Author Archive
Mentorship Tips
Posted on September 16, 2015 byIn this article I am going to take a different approach as to the format. This time I am going to give you a list of tips for finding and working with real estate Coaches and Mentors. A good education is paramount to building any successful business. Good mentors are the foundation of a good education. Here are some things to keep in mind.
- It’s not only ok but GOOD to pay for an education. Your education is the first of your investments. It’s also the most valuable. A good teacher is not free. I have spent about $75,000 on my real estate education. Mind you I didn’t plunk all that down at once. I have been through dozens of programs, books, home study courses, seminars and even coaching programs. You don’t need thousands of dollars to get started but do expect to pay something for your education. Start by setting a budget for buying education. If your budget is small then read a book. Go online and read blogs and forums. There are free trade magazines out there that you just have to sign up for and they show up in your mail or inbox. JUST GET STARTED!
- Not all mentors and coaches are equal (or even good). Buyer beware. Do your homework or due diligence on any teacher before giving them money. Good teachers will not be hard to get a good referral for. On that note…get referrals before signing up. Ask around or go online to get some feedback about the education this person is offering. If a teacher or mentor is not creating successful students or is ripping people off then someone somewhere will have posted about it. Just look. Ask the coach or mentor for some references from other students. If they have successful students then they and the students shouldn’t mind talking to you.
Setting the RIGHT Goals
Posted on August 1, 2015 byImproper goal setting can really hurt your business. Proper goal setting can make you rich. This is a concept that I see most new investors and real estate business owners learn the hard way. If you don’t know how to set proper goals for yourself then you are very unlikely to obtain any goal. In this article I will help you to learn the art of goal setting.
Whenever I begin mentoring a new student or business client I always start by having them submit their goals. I am actually more interested to see how this person sets goals more than the goals themselves. Most people will set goals based on what they want with little knowledge of what it takes to accomplish those goals. Understanding the requirements of the goals we set will greatly help us achieve them.
I follow a similar process for goal setting that the U.S. military follows. It’s called “Backward Planning Process”. Basically I decide where I want to be. What is my end goal? Once I know exactly where I am trying to go, I work backwards from that point. For example if I want to buy an apartment complex I start working backward with questions like this… Read More→
Get More Private $$$
Posted on July 2, 2015 byUnless you are already rich and have all the cash you need to build your real estate empire, you will probably need to explore the world of private money. Private money can come in many different forms such as investor’s capital, private loans, and hard money loans. Most real estate entrepreneurs start with capital from friends and family. This may be the best place for you to start raising money for your deals. Depending on the relationships you have with your friends and family will determine if this a good place to start or not. They may be willing to join you in your deal or they may still see you as the person they remember growing up and not the new real estate mogul you are now. Regardless of their opinion the best way to start raising money from your immediate contacts is to focus heavily on your real estate education. Friends and family will know you are new to the business and may be hesitant to jump in. If they see the amount of education and work you are putting into your new business then that attitude may change.
When you are ready to start farming cash from new sources then you need to start by networking. Networking is one of the best business skills you can learn. In the beginning most people are nervous about networking. I have found that this is usually because the person is not comfortable enough discussing the subject of real estate. Again you need to be constantly working on your education. This will lead you to be able to network confidently, discuss and answer questions, and to start building trusting relationships with new investors. If you are not comfortable and confident in your ability to discuss real estate investing they will not likely be confident in you. Read More→
Valuable Partners
Posted on May 29, 2015 byPartners can really make or break your business. Finding good ones is easier said than done. How do you find or attract the right partners? How do you know when the right person comes along? Will they want to partner with you and what should you offer them when they do want to partner with you? These are questions I get asked all the time. Here are some ideas about partnering in real estate but this article is not about the legal structuring side of partnerships, it’s about the people side.
A good partnership starts with equal but opposite skills, not necessarily a friendship. It’s good to be friends with a partner but contrary to popular belief that is not the most important part and not where you should start. A good partner will bring strength to your weaknesses and you the same for them. You are going to be splitting a lot of hard earned cash with this person so you want to know what it is that they bring to the table. What are they capable of that you are not and what are they capable of that you couldn’t easily hire an employee to do? The first step in answering the questions is to do a long self-analysis. Start with what you are good at. Ok you don’t need a partner to do any of those things. Now what are you really bad at? Now you know what a partner should bring as far as skills are concerned. They need to be good at what you are bad at or have what you don’t. Read More→
Real Estate at 10,000 Feet Up
Posted on April 30, 2015 byI will never forget my first business/real estate mentor. I was set to taxi the plane out to the runway on a flight to Carrabelle Florida. My passenger for the day was a wealthy real estate investor and developer. I was flying him to FL for the afternoon because he was in the middle of developing a new condominium community on a prime piece of water front real estate that I had watched him negotiate and purchase a few weeks prior on a separate trip that I flew him to Florida for.
