Why You Should Network With Non-Real Estate Investors

I’ll admit. When I first started out as a real estate investor all I did was go to my local REIA meetings. I happen to live in the Washington, DC area so there are plenty of REIA’s close to me and I hit them all.

I was a networking machine at these meetings and it paid off well. I got plenty of referrals and did plenty of deals from the people I met. However, after a while I didn’t feel as if the REIA’s were “productive” enough for me and I wasn’t getting the necessary return on my time investment.

Another problem was that as real estate investors we’re small business owners and all I was doing was hanging around the same type of business owners and not expanding my business network.

So what did I do?

I started joining various small business associations in my county. In every town and city in the U.S. there are more “clubs” you can join than you’d ever be able to attend, such as BNI and the Chamber of Commerce.

When you attend these types of events you expand your network and you could get deals and business from folks who would have never given you a deal before. But more importantly, you start to think more like a business owner and not just a real estate investor.

For example, what’s the most important part of the real estate investing business? It’s marketing. And when all you do is attend REIA meetings, you see all investors doing pretty much the same type of marketing.

However, when you attend a small business event you might get a marketing idea from the local plumber, or baker or photographer that you can use in your real estate investing business.

In fact, you should be looking for these marketing breakthroughs at every event you attend.

Perhaps the local salon is giving away a free report and you could give away a similar free report in your real estate business.

My point is, try and expand your horizons so you don’t fall trap to real estate investor “incest” and start doing the same thing you see other real estate investors do. Because if you do the same thing they do, how will you differentiate yourself from the competition? You won’t.

But when you get a great idea from a local restaurant owner, and you use a similar postcard the restaurant is using – but make it applicable to your real estate business, then you won’t have any competition at all.

So… if I were you, I would make a list of the associations in your area and join several of them this week. It will pay off in lots of deals and also, lots of great marketing ideas.

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I love doing lease options and subject-to’s. And with the properties that don’t go into my buy-and-hold portfolio, I sell almost all of them via lease option. However, the huge downturn in the real estate market has caused a problem for many landlords and their lease option tenants.

You see, since 2008 the market has dropped 30%-50% in many locations. If you gave a tenant/buyer an option to buy a house for $100,000 a few years ago, the house might now be worth only $70,000 and you’ve got a problem.

So what do you do?

Well… a lot of it depends on your tenants. Your tenants might decide they can buy a house down the street for a lot cheaper and they might move out when their lease is up. If a tenant can get a house for $70,000 and you can’t sell them your house for that price then there’s not much you can do.

In fact, this just happened to me on a property I have in Stafford, VA. I had an excellent tenant for the last several years that just moved out. She could buy a similar house in the area for $150,000 and the best price I could give her was around $200,000. I hated to lose her, but I certainly don’t blame her for moving out. In this case, I do have a good property so I’ll get it filled quickly.

However, if possible, I would encourage you to work with the tenant if you can. Let me give you another example from a property of mine.

I have a row house in Baltimore, MD. The tenants absolutely love the house and want to purchase it, but the appraisal came in a few thousand short below their option price. They didn’t want to move out so we extended the lease for another 6 months and will reevaluate things at that time.

Now, with the Baltimore property I could have dropped the price slightly, but it’s another good property and I am in no need or hurry to sell it. However, if it was a dump which I didn’t want any longer I would have dropped the price in a heartbeat to get rid of it.

What you have to remember is that every situation is different and everything is negotiable.

If you have quality tenants that truly want to buy the house and they’ve paid rent on time every month, I would definitely try and work with them. Much of the time this will be extending the lease every 6 months or so until the property is worth their option price. Or, if you have a ton of equity in the property you could always reduce the price if you wanted to.

On the other hand, if the tenants have been a pain in the butt and you’ve had to chase the rent every month then I would not extend the option and I would try and get new tenant/buyers in the property as soon as possible.

Just remember to remain flexible and take each property on a case by case basis.

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“Every great leap forward in your life comes after you have made a clear decision of some kind.” – Brian Tracy

Apartment property investors are constantly asking me when is the ideal time to get their properties ready to go “on the market.” Before I answer, I wanted to share the biggest mistake in selling an apartment building. The #1 biggest mistake I see investors make is:

Selling when you NEED to sell.

I have seen many investors over the years literally leave tens of thousands of dollars on the table when they sold their property because of some change in their lives. Retirement, divorce, financial problems outside of their property investment, and any other life change that “forces” the need to sell. This is the biggest mistake I see investors make, and one that you should avoid.

Now on to when you should get your property ready to sell. In my opinion, I would start getting things ready at least one year ahead of time. I know, timing is everything and you may not have this much time due to circumstances being what they are, but ideally it should be about a year.

Why a year? The MAIN reason is to get the rent up as high as possible. You know the tenant that you have been really nice to over the years. Letting them get by with lower (sometimes a lot lower) than market rent? Well now is the time to get the rent up there.

Why? Remember, the main points of value will more than likely be the cash flow the property produces. So, the rents are key here.

Also, this will give you time to do the necessary work and capital improvements that the buyer would possibly discount once the property is on the market. I have known buyers that have literally changed the value of their buildings by tens sometimes hundreds of thousands of dollars by doing these things.

If you can get started working diligently on these at least a year in advance, and maintain focus, you will increase your sales price substantially over selling at a time when you NEED to sell. Timing can be everything, as they say, but getting the property performance up there as much as possible is key to a successful sale.

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Should there be a Moratorium on Foreclosures?

The new headlines catch phase is “Robo Signer”. These robo signers have been signing foreclosure documents at a rate of up to 1 document per minute. That’s 5,000 – 10,000 per month. Everyone knows that it is not physically possible for these robo signers to have read every document. That is the reason everyone is calling for a moratorium on foreclosures. Or is it?

If everyone was upset with the fact that these robo signers were not reading all the documents, then why wasn’t everyone upset that congress has passed health care and over a trillion dollars in stimulus programs while all along admitting that no one could possible read all of it before voting on it. So ask yourself, are they really upset that the robo signers didn’t read the documents. If you are honest with yourself, then the answer would have to be no.

So what is the real reason everyone wants a moratorium on foreclosures. Politics… In 3 weeks there is a major midterm election and this could be one of the most historic elections in our country. The politicians on both sides of the isle are looking for something to blame and point fingers at to make themselves look like they care and that all our problems are the banks. 

In reality, these so called robo signers have whole departments of people to create the documents and make sure that everything is correct before giving them to the robo signer for their signatures. This is how all business works. This is how congress and the president pass bills.

Now to be fair, there are reports of fraudulent mortgage documents on the banks part, but these isolated incidents are rare and need to be dealt with. For those few homeowners who were victims of falsified documents, they should end up with their houses free and clear. However, that should not cause the banks to free all foreclosures for the remaining 99% of foreclosures that were done correctly.

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