Learn To Be Rich

I run a large national network of real estate investor websites and because of this, I work with many real estate investors and a lot of real estate agents and brokers across the country. One thing my experience has shown me is how differently some agents treat their investor clients than others.

For example, I have some agents that when I give them the contact information of an investor, they try to e-mail them. I have others that immediately pick up the phone and call. The worst agents, in my opinion, do this though: they start bombarding the investors with every house for sale in the Multiple Listing Service. Apparently they think that investors want access to all the homes for sale in their market.

What’s sad is that this is one of the quickest ways to turn an investor client off. As an investor myself, I know how to go and look up properties on the web from various real estate websites. On those websites I can see just about every listing already. If I just wanted access to properties, I would not contact an agent.

As an investor myself, I’d want an agent to add value… analyze potential deals and tell me which ones look better than others depending on whether I am looking to buy for cash flow, or for equity to quickly resell. I personally would quickly block e-mails from an agent that was sending me 30 new listings each day ranging in price from low 5 figures to multi-million dollar homes.

If they had taken the time to ask, they would know that I am never going to buy a multi-million dollar single family home as an investment. In fact, I’ve never purchased above the median price in any city I’ve purchased in and so sending me properties above the median doesn’t fit my investing criteria.

If you are working with a real estate agent or broker, tell them the types of properties you’d like to see. Be very specific. If you wouldn’t consider a 2 bedroom property, tell them not to show or send you info on two bedrooms.

Some of my local clients want to receive a list of all the properties that are short sales. Others want all the properties that show signs of being a fixer upper. I have custom searches set up for them to find these properties and to e-mail them automatically, but I do not send anyone all the new listings for the entire MLS each day.

Until my next post,

James

I met with a couple of clients of mine last night to write an offer on an investment property. This was their first investment property and they were a little nervous to write the offer, excited, but a little nervous.

There were dozens of questions running through their heads: Would the offer be accepted? Would the seller get mad at how low the offer was, compared to what they were asking? Would they counter? What would they counter for? Should we ask the seller to pay closing costs? How much earnest money should we use? These questions and more needed to be addressed.

It’s OK to be nervous when you write an offer, but don’t let that stop you from writing the offers. We found out this morning that the seller could not accept their offer, but they submitted a counter offer. If the sellers had accepted the offer my clients wrote, my clients would have been very happy. They had done their homework on the deal. They knew what they could rent it for. They knew what repairs it needed and had gotten reasonable estimates to get those repairs done. They knew what they could sell it for and they knew about their financing situation. They were prepared, and even though this offer wasn’t accepted, it was a necessary first step. This was the first of many offers that they will be writing.

The next time they make an offer, I suspect they will be less nervous since they’ve gone through it once before. The one after that, they will be even more comfortable. It will get progressively easier each time. I have a saying: “The first is the worst.” I usually use it when I am talking about why you should just do something to have it done and accomplished. I use it as a battle cry to destroy procrastination caused by wanting to have everything perfect, but it is appropriate here too. Writing your first deal is usually the most uncomfortable because much of the process and outcome is unknown to you. So, go out there and make an offer where the deal will work for you if it is accepted. Get over the fear earlier rather than later. I think you’ll be glad you did.

Oftentimes, we discover the best things in life by chance. Like the time my wife made me try a new restaurant (I’m the guy who doesn’t like to try new foods) and now I eat lunch there everyday. How about when your father (or mother) insisted that you get a job and work weekends in high school, and you discover that you love working. (Hey – it can happen, plenty of us love to work!) Or, maybe it’s when you finally discovered that the home you purchased to live in has become one of the greatest investments you ever made.

Alright, the first two weren’t discovered by chance as much as by compulsion – wives and fathers can be formidable forces in forging our life habits – but the last discovery really was stumbled upon. We buy a home to live in, only to figure out somewhere along the way what a great thing owning a home is.

Now, I won’t be discussing paying yourself versus paying a landlord… you still need to make payments to someone if you are borrowing money. Nor, will I discuss the tax benefits of owning a property versus renting. However, I will discuss how owning a home can be an amazing investment and why you might consider buying just one more piece of real estate.

First, you will eventually own your home without a mortgage. The amazing thing about 30 year loans is that they are actually paid off in 30 years! So, if you get a 30 year loan and make 30 years of payments without refinancing, guess what? You own the house outright. Assuming the house did not go up in value at all and it was a $200,000 house you’d have increased your net worth by $200,000 just by paying your loan each month. However, that’s not even the biggest benefit of home ownership.

The biggest benefit is that real estate tends to go up in value over long periods of time. Of course, house prices rise and fall, but inflation tends to make housing prices go up over time. So, what would a $200,000 house be worth in 30 years? Well, if values were going up at about 7.2 percent per year (it makes the math easy to use that number), then your property doubles in value every 10 years. So, over 30 years, it would have doubled three times.

So, a $200,000 house doubles once to $400,000. It doubles twice to $800,000 and doubles a third time to $1.6 million dollars.

Remember, you own it without a mortgage at that point too. You can sell it to fund your retirement account at that point. Alternatively, simply refinance it to have the advantage of its increased value while still living in it.

So, now that you know that you’ve been an accidental real estate investor by owning your own home, perhaps you might want to double your wealth by buying just one additional investment property. Triple it by buying two other properties. What would an extra $5 million mean to you and your family?

Until my next post,

James