Have you heard the news on the BP Podcast, in the blogs, or on the forums?
People are doing lots of deals! Investors are making money again!
So isn’t it time for you to get more deals too?
Maybe you’ve tried. You’ve followed the MLS daily. You’ve sent out direct mail. You’ve made your business card. You’ve built your team.
Why don’t those good deals start falling into your lap?
Is there something wrong with you and your investing?! Are there just no deals in your town?
Well, there is something wrong, but thankfully, you can fix it right now.
Here’s the take home:
Good Deals Don’t Fall into Your Lap! Deals are Found, Nurtured, and Created Using the Skills that I Will Share Here.
Even the easiest of the hundreds of deals I’ve purchased did not just fall into my lap.
Just like fishing, I had to know where to fish, how to get the fish on the hook, how to reel him in, how to bring out the net, and how to get the big fish into my boat.
Some fish struggled for hours before finally being caught. Others swam right towards the boat and made it easy. Still more than I care to admit broke my line, laughed, and swam away!
So, the first thing to fix is this expectation that deals just happen or fall in your lap.
Becoming good at buying real estate deals is like mastering any craft or trade. The better you become, the more effortless the process will appear from the outside.
But the secret is in the fundamentals!!
It’s about the skills that you practice, practice, and practice until you start to master them.
This doesn’t mean you can’t go fishing for deals right away. The opposite it true. That is how you get better.
This mindset of mastery is completely different from the impatient, results-now mindset we tend to inherit from gurus and get-rich-quick nonsense. And ironically, it tends to get results faster.
In the rest of the article I will share 5 critical skills that I consistently practice and try to master. If you practice them too, I think you’ll find more and more deals “magically” falling into your lap.
1. Market Knowledge
If you don’t master your target investing market, not much else matters. This is the equivalent of studying the locations where you are most likely to catch the big fish. You can have all the best bait and equipment, but first you need the fish!
Here are some questions that will begin to get you thinking about the best fishing holes for your deals:
- How are big picture demographic trends affecting your local market(s)?
- What do your local buyers and renters really want?
- What local features are most desirable? Schools? Amenities? Community centers?
- What types of properties are most in demand for your market?
- What price ranges and locations represent the best value?
- What price ranges and locations have investment grade (income producing) properties?
- How do other investors in my market make money?
In addition to those big picture questions, I find real estate valuation to be a critical skill.
Even if you don’t plan to become an appraiser or a real estate agent, you need to learn how to predict the likely rental or sales price of a property by studying comparable sales or other income properties.
If an experienced appraiser, real estate agent, property manager, or investor will let you shadow them while they do valuations, I highly recommend it. You will learn a lot.
2. Lead Generation
Deals might not fall into your lap, but you sure can choose good bait that attracts the right fish.
Lead generation is the skill and habit of consistently planting seeds that will later grow into opportunities.
The possibilities are endless, but I have used all of the following lead generation channels successfully:
- MLS daily searches
- Driving For Dollars (or pushing strollers for dollars, my current favorite:).
- Business cards
- Direct mail
- Non-Owner occupied
- Owner-occupied with equity
- Local Professionals (attorneys, CPAs, etc)
- Eviction landlords
- Tax sale owners
- Radio advertising
- Car magnets
The list could go on and on.
Interestingly, some people think this one step is the secret to finding a lot of good deals. Unfortunately, many investors waste a lot of money when they work this skill but don’t strengthen the other skills, like #3. Negotiation.
When an opportunity comes your way, can you turn it into a deal? If you get a fish on the hook, can you reel it in?
I will write a lot about negotiation in future articles, but for now know that three different things often get lumped together:
I am not a good haggler. It’s fun at the flea market or yard sales, but starting low and meeting in the middle is hardly negotiation.
And my stomach turns at the slimy mind-control and manipulation tactics that get passed off as negotiation by many so-called experts. If you want to control other people with intimidation, scripts, and subconscious suggestions, go start a hypnosis show in Vegas.
True negotiation is not magic. It’s not secret. In fact, the best negotiators I know are very transparent and vulnerable, and as a result, people trust them.
Trust is a currency in high demand in our world. If you can learn to earn trust with people, you can then get the opportunity to present solutions to their problems.
Sounds simple, but it’s a rare and valuable skill for real estate deal making.
If you are in this business to make a profit, you must sharpen your deal analysis skills. You need to be able to identify a good deal and run the numbers, just like you would identify when a fish is a keeper or one to throw back.
There are many analysis short cuts or rules of thumb, like the 2% and 1% rules. But you also need to develop more in depth analysis skills using spreadsheets.
BiggerPockets.com contributor J Scott wrote an awesome Introduction to Deal Analysis that I highly recommend as a starting point. I will also write more about this big topic.
5. Real Estate Tools (Legal/Paperwork)
If you can’t choose and execute the right tools and paperwork for a purchase, you’ve wasted your time with all the other skills. This is like losing your fish while trying to get it into the boat.
Real estate laws and contracts are the foundation of the real estate market. You don’t need to be a lawyer, but you do need to understand at least the basics of the contracts and tools you will use.
Where do you start? I suggest the real estate licensing classes in your state. Even if you don’t ultimately get your license, you will learn a lot about the basics of contracts and real estate law.
After that, study in more depth some of the primary tools that real estate investors use to purchase properties.
Some of my favorites are:
- Private notes/mortgages (especially self-directed IRAs)
- Seller carry-back financing
- Leases and options
- Conventional mortgages (until they cut you off)
- Local/portfolio mortgages (in moderation)
I will be writing a lot more about how to use these tools on my BP blog. But you can also search on the BiggerPockets forums to get started on these subjects.
What do you think?
Have you found these 5 core skills to be helpful? Are there others that I have missed?
I would love to hear from you.
Be sure to leave your comments below!