The Most Costly Mistake You’ll Ever Make as a Creative Real Estate Investor

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Have you ever read or heard about a killer deal that a real estate investor did and thought to yourself, “Why in the world would the seller ever accept an offer like that?” or “I could never make that kind of an offer” or “How do you talk someone into that?”

If you answered “yes,” than you have most likely suffered from this common profit destroying tendency. At some time or another, ever creative real estate investor has made this mistake and must always be on guard against it. Without further ado. . .

Don’t Think for Other People!

Here’s an example when we didn’t think for the other person and came out on top.

A motivated seller gave us a call. She owned a mobile home in North Charleston. Our primary business is not buying mobile homes, but our motto has always been, “We do deals.” So, whatever it is, if it’s a deal, we’ll take a look at it. The home was in good shape and the owner wanted a cash offer so we gave her one. We offered her $9K. And the seller owed $36K!

You may be thinking that our offer doesn’t make sense, but who ever said that you had to offer a seller more than they owe. She went through a credit union and got a personal loan for $27K to pay off her title loan. That’s how bad she wanted out.

We bought it for $9K, had the carpets cleaned, and financed it to someone for $24,900 with $3K down! Had we thought for the seller, we never would have made that offer in the first place.

4 Sure Signs That You’re Thinking for Other People and Losing a Ton of Money in the Process

1. You Get Your First Offer Accepted

My business partner, Dusty, is a master real estate investing negotiator and does his best never to think for someone else. He prides himself on the fact that he has a method to not only negotiate price but terms as well. Typically, most investors only negotiate on price but there is much more to deal structuring than what you pay for a property. How you structure paying for a property can turn a mediocre deal into a grand slam!

A lead came in about a year ago from a seller who owned a property free and clear. The seller was already asking a reasonable price so we knew there was a great opportunity here.  Dusty took the seller through his normal negotiating process and low and behold when Dusty made the offer . . . the seller said, “OK.”

Even though we got a good deal under contract that day, I remember talking to Dusty when he got back from the appointment, and he was not too happy with himself. When you get your first offer accepted, you know that you left money on the table, and the culprit was most likely thinking for the seller.

2. You Don’t Ask for What You Want

Only you can be the judge of this sure sign that you’re thinking for other people. Maybe you didn’t ask for the terms that you wanted in the deal or you didn’t ask for the seller to include the appliances, fixtures, or the boat sitting in the front yard.

Children have an amazing capacity to continually ask for what they want regardless of how many times they have been told “No.” Think back to when you were a child and harness that ability.

3. You Consistently Make the Same Profit on Your Deals

Have you done several deals now and seem to make around the same profit in each deal? Even if you are a seasoned pro, there is an average profit that you make per deal.

Find out what your average profit is and determine to make more on your next deal. You may have gotten comfortable and stuck in your ways. You may be thinking for other people and have an established profit # in your head that you “should” make per deal.

Every deal that we do is looked at on a “deal by deal” basis. Depending on the terms of the deal, the location of the property, condition of the house, etc., we determine our bottom line and make an offer we feel will be rejected.

4. You “Try” to Make a Deal Work

“Trying” to make a deal work is a dangerous thing to do. This usually occurs when you become emotionally attached to a property, the seller’s situation, and you start thinking for the seller.

It must be black and white! Either it’s a deal or it’s not. Run your numbers and keep your thoughts on what makes sense for you.

Posted in Negotiating, Personal Development, Tips and Tricks | 4 Comments »

How to Train Your Tenants : Real Estate Investing Property Management

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It is amazing how quickly the tenant/landlord relationship can be defined and redefined.  You must lay the groundwork for how the relationship will work from the start.  If you lack an iron fist up front, it will be hard to enforce your rights later on.  When you try, your tenants will accuse you of “being a jerk all of a sudden.”  On the other hand, if you are tough up front and help them out later on if need be, your tenants will think (correctly) that you are being extremely fair. 

For example, I recently bought an investment property with tenants already in place.  The sellers had mailed the tenants a letter informing them there would be a change in ownership and management.  I did the same and also informed them of the new address to send the rent to, who to make the check payable to, and the contact phone number for any problems or questions.

The tenants were behind on their rent when I bought the property, and due to a family emergency I hadn’t followed up on the late rent.  By the time I was able to check again on the rent another due date had come and gone.  Up to this point, I had received no contact from the tenants. 

