The Real Estate Investor Mastermind

As I read through the various posts on BP I am struck by the number of posts from all investors, but mostly new ones, wondering what they should be doing to find properties.  It's a great question... whose answer in todays REO heavy environment often is... hit the multiple listing service. 

While I agree that, that is a sure fire strategy, for many investors they can't position themselves due to lack of experience, or cash to buy, or they can't qualify for a loan, etc.

Then what?

Let me share a recent experience I had with a client that continued to drive home the importance of the age old technique lovingly referred to as "driving for dollars."

While this story didn't start out as a "driving for dollars" approach, it is fast ending up that way.

This particular client is similar to the one I described above.  He is just starting out and lacks just about everything... but he is not letting that stop him.

So, after pointing him in the right direction he starting looking on the MLS for properties that met the criteria we had established.  Criteria like high days on market, properties within a certain price range and in a specific location.  And with that guidance and those criteria he staring looking.

And he found a promising deal!  An upstairs/downstairs duplex, gross rent potential $2100, high days on market and price within striking range.  In other words... I was excited about this deal!

And this is where the "driving for dollars' part comes in.

As I am turning down street I couldn't help but feel like Dorthy in the Wizard of OZ must have felt as she laid eyes on the great city of OZ for the first time.  Excited and filled with wonderment.  Well, I was excited, but wonderment is not what I was feeling, a fattening bank account is what had me juiced up.

This street had duplexs on both sides.   Many of the properties needed some work, there were a few vacancies... in other words a street that needed an experienced investor to move in and make a killing.

After I inspected the property with my client and established his offer price we laid out a plan for him to target that entire area with letters and to not stop sending them until he had either put the property under contract or received a solid no from every owner.  Within the next 4 weeks this client will know this street like he knows his mother... and any deal that even pokes its head up for air will be his for that taking.

Why?

Because he will have become an expert on what is going on that block, will understand the pricing, renovation costs, income potential, etc.

So... if you are standing around wondering how to get started finding deals I think I just laid out a fairly simple plan for you to follow.  Get in your car, drive to a neighborhood, once there get out of your car and observe what is happening.  Get a realtor to get you into one or more of the properties so you can learn to estimate the repairs... and then start sending letters or postcards... and don't stop.

Now... it's up to you to go out execute this plan... and if it doesn't work... be sure to have a few words with the person staring back at you the next time you look in the mirror.

Drop me a line and share your actions and results.

Have you noticed the number of articles being written about when housing prices will start to recover and "real' appreciation will start to kick in?  It seems everywhere I turn someone is trying to "TALK" the housing market up.  Have you reading the same things? 

This link http://tinyurl.com/y2fdzy5 will take you to a Baltimore Sun housing blog that displays a map of the U.S. and predictions of when housing prices should return to their pre-decline days. 

After taking a quick look at these predictions... I am not sure I agree.  While I do believe we will be seeing measured, very measured appreciation starting in the next few years, in order for property prices to climb to their pervious highs is wishful thinking!

Why... to get to those highs would mean that the economy would have to produce over 8 million new jobs (just to reclaim all those who lost their jobs) and then it would have to grow so that incomes increase to the point where higher priced homes could be afforded.

Remember, one of the contirbuting factors to the downturn was that home prices had outstripped the ability of buyers to afford them.

Bottom line for investors... if you are counting on appreciation to make any part of your deal profitable... DON'T!  You will only learn some very hard lessons and it will cost you money! 

In the previous installment of this article... you can read it here... http://tinyurl.com/y8786dx I focused on one of the key elements Michael Gerber in his book The E-Myth Revisited believed was essential to the success of any entrepreneur and that was having a clear, articulated vision for their business.  I believe I made mention that most real estate investors only got into real estate for the money... and if that is the VISION for your business expect real and significant challenges as you try to grow your baby.

Here is another insight... and I am pretty sure that most of you, no all of you, have fallen into this trap. 

You left your full-time job thinking that you were going to make a heck of a lot of money and that once the cash started rolling in, you would be able to sit back and everything would take care of itself.  The sad truth however, is that it probably didn't happen that way.  For most real estate investors, that would include you and me... if we removed ourselves from our businesses... the business would most likely wither and die!

(Note:  I would love to be proven wrong regarding the above statement... if you believe your situation has been different please share your story.)

Now... where was I? 

So, in essence what we did was we traded one job, a job that at least paid on a consistent basis and one that we could quite and move to another one, for a job that at best pays consistently and that we are "welded" to and can't get rid of... even if we wanted to.

