Getting started in real estate investing can be hard, especially if you don’t know what you’re doing or have someone to show you the ropes. When I got started, I made a lot of people angry by making low ball, all-cash offers. I quickly realized that if you don’t know the numbers on a deal and you make an offer on it, you’re a fool. Throwing dollars at deals doesn’t guarantee you’ll make money.
People want to buy based on price but that’s a surefire way to a bad deal. You have to get face time with every seller and ask them the important questions about their property. You can do much better making creative offers to sellers that help them get what they want instead of just offering cash.
Not everybody has someone behind them that is willing to lend as much money as they need to make a deal happen, and it can actually make your deals worse. Solving the seller’s problems is a much better approach. You can make a lot more money by leveraging what you have and figuring out terms that work for both parties.
I see things totally different today. When you talk to a seller, learn what the seller wants and try to come up with several solutions to those problems. Always make an offer and don’t let the broker get in your way. Even for sellers that want all cash, there are strategies you can use where you don’t have to put the cash up front like writing a note for the property. There are creative ways to get a deal done that make everybody happy, you just have to think outside the traditional box.
Don’t make the mistakes I made, make your own mistakes. Even better, learn from the mistakes of others so you don’t have to learn things the hard way.
People are always asking “why don’t you talk about selling properties?” The reason is you have to acquire properties before you can sell anything. Let’s not get ahead of ourselves. If you don’t own anything, how are you going to make a profit?
Once you become good at buying, that’s when selling strategies become important. Being a profitable seller is also a collection of strategies and techniques and that’s the topic today. Your plans for a property are the most important because the numbers calculate differently depending on your goal.
When you buy a property, you have to think about what the highest and best use is going to be. If you don’t know that, how are you going to know how much to pay for it? You’re not in business to lose money, you’re in the business to make money. The repair costs matter, the appraisal matters, holding costs matter, they all impact your calculations and ultimately your profit margin.
Your selling strategy is very important. Are you going to sell for cash? Financing terms? Are you going to hold the property and rent it instead? Each selling strategy has to be assessed differently because they change the numbers involved in the deal. You should also know your exit strategy before you’re going to buy.
When you know your selling strategy and make those calculations, you won’t be buying as many properties but the ones you do will actually make you money. Be realistic with your sale price and make sure your buyer doesn’t go out and buy a new car before closing the deal. If you’re going to sell your properties, you must get to know your buyers and make an offer that gets them as much of what they want as you can.
People are always asking “what are the steps to be a successful investor?” Well, the good news is there are 9 steps that you can take to accomplish exactly that. One of the biggest lessons you can learn is that procedures are critical to your success. If you follow the procedure, you will find success.
You have to find deals that others aren’t seeing. Everyone looks in the Multiple Listing Service, but the deals you can find there are all the leftover properties that really successful investors have passed up. Rental property opportunities in the price range where the majority of the people living in the area could afford is what you should be looking for and you have to do your research beforehand.
Find out everything you can about the owner and the property before approaching them and before you sign anything, make sure you can bring in a contractor that can assess how much the repair costs will be. You will need that information to negotiate with the seller.
You have to figure out the highest and best use of that property. Talk to different property managers in that area what that property should rent for. Those numbers will determine what you will be able to pay for that property. Once you’ve done that, you can look on MLS for similar properties to understand what the price range for the property is.
Next step is to run your formulas, there are 8 formulas that you must use to figure out what you can offer for a property. Then look at other houses in the area and take pictures of the features of those houses. You can make your prospective property more enticing to renters by adding some nice features that make the home stand out.
Once you’ve done your research, you should ask the seller what they really want. There are a number of ways to make an offer that allows everyone in the deal to feel like they’ve won. When you get the purchase agreement signed, it’s time to close the deal. However you are going to finance the deal have it lined up before you even make the offer. Make a copy of your purchase agreement and take it to your title company, then make sure that the closing is progressing. Contact them every few days and stay on top of them.
Finally, never stop building your cash buyers list and never stop marketing. If you are buying property to wholesale, you need cash buyers. Never stop looking for opportunities and always make an offer on every property you look at.
When Larry first got started investing in real estate he had nothing and had to learn everything in the school of hard knocks. Hear the tale of one of Larry’s first deals and how he purchased a property without having any money. It was Larry’s first exposure to creative financing, he figured out what they wanted and found a way to give it to them.
When putting together the terms, Larry only knew that he had a deal on his hands, not whether or not he had a good deal. That’s why it’s extremely important to know what numbers matter to the deal before you sign anything. Just because you can buy a property at a “good” price, that doesn’t mean you’ve got a good deal on your hands.
One of Larry’s biggest mistakes has made and sees other people making is doing their own rehabs. Instead of doing all the repairs yourself, you should negotiate the price so that you can afford to hire a contractor. Remember, your time is worth something. Don’t just throw it away. You don’t make money swinging a hammer to save $12 an hour. Take a licensed contractor with you through the property before you make an offer.
Too many people throw dollars at deals and fail to factor in holding costs to their deals. Things like the mortgage payment every month, the property taxes each month, property insurance each month, and other monthly fees. If you don’t factor those into your buying decision, they are going to come out of your profit check at the end. It’s going to take at least 4 to 6 months to rehab a property, don’t fool yourself.