Hmmm . . . I am a new owner/manager.  I have tenants that are late on their rent.  And the tenants haven’t even bothered to call me about it.  This was bad, especially this early in the relationship.  I was training the tenants and teaching them how our relationship works. I had to nip this in the bud quickly.

I filled out and mailed a Pay or Quit Notice as well as a Statement of Account showing the tenants the amount they were behind, including late payments, late fees, and legal fees if I had to pursue that route. 

Now, normally at this stage, I also file an eviction on the tenants.  In this particular case, I didn’t because the previous owners had told me the tenants had been good in the past but had run into some life problems and were paying, but consistently paying late. 

 

This can actually be a benefit.  If properly handled, a consistently late paying tenant can add up to big profits for you, as long as you enforce your late fees. I was taught by my mentor to let the paperwork do the talking.  Therefore my leases define all the late fees plus a rental discount that is lost as soon as the rent is late.  I make at least $100 the first day the rent is late, plus $5 per day after that.  It’s a great profit center!

I had to travel to the area of town where my late paying tenants lived so I personally placed the “Notice to Pay or Quit” and the “Statement of Account” in their mailbox at around 4:30 that afternoon. This paperwork has very strong language about the implications of not paying.

At 6 pm that day, I received a phone call and an anxious sounding voicemail asking me to contact them as soon as possible to resolve this situation. I did not respond. The next morning at 8 am, I received a second call and another voicemail pleading with me to call them. I waited until about 10am to call back because I wanted to make a statement to the tenants. I don’t want them to think that I am at their beck and call. If they think that they can ignore me and their obligations and get me on the phone at any moment, their wrong. That’s not the kind of tenant/landlord relationship that I want to create.

We ended up negotiating a workable payment plan, and I wrote up a consent judgment for the tenants to sign.  If they don’t make the agreed upon payments on time, they have already consented to a judgment being filed against them (without the hassle or expense of me going to court) and agreed that a writ of possession would be issued giving them 24 hours to vacate the property.

How about that?

You are going to save untold hours of frustration and headaches wondering if and when you’ll get your late rent and fees by following this advice; plus you’ll have tenants who know you hold them accountable for their actions, but also know you are fair and willing to work with them when the situation warrants it.

Posted in Property Management | 3 Comments »

59 “Must Know” Tips in Creative Real Estate Investing to Minimize Risk and Maximize Returns

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As creative real estate investors, there are many strategies that we can implement in our businesses to minimize risk and therefore . . . Maximize Returns!

When I first wrote down the idea for this post, I had a few things in mind to list and then something happened. I started to realize how many of the things that I do regularly are done for a specific reason. And that reason is to Minimize Risk and Maximize Returns!

Many of the suggestions and tips that I’m about to share with you were learned due to hundreds of hours study, and years of experience investing full time in the field. So hold on tight because this is going to be hot!

59 “Must Know” Tips to Minimize Risk and Maximize Returns

1. Become a Wholesaler

Some wholesalers close on a property and then immediately turn around and sell it. Others never even close on it in the first place. If your goal is to minimize risk, this is the strategy for you. Find a motivated seller, contract the property, and assign it for a wholesale fee. You can easily make $5K to $10K if you’ve got a good deal and sometimes much more.

Check out these two posts to learn more about real estate wholesaling strategies:

How Flip a House for a $14K Wholesale Profit without Rehabbing It

How to Start Investing in Real Estate Without Spending Money on Marketing

2. Use OPM

If you’re not familiar with the term, get used to hearing it. I’m talking about Other People’s Money. Doesn’t matter whether it’s a hard money lender, Bank of America, or your Uncle Bob. Leverage is powerful! Learn how to use it!

Check out the Real Estate Investment Financing Strategies category.

3. Build a Guerilla Marketing Plan

A Guerilla marketing plan is a low-to-no cost real estate investing marketing plan. There are a bunch of ways to get motivated sellers on the phone that don’t cost an arm and a leg. There’s a book by Jay Abraham on the subject that’s pretty popular.

Also, there are several posts in the Marketing category that go over low-to-no cost marketing techniques. Check them out.

4. Join a Mastmind Group

Andrew Carnegie taught the power of a Mastermind Group to Napoleon Hill, and Hill penned it in the classic book, Think and Grow Rich. If you haven’t read it and care about your financial future, buy the book this week.

As far as a Mastermind Group goes, find like-minded individuals that you can bounce ideas off of. Meet regularly to discuss your experiences, hardships, and successes. This will provide valuable insight into both your business and yourself.

