…cashed a check for more than their annual salary!

It’s not uncommon in creative real estate investing to make $30,000 or $40,000 or much more on a deal. BUT, there are a number of common roadblocks that keep beginning real estate investors from ever seeing a big fat check like that.

Beginning Creative Real Estate Investor’s Common Roadblocks 

Roadblock # 1 - Neysayers

This well meaning but dangerous group of people should be enemy number 1 on your “Who to Avoid” List. Neysayers are everywhere in this day and age. Being negative has become the conditioned response from the masses due to what main stream media shoves down everyone’s throats. But you do not have to listen to or even associate with them. Actually, you’ll be better off in every facet of your life if you don’t.

When someone asks you what you do and they immediately start talking about the terrible state of the real estate market, that buying property no money down is a myth, and how real estate investors are glorified scam artists…RUN! Do not even say another word to them. Justifying what you know to be true to someone ignorant on the subject is pointless, futile, and flat out unnecessary. If you must say something, I would advise saying, “That’s an interesting point of view” and walk away!

Roadblock # 2 - Not Having a Strong Enough Why

Do you know exactly why you want to become a successful creative real estate investor? If not, take this time to think about it and clarify what it is that you are moving towards. Is it to provide for your family, to be your own boss, to free up your time to pursue a certain hobby or sport or to have financial freedom to do what you want, when you want? If you have a strong enough why, you can accomplish almost any how.

What’s your why?

Roadblock # 3 - Fear of Failure

There are only two fears that are inborn when you are brought into this world; the fear of loud noises and the fear of falling. ALL other fears are learned. Therefore, these fears can be unlearned.

In Napoleon Hill’s book, Think and Grow Rich, it’s explained that fear of failure is one of the major roadblocks people must face on the road to personal achievement. Fear of failure can be a paralyzing state and must be confronted squarely.

Here’s what to do to master the fear of failure. It all starts by reframing the way you think about failure. Check out what Thomas J. Watson had to say about it:

“Would you like me to give you a formula for success? It’s quite simple, really. Double your rate of failure. You’re thinking of failure as the enemy of success. But it isn’t at all. You can be discouraged by failure - or you can learn from it. So go ahead and make mistakes. Make all you can. Because, remember that’s where you’ll find success.”

Roadblock # 4 - Lack of Continued Education

Most adults regard education as something that they did growing up. They might say, “Been there done that.” Most people never finish even one book after they graduate from their formal education. This gives the person with initiative quite an easy advantage.

BUT, the roadblock is “Lack of Continued Education.” Even after reading many creative real estate investing books, attending several seminars and courses, and buying, leasing, and selling dozens of houses, I still continued educating myself. A grave mistake in any en devour or occupational field is to think you know it all.

If you are reading this post right now, give yourself a pat on the back. You are already on your way to bulldozing this common roadblock.

Popularity: 12% [?]

When getting started investing in 2003, I ran across two properties in dire need of repairs.  I purchased both properties at the same time, and my personal creative real estate investing/rehabbing career was under way.  I spent the next 3 months rehabbing these properties.  

I had renovated houses before but for other people. Even with my background, I still got “taken for a ride” by a couple of contractors.  Like my good friend and mentor Lou Brown says, “They’ve got it built right into the name, CON-tractor!” 

Still, I managed to turn a profit on those first two houses and have renovated well over 100 houses since. That said my friends, my goal here is to help you navigate the shark-infested waters of residential rehabbing…without getting bit!

The Contractor Success Triangle

You’ve heard of the Bermuda triangle, that mythical space in the Atlantic the superstitious stay out of at all costs.  Well, the contractor triangle is just the opposite; it’s the space you should stay inside of - when hiring a contractor that is. 

Defining The Triangle

The corners of the “Contractor Success Triangle” are defined by the contractor’s: 

1. Price
2. Quality
3. Reliability 

As any one of these change, the other two change as well…sometimes in the same direction, other times in the opposite direction. 