At this point my real estate career didn’t exist at all. I was a pilot flying for a medical supply company in Macon, GA. My passenger (Lee) was a friend of the owner of the company I worked for. The owner had invested in Lee’s next development and had given him access to the plane (and me) to take him down to the development site when he needed. At this point in time I was working on my flying career but I was slowly getting the real estate bug. Little did I know that in less than a year from that fateful flight, I would be completely out of aviation and full time in real estate, never to look back.
As we taxied out to the runway on a beautiful spring day Lee said something that would change the course of my life forever “what’s that button for?” Read More→
The Momentum Effect
Posted on April 3, 2015 byOne of my favorite business books is Good To Great by Jim Collins. In this book Mr. Collins gives a great example that I realized applied to me when I was building my real estate business and will apply to you too. The author gives us an example of a great big fly wheel. He describes this as a giant metal disk on a thin pole. Imagine this disk weighs thousands of pounds and is currently stationary. Your job is to get this disk spinning.
It is easy to imagine that it will take time and effort to get the giant, heavy wheel to spin. You will begin with a single shove on the wheel. Very little will occur with this initial input from you. The wheel may move very slightly. You will push and push and the wheel will slowly start to move. Your effort will be great and the results will be minimal. Shove and shove and shove…the giant wheel begins to spin slightly faster and faster.
At a certain magical point the wheel will become much easier to spin. The weight of the wheel is now working for you. Its own momentum will keep it spinning with very little effort on your part. You can now give small gentle pushes and the wheel will keep spinning on its own. Read More→
Got Problems? Network!
Posted on February 27, 2015 byIs your business exactly where you want it? Are you making all the money you need? If not…Network more! Opportunities lie within the people you have yet to meet. So go meet them!
Networking is one of the most important aspects of your real estate business. Always be networking. You never know when you will meet the person who has the next opportunity for you. That is why I say if you need to be doing more deals you need to be networking more.
When most people talk about networking, raising private money for deals is usually what comes to mind. Although that may be a large part of networking there are lots of things you can get from meeting new people. Good deals can be hard to find. Have you done a mail campaign? Have you called broker or agents? Have you had lunch with an apartment owner this week who may want to sell you your next deal “off market”?
Networking to meet owners of properties is a great way to boost your business and deal flow. With the apartment/real estate market rapidly on the rise and competition heating up, going directly to owners may be the fastest way to get more units. Sending letters is a great idea but owners may or may not respond. If you can get to have a meeting with them it is much more beneficial. If they are not selling today they may sell in the near future. If you know the owner it is much more likely they will sell to you. Read More→
We Can Raise The Rents!
Posted on January 30, 2015 byRents are on the rise in most markets today. This is a great way to increase overall revenue and value of our deals. In this article I want to discuss the reality of raising rents and increasing values of our multifamily properties.
As I stated rents are naturally on the rise but raising rents is not always as easy as it may seem. “The rents are below market” seems to be the mantra of realtors today. I can’t remember the last time I looked at a property that the agent didn’t tell me that I could raise the rents and make a lot more cash flow. I agree in a lot of cases the rents could have been raised but rarely can it be done for free.
On average rents can be raised by 1-3% per year without any upgrades needing to be done. This is what we call the “annoyance raise”. When analyzing a deal and considering a rent raise as a “value add” component we need to look at several factors and ask one very important question, “why are the rents currently low?”. In most cases I don’t find that the current owner hates money and just won’t raise the rents because they just love the tenants so much. Your agent may want you to believe that something like this may be the case and you can just magically raise rents but it usually doesn’t work that way. Read More→
New Year Resolutions
Posted on January 1, 2015 byHappy New Year! I know a lot of you are looking for a “break out” this year and some are looking to continue their multifamily growth in 2015. No matter what your goals for the year are, they all begin with one very important concept… Focus!
At the beginning of every year most people make crazy resolutions that they never keep. We make resolutions to eat better, get on a crash diet, start that extreme workout program etc. While these resolutions start with the best intentions we usually don’t follow them through or at least not to the extent we had planned on.