5. Log Your Tenant Communications

When you end up in front of a judge (notice I did not say if), the more organized you are, the better chance you have to come out on top. The judge can pretty much make decisions to suit their personal liking so it’s a great way to minimize risk by knowing exactly when, where, and how you ended up in court with this tenant. Some judges are more tenant friendly, some more landlord friendly.

6. Build a Good Contractor Team

I have heard about and personally experienced bad contractors. I’ve been given estimates for things that didn’t need repairing, had a contractor get paid and never be seen again, and had contractors that stole supplies right off the job site. As a matter of fact, I just filed a judgment against a contractor a couple weeks ago who owes me a few thousands of dollars.

OK, I’m done with my rant now. There are also many excellent contractors. You may have to look hard but we’ve built an excellent team of good quality trustworthy contractors over the years.

Check out a recent post from one of our contributors, Wil Christenson, How to Find Great Contractors for Your Real Estate Investing Renovations.

7. Order a Title Search

My mentor, Louis Brown, said to always buy title insurance. I am a proponent of doing what experienced successful investors say so this one’s coming from Lou.

8. Get Everything in Writing

With your contractors, investors, tenants, partners . . . everyone that you do business with. Write down the terms of your agreement! Determine what will be paid for any products or services rendered prior to them being provided.

You can infinitely improve your chance of building longterm professional relationships by adhering to this often ignored nugget of wisdom.

By foregoing this easy and intelligent tip, you’re putting much more at risk than you realize.

9. Learn How to Utilize Options

Options can be used as a great way to tie up property with minimal risk. Since an option is a unilateral agreement, you can choose whether or not to exercise your option and close on the property. The only thing typically at risk is the option consideration that you put down which doesn’t have to amount to much. That will be determined by your negotiation skills.

10. Buy it Cheap Enough where you Could Flip it and Come out on Top

Flipping property is the most expensive way to sell real estate. Between purchase costs, the renovation, holding and marketing costs, and the costs associated with selling any property, profit can disappear pretty quickly. And we haven’t even talked about the tax consequences!

If you analyze a property and you could flip it and come out on top, that’s a safe bet.

11. Hire a Good Accountant

Knowing the bottom line in every deal you do is vitally important. If you are set up properly, an accountant can provide you with a wealth of valuable information so that you know how to maximize the returns from your portfolio.

12. Buy Properties with More Than 1 Bathroom

One bathroom houses have always taken us longer to fill with a tenant than houses with more. If you are looking at buying a 1 bathroom house, look for a way to at least add a half bath. You’ll be kicking yourself when your 1 bath house is sitting vacant for months at a time if you don’t.

Two or more baths is ideal and makes for a much more marketable house.

13. Utilize Technology

The Internet and technology are changing the way business is done at a faster rate than at any other time in history. Staying current and knowledgeable on the applications of technology to real estate will put you ahead of the old timers that are stuck in their ways.

You will be minimizing your risk of getting left behind by utilizing technology in your business.

14. Get a Professional Opinion of Value

This could be from a real estate agent, an appraiser, or some other knowledgeable real estate pro.

Check out this post for some tips on valuing property.

15. Be Able to Survive the Worst Case Scenario

This could correlate to many different scenarios.

For Example: Let’s say you find out there’s $15K worth of water and structural damage on one of your rentals, the tenant stops paying you rent and you start the eviction process, and it takes you 6 months to get it fixed and rented out again . . .

Could you Survive?

16. Use a Good Closing Attorney or Title Company

A good attorney or title company could save you many thousands of dollars and headaches. If you are looking for someone that is creative real estate friendly, I would suggest asking people in your local real estate investing association. Referrals have always provided much more value to our company than pulling out the phone book.

17. You are NOT the Owner . . . You Work for the Owner

As soon as someone knows that you are the decision maker in relation to a property you own, you have given up a valuable position of leverage. Whether it’s with tenants, contractors, or buyers, you’re best off if you “have to consult with your partner” or “have to run it by the owners.”

18. Have Sellers/Tenants Sign a Lead Based Paint Disclosure

I’ve never had any problems in any of our properties with lead based paint but many people have. This is a standard form used for most real estate transactions.

19. Learn How to Evaluate Property on Your Own

Knowing how to evaluate a property on your own gives you an advantage. You do not have to rely on someone else’s opinion, and you’re not on their time. By doing your own evaluations, you will be able to know quickly if you’ve got a deal on your hands. And time is of the essence when working with motivated sellers.

