Note: This is my next post in my series of ABCs of buying, selling and investing in real estate. Each post I choose a letter (Y this post) and make up a story dealing with real estate. The story is fiction but the advice is very real(
Yoko and I sat waiting for the music to start. We had decided to get together to watch a Beatles cover band. Since we were both huge fans of the Beatles, Yoko thought it would be a good thank you gift for the recent help I provided to her as she started her real estate investing career. All real estate investors have to start somewhere and Yoko approached me one evening as I was closing up for the day at a local coffee shop. She said she had seen me there every week with my real estate polo shirt and had finally decided to approach me about her dream of making it rich in real estate. I invited her to sit and we spent the next thirty minutes getting to know each other. Yoko had attended a real estate investor information session years ago. At this session, she learned that you could buy some real estate cheap and then turn around to make thousands of dollars, even millions over your lifetime by buying real estate for pennies on the dollar. She said, even though she felt it was mostly a scam job to get her to invest in their products, the overall message had stuck with her all these years. She had a yearning to get into real estate and make her fortunes. She ended her story by asking if other investors came into the business with the same yearnings and did I think it was realistic.
This is what I told Yoko
I told her that our company worked with investors quite a bit and even invested some ourselves. We worked with the investors who were serious about making a business out of real estate, but only if we were a team where we could both work towards achieving our business objectives. I always chuckle when someone asks me if I am investor friendly, which to me means that the investor will want certain items, like Comparative Market Analysis (CMA) with comparable properties, and not really care if my business advances. I consider us to be investor smart where we honestly look over what the investor is looking to accomplish and help them reach their goals while at the same time moving my company forward as well. People do come to us quite often with questions like Yoko and we are happy to advise and discuss, but when it comes to actually moving on properties, we will work with qualified candidates only. Investors who have the financial means to purchase the properties they are pursuing. With many of these new investors, we have seen three common yearnings they have about the business.
1. Make a lot of money very quickly – Almost every new investor that comes to me for my help will have some yearnings about making a lot of money and they usually want to do it within a year’s time. It is possible to do so, but it takes a lot of resources, money and people, and a little luck to get it done quickly. Most real estate investors will tell you that their investment income is not enough to leave their full time day job. However, many of them have firm goals and objectives in place for getting to a point where they can leave the W2 jobs. It is a tough market right now for buyers. We don’t have a ton inventory available, either on market or off market, so most investors have to be flexible with their numbers, or hold onto their funds until the market turns more friendly to buyers. New investors also have to realize that this business is a people related business. It is best not to burn any bridges with anyone in real estate. You can’t go making low ball offers on 100 properties in this market without risking your reputation. It is much better to just hold onto your money until low ball offers are more acceptable because we have plenty of houses for people to buy. Right now, you are just killing your chances on making any future deals because no one will take you seriously.
2. Find a steal – Some real estate investors really don’t care much about the money. Instead, they love finding a steal and being able to capitalize on it. This yearning can be especially frustrating to investors right now when deals are very hard to find. If you are looking for deals on the MLS, you have very few options and a lot of competition, which leads to some truly outlandish offers. Of course, with off market deals, you tend to have the danger of getting involved in a scam, which are on the rise at the moment. With these scams, you can understand pretty quickly why the government stepped
3. Get an inside deal – This last yearning is about the thrill of knowing the right people so you can get the inside deal on a property. Most real estate investors I know are constantly building their networks in the hope they will find the one agent, wholesaler or other investor that can give the exclusive inside deal. I believe that some investors feel this yearning more than the other two because they react differently to my off market deals than they do my MLS listings. I have a good sized buyer’s list where I can send off market deals. I get these deals because of my own network. Many times the property owners don’t want to spend the cash necessary to hire a real estate agent but they are willing to pay an agent that brings them a buyer. At other times, I just request my commission be paid by the buyer. Either way, some of my buyers jump at every off market deal I send, but ignore anything I send them on the MLS, even if the MLS can generate better numbers. The only explanation I have is tied to this yearning of getting an inside deal. These investors cannot resist getting a hot inside deal.
Yoko listened to my advice and was able to land a good rental that matched her goals and objectives. She told me while waiting for the concert that she had felt all three yearnings. She still wanted to make a lot of money in the industry but knew it might take a longer period time. She did yearn for me to find her a steal so she could get that great inside deal. She knew that she had gotten the real estate bug and wouldn’t be changing her course anytime soon.