Scared Money Dont Make Money
Investor · San Diego, CA · Member since 2008 · 62 posts · 32 votes
I just love this saying...
and,
"analysis paralysis" = someone (usually a numbers guy) who over analyzes every deal to a point where he can never jump in the game.
Dave Ramsey always uses "leave the cave, go out and kill something and drag it back."
All this is good motivation but make sure you jump in well educated!
There is never a reason to be afraid to invest because........
There are lots of people out there that are willing to help you.
I take people by the hand all the time and lead them thru a couple deals untill their knees quit wobbling and they don't fall anymore.
Gee that is how I learned to walk.
Ride a bike.
Drive a car.
Rappel off cliffs.
Windsurf.
Skydive.
Talk before huge groups. Anybody need a speaker at a seminar?
Hey In my life I could give a seminar before a nudist colony for a check.
Hell I might even do that one free just to get past that fear.... :roll:
Point is everything we do that we have never done before triggers flight or fight response. Recognize this and do it anyway.
Take Nike's Advice..........JUST DO IT!
Just be afraid of the guys who want to charge you up front to teach you before you have made anything.
My thoughts on FEAR
Brice
Sometimes even someone who has been investing a while can start to have reservations when market changes require changes in their tried and true method. My partner and I are in the process of addressing ways to get around the fear of investing in a buyer's market. The following is a rough draft of the introduction and I hope it will help. There are as many ways to make money in real estate as there are patterns in snowflakes so if one doesn't match your personality find one that does. Don't be discouraged by anyone that says their way is the only way because it just isn't true.
Introduction
Creative Investor Exit Strategies for a Buyer's Market
By Lake Sirmon and Sheila O'Shea
Buy land, they're not making it anymore. --Mark Twain
"REAL ESTATE CRISIS!" the headlines everywhere scream. Nearly every news story tells us that that this is the scariest time ever to deal in real estate. Investors who look at the long term, however, see an unprecedented opportunity--it simply takes a little rethinking of your strategy.
Houses for sale are abundant, and with rising foreclosure rates, will continue to be so. But the question becomes--once you buy a house as an investment property, how do you turn a profit in a market that continues to soften? Here are some ways to get past your fears and into the cash.
If your strategy has been to buy and rehab at 70% ARV and flip for market value, consider this--right now many REOs and Fannie Mae properties are available for 20-30 cents on the dollar. If you need to turn your property quickly, you probably shouldn't to go in for over 50%ARV.
If you don’t already have one find a mortgage broker who is familiar with all the grants and down payment assistance plans in your area, can do refinances with no seasoning, and has a very aggressive credit improvement plan. Then start running ads: Newly rehabbed homes available soon. $5000 down, owner financing available, instant equity. Put a prescreening form on your web site or a recorded message and start building a buyer’s list.†When you make your offers include a request to put a For Sale By Owner sign in the yard right away and state on the sign: fully rehabbed home available soon, taking applications now.†Since it is easier to refinance a home than to qualify for a mortgage, you can get buyers working with your mortgage broker so they can refinance and cash you out.
Example: Lake found a brand new home in a great area that was foreclosed on the builder; it was appraised at $268,000 and the asking price had dropped to $34,000.†While it had been sitting vandals stripped out the wiring and plumbing so it needed about $20,000 for rehab costs.†Once restored, the property can be sold to a prescreened buyer for $190,000. The buyer gets a fully rehabbed $268,000 property for $190,000 (which just about anybody could easily refinance), the bank gets a property off of its REO listings and the investor gets a tidy profit. Everybody wins.
Another option would be to lease option the property for two years for $250,000 with a “down payment assistance planâ€.†In this case you get $5,000 upfront to purchase the option to buy the property in two years for $250,000 .†This $5,000 is not refundable because they are buying the option whether they use it or not.†Now you set the monthly lease amount and tell them for every dollar over that amount up to $100 a month that they pay, you will match it towards the down payment.†That makes a great incentive, you increase your monthly cash flow and at the end of two years you just knock a maximum of $4,800 off the sales price.†You will have the $5,000 cash, positive cash flow during the lease period and clear a huge profit when you sell.â€
If you are looking to add to your portfolio but fear holding too many empty properties your concerns can be addressed.†Many cities are tearing down public housing in favor of giving families Section 8 assistance. Most families receiving this type of assistance stay in the rental for an average of nine years, plus the government sends you a check on the first of every month for full market value rent.†Check your local housing and development authority for opportunities in your area.†Many cities are offering incentives to investors interested in certain neighborhoods so check with your city planner, neighborhood associations, and government agencies in your area to find out what may be available to you.†As with any purchase these days make sure you buy the property at a low enough price that a temporary rent reduction will not eliminate your cash flow.
Offer the property for rent for $500 a month more than you actually need and advertise that discounted rent available to qualified renters.†In this case you offer to reduce the rent $500 a month if they agree to take care of any problems with repair costs of $500 or less. Give them the numbers of the repairmen you know and trust to work with. This way, the tenants become much more invested in maintaining the property and believe they got a great deal on the place making them much more likely to stay long term.†If you hire professional property management make sure you pay based on percentage of rents collected so you don’t incur excess expenses on vacancies.
If you have multiple back up exit strategies you can go forward with confidence on any deals.†Just make sure you increase the spread you normally work with to give yourself the most options. Accumulate a list of wholesalers and buy and hold investors. These can serve as back up exit strategies.
