Everyone in business makes mistakes. When you are self-employed your mistakes tend to sting a little bit more. Instead of explaining yourself to a boss, there is nobody to blame but yourself. Under the right circumstances a mistake can be used a learning experience. However, if you continue to make the same mistake again eventually it will start to impact your business. All it takes is on misstep to change your reputation, your bottom line and how people view your business. Instead of acting after an error you are better off taking a step back and learning from your actions. You are only human to make a mistake once, but you are a fool if you make the same one twice. Here are five important real estate investing mistakes never to repeat twice.
- Not asking questions. Real estate investing is a difficult business. There are investors who have been in the business for years, who still get stumped on a scenario from time to time. It is ok to admit that you don’t know everything and need to reach out for help from time to time. One of the worst things you can do is get involved with a deal you don’t know everything about. A wholesaler may present you with an opportunity that is seemingly time sensitive and needs and immediate response. Regardless of the situation, if you don’t understand what you are walking into you need to take however long you need until you do. There is often little recourse if you find something out about the property after the fact. There are many people, websites and resources you can tap into to find out whatever you are looking for. Never accept someone at their word without doing your homework and asking questions where need be.
- Leaning on emotions. Real estate is often full of wild swings. One day you are at a closing table and the next a deal falls out at the 11th hour. As high as the closings and accepted offers can be, the fallouts are equally as brutal. It is important to always stay on an even keel. Never let recency bias influence your next action. Losing a deal can be tough, but you don’t want to compound it by reaching for a bad property. It is important to have a system, or checklist of actions, prior to moving forward with a deal. If not, it is easy to let your emotions take over and fall head over heels for a property. As obvious as it sounds, your goal is to make a profit and not simply buy properties you like. A home may have everything you personally look for in a home, but if you can’t generate appreciation you will be left with a poor asset you can’t get rid of. Emotions and business don’t go well in the world of real estate investing.
- Overpromising. Your reputation is one of the most important things you have in any business. As much as you want to do everything for everyone around you, it is important to know where to draw the line. By overpromising and under delivering you instantly lose credibility with the people around you. It is ok to say that you can’t do something, or you don’t know an answer. By doing so, people will respect and appreciate your honestly. The alternative is saying yes to everything and leaving them disappointed a few days down the road. Not only will they be more disappointed, they will be far less inclined reaching out to you in the future. Any chance you had of building, or enhancing, a relationship will be lost. If you can’t do something, it is ok to be honest and lay your cards on the table. Not doing something isn’t the end of the world but saying you can then not deliver can be damaging.
- Not getting help. Just because you can do something in your business doesn’t always mean that you should. There are many things you are far better off outsourcing. By driving to and from a rental property to cut the grass every few weeks, you pull yourself from work with a greater potential for return. The same is the case with trying to handle all the marketing, accounting, property management and lead generation. There are items you need to outsource, even if you don’t think you can find the capital to afford it. These items will create time or directly help generate new business. This business will often produce a greater return than whatever money you would have saved.
- Chasing deals with limited upside. There is nothing wrong with making a minor profit on a given deal. However, with any deal the return must justify the time and financial investment. Working on a property for six months only to scratch a minuscule profit is not worth the time and effort. Not only is this risky, but it leads to burn out and frustration. This doesn’t mean that every deal will be a home run, but you need to pick and choose your battles. Look for deals where you can generate appreciation or get out with a profit and move on. It is the deals that drain your time and money that are an anchor to your business. They will pull everything down and leave you wondering what you are doing.
Mistakes are part of life, and business. That being said learn from them and never make these five investing mistakes twice.
It is not enough to rely on the strength of your market to produce a sale. All across the country there are plenty of places where real estate is in high demand. Even though your market may be flooded with buyers, it doesn’t mean your property will fly off the shelf. You still need to do things that will attract buyers, keep them interested and ultimately generate an offer. By simply listing your home and waiting for offers to come in there is a good chance you will be left disappointed in the results. With such a premium placed on turning your property over as quickly as possible you need to go above and beyond to generate interest, regardless of your market. Here are the five most common reasons why your property may not be selling, and what you can do about it.
