3 Lessons From the Hard-Knocks School
- WEALTHY: The most important "un-taught" lesson in real estate (Kam Weiler)
- HEALTHY: The bad breath/good health trade-off
- WISE: A lesson on lessons from an Italian poet
ALSO IN THIS ISSUE:
- 2 more reasons to get yourself "on stage" (Peter Fogel)
- Not my idea of customer service! (Michael Masterson)
- Add "cynosure" to your vocabulary
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ETR Insider Report: 3 Lessons From the Hard-Knocks School of Real Estate
By Kam Weiler
In a short time, the real estate holdings I’ve acquired in my "side business" have easily surpassed all other investments I’ve ever made. I went from a negative net worth to six figures, with relatively little effort. Today, I have ownership in 11 rental units valued at over a million dollars, and enjoy the benefits of cash flow every month.
But the truth is … I could have done better. I missed out on hundreds of thousands of dollars in profit. One reason is because I’m a fairly lazy investor, when it comes down to it. Real estate is truly a part-time endeavor for me.
The other reason is more heartbreaking. Because for all of my good intentions … the fact is, I still managed to make some pretty major mistakes along the way. And those mistakes could have been avoided.
Suffering my way through the Hard-Knocks School of Real Estate, there were three pivotal lessons that helped me "trim the fat" from my efforts and start seeing real, tangible results.
Now, these aren’t your typical lessons about how to figure out cash flow or where to look for motivated sellers. That information is all available from a variety of sources. The lessons I’m talking about were often contrary to what I’d read from "experts."
Hard Lesson #1: You Don’t Have to Be "Trapped" in a Bubble Market.
In my opinion, this is the most important "un-taught" lesson in real estate.
When I began reading real estate books, they all started out by telling me to invest in or near my own town. They reasoned that I would be familiar with the different neighborhoods, and it would be easier for me to manage the properties. Sounds like pretty good advice … in theory.
Let me tell you, I wasted a lot of time, energy, and enthusiasm trying to make things work for me in Southern California.
I had no cash to invest, so I needed positive cash flow in low-risk properties. I needed to buy with no money down. Period. Since I was a beginner, I didn’t realize that trying to find cash flow real estate in Southern California with no money down was like trying to capture a unicorn.
I’d missed a step. I had begun by focusing on individual properties. I’d run the numbers, one by one - a very time-consuming task. What I should have done first was run the numbers to analyze the local real estate market as a whole.
Undertaking specific research about the area would have CLEARLY revealed that Southern California just wasn’t the right market for my investment goals.
The following are criteria I should have looked for. They will help you determine if your local market is, in fact, the ideal place for you to invest.
- Check the average price of homes in the city. How do prices compare to other cities?
- Compare the average price of homes to the average rent. This is a critical ratio for investors interested in cash flow. If homes are selling at 15 or more times annual rent … it’s going to be difficult to see cash flow.
- Look into the affordability of homes. In an affordable market, the average home price is no more than four times the average household’s income.
- How is the economy? Job and population growth are essential to continued home appreciation.
Every local real estate market in the world is different (and constantly changing). Understanding which market is realistic for your goals will relieve you of frustration, and you’ll find profits are easier to come by.
When I came to central Texas, I found the perfect market for my goals. It was suddenly much easier to buy cash-flow property, and I wished I’d discovered this secret much sooner. Which is why I’m excited about Justin Ford’s Investor’s Guide to America’s Best Value Real Estate Markets. With specific profiles of over 100 U.S. markets, it is the first and only such tool I know of - a quick reference to nearly any real estate market you’re interested in.
Hard Lesson #2: Don’t Just Know the Numbers, Know the Numbers COLD!
This lesson may sound elementary … but more than any other technique, it quickly made me an expert in my chosen target area.
You need a complete and updated list of every property for sale and recently sold in your target area - and you need to create that list with an Excel spreadsheet.
I discovered this secret by accident. My real estate agent in Texas e-mailed every available duplex, triplex, and fourplex to me in a spreadsheet. The details included rents, size, neighborhood, and price. You can easily create this on your own.
I combined this newfound treasure with Justin’s "Matrix" technique for tracking properties and comparing price per square foot and other vital stats for spotting a good potential deal. When I do this, it helps me feel absolutely confident about every offer I make. Which brings me to Hard Lesson #3 …
Hard Lesson #3: Strike While the Iron’s Hot.
The moment you see a property that you think might fit your criteria is the moment to submit your offer. Don’t pause. Don’t over-think it. Simply make the offer.
Your standard offer should include an "out clause" if the deal turns out not to be right for you. But there are two good reasons you should never wait to make an offer:
1. It’s important to get in the habit of making offers based on strict value criteria … lots and lots of offers.
2. You don’t want miss out on deals just because you’re sitting around thinking about making offers.
This point becomes more and more "obvious" to me as time goes by. For instance, I was interested in a $225,000 duplex last year. The area was good and improving. Rents were on the rise, and the property would have cash flowed. Yet, for one reason or another, I didn’t make it happen. Two months ago, that same property went back on the market and sold within days for $285,000. That’s an easy $60,000 that could, nay should, have been mine.