Your job as a rehabber is to decide what level of each you are happy with. For example, if price is less important to you than quality work, like in a higher-end or retail property, you should be willing to pay more for a contractor as long as the work is top-notch.  When the quality of work isn’t as important, for example in low-end properties, you can push a little harder on price.  When it comes to reliability, I’ll let you make up your own mind.  However, as with quality work, the less reliable contractor should expect to be paid less if they get the job at all.  

My philosophy has always been if the contractor can’t, or doesn’t show up on time, they either don’t get the job if they’re coming to bid, or they lose the job if they’re coming to work.  I don’t have time for unreliability from any of the professionals I deal with.  Maybe you shouldn’t either.  It’ll save you countless headaches and sleepless nights. 

Live In Your Space

Once you’ve defined your triangle, your job is to stay in the space defined by your needs! It might feel good initially to save a little money, but when the contractor isn’t showing up or is doing less than top-quality work, the money you saved won’t seem nearly as important.  Stand your ground and your business will benefit.  Remember, we teach people how to treat us.  Let your contractor do low quality work for high quality prices, or show up whenever they like, and that relationship will be hard to change.  Start out making your contractor toe the line, and you’ll both be better off because of it. 

Paperwork Can Set You Free

Never rely solely on a contractor’s (or anyone else’s) word.  Get EVERYTHING in writing from the start.  If there are ever any misunderstandings or disagreements, you can always refer to the paperwork.  In the case of the contractor, your paperwork should include ALL the work to be done, permits to be pulled, material purchased, number of workers onsite each day, start date, finish date, total price with no exceptions for increases, and, perhaps most importantly, a monetary penalty for each day the work goes past the completion date.

Another important piece of paperwork is your contractor’s liability and worker’s comp insurance.  Make sure you see a current declarations page.  Skip this step and their employee’s injury could become your problem.

There are many awesome contractors out there, but you have to do your part to check them out and hold them accountable.  That said, once you find them, treat them like gold, and they will do the same for you. 

Popularity: 23% [?]

1. The Internet

Everybody is turning to the Internet to buy and sell about anything these days and houses are no different. If you don’t have your own website yet, you are missing the boat. Call our office or email us for the best people in the website design business and we’ll give you a list of them, but you have to have an online presence these days to drive traffic to. It is a must!

2. Free Classified Ad Websites

Craigslist is a tremendous asset in recruiting tenant buyers. And it’s FREE, so you should definitely be doing it! There are also a lot of other free posting websites like Backpage and plenty others if you look for them, but craigslist has been a huge resource for us in filling properties.

3. Local Investors

Often times, a buyer lead will come in through one of our marketing methods, and we will not have the right house for them. We have built some relationships with other investors so that we can refer out buyer leads that don’t work for us and vice versa. Many of our houses have been filled with tenant buyers referred to us by other investors.

4. Realtors

Realtors work with buyers everyday. Maybe they have a client whose credit isn’t in a place where they can quite buy a property yet, but they don’t want to totally lose the commission. You can pay them a referral fee or a commission on the backend if the person actually buys the house from you.

5. Mortgage Brokers

They come across clients everyday who can’t qualify for traditional financing today, but they don’t want to lose their future business, so they’ll refer them over and do their financing when the time is right.

6. Credit Repair Agents

Their clients are a perfect fit for a lease to own program. And these are the people that are already taking proactive steps towards getting their credit back on track. Talk about a good fit!

7. Newspaper Ads in Your City’s Small Publications

By putting an ad in these types of publications, you are giving yourself a better chance of getting noticed. I don’t know about your city but the main newspaper in mine is littered with TONS of ads for properties. One technique to generate the most amount of traffic possible is to run a “Ghost Ad.” That is where you write a generic ad to appeal to the most people possible. Maybe you have several houses in town that you want to market. Instead of running several ads, you could run one that says, “Beautiful 3/2 in desirable neighborhood. Flexible financing available. Let’s make a deal!” That will get your phone ringing.