- Lack of curb appeal. Every seller should understand the importance of curb appeal. A negative first impression can single-handedly turn buyers away quicker than almost anything else you can do. Instead of giving the property an honest look, you will have to wow buyers just to regain their interest. Improving curb appeal can include a handful of important items ranging from the condition of the yard to the quality of the front walk. If you have been working on a property for weeks it is easy to overlook a number of these items. Ask a friend, or someone you trust, to drive to the property and write down the first three negative things they notice. These will be the same three things that potential buyers will notice as well. Many of these are relatively inexpensive and easy fixes but are essential if you want to generate interest.
- Not using a real estate agent. When selling a property it is critical to look at the big picture. Of course you want to squeeze every dollar out of the property as possible. However, you shouldn’t eliminate a real estate agent to do so. There is a lot that goes into selling a home. Everything from finding the right list price, marketing, scheduling showings, negotiating offers and reviewing contracts is all part of the process. If you lack in just one of these areas your transaction will not go as smoothly as you planned. Many times what you think you are saving in commission you actually lose by negotiating a reduced sales price. Even if you can get the price you want you will spend many more hours at the property than you anticipated. There is too much on the line not to use a professional real estate agent. There are other areas in the transaction where you can look to save money. If you want to maximize your bottom line you have to enlist the services of an agent.
- Not following up with showings. Every showing you have is potential sale. One of the byproducts of not using a real estate agent is not being as organized as you need to. There are times when a potential buyer doesn’t show their hand and you assume they aren’t really interested. You don’t follow up with them or ignore their calls and they move onto another property. Every showing should receive an email or call within 24 hours. Don’t be afraid to ask for feedback or even ask if they are interested in making an offer. You never know when a buyer will circle back to your property at some point down the road. If you aren’t responsive to their inquiries you will leave a bad taste in their mouth. Most buyers will come from your existing database. It is critical that you follow up with every showing you have.
- No staging. Every property is just a little bit different. Something that worked for you on a property a few months back may not work for your current property. If you are trying to sell a full rehab the quality of your work may not be enough. Most buyers want to envision themselves living there and need to see the property furnished. The right staging can instantly transform the property and add to the appeal. Staging doesn’t work for every property in every market, so you need to do some research to see the benefit. However, for the right property staging is exactly what is needed to produce multiple offers.
- Listing too high. Price is the leading influencer in property demand. You can do everything else right but if you are listed too high you won’t have demand you anticipate. A good barometer to gauge if you are listed too high is the number of showings you have. With only a sprinkling of showings it is a good bet that either your marketing or your list price is flawed. If you have numerous showings and still have a lack of offers there is something wrong either in your presentation or with the property. Listing too high is a popular mistake with sellers working without a real estate agent. They think they can list high and meet buyers somewhere in the middle. That thinking is outdated and doesn’t work in this market. You need to list at fair market value and create demand with showings. Listing too high will cause your property to become stale, eventually leading to a price reduction and a lower price than you anticipate.
If your current listing is not selling you need to be proactive and take action. Use these five tips to help resuscitate your listing or help avoid these common mistakes.
There is a line from the movie “Rounders” that states we rarely remember our winning poker hands, but we can cite with incredibly accuracy the big ones we have lost. The same can be said for the world of real estate investing. For every success story it is easy focusing on the ones about the terrible tenant that prompted an eviction or the unexpected issue with a properties foundation. These negative stories leave the average investor hesitant to act and apprehensive to conduct business. The reality is that these negative stories are truly the exception rather than the norm. Furthermore, in most cases they are usually caused by an oversight, negligence or even overconfidence. Running into unexpected situations happens from time to time, but you can 26take measures to minimize your downside. Here are four ways to always protect yourself and your business.
