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The Key to Your Long Term Success in the Real Estate Business

by Michael Zuber on November 7, 2012 · 11 comments

  
white picket fence

When people hear that I have been investing in real estate for 10+ years and that we have built a decent portfolio, the conversation always works around to the following questions:

“What is your secret?” Or “What is your System?”

I love helping people and wish it was as easy as a simple system that everyone could follow, but alas, it takes work, time and maybe a little luck to be successful in the long term. That said – I do believe there is one key ‘secret’ to increase your chances of long term success.

I believe in this ‘secret’ so much that I try and use it in every aspect of my business. Let me explain. First, the secret:

Always do more than is expected!

Now, granted, this is not some earth shattering revelation, but let me tell you how important I believe this is to our business. I always strive to do more than is expected. Below are some examples of how we do more with the different players in our investment model.

Doing More than is Expected With Your Real Estate Business

Real Estate Agents or Sellers: Whenever I call a new agent, I do so with a specific property in mind and I ask a couple of key questions about the deal. During the call I let them know what I am looking for and a little bit about our track record.

Regardless of how the call goes I will send a hand written thank you card with a business card pointing them to our site. In addition I take time each week to call past agents I have worked with to check in and let them know I am still looking to buy more distressed assets. I believe it is my responsibility to remind them I am still in the market, so I am top of mind should a property fall out of escrow or they get a new listing they need to sell fast.

Tenants: I believe in providing the best property at the best rent. Now granted it takes time to figure this out in each market, but as I buy distressed units, I make sure to repair and replace what is required. I want the unit, once occupied, to require no new repairs for several years. I also make sure the exterior of the rentals have green grass, are well maintained and, frequently, are surrounded by a white picket fence. Tenants have lots of options in my market and I want our units to stand out from the crowd of pretenders. I see some investors slap a “For Rent” sign on properties and tell prospects they will fix it at move in. I don’t know for sure, but I doubt they fix anything.

Investors: My model relies on recycling capital through private investors, and that is why we have created our unique model that is very investor friendly. We want our investors to have enough security where they actually wish we don’t pay them. First, we only look to secure investor capital after we have repaired and leased units. We do not believe in asking investors to lend on distressed assets. We want them to have security in a leased and producing property.

Next, we offer double digit interest rates on the investor capital as we don’t buy “skinny deals”. Our minimum expected return is 20%+ and thus we are happy to pay double digits on repaired and leased properties. We have leveraged this model successfully for several years now. It’s no surprise that investors who have lent money at double digit rates with tremendous security will talk about it with their friends. Once our investors understood our model they started talking to their friends about the double digit returns they were earning on repaired and leased properties. At that point we had more investors calling to learn about our model and the momentum just keeps building.

So there you have it; the key to this business is ALWAYS doing more than is expected!!!

Good Investing

Photo: Rachel Kramer

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{ 11 comments… read them below or add one }

Joshua Dorkin November 7, 2012 at 1:50 pm

Michael – This is a great post and I’m very happy with the timing, as we just had another great related post from Chris Clothier, Does Full Disclosure Kill Real Estate Deals, Build Character, or Both?. If investors follow the advice of you and Chris, they will certainly rise above the rest of the crop.

Reply

Jason November 7, 2012 at 2:15 pm

Josh,
I have to agree. I always look forward to posts from Mike and Chris. Two very different business models, but at the core they have the same philosophies.

Jason

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Mike Z November 10, 2012 at 11:01 am

Jason

Thanks for the nice words. I didn’t ask Chris but I believe we have at least two things in common. First I believe we love our business and want to be doing it for a long time so we don;t make short sited decisions and second we both really like helping people.

I get just as big a kick out of seeing someone do their first deal as I do in doing latest deal.

Good Investing

Reply

Mike Z November 10, 2012 at 10:57 am

Josh

Thanks for the note. I follow Chris and think he is a very smart and wise investor. To be linked with him in any way is an honor.

Good Investing

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Glenn Schworm November 8, 2012 at 9:44 am

Great article Mike, we have used those practices in our company for the past few years and it sets us apart from any competition. I do have a question for you on the holding. How do you make the numbers work offering double digit returns to your investors. We are primarily a flip company, but need to start holding more for retirement. In your model, it looks as though the numbers so do allow for much positive cash flow, true? Is that the model, get them done and rented and let them pay themselves off? I assume your investors have a mortgage on the property? Just curious and would like to know about your structure. Again, great article and points.

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Mike Z November 10, 2012 at 11:04 am

Glenn
First I think I wrote an article 6 months ago our model in detail so it will have more meat for you. But quickly, yes every property we buy has cash flow after mortgage payments, our investors hold a recorded deed of trust and have a note with the terms.

Good Investing

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George Bawuah November 8, 2012 at 11:14 am

“My model relies on recycling capital through private investors, and that is why we have created our unique model that is very investor friendly.”

Very wise idea, Michael. I’m out here in Orange County, and the percentage of properties purchased by investors is simply staggering. This is an element I’m working into my own platform.

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Mike Z November 10, 2012 at 11:06 am

George,

Frankly the recycling of our Capital is the only way we could have done 30+ buy and hold deals in the last 30 months. When it works it is like magic

Good Investing

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Dale Osborn November 9, 2012 at 11:00 pm

Another way of putting it is to under promise, but over deliver. Doing more will always assure you of great success in your business dealings.

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Mike Z November 10, 2012 at 11:06 am

Dale

Very well said

Good Investing

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Glenn Schworm November 10, 2012 at 9:13 pm

Hi Mike, I would be very curious to read the article that has some “meat” about your process. I am fairly new to this blog so I am not totally sure how to navigate it to find that article. Any direction would be greatly appreciated. I see we are on opposing sides of the country, if I can ever return the favor over here, please don’t hesitate to ask. Your 30 held houses in 30 days comment caught my attention. Look forward to your reply, thanks.

Reply

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