Have you ever been walking down the street – focused on getting somewhere in record time – only to stop dead in your tracks when you spot a penny and are tempted to stoop down to pick it up?

That’s not the only way we allow low-value objects, goals, or priorities to distract us from more important things. We interrupt conversations with family members to comment on silly commercials on television. We check our Blackberry in the middle of a workout. And we allow e-mail to interrupt higher priority activities on the job.

I call it shiny penny syndrome.

Early in our real estate investing days, shiny penny syndrome nearly cost me and my husband our investments. We’d been working on buying good quality cash flowing properties in good neighborhoods and were doing just fine, but we suddenly stopped and started moving toward different options. We saw all those shiny pennies and thought we could turn them to gold nuggets.

In “The Problem With Fire,” I described how we started chasing no-money-down deals, flips, and property assignments. It turned out badly. Meanwhile, we lost our focus on what had been working for us.

It’s a good thing to consider your options, but don’t let them distract you from what’s been working for you and helping you achieve your goals.

If you have an investing strategy that is working for you – stick to it. Master it.

Though there are plenty of ways to make money in real estate, the optimal route is to find a strategy you like and get really good at it. Stay focused and become a specialist in your investing niche and you, too, will find your wealth grow very quickly.

[Ed. Note: For more insider strategies for getting started as a real estate investor, sign up for real estate expert Julie Broad's free monthly newsletter. Get your free report for making money with real estate here.

Losing focus in your personal, social, or business goals? Achieve all you want in life with ETR's Total Success Achievement program. Learn more here.]

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By Julie Broad

When you think about real estate investing, my guess is that you don’t immediately think “direct marketing” as well. But direct-marketing skills are essential to almost every aspect of real estate investing… from finding motivated sellers… to buying a property… to finding your ideal buyer… and more. In fact, mastering direct marketing can help make practically every step of the real estate investing process more profitable and a lot less risky.

I discovered this on the plane back from a recent trip to Austin, Texas, while reading Dan Kennedy’s The Ultimate Marketing Plan. I was flipping through it looking for the useful big idea of the book. I’d expected to find an idea I could apply to my Internet business, but instead found applications to my real estate investing endeavors.

When my husband and I were new to real estate investing, we had loosely defined goals. (I wrote about that in my article “The Problem with Fire.”) Our lack of clarity led us to buy properties because they generated a lot of positive cash flow or (more…)

Many people are trying to call this the bottom of the housing market. While the loudest voices may be those with self-serving interests (namely, realtor groups), there is some real optimism creeping in.

The most recent Housing Opportunity Index – released by the National Association of Homebuilders and Wells Fargo Bank – shows that almost 73 percent of homes sold in the first quarter of this year were “affordable.” In order to qualify as “affordable,” the total costs of a home (mortgage, taxes, etc.) must not exceed 28 percent of the median family income (currently $64,000).

A few factors contributed to this jump in affordability, and it is a bit of a good news/bad news situation.

Plummeting home prices are a major factor in affordability. Unfortunately, the recent drop in prices is primarily due to foreclosures, which means that someone had to lose their home for it to become affordable for someone else. And until foreclosures slow down, prices won’t stabilize.

Another factor is record low interest rates, which hovered near 5 percent for a 30-year fixed loan at the end of the first quarter. This is good for individuals who qualify for those loans, but many who need a lower rate to be able to stay in their homes don’t qualify.

I think the housing market will find its true bottom by the end of the year, when the Obama administration does something to tackle the last roadblock: the vast number of homeowners who are currently underwater.

While there are still obstacles in the housing market, it seems like now is a great time to buy. Sure, prices may come down a little more, but the drastic drops appear to be behind us (and trying to time any market perfectly never works). If you find a home you like, at a price you like, don’t second-guess yourself. Interest rates won’t stay this low forever, and neither will prices.

And if you are looking for the country’s most affordable large city, check out Indianapolis. It has topped the list for the last 15 quarters.

[Ed. Note: Detroit native Christian Hill is an active follower of the real estate markets, the auto industry, and practically every other investment vehicle under the sun. You can catch his insightful commentary and advice for free in Investor's Daily Edge. Click here to find out more.]

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I almost missed out on making $100,000! My husband took me to see a rental property he wanted to buy – and though we could buy it without spending a penny of our own money, I didn’t really want it.

It looked more like a tool shed than a house. I had visions of constant repairs and never-ending tenant troubles. But my husband told me to do a reality check – because there were a lot of reasons to like the deal.

Four years later, that property – a large chunk of land in an emerging area – has more than doubled in value, and the rent has covered all the costs. We’ve yet to put a single dime into it.

It’s easy to get thrown off by the appearance of a property, your emotions, or what the media is saying. Here are four ways to avoid making that mistake:

Reality Check One: Who is Your Target Market?

I couldn’t imagine myself living in that little shack – but I was not the target market for that rental. The tenant who lives there loves the large yard. He doesn’t mind the exterior appearance because it’s cozy inside and the rent is cheap for the privacy and space he enjoys.

If the property is a good fit for your target market, it doesn’t matter if you wouldn’t live there.

