Mistakes I see newbies making
I've been flagged for "mocking", when someone asked about a course that they were CONSIDERING buying, I told them I thought it was a waste of money. Another poster on that thread criticized me as they had purchased the course and I shouldn't look down on those who know less than I know.
Let me state right here, that I don't know everything, although I know that I sound like it at times. I hang out here to share the only thing that I can, my experience. Thanks to Carl and the others who jumped in and defended me.
But this isn't about me. It's about newbies and the continuous problems that they seem to have. I think I can boil a lot of it down to a few points.
1. Lack of DUE DILIGENCE. I've been cheap my whole life, I never buy a book if the library has it, I study accounting, law, construction, remodeling and other subjects of interest. Sometimes it so I can DO IT MYSELF, quite often it's to know when to CALL THE PAID PROS. A lot of the posts that I see regarding buying courses and seminars are from people WHO HAVE ALREADY PAID THE MONEY. That's not the time to ask if it's worthwhile, you've already spent, make the most of it.
2. Trying to run before you've learned to walk or crawl. Back in the day I used to run into lots of folks at our local REI club who were all set to jump right into any combination of the following, Subject 2 / WRAP / Lease Option / CFD / Seller Carry Back / you name it. But when questioned about the basics; neighborhood comps, ARV, FMV, key points of Deed Of Trust, difference between a Special and General Warranty Deed, etc, etc, they didn't have a clue. I think if you want to structure deals with a lot of "bells and whistles" you might first want to understand the basics of how a straight up, conventional, FHA or other mortgaged purchase operates.
3. Thinking you can do it all with OPM. I know the gurus told you never use your own money, and if you can do that, more power to you. I learned long ago that the two sides to any purchase (RE or otherwise) are price and terms! You're not taking advantage of a seller on both sides of that equation. If your getting great terms, you're paying too much. Generally the people who have the least trouble borrowing money at great rates are those that don't need it.
4. Failing to think and act critically. A seller with a $200K property, that you ask to carry the entire $200K back, is not generally going to do it if he wants the cash, not the income stream. Yes you can tell him that he can sell that note on the open market, yes he may naively take your assurance and not verify that. When he does his DUE DILIGENCE he'll find out that his $200K note is maybe worth $140-$150K, at which point he is quickly going to realize that by just cutting his price to that range he opens himself up to a much larger market.
People who have accumulated sufficient assets to own a $200K property, free and clear, have probably lived long enough that they check out things they are told. Not to say that there aren't EMOTIONAL sellers, WHACK JOB sellers, and yes just even MOTIVATED sellers on whom it might work. But it's a bit of a stretch.
5. Not every banker is an idiot. If a bank has an REO, listed for $125K, they probably didn't get that price from a Quija board. More likely from a Licensed Real Estate Agent, presumably one with some knowledge of the market in that neighborhood. The banker is not a sole proprietor, he has a boss, who has a boss etc. The banker may think your offer of $75K is really sweet, but if he keeps taking lots of loser deals to his boss, his boss will decide that he's a loser, and lose him. Overly emotional buyers are more rare than overly emotional owners. It's not a HOME to them, it's a LIABILITY, yes they want to sell it, but they want to mitigate their losses too.
6. Suffering from "gotta-do-a-deal-itis". I see posters who will start a thread "help me analyze this deal". Four or 5 experienced investors will point out something left out of the formula; severe underestimating the cost of a new heat or A/C system, severe underestimating of occupancy rates, thinking that work can be done as quickly as you'd like it done, etc. In reply to each of these the poster will come back with "but what if ....?" In my experience we all underestimate costs and overestimate repaired FMV.
7. Not having a "plan B". Once you've identified the PPTY (PPTY is the key, without it there can be no deal), and presented your deal to the seller, many buyers are not prepared for any kind of response from the seller. Sellers want what you want, the BEST DEAL. Presenting a deal that you can't explain to the average moron in less than 30 seconds is probably not going to get the courtesy of a counter offer. Make it short, simple and sweet. Ask him if he understands what's in it for him and then SHUT UP. If he has a couter offer, HAVE A CLUE WHAT TO COME BACK WITH. That's not the time to retreat to your office and get out the TI BAAII (BTW, a basic 4 function calculator is sufficient). You need to know the ranges of price, terms and time that will work for you. Presumably your offer is at one extreme of all 3, his counter is at another extreme. How do you get to the middle.
8. MINIMIZE YOUR COSTS. If you're mailing 200 postcards a month, and I"m mailing 25, to get the same number of responses, my costs are lower. If you're driving around looking at 40 properties to find one, and I"m driving to look at 4, my costs are lower. If you're borrowing from a hard money lender, credit cards, high interest HELOC because you're credit isn't top notch and I'm getting great rates or paying cash, my costs are lower. If you have to pay higher prices because you need terms and I don't, my costs are lower. If you have to lease now and hope they buy next year and I can sell now, my costs are lower. If I'm buying "whoops" paint at HD for $5/gallon and you're paying $20, my costs are lower. If I'm buying my fixtures at yard sales and you're buying at HD, my costs are lower.
You see the point here, all other things equal I'll be more successful because my costs are lower.
Anyway, my advice, like the rest of it here is worth exactly what you pay for it, feel free to take it or leave it. I don't know a smooth way to tell the truth. However, if you send me $300 I'll be glad to put together a book that will tell you exactly how to get rich with no effort.
all cash