Unfortunately, I have many stories like that one. I’ve definitely learned this lesson the hard way, and it’s cost me hundreds of thousands in profits.
Now, don’t get me wrong. Losing potential deals is a lot better than losing money. And because I’ve insisted on adhering to the under-value, cash-flow principles found inETR’s real estate success programs, I’ve made money in all my real estate investments. And as I continue to apply the three lessons learned above, I intend to do a lot more of these profitable deals.
[Ed. Note: Kam Weiler is contributing editor for ETR’s Main Street Millionaire program, a licensed real estate agent, and a deep-value real estate investor based in central Texas.]
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Public Speaking as a Self-Marketing Tool, Part 2
By Peter Fogel
Yesterday, I gave you two reasons to make public speaking a major part of your self-marketing plans. Here are two more …
1. It Gets You Out of Your Comfort Zone … and Into a Sizeable Profit Zone.
Public speaking gets you to interact with an entire universe of prospects. This is a great way to learn not only what individual prospective clients want and need, but also to learn what your entire target market wants and needs.
And nothing is more exciting than to give a good program and have eager clients coming up afterward to exchange business cards with you or ask for an appointment to discuss a project.
2. It’s the Quickest Way to Build Your Opt-In List for Future Contacts and Communication.
I spoke at a seminar that had about 80 attendees. Every one of them signed up for my e-zine. At the beginning of my presentation, I gave each person a sheet to fill out with their contact information. Then I had "a call to action" during the seminar to remind them to do it. It worked … handily.
The cost to get their contact information? Zero dollars. The ability to follow up with them whenever I want to? Priceless.
Chambers of Commerce and Rotary Clubs are good places to start. Just make sure you provide your audience with content that THEY are interested in hearing.
Keep in mind that you will be approached by lower-end clients (who can’t pay as much) as well as higher-end ones. Working with lower-end clients is a perfect way to build your business in the beginning. Higher-end clients will more than make up for them down the road.
[Ed. Note: Peter Fogel is a copywriter, speaker, author, and the creator of "Peter ‘The Humorator’ Fogel’s Guide to Effective Public Speaking." Get more information - and get Peter’s FREE 7 Days to Effective Public Speaking e-course - on his website.]
Onions and Garlic … "Powerful" in More Ways Than One
By Jon Herring
If you’re like me and enjoy the taste of garlic and onions and you eat them often, you’re doing a lot more than adding some flavor to your meals. You could be adding years to your life.
The allium plants - particularly onions, shallots, and garlic - have been used as food and medicine for thousands of years. And modern science has confirmed that these pungent vegetables are some of the most medicinally potent foods we can eat. Hundreds of population and laboratory studies have shown that they have strong anti-bacterial, anti-viral, and immune-boosting qualities.
Onions, shallots, and garlic have also been shown to reduce inflammation, lower cholesterol, and normalize blood pressure. And a large Italian study, recently published in the American Journal of Clinical Nutrition, shows a strong inverse correlation between onion and garlic consumption and cancers of the mouth, esophagus, breast, ovaries, kidneys, and prostate.
So whenever you have a chance to slice a shallot for your salad, put an onion on your sandwich, or press some garlic to go with your mixed vegetables, do it!
Notes From Michael Masterson’s Blog: Why I Don’t Like Southwest Airlines’ "Culture"
Colleen Barrett, the president of Southwest Airlines, knows something important about rewarding employees: that it pays to pay attention to small accomplishments as well as big ones. That was something her mentor, Herb Kelleher, taught her.
But how she implements that good idea is downright silly.
[Ed. Note: Read the rest of this article onMichael Masterson’s blog.]
- Michael Masterson
A Tale of Two Cities: Bubbleville vs. Bargaintown
It was the best of times to buy real estate. It was the worst of times.
Just as there are Bubble Markets in places like San Diego and Boston, there are also excellent Bargain Markets hidden in a handful of U.S. cities today
In fact, thousands of homeowners and investors are fleeing the Bubble Markets and heading to the Bargain Markets … and they’re helping create the Next Great Real Estate Bull Markets in the process.
Get in on the new bull markets now, while the time is right to make fortunes.
Justin Ford
Word to the Wise: Cynosure
"Cynosure" (SY-nuh-shoor) - from the Greek for "dog’s tail" - is the constellation Ursa Minor, which contains the North Star. We use the word to refer to anything to which attention is strongly turned.
Example (as used by John Simon in a review of the movie Stealing Beauty: "Lucy is very pretty and becomes the cynosure not only of the aforementioned characters, but also of several faceless and epicene young men who also loiter about."
Michael Masterson
Copyright ETR, LLC, 2006