- Consider worst case scenario. The most basic thing you can do to protect yourself is take a minute and think before you act. In every scenario you should at least consider what the worst case may be. This doesn’t mean you have to be paralyzed by it, but you shouldn’t blindly run into a deal either. If you own a rental property your tenants may stop paying, the furnace may suddenly break or there may be damage to the property. You can’t expect these things to happen, but you should put plans in place to brace for them if they do. The same is the case with a rehab property or any other potential deal you may have. By thinking of the worst-case scenario and playing every potential option in your head you will always be one step ahead. This doesn’t mean you will be able to prevent issues, but you will act quickly to minimize the damage instead of waiting and making them worse.
- Attorney review all contracts. The primary goal of any investment is protection. Sure, we all look for upside, but the downside is usually much lower. Think of how badly getting involved in a legal mess would impact your business. You would stop focusing on other areas and devote all your time to fixing your problem. There is a good chance you would probably look back and wish you took the time and paid the minimal expense to have an attorney review your contract. It is not a stretch to say that it could be the best money you spent on the deal. Whether you are on the buy or the sell side it is imperative you have an attorney review the contract. Once a contract is signed it can be difficult, if not impossible, to get out of. The language on the contract can be misleading and the next thing you know you are fighting to get in or out of a deal. A dedicated real estate attorney knows what to look for and what sections could be a red flag. If you want protection you need to have an attorney on your side, you can trust.
- Partner with the right people. Another common area where investors often get in trouble is blindly jumping into partnerships. If a deal, or situation, looks too good to be true, it usually is. There are legitimate cases when time is of the essence and you need to act quickly. However, these are few and far between. If a potential partner pressures you to act or asks you for money it should be a giant red flag. As unfortunate as it is, there are people in the real estate world who look to take advantage of inexperienced investors. They promise the moon and ask for money to get involved in a once in a lifetime opportunity. If you are slow or don’t have as many deals as you would like this can be a tempting proposition. The internet has made it easier to vet out potential partners than ever before. If there is something you want to know about a potential partner, ask. If you don’t like the answer do some independent research until you are completely comfortable with who you are working with.
- Insurance. In addition to a strong contract the next most powerful piece of protection is insurance. As we mentioned, there are many ways to save a buck in business, but protection should not be one of them. Make sure every property you own has the necessary amount of coverage. The same is the case with your short-term rehabs. Even though you may only need insurance for a few months, you must consider the worst-case scenario. If there is an accident on site are you liable or open to litigation? In addition to personal insurance you also need to make sure you work with people who are licensed and insured. Getting a great bid on a job from someone not licensed can be fools gold. Sure, if things go well you can save some money but if there is a problem with the work or an injury you open yourself up to much bigger issues.
Protection is the name of the game for any business. If you are worried about losing money or getting involved in a nightmare scenario there are plenty of things you can do to protect yourself. Start with these four basic tips and go from there.
There is more to real estate investing than quick flips and rehabs. While these types of deals are currently the norm, they are far from the only way to dabble in real estate. You can still build a long-term portfolio through rental properties, pass along wholesale deals or form a capital partnership. There are literally a half dozen, or more, ways to get started or build a real estate business besides flipping and rehabbing. What many investors fail to grasp is that these types of deals are difficult. For as much potential upside available in rehab deals, if a few things go wrong you will battle just to scratch out a small profit. Rehabs and flips are great in the right situation, but you need to make sure they align with your investing goals. Here are four important items to consider with quick flip and rehab deals.
- Access to capital. One of the key elements to any successful house flip is access to capital. Most of the best rehab properties come from distressed sales. Whether it is a foreclosure, short sale, tax auction or probate most sellers do not accept any type of financing. Without access to capital you will have a hard time finding good deals. What makes real estate investing so great in 2018 is that you don’t need to have your own personal funds to get started. Between hard and private money there are multiple outlets to find the cash you are looking for. If you do go with one of these routes your profit margins will not be as robust as you anticipated. With interest repayments and additional partners to satisfy your slice of the profit pie will be greatly reduced. This is all ok, because you wouldn’t have any profit to spilt if you didn’t have the capital to close the deal in the first place. Finding money to fund your rehab deals can be a challenge, but there are more options out there than ever before.