Click on the link in #14 if you want further info on this one.

20. Don’t Quit Your Day Job . . . Yet

Relying on monetizing your real estate deals for your sole source of income can be quite challenging. If you have a good income and your doing deals to make extra money and build wealth, you will be in a great position to do so.

21. Learn Creative Deal Structuring Strategies

Creative deal structuring spans from doing subject to deals, to structuring owner financing notes payable over time, to using the little know concept of substitution of collateral, to bringing in private investors to fund your deals, and the list could go on and on. You can be as creative as you want in the contracting, financing, renovating, and selling phases.

Ask yourself continually, “What’s another way that we could structure this deal?”

22. Have Multiple Exit Strategies

DO NOT enter a deal if you only have one way out of it! Why do you think so many of the speculators that bought preconstruction deals when the market peaked are losing their investments to foreclosure. They banked on one thing and one thing only . . . Appreciation! So the market fell out and so did they.

Check out the post, Real Estate Investment Financing Strategies : What is Your Exit Strategy for more info.

23. Do What Experienced Investors Tell You to Do

Maybe it’s built into human nature to not want to listen to people and to forge our own path and make our own decisions. Well, if you’re just getting started, fight this tendency!

It is much cheaper to learn from the mistakes of others rather from the school of hard knocks! Do exactly what successful investors tell you to do.

24. Define Your Niche

This will skyrocket your chances of success as a creative real estate investor. You will make it much harder when starting out by buying a couple properties in the hood, a few nice houses in nice neighborhoods, multi-family property, a beach front condo, and a mobile home park. You get my drift anyway.

My company’s niche is single family homes in nice areas, in good condition, with an ARV between $150K-$175K. Depending on where you are located in the country that price range may sound like a war zone to you, but it all depends where you live. Here in Charleston, South Carolina, there are many areas within a 30 minute drive that fit into our niche.

25. Write Small Earnest Money Checks

Between $10 and $100 is customary for our company. Most real estate professionals (agents) typically do 1% of the purchase price. But we’re creative real estate investors so we do things a little different.

26. Use Sandwich Least Options

I first learned about this concept through Peter Conti and David Finkel’s book, Making Big Money in Real Estate without Tenants, Banks, or Rehab Projects.

This has never been my style since you don’t get the deed but there seems to be people doing it successfully. And this technique definitely limits risk.

27. Bring in a Financial Partner

My first year investing we found an excellent financial partner. An additional bonus was that he had been doing renovations himself for years. He would put up a loan for 80% of the ARV, and we partnered with him on the deal. He not only financed the deal for us but also managed the renovation. It was an excellent set up for us as beginning real estate investors, and it was also a great way for him to leverage his way into more deals. A true Win-Win relationship.

28. Hire Qualified Contractors

This can be challenging when just getting started but not impossible. Here’s three tips to help you out:

1. Don’t accept the cheapest bid.
2. Get referrals from other investors.
3. Don’t pay for work yet to be completed (a material draw is OK but you may want to buy and deliver yourself).

29. Process Tenants Credit Applications

You shouldn’t expect every tenant to have stellar credit because if you do, you will have a major vacancy problem. At least, that’s been my experience. For awhile, we qualified our potential lease option tenants strictly by down payment and didn’t even pull their credit, but we have changed that now.

A credit report can tell you a lot about someone if you know how to read it. And if you don’t, get a mortgage broker to show you how.

30. Use an Investor Friendly Purchase and Sale Agreement

As a creative real estate investor, you want to make sure that you are well protected. Make sure your purchase and sale is rock solid and very investor friendly.

The best contracts that I’ve ever come across are Louis Browns. And no, I’m not making any money if you click through and buy any of his stuff. I’m telling you it’s the best because it is.

31. Lease Option Your Property

There are some big differences between a standard tenant renting from you and having a tenant buyer in one of your properties. Lease options are our primary exit strategy with our properties for many reasons.

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

And for some marketing tips, 10 Great Ways to Find Lease Option Tenant Buyers.

32. Limit the Cash You Tie Up in Your Properties

Less Cash in Deal = Greater Return on Investment

More Cash in Deal = Greater Risk

33. Find a Great Property Manager

It can be a great experience to manage your first few properties on your own but property managers are worth their weight in gold. We manage all of our lease options and have a couple different property managers handle our rentals. Typically, you can expect to pay 10% of the gross rent to property managers. We pay one of ours 8% and the other 10%.

