Real Estate Investment Blog

One Man, One Woman, 2 Weeks, and $23K Profit

This is a story about one man, one woman, two weeks and a twenty-three thousand dollar profit.

When I first started investing I took real estate classes, read books and manuals, and listened to cassettes (yes cassettes…what are those?!) constantly.

I wanted to learn as much as I could and I wanted to make as much money as I could. I knew the more I learned, the more I earned.

I started buying multi-family properties. Then I began flipping single-family properties so that I could buy more multi’s.

It was during one such flip that I encountered a very strange experience.

I got a call from a woman who had seen one of my “We Buy Houses” bandit signs on a telephone pole.

I got out my seller’s script and started asking her questions about the property and her situation.

She had a three-bedroom ranch in Brockton that needed a little bit of work. She was looking to sell and move to another area.

I asked her if she was behind on any payments (I wanted to know how motivated a seller she might be). She said that she was not behind. She just felt it was time to move.

After several other questions, I knew she wanted to move, but I still didn’t know how motivated she was. She was actually playing her hand very close to her chest, as a good negotiator should.

It was time to ask her the price question, that question that makes our stomach get all queasy so we avoid to the very last minute. It is the question, we need to know the answer to so we know we are not wasting our time.

The question I ask is one of the best questions I had […]

Ten Traits Of An Entrepreneur

Have you ever wondered if you have what it takes to be a successful entrepreneur? There are certain key traits that most, if not all successful entrepreneurs have in common. The good thing is, you don’t have to be born with them. You can develop these traits.

So, if after you read this list, you find you are lacking in one, two or a few of the areas, it’s OK. Now you know what you have to work on.

And if you have been trying to start your own business but it hasn’t been going well, look through the list to see what your lacking.

OK, here we go– these are the ten most common traits that successful entrepreneurs have in common:

1. Discipline
Entrepreneurs are focused on making their businesses work. They eliminate things in their lives that are a distraction to getting to their goals. They are planners. They create strategies and implement tactics to progress their business. Successful entrepreneurs are disciplined enough to take steps every day toward the achievement of their goals.

2. Confidence
Entrepreneur does not ask questions about whether they can succeed or whether they are worthy of success. They are confident with the knowledge that they will make their businesses succeed. They exude that confidence in everything they do.

Even if they are not sure, they tell themselves over and over again that they will succeed. They focus on winning, not worry.

3. Open Minded
Entrepreneurs realize that every event and situation is a business opportunity. They are constantly generating ideas about workflows and efficiency, people skills and potential new businesses. They have the ability to look at everything around them and focus it toward their goals.

They are innovative in spirit, knowing that every experience they […]

Income Analysis – Getting It Right

Today we are going to analyze all of the different ways we call and account for income.

Obviously, this is an important subject because without income, you are not in business. But, in the real estate business, like most businesses, the recurring income your business generates determines the value of your business, and how much you pay your management company.

Let take, for example, a ten-unit property. All units are two-bedrooms, and all units are renting for $600 per month. Let’s also say that the market rent for an apartment like this, in a building like this and in this market is $700 per month. Let’s also say that the property is 80% occupied. This means eight units are currently being rented and two are vacant. And, one unit is in the process of being evicted for nonpayment of rent.

OK, now our example set up is complete. Let’s go through the different ways we account for income.

Gross Market Income

The first type of income we will consider is the Gross Market Income. This is the amount of income the property could generate if the property was fully rented at market rents ($700 per unit). In our example, that amount would be $700 x number of units 10 = $7,000 per month or $84,000 per year.

Gross Scheduled Income

Since our example property is not rented at market rents, the Gross Scheduled Income will tell us how much we could expect from our property if it was 100% occupied at the current rents. In our example, that would be $600 x 10 = $6,000 per month or $72,000 per year.

Gross Potential Income

The Gross Potential income is the amount of income we would collect if we were to collect […]

How To Analyze Real Estate Expenses

If you don’t get the expenses right when you are analyzing a real estate deal, you are setting yourself up to get into a bad deal.

There are three parts to due diligence for any real estate deal. The first is financial. This is because if a deal is going to die, 72% of the time it is going to die during the financial due diligence.