- Leadership skills. There is no such thing as an easy rehab. One of the reasons you can find a real estate show on TV almost every night is because of the challenges presented. Even the flips that appear to be cut and dry always have some kind of issue associated with them. If you are not ready to deal with these challenges, you need to reconsider if flips and rehabs are for you. As a rehabber you have a handful of people you need to lead. Even if you have a contractor to handle the nuts and bolts of the property, you are still the lead decision maker. You control the budget, the work you want done, the timeframe and who you want working on the property. You need to have the ability to make quick decisions often between two poor options. You will have to answer to everyone on the site as well as any business partners you have. Everyone will take your lead and your actions go a long way in determining your profit. If you are not ready to take this responsibility you should think twice about rehabbing.
- Time is money. It is not just a catchy saying, but time really does equal money in the world of rehabs. Every day you own the property you are on the clock to get it sold. The interest payments don’t stop just because you need to get an inspection done with the town. The longer the property goes unsold the more interest payments, and the lower your bottom line. This creates a necessary sense of urgency with the property. If you have never worked a rehab before it is not easy organizing all the work you need to get done. You have several people to schedule each with different demands for when and how they want to work. A delay with one person can have a trickle-down effect to everything else in the project. A few days can turn into a week and the next thing you know something is pushed back a month. A lot can change in a market in just a few weeks. The best rehabbers know and understand that they need to constantly keep the process moving forward, even if it makes them look and feel like a bad guy.
- The property must sell. It is not enough to do great work with the property. As obvious as it may be the goal of a rehab is to make improvements that ultimately push the sales price higher. By blindly dumping money into the property without thinking of the market and who the end buyers are you may be throwing money away. You also need to consider the market and how you price the property. Buyers don’t care about all the great work you did or what the condition was when you bought it. All they care about is the end product and how it stacks up to what else is on the market. Listing too high and shooting for the moon can tack on additional weeks, even months, to your transaction. All the while your business is stuck in neutral until you can cash and get the property sold.
Rehabbing is a great way to make a profit in real estate, but only if you know exactly what you are doing. You don’t need to be an expert house flipper to be a successful real estate investor. If flipping isn’t for you there are many other ways to build your portfolio.
2A healthy real estate portfolio is one of the keys to true long-term wealth. Even a sole single-family rental can completely change your financial outlook. As much as you may see the upside with a rental, there are a handful of negatives that can be difficult to ignore. There is no question that if you get involved in the wrong property, with a bad set of tenants your experience will be a negative one. However, for every negative story from a disgruntled landlord there are five others who have been positively impacted by a rental property. You can’t let the potential of a negative influence your decision to actively look for a rental. Here are the five biggest fears of rental property ownership.
- Losing money. Losing money is the single most common fear of any real estate investor. You may have heard one isolated story of a fellow investor losing their shirt and can’t get it out of your mind. The reality is that losing money is a part of any business, but often the exception rather than the rule. For you to lose money with a rental property you need to completely misread the market, the cost of repairs and the property. There will usually be a large ticket, unexpected repair that catches you off guard and changes the financials of the property. Even if this occurs you have years of ownership to make up for it. Sure, you will outlay money in the short term but if you view the property as a long term hold you will be able to recover. Losing money on a rental takes a series of unfortunate events that can happen, but the odds are certainly against it.
- Evictions. Just the thought of an eviction can make you think twice about pursuing a rental property. Dealing with an eviction is time consuming, expensive and exhausting. However, they are much less frequent than you may think. No renter plans on getting evicted. An eviction is a stain on your credit and leaves the renter without a place to live. Sure, there are a handful of “professional tenants” who bounce from property to property, but they are certainly the exception and not the rule. In most cases, an eviction is caused by a lack of due diligence. Instead of following up with references, pulling credit and calling previous landlords you rush a tenant into the property just to fill a vacancy. Inevitably, at some point during the lease they stop paying and soon after they are evicted. Proper tenant screening can’t completely prevent every eviction, but it goes a long way.