34. Secure Financing that Works with Your Exit Strategy

I’ve written an entire post on the subject here so no need to be redundant.

Check it out, Real Estate Investment Financing Strategies : What is Your Exit Strategy

35. Negotiate Seller Financing

First off, NEVER use the terms “seller financing” or “owner financing” when negotiating with homeowners.

Check this out, Real Estate Investment Financing Strategies : How to Get Seller Financing

This is just a small primer to the subject. My business partner, Dusty Keefe, is the man when it comes to negotiating seller financing. You may not have noticed it yet but we just added an “Ask the Expert” page on the site. If you’ve got any burning questions, let us know.

36. Stay Abreast of Real Estate Law

By networking with local investors you will most likely here about any new legislation that would affect your business model. You can also ask your accountant to update you when they hear about new laws.

37. Buy Property in a Modest Price Range

This may seem vague but I will use an extreme to illistrate.

For Example: If you get a good deal on a 1.5M luxury home and buy it for 1M, that’s great and all but be careful. Consider the worst possible scenario. When you are dealing with properties in higher price ranges, you have a much smaller pool of buyers and your equity spread can disappear in a hurry.

38. Learn as Much as You Can About the Things You Delegate

When you hire out work that you do not know how to perform yourself, you stand a chance to get taken advantage of especially when you are a beginner.

Writing this reminded me of the first 5 or 6 heating and air estimates that we got from various contractors our first year investing. Every house that we bought “needed” an whole new unit. Didn’t matter who we asked or what the unit looked like. We finally wised up and learned some things about heat and air units.

39. Have an Asset Protection Strategy

There are many different approaches advocated across the industry. We are partial to using land trusts to protect our assets.

If a tenant ever slips and falls at a property we own and goes to an attorney to seek out their options, they will reluctantly find out that the only thing the trust owns is that one house. Unless the tenant has a lot of money they want to blow, the attorney wouldn’t have any reason to take the case.

Read up on these two posts below for more info:

Utilizing Land Trusts for Asset Protection as a Real Estate Investor Part 1

Utilizing Land Trusts for Asset Protection as a Real Estate Investor Part 2

40. Bring in a Credit Partner

Don’t have good credit, just find someone who does. You can provide the expertise, time, labor and management in exchange for someone else’s good credit.

41. Find a Mortgage Broker You Can Trust

I hate when you barely get it out of your mouth to a mortgage broker about a potential loan, and they are already telling you that they can get it done. All that I want is someone who will honestly give me a breakdown of what the options are and the likelihood of each.

With the mortgage industry changing the way it has lately, I can sympathize with them a little bit, but this has been going on as long as I’ve been in the business. Find a mortgage broker that levels with you and doesn’t promise the world.

42. Stay on the Real Estate Investing Sidelines, Don’t Invest, and Cling to Social Security

Not something I suggest but it would reduce your risk as an creative real estate investor. Real estate investing is definitely not for everyone. This is evidenced by how many people get in and barely get back out.

It amazes me the number of individuals I’ve seen “give it a try” over the years. By not committing to their real estate success, they are committing to its failure.

43. Use a Rock Solid Lease Agreement

As a landlord, you deserve to be protected to the utmost and that’s what a rock solid lease will do. I already told you who I think has the best paperwork in the business so if you missed it, you’ll just have to read the post again.

44. Know How to Protect a Deal while it’s Under Contract

In a recent post I stated, “If you do not know the secret to protecting deals you’ve contracted, it is not a matter of whether or not you will lose a deal to another investor, it’s a matter of when.”

Check it out, How I’ve Made Hundreds of Thousands of Dollars with this Creative Real Estate Investing Secret.

45. Be Flexible and Open Minded

You will especially need to adhere to this tip if you didn’t follow #8. Soooo, prepare to be flexible. A close minded person will not see the abundance of opportunity throughout the market. By opening your mind to an infinite amount of possibilities, you stand to profit from an array of areas throughout your business.

Remember: It’s risky to be rigid to a specific plan or way to go about business. Couple that with close mindedness and you no longer have any options.

46. Buy Property Way Under Value

This may sound like common sense but don’t forget about how many speculators entered the market during its peak and based their decision solely on potential appreciation.

Check out Our Buying Criteria.