In the business world this is what I call the battle of the “Comfort Zone” vs “Shock Zone”. This can probably be applied to our daily lives as well. When I first became a real estate student I realized a very important lesson. The need for FOCUS! Read More→
Takeoffs Are Optional, Landings Are Mandatory!
Posted on November 28, 2014 byThe sky was clear and it was a nice warm summer afternoon. My flight instructor had just stepped out of the small trainer airplane and left me alone for the first time. I was just about to taxi the plane out and to do my first solo flight as an aviation student. I was terrified and exhilarated at the same time. Just before my instructor closed the door behind him he leaned back in and gave me one last lesson that I will never forget. “Remember kid, takeoffs are optional but landings are mandatory.”
This was a great aviation lesson and an equally valuable business lesson. When flying a plane we need to make sure everything is ready before takeoff. Do we have enough fuel? How is the weather between here and where we are going? Do we know where we are going? Once you leave the ground there are no timeouts. You don’t get to pull over and walk home once you are in the air. You will land that plane in one piece or in many but either way you will land. Years later I realized that doing a real estate deal is no different. You can chose to close or not to close but once you do buy the deal you are in it for the long haul.
The point I am making here is, that like safely landing an airplane, our exit strategy for our deal is just as important. Some people say “you make money when you buy”. I wholly disagree with this statement. You may create value when you buy but you don’t make money until you exit the deal profitably. Saying that you make money on the purchase is a cliché that I find to be dangerous. This is like saying as long as I get my plane into the air everything else will take care of itself. I hope you would not get on a commercial flight after hearing the captain saying that. Trust me, your investors and partners will not want to hear you say anything like that either. Read More→
Getting Sponsored
Posted on October 31, 2014 byMultifamily real estate can be one of the most profitable real estate business models but it can also come with some barriers to entry. Qualifying for a loan to buy apartments can be challenging but not impossible. One of the major misconceptions today is that a bank will lend only on the value of the property and will not look at your personal financial standing for the loan qualification. This simply is not true. A lender will always look at the financial wherewithal of the borrower. The good news is that you can have partners that bring some of the things that you may not have and help you to qualify for a loan.
What I am discussing here is what we call a “Sponsor”. A Sponsor is a partner that brings the needed qualifications that will help you get the loan and the deal done. Sponsors can bring many things to your business besides money and net worth. They can bring experience too. Let’s start with the money side first.
Most banks and lenders will want you and your team to have a net worth greater than the loan amount. If you want to qualify for a $1,000,000 dollar loan then you and your team will need to be worth at least $1,000,000. If you don’t personally have that much net worth then you will need to bring on a partner or partners that do have it, in order to satisfy the lender. Net worth is a gray area that will ultimately be judged by the lender, but for this conversation I will give you some guidelines from the loans I have done. Read More→
A Few Horror Stories
Posted on October 1, 2014 byTo maintain the spirit of the season (Halloween) I thought I would tell you about a few of the mistakes that I have made in the real estate business and share the lessons with you.
Know the value of something before you buy it!
My first mistake was to pay way too much for my first deal. It was a duplex. The numbers worked as far as cash flow was concerned but I never researched my comparable sales in the area. I paid twice what everyone else had bought duplexes for. It cash flowed so I was able to operate but that killed any exit strategy of selling or refinancing. Cash flow is great but you must always have an exit strategy before you buy. Make that a part of your deal analysis.
If something is cheap… there is probably a reason.
I have bought some tough properties in some tough areas. I have been successful with them but I also managed them myself. Learning the art of management has been great but it has also been a tough road and has kept me from buying more deals sometimes. What I have learned is that if you want to a reposition a deal you need to make sure it is in a good area. Most of the repositions I have done were in areas of town that were not so great. When you see an apartment complex that is selling for a good price you need to analyze the deal with your eyes wide open. Sometimes properties are selling at a discount because they need physical repair and sometimes they are selling cheap because they need repair and are in bad area. When looking at reposition deals pay close attention to the demographics of the area the deal is in. Look at the median income of the area. Is there job growth? What is the vacancy of the other properties in the area that are like yours? Look at the rent roll in the delinquency column. Are they actually collecting rent? You don’t want to do reposition deals in marginal areas even if you can buy them cheap. Your property is only as strong as the tenants you can rent to. No matter how much work you do to the property…if you can’t collect the rent it’s not a good deal. Read More→