The second part is the physical due diligence… are all the parts to the property working properly. And, the third part involves legal due diligence… is there clear title to the property.

For now, let’s narrow our focus on financial due diligence, and more specifically the expenses.

Operating Expenses vs. Capital Expenses
There are going to be two different types of expenses– Operating Expenses and Capital Expenses.

How you analyze these expenses will determine whether you are going to set yourself up for an easy or difficult operation when or if you take over the deal.

The type of expense will either increase or decrease the value of a property. By the way, if you are considering selling a property, understanding the difference is extremely important for you too.

Operating Expenses are an “above the line” expense. This means that if an expense is an “above the line” or Operating Expense, it is accounted for before debt service (mortgage).

Meanwhile Capital Expenses are a “below the line” expense. As such, they are accounted for after debt service is recorded.

Calculating Net Operating Income
This is an important distinction to remember. When we calculate Net Operating Income we use the following formula:

Yearly Operating Income

Yearly Operating Expense (not including debt service)

=Net Operating Income

This formula is important because one of the most important ways we determine value is by […]

I Don’t Know…CAN You Do This?

I get this question all the time… Dave, can I do this? And my response is always the same, “Do you think you can?” But in reality, there is more to it and that’s what we are going to be talking about today… Can you do this?

First, let’s talk about what “This” is. “This” is anything you are not sure you can do. It doesn’t matter what “this” is because the answer to “can I do this” is going to be the same.

1)   Believe: The first thing you have to do is believe that you can do it. If you don’t believe you can do it, your mind won’t allow you to do it. Take a moment, put all fears aside and envision in your mind what your world will look like when you do your “this.”

See yourself doing it, see yourself doing it successfully, and finally know you can do it.

If you’ve ever read, Think And Grow Rich, one of the great success books of our time, you know that the book talks about a ‘secret’ that is not divulged in the book. However, it does become obvious while reading the book.

That secret is: ‘if you believe, you can achieve.’

Remember that little ol’ ant, who thought he could move that rubber tree plant…

2)   Decide: The next thing you need to do is make a decision that you are going to do it. So many people remain indecisive in their lives, and they never get anything done that they really want to be done.

They put off the decision-making process until the time is right and, often times, when the time is right, the opportunity is gone. Do you think this might be preplanned […]

Is one or more of these 7 common real estate investing mistakes stopping you from being successful?

I’ve been investing in real estate, businesses and commodities for over nineteen years now. And, I’ve been teaching people how to invest and run their business for just about nine years.

Tens of thousands of people have gotten my systems, come to my events and taken our coaching programs. Over the years, I’ve watched, listened and surveyed my students to see how we can help them become more successful faster.

As a matter of fact, when you walk through the front door of our 12,000 square foot office building, right behind Alice’s reception desk, you’ll see our core values. Our number one core value is “we are not successful until our students are successful.”

My staff and I are committed to your success.

That being said, I’ve discovered 7 common mistakes that investors make that prevent them from being successful. They are:

1)   Limited marketing – the first thing you need to realize is you are in the marketing business. Real estate is your product but marketing is your business. The number one reason I see a student doing a bad deal is lack of marketing.

Why? Because you don’t have a lot of leads coming in, you get emotionally attached to doing this deal… because it’s the only one you’ve got cooking right now. So, you come up with reasons why this deal could work. That’s called rationalizing. Once you start rationalizing, you have lost. If you can’t come back to your senses… walk away!

This is why we are spending a lot of time at the Business Explosion and Ultimate Partnering Summit in February on Marketing.

2)   Poor relationships – the sooner you realize this is a relationship business and the more relationships you have, the faster your […]

If You Bring Them To An Island…You’ll Close More Deals, In Five Easy Steps

The better negotiator you are, the more deals you close. Negotiations don’t start when you make an offer, negotiations start with the first contact you have with a potential seller.

I’m going to lay out a technique that I learned many years ago and I’ve used since, to close over 7,000 units in my eighteen plus years of real estate investing. I call it… The Safe Island Technique.

Imagine you are going to have a major operation. When talking to your doctor, the doctor doesn’t tell you, “show up tomorrow morning and we will remove that spleen and you’ll be as good as new in a few days.”