47. Have a Well Connected Attorney on the Team

We have been in court plenty of times for evictions but have fortunately steered clear of lawsuits. People are so quick to file suit for anything these days.

I remember reading about a survey that was done at the turn of the 19th century and again several years ago. They asked people the question, “If you were to get rich, how would you do so.” At the turn of the century, the number one response was to build a business. Recently, it was to sue someone.

In other words, get a good attorney!

48. Give Yourself an Out in Your Purchase and Sale

This is very simple. Write in the special stipulations, “Subject to partner’s approval.” No one ever said that your partner had to be a person. Maybe your partner is your dog and if you end up not feeling good the deal, neither does Fido.

49. Commit to Being a Lifelong Student of Creative Real Estate Investing.

In addition to books, seminars, and courses, there are a tremendous amount of resources on the web.

Here is a short list of a few websites that I check out regularly:

RealEstateInvestor.com

BiggerPockets

theREIbrain

TheCreativeInvestor

Bryan Ellis FreeRealEstateTraining

JP Moses Real Estate Investing Tips Blog

Scott Roemermann’s REI Blog

50. Get a Great Agent on the Team

A good real estate agent can bring a lot of value to the table. I have always been all about delegating everything that I possibly can to professionals. I consider myself to be a professional investor . . . not a professional real estate salesperson. I do not want to do what they do.

And like Robert Kiyosaki says, “Don’t be like most people who want to stiff people who offer their services to you in the asset column and overpay people that serve you in the expense column.“

You get what you pay for and that’s why you should pay the professionals that serve you well.

51. Call Tenants References on Their Application

Even though people typically put down friends and family as references, you would be surprised. Call their references and you’ll save yourself many headaches. It’s an easy thing to do so just do it.

52. Buy Property where the Rental Rates Support Your PITI Payment

Going back to that worst case scenario thing again, if you have to hold a problem property, at least the rental rates support your monthly payment.

53. Have the Property Inspected

This could mean getting it inspected by a general contractor, home inspector, pest control company, etc. There are plenty of real estate investors that buy property site unseen, but I don’t recommend this strategy if you want to minimize risk.

54. If you Plan to Flip a Property, Have the Ability to Hold it if Need Be

If you are financially able to hold any property you buy indefinitely, you’re in a great position. This may not always be possible but it will greatly minimize your risk.

55. Network with Local Investors

There is about a 90% chance that there is a local group of investors that meet on a regular basis in your hometown. Investors usually have one of two mindsets. There are those that think that every other investor is their competitor and then there are people like me, who think of every investor as a potential partner.

We have worked with most of the active investors in our community and get a ton out of it. We’ll pass a deal on to one of our investor friends for a wholesale fee, and then they’ll fill one of our properties with a tenant that doesn’t fit what they have available.

WIN-WIN!

56. Have Your Closing Attorney Hold the Earnest Money When Contracting Properties

Our contract specifies that earnest money can be paid by check or promissory note, both of which are held by the closing attorney of our choice. Remember, we are the ones putting everything on the line to help all of the motivated homeowners out there. Protect your interests first!

57. Buy Property That Has At Least 3 Bedrooms

2 bedroom houses have ALWAYS taken us longer to fill or sell than 3 bedrooms.

The majority of households cannot live in that small of a house. I like to always position myself so that the majority of the marketplace wants what I have, and the majority of the marketplace doesn’t want to live in a 2 bedroom house.

You can easily minimize your risk in creative real estate investing by taking this tip. If you come across a 2 bedroom that looks like a great deal, get creative and see if there is any way to add that coveted third bedroom.

58. Pay Sellers Their Equity Over Time

Does this remind you of another one of the tips that we’ve already gone over?

I hope that it does. If so, you’re on the fast track to building massive wealth through real estate.

59. Hire a Creative Real Estate Investing Coach or Mentor

I have been in several real estate investing mentoring programs since I got started and continue to educate myself on a daily basis. It’s a never ending process in my mind.

Having a mentor who has seen the ups and downs of the market and that has made the mistakes necessary to become successful is invaluable. In the real estate investing game, one mistake can mean losing tens of thousands of dollars or one tip could mean $30K in your pocket next month.

Check this out if you think that a coach could benefit you. There a many programs available on the market. Find the one that is right for you.

_________________________________________________________

Well, that’s it for the 59 “Must Know” Tips in Creative Real Estate Investing to Minimize Risk and Maximize Returns. If I missed anything, please add it to the comment section. Let’s see how many more you can come up with.

