There are certain skills and areas of knowledge that are common to ALL real estate investing strategies. Every successful real estate entrepreneur knows these things, and it doesn’t matter if they’re wholesalers or landlords, whether they invest in apartment buildings or single family homes, whether they’re in San Diego, San Antonio, or Saint Paul, whether it’s 1960 or 1990 or 2019. You need to know them, too. They are:
- How to evaluate properties—what they’re worth, what they need, and what it will cost to get them renovated. Without this skill, you literally don’t know what a good deal is, or how to make an offer on a property that will actually make you money.
- How to find motivated sellers of the kinds of properties you want. The entire real estate investing business, at least as small real estate entrepreneurs practice it, is based on the fact that real estate is a relatively illiquid asset with no national, stock-exchange-type market that values and buys it. For this reason, it sometimes trades at prices that allow a ready, willing, and able buyer—you—to profit from the difference between what it’s “worth” in an open-market situation and what a motivated seller will sell it for in return for a quick sale or other non-monetary benefits. One of your primary jobs is to find these motivated sellers and their properties, and understanding who they are, where they are, and how to contact them.
- How to comfortably talk to those motivated sellers. It’s tempting to call this skill “negotiating”, but there’s not a lot of the kind of intense back and forth haggling and hard-ball position-taking in real estate that it takes to, say, negotiate peace in the Middle East or get your husband to do the dishes. The reality is that 95% of “negotiating a great deal” consists of finding the right seller (see b.), asking the right questions, and being brave enough to say, “Based on what you’re telling me about your property, the $1 zillion dollars you’d like to get is probably not realistic. I can give you $1.”
Understanding the psychology and motivations of these sellers and how to build the rapport that will allow you to comfortably make offers lower than—or on different terms than—the seller would ideally like, is something that every real estate entrepreneur must master.
- How to finance the purchase and renovation of properties without using conventional sources. Eventually—and probably sooner rather than later—you’ll want to actually buy a property. And while “No money down” is an attractive and popular ideal, the reality is that unless you literally get a property for free, SOMEONE’S money is going to go into the purchase (and any rehab) of it.
No matter how much cash you have or how great your credit is, you’ll run out of money before you run out of deals, and the bank will stop lending you more before you’re finished buying. Luckily, there are several ways to use other people’s money—sometimes the seller’s, sometimes a partner or private lenders—to acquire real estate. Fully understanding ALL of the ways of doing this, and all of the variations of each way, goes beyond the idea of “fundamentals”—but understanding the basic structure of various “creative finance” strategies is important even at the very beginning of your real estate investing career, because knowing that these things are doable opens up opportunities that don’t seem possible when you still think that everybody gets all of their money from conventional lenders.
- The basic exit strategies and what they do for you. Based on the number of available real estate investing courses and bootcamps and seminars and webinars and e-books, you might think that there are dozens or even hundreds of different ways to make a residential property make money. In fact, there are only 4, or at most 5—wholesaling, retailing, renting, and selling with owner financing (whether lease/options fit with renting, owner financing, or are in their own category decides whether there are 4 or 5). Everything else is a variation on or combination of these strategies.
While any one of the basic exit strategies can and should be the subject of much more in-depth study than can be defined as “fundamental”, understanding what they are and what they do will save you a lot of time, money, and heartache by quickly eliminating those that don’t meet your goals—thus keeping you from spending thousands of dollars more learning exactly how to do something well that you shouldn’t be doing at all. In fact, knowing what exit strategies are available to you and what each produces in the way of benefits is key to the rest of what you do on a day to day basis in your real estate business—the kinds of properties you look for, the kinds of seller situations you key in on, whether you need that creative financing, and how much, the neighborhoods you focus on, and what other resources you gather.
How are you doing with your 5 fundamentals? Without them, none of the super-sexy things you’ve learned about earning quick cash or becoming a rental mogul or assigning lease/options or whatever will come to pass. Focus on these basics until you’ve learned and internalized them, and you’ll be able to do whatever you like in real estate. Ignore them, and you’ll never succeed.
Reprinted from The Real Life Real Estate e-letter with permission of Vena Jones-Cox. Get a free subscription at www.TheRealEstateGoddess.com
Article provided by Vena Jones-Cox, full-time real estate investor since 1989. She’s wholesaled over 600 properties and has written the definitive home study program on how to flip properties quickly and easily. She’s the past president of the National Real Estate Investors Association and has appeared in Money Magazine, Reader’s Digest, Smart Money, and a host of other national publications. Request access to her FREE Training she has provided. Vena will be at the March 13th MAREI Meeting explaining how wholesaling works to make $5 to $10k in 30 days. She is coming back on March 24th for an all day workshop to go in depth on creating a Six Figure Wholesaling Business as well as Marketing for the Best Deals in today’s seller market.