Sound familiar?

Why is that?  I believe what Gerber stated is correct... "almost everyone moves from one job (as a technician) to creating our own business where we start as (technicians) and we never figure out how grow out of doing everything ourselves."  Or in other words we end up being the chief cook and bottle washer for... FOREVER! 

OK... so what do we do about this conundrum that we find ourselves in?  And notice that I am including myself here.  Even as seasoned a business builder as I am, I constantly struggle to get out of the technician mode and into the manager/visionary role.  It is tough!

About this conundrum... first I am going to take a swipe at the gurus.  Yes... I know they are an easy target.  My purpose in bringing up gurus is that they all focus on you being a technician first.  Almost every course I have ever read focuses on just a few techniques, sometimes only one, and then of course the expectation is that you should go out and execute.  Again, being forced into the position of a technician.

What if there were a different way to view what the gurus provide to us perpetual technicians?  What if instead of you, or I for that matter, getting too bogged down in the weeds or details of whatever approach we are following and instead take the gurus stuff and start to teach it to our team members... or virtual assistants/employees if you have them?  How quickly would your business accelerate if you could find a way to get your team or virtual assistants/employees to take this guru stuff and run with it?

I think you see where I am going with this discussion.

If you want your business to grow, you must grow out of being a technician and get beyond the point of doing everything yourself... and instead learn how to direct others, using your systems (this could be guru stuff) to run and grow your business.

If you don't you will find that your levels of frustration only increase until your new found job is no longer fun... but actually way too much work!

I'd appreaciate your thoughts on this series and what take-aways you are willing to implement in your real estate business.

Drop us a line and share your actions and results.

I would like to start out the second part of this article by sharing a short story that drives home the importance of having a vision for you business. 

As discussed in Part 1 Michael Gerber identifies in his book The E-Myth Revisited, that vision as one of the critical legs that all entrepreneurs (read real estate investors) must possess to grow and build their business.  Yet, most real estate investors only have a glimpse of that vision on the day they start their business… and then it gets relegated to the back corner never again to see the light of day.

Now… on with the story…

There once a great timber company that possessed the best lumberjacks (technicians) and whose (managers) the had developed the best and most advanced processes and methodologies for cutting down trees.  Their reputation was the envy of every timber company in the region… as this company could enter a forest and harvest more board feet of timber in one day then most companies could harvest in a week.

And that is what they did… Day-in, day-out! 

In the middle on one highly productive week where the technicians and the managers were cutting timber at an awesome pace, the owner decided that he would climb to the top of the tallest tree to observe his splendid operation.  Once he had climbed to the top and he started to survey the operation he went into a panic!  To his horror his efficient and profitable operation was cutting down the WRONG forest!

I will let you imagine the consequences of having realized that not only had his highly efficient operation cleared out the wrong forest, but his company had just spent a small fortune to get this forest cleared.

Lets take a look at what happened here.

As presented, this company had the best processes and methodologies… which means it had great managers.  Those individuals who Gerber claims are obsessed with making sure everything works according to the plan.

Also, it is evident that this company possessed some of the best technicians in the area as they were able, working with the managers, to use the processes and methodologies at a highly productive rate.

So, what was missing?  How did the highly capable company end up in the wrong forest?

Simple… the owner was not clear on the VISION for his company and allowed the managers and technicians to cut down any forest that got in their way… and they did a darn good job of it!

OK… you say to yourself… how does this apply to me as a real estate investor?  What is the point?

The point is simple… as mentioned in Part 1, every real estate investor must have the capability to: (1) create and articulate a vision, (2) develop repeatable process and methodologies, and (3) adequately perform the tasks at hand in order for their company to grow and prosper. 

The challenge however is that most real estate investors don’t have a vision for their company.  They just want to invest in real estate and make money.  It doesn’t matter how.

And so… they find themselves jumping from one approach (forest) to another, recreating the wheel every time they perform a task, or they do such a poor job executing the task it might have been best not to do it.

My question to you is this — “where do you fit in this scenario?”  Are you the visionary?  The manager?  Or the technician?

I will close out this series with a discussion of the roles of the manager and technician and how real estate gurus create huge problems for the uniformed entrepreneur.

Have you ever wondered how you inform the world of your experience with a dead beat tenant?

Well... one person in Maine has demonstarted one way of doing just that.

Watch this short video... which I put together to create a learning moment for everyone.

To Your Success...

Pete