If he did, how would you feel? You would feel very anxious because you have no idea what is about to happen to you, you just know something big is going to happen and you are very nervous.

This is the same way a potential seller of a property feels when meeting you for the first time. The seller knows you are an investor, he or she knows you are interested in buying his or her property, and thinks you are going to try to “steal” it for a low price.

By the way, whatever you’re buying or selling, whatever industry you are in, you can simply substitute “real estate seller” or “real estate buyer” for your situation because these foundational techniques work in all industries.

To relieve the fear a patient may have, the doctor takes the patient step by step through all parts of the operating procedure. From what to eat and drink the night before, to who the patient will meet at the hospital upon arriving in the morning, the pre-operation routine, the operation prep routine, the […]

Think Like a Client

Read the following and see your business grow and your profits increase…

Make your website a reflection of your prospective clients, the people you want to attract. Clients want to see themselves there; they want to see that you understand their needs and challenges. Most importantly, clients want to know that you can solve their problems and meet their needs.

Don’t forget about your existing clients—keep them totally informed. Always be sure that your clients know all of what you can do. Keep in touch with them regarding all facets of your business. Make them want to purchase more from you before they do from anyone else.

Welcome client input and comments. People love to leave online comments (via websites, social media, etc.). Make your clients know how well and how fast you provide answers to their questions and solutions to their problems. Show your clients all the other ways they might not otherwise know about, that you provide solutions and answers.

Be open to learning from clients. Just as you should take every opportunity to educate your clients about your work, you should be ready to listen and learn from them too (See above—another benefit of providing clients the opportunity to comment!).

7 Tips for Achieving Your Goals

The New Year is right around the corner. A lot of people are setting their goals for 2013. While goal setting is an important part of your business life, achieving those goals is much more important… Besides, you should be goal setting constantly throughout the year, not just at the beginning!

The reason you are constantly goal setting throughout the year is because you will be achieving your goals and setting new ones… Unlike those people who set their goals on January 1st and then by January 14th they are back in the same rut they were in, in December.

Here is how successful people achieve their goals…

Success: Dream Big, but with even Bigger Motivation

We all like to dream and some of us have big goals. In order to actually accomplish these goals you dream of, you have to do something. To do something you need motivation, and lot’s of it. First, identify a reason you need to achieve your goal. Then, make sure you have the true desire to achieve it.  Do not get bogged down by excuses and trouble; and whatever you do, do not allow yourself the opportunity to talk yourself out of achieving your goal. Instead, keep revisiting your reason and your desire to reach your goal. Reason and desire will help keep you on track.

Success: Set Daily Mini-Goals

Working toward big goals can become overwhelming. Try breaking down the goal into more manageable daily mini- goals. For example, if you are striving to lose 25 look at each day and what you can do to get yourself toward that goal. You can’t lose all 25 pounds in one day but you can lose plenty of ounces, thus […]

10 Tips For Hiring A Contractor

If you’re in the real estate game or if you are just doing a renovation on your house, contractors are notorious for underperforming and making your life very unpleasant.

I’ve been a licensed contractor in the state of Massachusetts for over eighteen years now. I got my start investing in real estate by doing contract work for banks during the downturn of the early 1990’s.

Though I wasn’t licensed when I started, I actually had no idea how to do contract work but I saw an opportunity in the market and I went for it. The banks needed repairs done on houses they took back in foreclosure and I needed money. The two went together nicely.

I learned fast, read everything I could, watch all the video’s I could find at Home Depot on how to do house repairs and got other people to do the work for me.

I got good and eventually ended up being the lead contactor for Freddie Mac and Fannie Mae during the last big round of foreclosures, by that time. I needed to have my contractorslicense. So I studied hard, took the test and passed.

It’s not because I’ve got my contractors license that I became so savvy dealing with contractors. Its because I hired so many of them to do the work for me.

At the height of my contracting days I was working on 12 – 16 houses a month and had 35 – 55 sub-contractors; carpenters, electricians, plumbers… at my beckon call to get work done.

I’ve been through the trenches and I survived, and I learned a lot of lessons on the way. Here are ten tips you should adhere to when dealing with contractors:

1) Licensed and Insured – […]