Bag of Tricks Many people consider themselves a real estate investor but the fact of the matter is that just because you put money into investing does not make you an investor. 95% of all investments are done for capital appreciation, this is really just gambling. Are you a speculator or an investor? A solid investor understands several methods of making money and is not a one trick pony. Most speculators only understand flipping and most of them want to sell as soon as they buy. So they are really trying to out purchase the competition and get the next sucker to come along and buy the property for more than what they paid for it. This is not always a solid game plan. In upward markets flipping makes complete sense. But anyone can see that was a good plan 4 years ago and none of us has a time machine.
A real investor understands how to make money in any economy up, down or sideways markets. This does not matter, because the true investor is flexible to changing market conditions and will react to market changes. A true investor is well taught and properly coached to succeed in any environment. A real investor can stop and adjust to a new situation and adapt to new information, will lower one's ego in order to get a different result. A few years ago buy fix and flip was the preferred method of transacting real estate, but today a great investor will change their plan in order to make a profit. Yes and that means investing in new areas not just learning new techniques. Sometimes we change our mindset but we also might need to change our investment locations. We always need to be adding to our Bag of Tricks. How many methods of real estate investing are you familiar with?
The cycle of real estate is favoring the renter now. Rentals are more popular for people that have limited cash flow, but also are more favorable for investors as well. Apartment complexes that held higher vacancy when most people were home owners at the peak are now running at occupancy. This change in demographics should get people much more excited about cash flow. Just because you can rent a property doesn't make it profitable, you still need to be produce an asset. So many people call it investing when they buy a negative cash flow property that yields a 6 cap rate. How can you cover debt service with such a low cash flow? You really can't so this means that we need to be investing in areas that might be less popular but cash flow a whole lot better. We all make choices every day. Lets all make the right investment choices that makes us money today as well as get us paid tomorrow. You might have to study a demographic that is beyond what everyone else is thinking. If you invest with the crowd then you will get the same results as everyone else.
Another example of changing market conditions is the use of creative financing. Even people with solid jobs and good credit are being declined on their loans, so in order to make better sense of leverage seller finance is becoming more popular. In all transactions it is increasingly difficult for people to purchase anything with cash. We always should be leveraging our money with good debt. Often transaction will be viable with a carry back or seller finance terms. Let get creative on the terms and this can lead to our success. Here is a real example of how I sell my homes, I sell single family homes for $55K, I would be willing to take $35K down on the property and finance the remaining payments for my buyer. I would take $35K because that provides me with enough money to purchase the next rental property. This solves a problem since we do not need a bank to lend to us. No appraisal, no income verification or credit check. The loan is still guaranteed by the property. The gross rent of $800 a month covers the expenses, debt service and provides cash flow.
We all need to understand new methods of transacting real estate. Since none of us control the market we need to be able to invest in methods that are quite different than a few years ago. We all need to understand there are many ways of investing in real estate. I mentor a large number of investors towards their real estate goals. It is invaluable having a great coach that can make us better players. We all need someone to provide leadership and direction and help us to learn new techniques in investing. A good coach will raise everyone around them in order to win. Coaching provides us the ability to learn more and add new processes and techniques in winning. Is it more important to be in control of an investment or make money? Sometimes people invest in order to appease their ego, not necessarily because it is profitable. What type of investor are you emotional or rational?
Most people should have a goal in mind for their investments, a desired rate of return, amount of leverage, tax avoidance or specific cash on cash return. The learning of new techniques other than flipping is only a process of achieving your goal. There are so many ways to arrive to a desired location. A true investor continues to learn new processes and is both flexible and motivated to achieve beyond everyone else's results. If you want something different than the typical then lets learn something new. If you need help then find the right coach. Determination is not innate we need to be shaped to learn how to win. Are you capable of learning something new in order to get your desired result? Can you add to your Bag of Tricks?
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