Posted in Business Management Systems and Tools, Marketing, Negotiating, Personal Development, Property Management, Real Estate Investment Buying Strategies, Real Estate Investment Financing Strategies, Real Estate Investment Selling Strategies, Renovations, Tips and Tricks | 19 Comments »

Warning: Be Prepared for the Worst as a Real Estate Investing Landlord

1 Comment »

Got a call from one of our contractors yesterday who opened the conversation by saying, “You might want to sit down for this one.” Never what you want to hear especially when you’ve already spent a lot of money in a property, know you’re about to be spending more, and that the expenses aren’t your responsibility in the first place.

This is a property that we have on our lease option program. We bought it about a year and a half ago by taking over payments on the existing mortgage, put $12K into the renovation, and filled it with a tenant buyer. The tenant buyer put $6K down on a 2 year lease option agreement.

As they were moving out of their previous residence, it burned down. Most of their belongings had not been transfered to the new house either. So these good people started out with us on a tough footing. Ever since they moved in, they have struggled to keep up month after month. It’s really a sad situation but as a landlord, our motto is “You’ve Got To Pay To Stay!”

So anyway, we had sent our contractor up to the property because the tenants called about a water leak. We know that they barely keep their rent payments current and don’t have any spare money for repairs. Even though they are contractually responsible for repairs up to $500, we made the executive decision to get the problem fixed.

Now back to our contractor’s comment, “You might want to sit down for this one.” He had already spent a couple days replacing shower valves, some of the old beat up pipes in the upstairs bathroom, and stopping the flow of rain in their bedroom. And then he calls because the water heater is on the fritz, we’ve got a new growing puddle of water to worry about, and he found a mold problem. Our contractor knows that we do not want to spend any more money in the property but that at the same time, we want to take care of what needs attention so that major problems do not arise.

Last Friday another one of our house’s water heater burst and caused a lot more problems than this one. And we are in the eviction process with this tenant. My business partner just told me yesterday that he thinks she is asking for a notice to show cause hearing which means he is going to have to go to court with this eviction. The process will take longer, which in turn will cost us more money since we are not receiving rent, and she will surely bring the property’s “horrible” condition into play. Or at least that what it sounded like in a message my partner received.

I say all of this to tell you, “Always prepare for the worst with your real estate investing portfolio. Be prepared for a HVAC unit to go out, a roof to need replacing,  and tenant problems. Unfortunately, it’s part of the business.” But, as always, we are continuing to learn an extraordinary amount from every problem that we face and will continue to put these learnings into our business and be better off because of it.”

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How to Find Great Contractors for Your Real Estate Investing Renovations

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Once you find a potential contractor for your renovation, your work is far from over. You’ll want to do background checks, call their references, review their accountabilities, determine their expected pay and method of payment, among other things.

When I’m interviewing potential contractors, I rely on my gut feelings more often than not. If a contractor pulls up in a brand new truck with lots of fancy tools and gadgets, that’s been a good indication that he may not be the contractor for me. It’s been my experience that contractors like that will be looking for a raise even when they’re the highest paid person on site. I prefer a contractor in a beat up old truck who works hard all day for a modest wage and is grateful to have work.

I’ve also found that a contractor with a working spouse and/or child is a huge plus. I’ve had contractors telling me they need more money because they are paying the bills for “three people at home.” I do my best to help out my contractors if they are in need or have an emergency, but I’m not sure why some contractors think that simply having non-working family members should affect how I pay them.

One indicator of a poor quality contractor has been the one that constantly talks and says they know how to do everything. They’ve worked in every trade known to man. Once you give them the job, you find out that they don’t know how to hang a door or replace the inner workings of a toilet even though they were a plumber for 5 years. I would much rather have contractors that know their limits and are not afraid to disclose those limits up front.

I recently hired a contractor who “knew everything.” He showed me pictures of work he had done and bragged up how great his work looked when it was done, but when it came time to work, it took him five hours to hang a door. Plus this contractor was the most expensive person I had (out of seven) on the job site.

The bottom line is this . . .

Contractors living modest lifestyles that know and communicate their limitations usually work out best.

Next time, we’ll talk about defining your contractor’s responsibilities up front to avoid the most frequent contractor “gotchas.”

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The Contractor Success Triangle : Real Estate Renovations

Posted in Renovations | 2 Comments »