- Constant tenant issues. Somewhere along the way tenants have gotten a bad rap. There is the thought out there that most tenants are bad. This could not be further from the truth. The reality is that there are more tenants now than ever before. With loan guidelines still difficult and home sales stagnant, prospective buyers are staying put. This has further increased the pool of renters to the market. Many of these renters are young professionals who have never rented before and don’t know the basics of a house. As the owner, you can’t expect an increase in phone calls, texts and emails but nothing too time consuming. There is a thought that some tenants constantly harass their landlord and make their life a living hell. Those landlords that complain probably don’t take care of their property the way they should. The tenant may simply be asking for a lock to be changed or the dishwasher fixed. These requests are not unreasonable and should be tackled as soon as possible. Tennant issues are not a constant struggle that should dissuade you from being a landlord.
- Reduced equity. Owning a rental property should be viewed as a long-term acquisition. There are many investors who are scarred from the mortgage collapse over a decade ago. In the matter of just a few weeks their property value dropped in some cases close to 40% and their tenants suddenly stopped paying. That can happen again but that was widely viewed as a once in a lifetime occurrence. There was a perfect storm of influences in the market that all came together at once. Property values are nothing more than an estimate of price at a given time. Unless you are planning on selling or refinancing the current value should not be a consideration. Look at the value of your home in five, ten or twenty years down the road when you are ready to move on. Values will certainly rise and fall during that time, but it is nothing to keep you from buying.
- Negative cash flow. There are many rental property owners who use their cash flow to supplement other areas of their business. The extra couple hundred dollars a month helps with marketing, paying down debt or saving for repairs. The thought of losing this, or even coming out of pocket every month keeps some prospective buyers away. As scary as negative cash flow may be it is usually a byproduct of shoddy numbers. You should be able to estimate long term cash flow if you account for all the hidden costs, repairs and prospective issues. If you go into the property with rose colored glasses on, expecting everything to be perfect you will inevitably come up short with your projections.
There is risk in every area of real estate. With rental property ownership the risk is often worth the reward. Don’t like the common rental fears keep you from exploring the market.
Throwing money at a property does not guarantee success. The reality is that finding the right updates, upgrades and improvements is not about money, but rather doing the right work for the market. Simply throwing money at a property and expecting a return will leave you frustrated and disappointed. Savvy investors know that not all updates are created equally. A large infinity edge swimming pool sounds great on the surface, but if it takes up most of the backyard it will be viewed as a negative rather than a positive. On projects with a limited budget just a few mistakes will leave you in the red scrambling for ways to recoup your investment. Without many options you will quickly turn a positive property into one where you are forced to take what you can get and move on. Here are five property improvements that look good on the surface but are usually more trouble than they are worth.
- Swimming pool. As we mentioned, a swimming pool does not work for every property. For starters, the average in-ground pool can quickly add tens of thousands of dollars to your budget. More importantly, a pool is a niche property item that not every homeowner wants. Not only can they be a pain to maintain, but they can eat up most of the useable yard space. Like most everything else with a property you need to evaluate the market. If your property is in a warm weather location like Florida or California a pool makes more sense than in Connecticut or Minnesota. From there you need to consider the yard space and layout. Does a pool fit the neighborhood more than simply using the space as a play area? If so, you need to accept that your expense on the pool might not provide an equal return. You may need to spend a little more and even than there are no guarantees.
- Yard improvements. There are certain property upgrades that are taken for granted. Buying a property with an overgrown garden or large bushes everywhere may seem like a fairly easy fix. Anyone that has ever had to have extensive landscaping knows that this can quickly become a mess. Cutting down trees, removing bushes and replacing the grass does not come cheap. However, you understand just how much first impressions matter and that this is a necessity rather than a luxury. Prospective buyers only look at the finished product and don’t care how much work you had to do. They will not pay a premium for something that is considered a basic item, such as yard maintenance. Whatever you do to the yard should be done to get a buyer in the door and not add value to the property. This doesn’t mean you are throwing money away, but any upgrades you make to the yard will not do much to move the needle on the value.
