My email Inbox receives a lot of email. Sometimes I spend an hour or more simply opening, reading, responding or deleting hundreds of emails at a time. It is partly my fault because I register for every promotional pitch offered in real estate and many that are on the fringes of real estate investment. I receive quite a few emails with a variety of ‘learn-how’ and ‘how-to’ and ‘escape to freedom’ topics. Being on all these email lists puts me right in the middle of the real estate marketing world for all it’s glory…or lack of honesty – take your pick. The thing about those emails is that they are both good and bad. Good in that they are definitely educational. Educational because they teach me what not to do!
Those emails are bad because in many cases it is hard for a real estate investor to see through the smoke and past the mirrors that they are designed to create. They come chock full of one liners about the next greatest real estate investment market or the magic house that produces unheard of returns “without any effort”! I half expect the next line to be about burying the beans and adding water and up sprouts a house that fills the toilet with gold coins every time you flush. Behind all of the glitz and the glamor created by marketing emails lies the truth and it is up to the investor to dig for it.
My point is that simply seeing something in writing about how great a market is or how great the returns are on an investment property should never be taken as fact. You should always be ready to dig a little deeper.
Don’t Take Anything on Faith!
I was in Canada in November of 2011 speaking at the Canadian Real Estate Investors Forum and I was lucky enough to get to share the stage with Don Campbell. He struck me as a very informed speaker and definitely someone who kept the audiences attention with the details he was sharing. And then he said something that floored me. He encapsulated something I had been trying to get across to investors for years in one simple and easy sentence…”Don’t take anything I say on faith”.
In real estate, unfortunately, numbers and phrases can fly fast and furious without a lot of thought for the consequences. Real estate investors often rely on other investors, real estate investing companies and real estate professionals in particular markets to give them an accurate picture of a local market and the opportunities there. This is where the truth meets the marketing spin and investors have to be smart enough to slow down and get knee deep into “due diligence” mode.
As I read those emails each day, I am not surprised with the poor reputation some companies and industries in the real estate niche have developed. When I first heard Don Campbell use that phrase I instantly understood what he was saying. You can trust what I am saying, but you have to find that out for yourself. Don’t take anything on faith! If you are not willing to dig a little and confirm the facts, then win or lose, an investment deal falls squarely on you.
Those daily emails are littered not only with every bell, whistle and shiny trinket known to marketing; they are also littered with false information and “half-the-story” statements meant to sell product. That product can be coaching, or self help programs and most often it is houses! Real estate investing can be a frustrating endeavor and when investors are being pushed and pulled by so many different messages, it is important that they take the time to confirm before taking action.
Real Estate Investing: Confirming The Facts
If you are going to spend your hard earned money building an investment portfolio, you owe it to yourself and your family to earnestly check out an investment opportunity. This shiny little objects called opportunities that are being hawked as great investment properties may be lemons in disguise and the only way to know for sure is to do your own due diligence. When it comes to whether or not a market is truly a great market here are some key data points to look at:
- Economic indicators such as GPD, per capita income and their historical ranges
- Industry leaders and key employers
- Population stats such as migration into the city and historical ranges
- Political situation and are there any significant challenges
Is this an exhaustive list? Not even close. But these are stats that point to where a city is heading and not where it has been. There are literally dozens of other questions to ask and while the answers don’t necessarily tell you if a market is good or not, they do give you a picture of a market and confidence that you understand what makes that market tick. Other great data points to check out on an area include:
- Housing starts and historical ranges
- Housing sales prices and historical ranges
- Rental rates and historical ranges
- Percentage of population renting housing and historical ranges
- How many SFH are rentals and historical ranges
- Crime rates and historical ranges
Again, the list is not exhaustive, but not once is the price of a particular investment property listed. Simply because a property is “cheap” compared to the price of a similar property in your area does not mean it is a good investment. There is so much more that goes into the decision to invest in a particular market than the fact that is has really inexpensive properties compared to where you live. Once you have zeroed in and are comfortable with a market, it is time to start researching companies and partners to work with. If you thought email marketing was confusing, wait until you start digging into websites and messages from particular companies. Often you can place two sites next to one another and if the wording is not EXACTLY the same, then the message is. How do you know what is legitimate and which one is the best fit for your needs? I will save that particular question for a later article, but you have to ask questions and then question the answers.
Successful Real Estate Investing Starts With You
The bottom line to finding success as a real estate investor, especially a passive investor buying out of state, is that success starts with you. If you are not willing to protect your investment capital and protect your returns by doing minimum due diligence, then the fate of your portfolio rests entirely with you. I titled the article to grab readers attention because, even though I am entirely comfortable with my company and process and the words I write and speak, you should still have questions and be willing to ask them. If someone like me or a company like mine takes offense at being questioned then alarm bells should be ringing.
I am often asked when I travel if it is really easy to purchase investment properties in my city from afar and I always tell investors…
Absolutely! But don’t take my word for it, you need to confirm for yourself!