Fundamental Real Estate Investing Concepts

At the last meetup in Houston, one of the attendees somehow got me to commit to writing a blog. Odd things happen after a few beverages, but I am up for the challenge. 

As for blog topics, I am going to start posting about how new investors can get started and what they need to do. I often get these questions and will do my best to put them down on paper. So here goes….

Before talking about any technical details about real estate investing (ARV, rehab costs, title issues, etc), there are a few fundamental concepts every investor needs to understand about the business. They are the cornerstone of how this business runs and may be beneficial for everyone who wants to succeed.

Key Real Estate Building Blocks

• Real estate is a people business. Has anyone known an investor to have ever gone to a house and negotiated the purchase of the property with the house itself? If so, how did they get the house to sign the paperwork or the title company to accept the signature of the house? Deals are done with people, and it may be in the investor’s best interest to treat sellers as their clients. More deals can be done if people take the time to understand their clients and have the mentality of providing them a service. As an experiment on your next house inspection, spend the first 5, 10, 30, 60 minutes talking to the client about other things besides the house. Let me know if it worked out ok for you.
• Investors get paid for solving problems. If an investor can understand the reason why a person needs to sell their home and can come up with a suitable (and sometimes creative) solution, transactions can be made. For example, let’s suppose we have a retired client who is recently widowed and wants to move across the country to live with one of her children. Their house is free and clear, needs some repairs, and more importantly, she does not want strangers parading through their house if she were to list it. She lives by herself and it would be a few months before her kids can come help her with the move (both from a financial and timing standpoint). She lives solely on here social security benefits and pension plan. Could you engineer a fair deal consisting of:
  • Hiring a moving company to move the client’s belongs
  • Paying for a one-way ticket to her child’s location
  • Provide her with monthly payments for the remainder of the balance

  Your client does not have to deal with the logistics of moving and can move on quickly. In return, you get an asset added to the portfolio for resolving her problem.

• Real estate investing is a team sport. One cannot begin to count the different components of real estate investing (rehab, accounting, legal paperwork, etc). Even for the sharpest minds in the world, it can be difficult to be an expert in every area needed for real estate. One of the most important assets anyone has is TIME, and investors can seek out ways to leverage other experts as part of their team to achieve their goals. Another key success factor for investors is networking. I view every other investor I meet as a potential partner….not another competitor. I would gladly bring another investor into a deal if it meant getting a deal. A shared percentage of a deal is considerably better than 100% of no deal.
• It is a marathon…not a sprint. Every client being marketed to will not call back, and every client spoken to will not sell their house. Successful investors are in it for the long haul and persistent. Rome was not built in one day and an investor’s path to financial freedom is journey.