- Overbuilding. Every buyer wants to live in the nicest home possible. They would all love to have the most modern amenities, a large walk in closet and a wrap around deck to watch the sunset. However, they are not all willing to pay a premium for it. When rehabbing one of the worst things you can do is to over-improve for the market. Having the biggest, most expensive house on a street with below market homes is not appealing to buyers. Not only will this eventually hurt the value, but practically speaking you will have a tough time finding a buyer. You can make the home nice and modern, but you should have an idea of the market and where the high point is. Blasting past the highest comparable sale in the neighborhood sounds good, but is often a giant waste of time and money.
- Specific upgrades. When considering any home improvement you need to take personal feeling and emotion out of it. Something that you may think is appealing, the market may have a different opinion. This is especially the case if you are rehabbing and flipping the property. You may get bored with the same countertops and cabinets, but if you try to get too personal you lose a large chunk of your buyer pool. Not every buyer wants specific countertops, fixtures and flooring. You are better off going boring and getting something neutral rather than putting your personal flair on the property. The only time you should consider a property specific item is when you are pushing the envelope in a market with intense competition. In these areas, you need to stand out any way you can. For most other markets, you are better off playing it safe even if that is not your style.
- Carpeting. There has been a shift on flooring demands in recent years. It wasn’t that long away when wall to wall carpeting was seen as a luxury, rather than a burden. Today, buyers are leaning toward hard wood flooring over carpeting. As a rehabber, carpeting can be expensive to purchase and install. You also need to worry about finding the right carpet and color for the property. If you pick the wrong color the room will not look nearly as nice as you anticipate. You also need to consider that buyers would rather hard wood and even though carpeting sounds nice is really a giant negative.
Don’t throw money at a property until you know what you are getting in return. There is a big difference on an update you would do for your personal residence and one you would do for a rehab property.
All loans are not created equally. Depending on the property type, timeframe and specific situation some loans work better than others. If you are into quick flips and rehabs a 30-year fixed loan doesn’t make a whole lot of sense. Regardless of what type of investing you are into you can probably find financing21 that matches your goals. Every investor should take some time to learn about what their options are and what is available. Finding a hard money or private lender may not appear to have much use now, but you never know what the future holds. Your ability to pick the best type of financing can help you close quickly and maximize the return. Here are the five most common financing options, and when you should use them.
- Lender financing. When people think of getting a loan they typically think of a traditional lender. It wasn’t that long ago when lender financing accounted for 95% of all investment financing. With the mortgage collapse many of these programs went away. What was left were traditional investment purchases with increased rates and down payments. These programs still hold plenty of value, but only in the right situation. Most of the investment loan options have long term amortization periods. As we stated in the opening, a 30-year fixed rate for a loan you plan on having four months isn’t the best program. However, if your focus is long term buy and hold rentals a 30-year option is the way to go. This gives you the security in knowing what your payment will be for the next 360 months. The downside is that these options require anywhere from 10-20% down payment, depending on the specific credit score and credit profile.
- Hard money lenders. With the decrease in traditional lending someone had to come in and pick up the void that was left. The area with the largest increase in financing over the past decade has been hard money lenders. These are lenders who lend based on their own specific rules and guidelines. Instead of following strict rules like a lender, they make guidelines that are important to them. They don’t need to see what the adjusted gross income is, as long as income is there. They may not need to see you have been self employed for a full two years if you have a history in the field. Hard money lenders often lend on a case by case basis with more importance placed on the property rather than the borrower. Since the rates and fees are typically higher, these type of loans are best used for the short term. Quick flips and rehabs where you plan on getting out within six months make more sense than long term options. Hard money lenders can be found more easily today than at any time in the past ten years.
- HELOC/cash out refinance. There are more ways of finding capital than you may realize. Perhaps you have the capital in your own portfolio without knowing it. After the mortgage collapse much was made regarding the difficulty in getting approved for a loan. In the past five years loan guidelines have eased up and getting a loan has been simplified. If you have a rental property, or even your primary residence, you should look at options of pulling capital from it. There are two main ways of finding capital from your property: home equity line of credit (HELOC) and a cash out refinance. With a HELOC you keep your existing first lien in place and add a new loan behind it. A HELOC gives you the option of paying interest only for ten years followed by a ten-year payment of principal and interest. The negative is that rate is based off the prime rate and not adjustable. If you are looking for a fixed option, you can opt for a cash out refinance. This rewrites the first mortgage and gives you cash at the closing in one chunk. The rate is based on credit score, equity and overall credit profile.