8. “Pick Your Next Neighbor” Flyer

When deciding where to move, people ask their friends and family for advice. And people usually run in similar socioeconomic circles…meaning that they make similar incomes, live in similar neighborhoods, etc. Using the “Pick Your Next Neighbor” flyer is a very inexpensive way to generate a buzz.

9. Bandit Signs

You have probably seen these beautiful signs all around your city advertising “We Buy Houses” but they also work for filling properties. Some of ours say, “No Banks! Rent to Own homes 555-5555” (or our website with no phone number).

10. Turn the Property Itself into a Marketing Station

A sign in the front yard is the bare minimum. You can also have an “info tube” with flyers in it, information about the property and your company in the windows, a lockbox on the door, flyers, business cards and lease option applications on the counter in the house. Try putting flyers with testimonials from happy tenant buyers dispersed throughout the house.

Related Posts

3 Reasons Why Lease Options are Our Primary Real Estate Investment Selling Strategy

How a Lease Option Tenant Buyer Won Their Down Payment Back in Court

Popularity: 37% [?]

Introducing MustKnowInvesting’s first contributor, Wil Christenson!

(Check out the Become a Contributor page for more information)

Dusty and I have known Wil both personally and professionally going on 5 years, and he never ceases to amaze us. Wil started investing back in 2003 without cash, credit or connections. His first investment was a small package deal that he ended up renovating and making over $150K in profit (not a bad intro into real estate investing). He is a hands on kind of guy and has done many of his own rehabs himself.

His expertise lies in evaluating, planning and managing renovations for maximum resale, appeal, and profit.

I had a chance to sit down with Wil recently and ask him a few questions.

Patrick: How did you first get interested in real estate investing?

Wil: I was really more interested in passive cash flow than any one particular industry. I had experimented on the internet a little and built a couple websites. I also had a completely different business idea that required a large chunk of capital. I was searching for every way possible to put together the funds necessary to get started.

As fate would have it, I was watching late night TV the next week (something I almost never do) when an infomercial came on touting a course for real estate investing. I thought it looked like a good way to generate a passive income and large amounts of cash. I ordered the program, devoured it as soon as it arrived, and immediately took action.

I found my first two properties within a month of finishing the course. These were low-income properties both of which needed extensive renovations. As a side note, I do NOT recommend beginning investors starting this way. After the renovations, these properties were producing over $1000 per month cash flow. I sold them two years later for $150,000 in profit.

Patrick: What would you attribute your successes to most?

Wil: I attribute my successes to three things. The first two happened pretty much simultaneously. The third one came along afterward but has contributed as much or more to my ongoing success.

First, I found people who had already succeeded and did exactly what they told me to do. Starting with the first real estate course I bought off that late night infomercial and continuing to other gurus, seminars and local investors who were gracious enough to help and advise.

Second, I took action in spite of my fears. There is a well-known book by Susan Jeffers, “Feel the Fear and Do It Anyway.” That’s exactly what I did. To get my real estate investing career jump started, I talked to every seller I could find. I called sellers from classified ads, I drove neighborhoods and knocked on doors, and talked to the owners of every run down house in sight. Was I scared? You bet. But it got easier with every conversation.

Third was my commitment to personal development. This grew out of the relationships I had formed with a unique group of investors in my local area and a dedication to learning whatever was necessary to achieve my goals.

Patrick: Where do you see the biggest opportunities in today’s market?

Wil: With the change in buyer confidence and the changing environment of the mortgage industry, sellers are having a harder time finding qualified buyers. This has lead to some of the best buying conditions in years. Therefore, I recommend buying and holding as many properties as you can get right now.

As always, don’t over extend yourself, minimize your risks, and use other people’s money as much as possible to leverage the number of properties you can buy. I have to qualify the last part of that last statement; there are many ways to use other people’s money, some more risky than others, so know what you’re doing whenever you leverage yourself.