For example, once you have a reliable tenant with cash flow in a property, you can find a buy and hold investor who will be much more interested in the property, since they'll be spared the trouble of finding a tenant for it.
You can also owner finance the property and then sell the note to another investor.†You can sell part of the note for cash now and have income later or sell all of the note at once.
If you're having trouble finding local investors, online auctions can offer your property to a potential global market.
Even in a soft market some homes will still sell at or near full market value.†Of course, you don't want to incur six months of holding costs waiting for your price so you have to get creative to make your property stand out.†One way is to "Go Green".†A few touches like solar hot water with a tankless water heater back up and adding rain barrels to the downspouts in order to maintain landscaping inexpensively even during drought conditions can put your property ahead.†Everyone likes ideas that save them money and if it is good for the environment too that is an extra bonus. This is also a good idea for properties you want to use for Section 8 tenants because the tenants still have to pay utilities and reducing monthly expenses helps your property be more attractive to government officials trying to provide affordable housing.
Of course everyone has heard about the importance of curb appeal and now it is more important than ever. You have to add little touches that go beyond the usual without breaking the bank. If the property has landscaping in place make sure it is cleaned up then add fresh mulch and some potted plants in a complimentary color scheme to the house color scheme to the house.†Go for balance with some around a tree or spaced across the front of the house then some on either side of the front porch or door and one inside where you have people sign in.†You don't spend a lot of time, effort, or money but you get a very nice result.†Depending on the yard you might add some decorative wind chimes to the trees or bird houses or other cute extra to make people have a little "ah moment" that makes your property stick in their mind.
The next area you want to address is creative marketing.†Invite all the neighborhood residents to an invitation only presale open house party.
Have simple finger foods and if it is a neighborhood with many young children you might put a toy box with little gift bags for the children in the room most likely to be for a young child.†If the neighborhood has more tweens and teens you might set up a game system in one room that will stay with the house.†Many times a neighbor will know someone who would like to live in their neighborhood.
When you do hold an open house go the extra mile to make it stand out.†Make your sign post at least 36†high so it stands above the rest.†You might also go to a party store and get a cardboard figure and put it behind the sign so it looks like it is holding it.†You could put individually†wrapped soaps in a pretty dish in the bathroom with a little complimentary sign.†Have snacks available, have a drawing for a prize, just use your imagination and have fun with it.†The goal is that people feel comfortable and want to live in this house.
If you are a wholesaler the banks are one of your biggest competitors right now.
You normally buy extremely low and sell low without doing a thing to the property.†In order to maximize your profits and keep a quick turn around right now you need to stand out from all the other distressed properties flooding the market.†Now is the time for the two hour rule.†As soon as you get the property clear as much junk out of the yard and clean as much of the interior as you can in two hours.†If you pay four people $50 each for two hours your property will be that much ahead of the other wholesale properties and that $200 you spent can make you a few extra thousand on the deal.†Perhaps you even throw in a $50 gas card for the buyer or a Home Depot gift card.†Small gestures can make a big difference during a soft market.
Another strategy is to target a group with specific needs and create a plan for them.†One example is student housing.†In Atlanta, Home Park was for a long time a place where Georgia Tech students could rent cheap houses near the university.†When Atlantic Station was built it changed the area to a much more expensive and more owner occupied area.†There is still a need for reasonably priced student housing but the closest area to campus where that is available is not exactly where a mother would feel good about dropping their freshman student off.†In this case, the city wants to renew the area and developer incentives are available but you see brand new homes standing vacant and vandalized next to not so new homes boarded up.†You have multiple needs here, available properties but fear of trail blazing in a marginal neighborhood.†In this case, you could identify available properties and incentives then go to your local investment group or online investment group and do simultaneous investing.†If you were to get fifty investors to buy and rehab at least two homes each and you all do it at the same time you can turn a neighborhood around in a very short period of time.†If you could rehab one hundred homes in a ten block area all at the same time you will have made money, provided a needed commodity and helped the neighborhood residents all at once.†It is a win-win-win situation.
Of course there are other groups such as artists that need low overhead and space to live and work.†They might not need hardwood floors throughout; they might be more interested in a large room with a utility sink, or a photo studio in a converted garage that you could do advertising photos of large objects in.
Find out who needs what in your market area and find a way to provide it.†If you address needs while solving problems you can get ahead even in a soft market.
previous poster has some good info.
As investors we need to keep the basic rules of investing at heart and not act in fear. As many of you have mentioned, do your homework!
One of the major challenges I see in today's market is that we have been acting like puppets to the media who has told us to jump and we say “how high sir?†The media has been bombarding us every day with negative propaganda of doomsday. We have allowed all that negative propaganda to fester in our system and to believe that there is no hope for the future. We have forgotten that we are the land of the free and of the brave. We have forgotten our American Faith that has pushed us over the years to accomplish what seems to be the impossible task. This is not the time to turn back, this is the time to remember the American Promise and get up and push forward. We must stop acting like slaves, thinking that we have no choices, that there is nothing better to hope for.
The real estate market has increased in value over the last 40 years and it will continue to increase in value.
Do or do not there is no try
Yoda
I agree the most important thing to do is go out and put some offers on some properties. Once you get your feet wet things will seem to fall into place.
Excellent exchange, the range of experience/perspective of the dialogue couldn't be better, thank you all and keep it coming!!!