- Private money. Private money and hard money have plenty of similarities, although they are very different. With a private money loan there is typically a friend, family member or business partner providing the capital. Instead of evaluating your ability to repay they are more interested in their return on investment. A private money investor is generally a silent partner who has no interest, or connection, to real estate. They want to provide capital and let you run the project. This works well for investors who are looking for financing and are willing to make a little less as they are just getting started.
- Seller financing. There are many ways of getting a real estate deal closed. If you have exhausted all your financing options and still having trouble you may want to consider seller financing. As the name indicates seller financing is the process of having the seller finance some, or all, of the deal. Instead of paying a lender, you pay the seller every month. This works on deals where the seller may be having a hard time finding a buyer or the property has unique financing restrictions. Either way the seller benefits by generating income monthly and you take ownership of the property.
Finding financing for your next deal can be difficult but should never restrict you from moving forward. There are many ways to finance your next deal.
There are many things needed to grow a successful real estate business. You need to have a firm grasp on the local real estate market, numbers and formulas. You need to build a reliable team that can help tackle anything that comes your way. It also helps to have capital behind you and the ability to dip into your reserves if you need to. Even if you have all these items in place, it still may not be enough to be successful. What many people overlook are the seemingly minor items that often have the biggest impact. How you treat people, the way you speak to your team and your attention to promptness can all have just as much, if not more, of an impact on your success. Regardless of where you are in your business the little things matter. Here are five everyday actions you can do that will help improve your business.
- Return calls. With all the various methods available for staying in touch there is no excuse not to promptly return calls. Not returning calls and keeping someone in the dark is one of the quickest ways to ruin your reputation. This doesn’t mean you should drop everything every time your phone rings, but it is not unreasonable to follow up within a few hours. If someone calls and leaves a long voicemail take the time to call them back. Sure, you can send a quick text and be done with it but consider the impact. The recipient will feel like they are not important enough for you to spend two minutes on the phone with them. This has a trickle-down effect the next time you want something from them. Always put yourself in the shoes of the people around you and think if this is how you would want to be treated.
- Keep appointments. Everybody is busy with something in their own way. Regardless if you have five other things going on you need to always keep your appointments. An appointment is like a personal promise made to someone in your network. You may not feel like the meeting is useful or particularly important, but the other person may feel completely different. If you break the appointment your reputation takes an immediate hit. You lose instant credibility that changes the way someone things about you. Changing one appointment or breaking it at the last minute may not be the end of the world but with the way people communicate in 2018 has a bigger impact than you think. Your mortgage broker may talk to you attorney who talks to their accountant who works with a local contactor you have worked with. With a bad reputation they may not be as quick to work with you the next time you have a deal. Most appointments don’t take more than half an hour. Everyone has 30 minutes they can spare to help grow their business.
- Listen more than you talk. There isn’t much worse than sitting down with someone and listening to them talk for 30 minutes straight. They tell you about all their accomplishments, deals they have closed and the people they work with. When they finally stop to catch their breath you have nothing to say. The reality is that in 2018 if you want to learn about someone you can do so easily online. In the matter of minutes you will have a good idea of what someone has done and who they have worked with. You don’t need to let the people around you know everything you have done. In fact, you should make it a point to listen more than you talk in meetings. Instead of controlling the conversation take a step back and listen. This allows the people around you to get whatever they want off their chest without listening to you all the time.
- Give referrals. There is nothing better in real estate than an unexpected deal. If you can give someone a referral, even if it doesn’t work out, they will remember it. Every potential deal you are a part of should be an opportunity. Obviously, the primary goal is to secure the property but even if you can’t you should find a way to profit. Passing along a referral to your attorney, mortgage broker or fellow investor will pay off at some point down the line. Always do whatever you can to get the people on your team involved, especially if they have done the same for you in the past.