Patrick: What is the biggest mistake that you’ve ever made as an investor?

Wil: Relying too much on someone else’s information instead of doing my own research. This is dangerous, and, coupled with speculation, it is deadly. A mistake here could take you out of the real estate game permanently. Always know your market and your exit strategy.

Patrick: What one piece of advice would you give to beginning real estate investors who want to get started but haven’t taken that first step?

Wil: Find someone who is a successful real estate investor that is willing to give you a plan. Then get the plan and follow that plan precisely.

Everyone, please be sure to give Wil a very warm and sincere MustKnowInvesting welcome!

Popularity: 41% [?]

You heard me right…that’s your hard earned tax dollars at work. Here’s a clip from Bloomberg:

“Bank of America Corp.’s $3 billion takeover of Countrywide Financial Corp. will be financed by 138 million tax-paying Americans.

Bank of America, led by Chief Executive Officer Kenneth Lewis, can use tax write-offs to pay for Countrywide, the country’s biggest mortgage lender, said Robert Willins, a former managing director at Lehman Brothers Holdings Inc. who now runs his own accounting firm. Taxpayers may pick up about $5 billion of Countrywide’s losses over 20 years, he said. Countrywide shareholders approved the sale today.”

Check out the full article, “Bank of America’s Countrywide Tab Signed by Taxpayers.”

Popularity: 65% [?]

My first year investing, one of the “Big Unknowns” for any deal that we were working on was financing. We were doing our best to just get a good deal under contract let alone even think about what we were going to do once we contracted one. That was the first big hurdle.

But, then the inevitable happened…we got a great deal! We did exactly what all the books and courses teach you. We were so excited running around high fiving each other and decided that it deserved a night out on the town. The next day after a particularly long night, I remember waking up and thinking, now what do we do?

Long story short, we ended up getting the deal financed because one of my partners went door to door to real estate agencies and mortgage offices until someone realized we had a great deal under contract. THAT WAS AFTER ABOUT 25 NOs!

________________________________

Per - sist - ence

-noun

1. the act or fact of persisting.

2. the quality of being persistent: You have persistence, I’ll say that for you.

3. continued existence or occurrence: the persistence of smallpox.

4. the continuance of an effect after its cause is removed.

________________________________

The reason that I’m even writing about this is because of a conversation I had with one of our students recently. Several weeks ago, on one of our monthly coaching calls, we talked about financing strategies for one of his deals. He contracted a great deal and wanted advice on the best way to secure financing. He passed the investment opportunity by a few people but with no luck. He wanted to know what to do next.

After our book club meeting this past Wednesday, he updated me on the deal. He looked into getting a credit line from a bank. But, he got turned down…

The decision that he made right then in that moment is what makes all the difference in the world and defines those who succeed as investors and those who don’t.

HE CHOSE TO PERSIST! And you know what happened…two banks later he got the financing that he sought after. A credit line for the exact amount that he wanted for the deal.

Let this be a lesson to anyone that is having difficulties getting started as a real estate investor. He made a decision to get what he wanted. If you ever have a great deal under contract and you say so yourself, “How am I going to get this deal financed.”

Remember…

PERSISTENCE! THAT’S HOW TO GET A DEAL FINANCED!

Related Posts

Real Estate Investment Financing Strategies : How to Develop a Solid Financing Arsenal

Real Estate Investment Financing Strategies : Hard Money is Easy Money

Popularity: 66% [?]

Have I got your attention???

First, I am going to tell you exactly what will most likely either stop you or at least get in the way of your increasing your profits by 300% in the next 90 days. Since I’m going to tell you what it is, I’m hoping you will identify it as soon as you see it and face it head on. Your Comfort Zone! It is one of the biggest roadblocks that you will continually face throughout life no matter how high you go. You are probably very familiar with it and know exactly when you are stepping outside of it. When you get that light headedness, stomach wrenching, uneasy feeling that makes you just want to STOP what you’re doing and retreat back to safety, you know that you have ventured outside of your comfort zone.

