the risk and the benefit. Meaning that if the deal goes down, their money or effort goes down with it. But if the deal does what it should or better, they get a percentage up to the very last penny.

The downside is that a partner can take the largest share of all, up to 50%, or more if they’re the lead. The upside is that they may bring skills, resources, or experience that make the deal possible. And it’s always better to have a smaller five-figure check than none at all. 😉

Credit Partners

Like a “regular” partner,  a credit partner is ann active participant in the deal and provides funding. However, unlike the partner mentioned above, a credit partner is not briging her own cash to the transaction, but is instead bringing her excellent credit, which then allows the project to get regular bank financing.

The upsides are the same as with a partner bringing cash; you get the deal done. The additional downside of using a credit partner is that your project will now need to meet more stringent and less flexible bank requirements in order to get funded.

Bonus

I know I said we’d talk about three, but you really can’t miss out on the most exciting funding option of all – seller financing. In this case the person or persons selling you the property offer to let you pay off the balance of the purchase over time. They basically loan you the money to buy their property.

Why is this exciting?

Two words: flexibility and motivation. Let’s clarify this by looking at the mainstream option – the bank.

If you deposit money into a bank, their goal is to pay you the least money (“interest”) possible, take your money (“deposit”) and make as much as they can with it. If you borrow money from a bank, you’re on the end where they want to make the most money possible, meaning they want to charge you the highest interest they can. And as bankers tend to be highly risk-averse, rigid, and emotionally detached from the success of your deal, they are not going to go out of their way to help you make the deal work.

Your seller is the exact opposite. They’re often far more interested in what the future has to hold for them than they are in making every last dollar from the deal. They’re used to eking out 0% to 2% interest on their deposits in the bank, so getting paid 3% to 6% by you is an absolute windfall. And they are motivated to get out of that property and on to the next chapter in their life, so they will typically be far more accepting of flexible terms. It’s good for your seller, it’s good for you. Win/win.

Why to Always Plan to Purchase with Hard Money

This is where you prepare for the downside, and it can mean not just security, but even increased profits. You can see why and how I do this in my free video. You can get access to here, to the left of this post on the top of this page or by visiting How to Invest in Real Estate Portland.

The bottom line is that if you always think and plan like you’re using hard money, but find the very best funding option you can, you will always give yourself the very best chance of making a five-figure paycheck, taking care of your family, and having enough left over to enjoy a quality lifestyle. Now, go take action and prosper.