- Be a straight shooter. It is always best to deliver bad news as directly as possible. Nothing good is accomplished by trying to wait for the perfect time or not giving the whole story as soon as you know. By skirting around the issue you instantly lose credibility and people will begin to question you. Whatever bad news you must give, lay it all out on the line regardless of consequence. Not only does this help to immediately start working on a solution but people around you will respect you. They know you are not afraid to deal with bad news and are honest to a fault. This is how relationships are built and trust is formed.
You can make a case that these five items are more important for business growth than anything you will read in a book or learn in a networking meeting. With so much competition in the market the little things often make all the difference.
In real estate numbers are everything. You can personally love a property but if the numbers don’t work you need to walk away. When you come across a new property how quickly you can process all of the data and assign a value is critical. Although value is always at least partially subjective there are a few key indicators you should use as a guide. Only when you put everything together and come up with an estimated value should you move forward with an offer. Even though there is a lot to digest when determining property value it is an essential part of the investing business. Here are five items to help you determine property value.
Seller Motivation. There is plenty of friendly debate in the real estate world as to exactly where you make your money. One camp insists you make it when you sell and the other based on the price point you buy. What can’t be argued is that the best deals are usually acquired from motivated sellers. In any transaction value is simply the number someone will pay for an item. This is often influenced by the motivation of the seller. If they have ample capital and can wait the market out they will not be inclined accepting the first offer that comes their way. On the flip side if they are delinquent on their mortgage or in the midst of a divorce they are more likely to want to sell quickly and without hassle. Knowing the motivation of a seller will help define your value and give you an inside track on the deal.
Comparable Sales. Regardless of the item it is human nature to rely on previous sales to determine value. This is the case whether we are talking about baseball cards, comic books or real estate. All buyers look at previous transactions as a starting point for future offers. They pit the past sales price against their notion of value and either defend or support it. In real estate the more local sales data you have the better idea of what kind of value you may be dealing with. It is important to remember to always compare apples to apples. A sale five miles away may not be a true indicator of what you may be able to sell your property for. The closer the sale is and the more similar in size, room count and style the more reliable the comparable sale is. Where many investors go wrong in estimating value is assigning too high a number for improvements. Upgrades are always nice but if they exceed what has sold in the market it may not make too much of a difference.
Property Info. Everything starts with the property itself. It is important never to trust data you get from outside sources. You can get a good idea of what a property is about by what you find online but you still need to do your own homework. Walk the property and gather as much information as you can on the square footage, room count, layout and any other amenities you see. Always look for places where you can add value. Does the property have the potential for an extra bathroom or bedroom without breaking the budget? Can you knock down a wall and open up the kitchen or living room? These changes take some experience but always look at the “bones” of a property instead of what you see on the surface. You also need to factor in the strength of the local market. A solid property in the right market can do more to improve property value than almost anything else you can do. You can have the best property in the world but if it is in a poor area you won’t have the value you are looking for.
Exit Strategy. If you show a property to two different investors they could have two completely different opinions on the value. With real estate investing value is not necessarily the price you can buy a property for but what you can do with it. When determining your value it is important to always consider the exit strategy. Generally speaking the more options you have the more valuable the property will be. If the exit strategies are limited you may want to reduce your offer price and lower your value estimation. As is the case with every aspect of real estate you always want to take a conservation approach with your numbers. You may think your after repair value will be one number but what do you need to make that happen. If you need multiple things to break right the value may not be as strong as you think. Exit strategy and value often go hand in hand.
Carrying Costs. A final step in estimating value is understanding what it costs to realize your end value. If you plan on rehabbing the property you need to know all of the carrying costs and any variables associated. You can have a great property but if the oil tank needs to be removed this has to be factored into your value. Getting a 50% discount on a property may sound like a deal but what are the costs in getting the property the way you want? If the costs are too high you can end up disappointed in the bottom line regardless of your purchase price.
Only when you know and understand everything about the property, deal and market can you begin to form a value. Mastering these five items will give you a good head start valuing your next property.