Over the years, I have conditioned myself to identify the feeling and attach an entirely different meaning to it. It’s the same idea that Tony Robbins teaches with neuro-associative conditioning (his branch of NLP). I know that when I do something uncomfortable, I have taken a step in the direction towards growth and progress. I know that I am in a position to learn an extraordinary amount. By knowing this to be true, I’ve attached that uneasy feeling to tremendous growth and development. I actually feel excitement now when I used to associate negative feelings with it.

Anyway, enough about that. Just know that to increase your profits by 300%, you’re most likely going to be uncomfortable at some point. Whether that means being uncomfortable about investing more money into your business, uncomfortable approaching and negotiating with sellers, or uncomfortable learning how to track and account for the details in your real estate business.

3 Keys to Making the 300% Leap (assuming your willing to step outside your comfort zone)

1. Fire Up Your Marketing Plan - You cannot reasonably expect to make 300% more profit in the next 90 days without putting some serious attention to your marketing strategy. If you don’t have leads coming in at all or don’t have as many as you would like, how else do you plan on getting the phone ringing? MARKETING! And you might as well go ahead and decide to accept that marketing is an investment, NOT AN EXPENSE. If you are saying to yourself, “I don’t have money to invest in marketing, I’m broke.” Well, there’s plenty of Low-to-No cost marketing techniques out there. Your willingness to do them is the only question at hand. Check out some of our marketing posts, you will find plenty of techniques. If you are not satisfied, shoot me an email, and I’ll help you out. If you already have 30 to 50 leads coming in per month, you’re going to need to triple that. This may involve simply investing more money into your marketing system or may force you to try something you’ve never tried before. Either way, you’ve got to take the next step.
2. Sharpen Your Negotiating and Sales Skills - Whether you like it or not, you are a salesman. If you don’t like the sound of that, assign another mental representation to what you think of when you think of a salesman. Everyone is in sales whether they admit it or not. As an investor, you are going to be selling contractors, investors, buyers, sellers, attorneys, accountants, and possibly employees just to name a few, on your ideas every single day! If there was a master skill to success as a real estate investor, I think that it would be to become an excellent communicator. That is really all negotiating and sales is…communication. So my question to you is, “What have you done lately to improve your negotiating and sales skills.” What have you read, what have you heard, and what have you tried lately to improve upon your ability to sell effectively. A great book that is an easy read is Zig Ziglar’s Selling 101. Also, Peter Conti and David Finkel’s books are a goldmine for good scripts for negotiating. You may not even realize how powerful they are until you study the subject in depth. My recommendation to you is to find a good mentor, and simply do what he or she says. A natural tendency is to do things your own way just like it’s a natural tendency to stay in your comfort zone. Take an expert’s advice and once you master it, then tweak your strategy to best suit your particular style.
3. Get a Laser Focus on the Numbers - What I mean by that is, “know your bottom line in every deal you do, know which marketing strategy(s) is bringing the best results, keep your eye on what you’ve paid your contractors, watch the time tables and budgets for your projects and make sure they are staying on track.” And I say this all from experience! I’ve thought I knew exactly where we were in a deal and then to my dismay, totaled up the numbers, and WHAM, we only made half the profit we were supposed to! Last fall, we had 5 or 6 renovations going on at one point and extended money to one of our contractors that never completed the work. I didn’t realize we were paying him for work yet to be completed, and now I’m having to file judgments against him, probably end up in court, and waste a lot of time! They say you can’t manage what you don’t measure, and I will attest to that! The closer you pay attention to the details, the more money you’re liable to make.

To increase your profits by 300% in the next 90 days, no matter what level investor you are, do these three things. Step outside your comfort zone! Your wallet will be thanking me later!

By firing up your marketing plan, leads will be pouring in from all directions. By honing and perfecting your negotiating skills, your closing ratio will dramatically increase. Coupled with having an avalanche of leads, you’ll be on your way.