Reality Check Two: Are You Emotionally Involved?

Emotions weren’t involved in this particular purchase, but it’s something to be wary of. If, at any point in the negotiations, you feel that you can’t walk away from the deal, you need to take a step back and review everything! When your emotions are involved, you can’t make rational decisions.

Reality Check Three: Are the Numbers Really What They Say They Are?

In this deal, the numbers sold me. The rent covered all the expenses and left a small cushion for surprises. But make sure the numbers are what the sellers say they are. Get copies of the leases to verify rents. Check market rental rates for the area to make sure the current tenants aren’t overpaying. And make sure you obtain copies of the bills you’ll be responsible for (taxes, utilities, insurance, etc.).

Reality Check Four: Are You Judging the Book by Its Cover?

Many opportunities are missed because a property makes a negative first impression. The best deals are often those that look rough but can be easily rehabbed. Granted, our little shack needs to be completely rebuilt to maximize its potential – but had my husband allowed me to judge it strictly on its looks, I would have missed a deal that has (so far) grown our net worth by $100,000.

[Ed. Note: Real estate expert Julie Broad can show you how to create your own million-dollar real estate portfolio with her new program. Find out how to get hands-on coaching and step-by-step instruction right here.

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My husband and I recently turned down a tenant’s request for blinds in the living room of one unit of a triplex. (They were unhappy with the “dirty curtains” on the window.) At the same time, we agreed to put a new toilet in another unit.

Our tenants can easily figure out that we’re bringing in nearly $4,000 in rent per month ($1,000 positive cash flow for us) from this property, so they may think we’re being stingy when we refuse their requests for improvements. It’s a business though, so we grant tenant requests only if spending the money will generate more revenue or reduce our costs.

We consider a few things:

• What are the costs of not doing the renovation or upgrade? (Is the tenant likely to leave – and what will that cost us if they do?)

• Is there another way to address the problem?

• Can the expenditure be delayed?

If the expenditure seems to make sense, we do a final calculation:

Total Cost of the Upgrade or Renovation / New Money Earned (or Money Saved) each Month = Number of Months It Will Take to Recover Our Costs

As a general rule of thumb, if you can recover the cost of items under $1,000 in 12 to 18 months, the money will be well spent.

In the case of the blinds, the tenant wouldn’t pay more rent to help cover the cost. And since only custom blinds would fit the large windows in that unit, it would take years and years to repay the expense… even if they did pay us more rent. Instead, we agreed to pay for dry cleaning the curtains, which cost less than $100. We’ll get no direct return on this investment – but since the tenants wanted the “dirty curtains” replaced, this will keep them happy.

In the case of the toilet, we decided that getting rid of the grungy old one would not get us higher rent but it would make it easier to attract and keep good tenants in that unit. And by replacing it for the current tenant (instead of waiting until they moved out), the tenant’s father (an experienced plumber) would install it for free. Plus, we’d be replacing a water guzzler with a low flush model that would qualify for a $75 water conservation rebate from the City of Toronto. The formula of benefits looked like this:

$250 minus $75 rebate = $175 Cost of the Toilet

$175 / $10/Month in Water Savings = 17 Months to Pay It Off (not including the $80 saved on installation)

This made replacing the toilet a very appealing use of our cash.

Just remember – real estate investing is a business, and you need to get a return on any money you spend… even if that return is simply in cost savings.

[Ed. Note: Real estate expert Julie Broad can show you how to create your own million-dollar real estate portfolio with her new program. Get all the details here.]

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Real estate investing has given my husband and me a great deal of freedom to do what we want with our lives. Whether we decide to putter around the yard, go mountain biking, or focus on our Internet business, we are making money from our properties. Many would say we’re earning passive income, but we no longer do.

The problem with pursuing “passive income” is that you’re telling yourself you don’t have to do any work to make that money. Keith Cunningham, author of Keys to the Vault says, “The label becomes the experience. Using the word passive for anything means that you are going to do the least to get the most.” Trying to build wealth through passive income is like trying to get six-pack abs without working out. It isn’t going to happen.

When you buy a property, hire a property manager, and then do nothing more than deposit the rent money into your bank account, you’re setting yourself up for trouble. We know! As I mentioned in my articles “The Problem with Fire“ and “An Easy to Prevent Scam, “we had a property manager steal rent money from us, we were featured in the newspaper as owners of “local crackhouse,” and we were fined in court for fire code violations. All of these things happened to us early in our real estate investing career because we had been in pursuit of passive income. We worked hard to find the properties, bought them, and then passively let things fall apart!

Now, my husband Dave reviews all the bills and talks to our property managers on a regular basis, and we both carefully track and monitor the money that gets spent on each building.

Listen, I’m not saying you have to treat real estate investing as a full-time job. It really doesn’t require a lot of time and attention. It takes us less than five hours a month to actively measure, monitor, and adjust to maximize our profits and minimize our struggles. And since we stopped considering real estate to be a passive income stream, we’ve been sleeping better… and making more money!

[Ed. Note: Real estate expert Julie Broad can show you how to create your own million-dollar real estate portfolio with her new program. Get all the details here.]

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