The 4 Steps to Getting a Fat Check in Real Estate Investing
I went to my regular monthly real estate investor’s meeting this past week, and we had a national speaker that I have heard many times; Robyn Thompson. Even though I have heard her speak many times, I still enjoy hearing about her business. She does have some interesting stories. She is quick to tell you about her failures and her successes. Robyn just lays it all out there; the good, the bad and the ugly. I believe the reason real estate investors everywhere like her so much is that she is so authentic; she is just a regular person.
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Most of you probably also know that she is the person that trained Than Merrill and Paul Esajian of “Fortune Builders” and the “Flip This House” TV show. Robin touched on some points during her presentation that I think bear repeating, and at least will serve as a reminder for things we already know but maybe have forgotten or aren’t doing consistently.
One of those point is that there are really only 4 steps to getting a fat check in this business of real estate investing.
The 4 Steps in Real Estate Investing To a Fat Check
- Find a high profit deal
- Find the money
- Fix the house (if you are a rehabber)
- Sell the house.
At its essence, real estate investing is a very simple concept, but I am the first person to tell you that it’s not always easy. So let’s break down the steps a little.
Find a High Profit Deal
Marketing. Finding a high profit deal only comes from one thing; marketing. You have to get good at marketing to succeed in this business.
The type of marketing you do will be greatly influenced by your skills, your experience and your budget. In the beginning when folks are just getting started they usually turn to Bandit Signs especially if money is tight. There have been a whole lot of posts here about both the positive and negative aspects of Bandit Signs. But the fact remains that they do work. If you are short on cash, put out some cheap signs to get your first deal. Then you will have some marketing money.
Networking. Begin by simply hanging out at your monthly REIA meeting and network. A lot of folks don’t think about this as marketing, but it is; marketing yourself and your business. You have to get over your fear of walking up to strangers, introducing yourself and shaking hands. In a couple of years you will look up one day and realize that you talk to strangers everywhere. You want people to remember you when they have a deal to sell or you have a house you need to sell.
Direct Mail. Move into direct mail as soon as you can. It is hands down the best source of leads for most seasoned real estate investors.
Website. Get a website. Once again, there are a lot of articles here on BiggerPockets that will tell you how you can get a free or low cost website. It doesn’t have to be perfect; just get one. Tweak it and perfect it later.
Find the Money
You must have a source of money to do this business. You can get by in the beginning with little or no money if you are a wholesaler. But in any other niche, you will need a source of cash right from the beginning.
I don’t need to go over this step, because Brandon Turner covered all of this in his in-depth post about a week ago. You can find that post here. Investment Property Loans: The Ultimate Guide.
Fix the House
If you are a wholesaler you will be skipping this step; the actual “fixing”. Does this mean you don’t need to know about repairs and the costs associated with rehabbing a property? Not a chance!
You can't begin to make offers as a wholesaler if you don't know how to determine the cost of repairs needed. Don't stress out too much over this though, because there are ways you can learn this process. And just remember that unless you are a contractor or already work in a similar field, everyone has this same learning curve.
Sell the House
This step has different meanings depending on which real estate investing strategy you are working with.
If you are a wholesaler, one of your top priorities should be building a cash buyer’s list. When you get a property under contract, you will need to move it quickly. Never stop building your list.
If you are a rehabber, you will need a system for “getting the word out” about your property. You can do this even before the work is completely done, and there are a number of ways to do this.
- Put a “For Sale” sign in the yard when the house is almost done. Be sure you have one of those flyer boxes on the sign and load it up with flyers. Say something like “act now and pick your carpet colors”, or “call today to find out if you can qualify for this beautiful, newly renovate home”.
- Offer a “good neighbor” bonus for referrals. Put this on all of your flyers. Be sure to blanket the neighborhood with your flyers too.
- When someone calls, let them know the house will be finished and available soon. Wouldn’t it be nice to have the house sold before it’s even finished?
- If you are a rehabber, how about keeping a list of those folks that didn’t buy your most recent house and find out why not? What is it that they were looking for that wasn’t included in your property? Would they be interested in a different house if you could provide those things? Build your own “buyer’s list”.
- If their credit didn’t quite make the grade, can you help fix that and make them a buyer in 6 months or a year? I’m not suggesting that you babysit these folks, but rather that you refer them to a mortgage person that can help them with the process so they become a qualified buyer for you down the road.
One Last Tip
Before you sign a contract with a buyer for your newly rehabbed house and take it off the market for a couple of months while they wait for approval, ask your buyer to get their loan "LP DU" approved. Make sure your buyer has actually been approved "to buy".
That means that they have sat down with a mortgage person and had all of their information put through two computer programs; Loan Prospector and Desktop Underwriter. This process will give them the OK to buy.
Do you have any more tips to share? I would love to hear them.
Photo: Chris Bevan