BUT, don’t forget to keep a watchful eye on the numbers. Remember, you can’t manage what you don’t measure. And if you want to manage to increase profits by 300%, you’ve got to measure your successes and failures. That’s the only way towards improvement!

Popularity: 100% [?]

Last week, I was driving across town and had the idea to begin compiling the most comprehensive list of useful real estate investing websites and resources on the net. I planned on posting it this week and categorizing each website to make it easy to find exactly what you need. I spend an extraordinary amount of time on the web and thought this would be quite a valuable resource.

Yesterday, I was reading through a number of real estate investing blogs that I check out from time to time and low and behold, Scott Roemermann has already put together quite an impressive list. No need for me to duplicate his work. So, here you go…

Here is a clip from his post:

“This week we’ve put together a fairly comprehensive list of resources for you to check out. You can start using many of these immediately as they are free of charge. As for the others, you should weigh up whether you need them for the stage you are at with your business.

We have first-hand experience with many of these sites but not all of them…”

Check out Scott’s post, 101 Real Estate Investing Resources : A Professional Investor’s Rolodex.

Popularity: 99% [?]

Oh the joy of dealing with contractors! Where to begin?

Some experts might say, “They don’t call them ‘CON-tractors’ for nothing.” I would never say such harsh things about these wonderful hard working Americans, but I can see where this area of the business could be a little frustrating. Over the years, we have honed our team down to a few trustworthy experts in their given trades, but it took quite some time to find them. So, I’m going to give you a few sure fire proven tips to cut out as much B.S. as possible in choosing your contractors carefully.

1. Ask for Referrals! Talk to other successful rehabbers in your area, and see who they are using to do their jobs or who they would refer. Ask about their experiences with these people, how long they’ve used them, the quality of their work, if they could be counted on, etc… (If you are going to use another investor’s crew it is proper etiquette in the real estate world to ask the investor first, as they may have other projects lined up for them).
2. Don’t Always Accept the Cheapest Bid! We’ve all heard, “You get what you pay for.” Sometime good quality just costs a little more. I know investors don’t want to hear that. They also don’t want to deal with managing the type of renovation they just signed up for. I spoke with a friend a few months ago (who hasn’t been through our real estate investment training) who hired these guys to pull up carpet and lay down some hard wood floors for her because they were $85.00 cheaper than they guys that people referred to her. Well, needless to say, 60 days past estimated completion date and $10,000 over budget later, she realized why she should have gone with the other guys. Often times, contractors in need of work will outbid others to get a job. Why do you think the contractor is in need of work in the first place?
3. Know Who Your Dealing With. Get an application from them with all their information including but now limited to; driver’s license number, current address where they live, all of their phone numbers, previous jobs and clients they have worked with. Get a photocopy of everybody’s ID who is going to be on the job.
4. Call Their Previous Clients! Not only the three that they give you, but the last three jobs they completed. See what their clients thought of them. Did they do a good job? Did they finish on time? Did any unpleasant surprises pop up in the process?
5. Document Absolutely Everything in Writing. Make sure that you have your agreement in writing with a “Scope of Work” attached outlining exactly what is to be done, what you are being charged, date by which work is to be done, and the penalties if the job isn’t finished on time.

How do I know this? By learning from years of heartburn dealing with problem contractors. Put these ideas into play immediately in your renovation business, and you will save yourself time, worry, and a whole heap of money!

Popularity: 91% [?]

 Here’s a clip from a post over at The REI Brain:

“I’m always a pretty positive guy and hate it when people start off in any discussion by looking at the negatives. There’s just too much negative talk out there in today’s real estate market … especially when there’s so much positive out there for savvy (and ethical) real estate investors to grab a hold of.

Anyway, here’s some positive news for all of those people who say the real estate market sucks.”

Check out the 10 Most Appreciating Real Estate Markets in the United States Summer 2008.

Popularity: 88% [?]