Not everyone who makes money in real estate works from 6AM until 11PM every day; we all probably know one or two people in real estate who never seem to be working. What does it take to become one of them?
Two rules allow you to work smarter, not harder (apologies for the clich): Doing Fewer Deals and Winning the Popularity Contest. Maybe these sound fun, maybe they don't, but what IS fun is having more time to spend in meaningful ways.
Doing Fewer Deals
Sounds counterintuitive, doesn't it? But the fact is you can either be a Volume Player or a Cherry Picker, and it's time to cultivate your inner cherry farmer.
Every deal you do, no matter how much work you THINK it will require, may require a vastly higher amount of work, time, and/or money, and that's simply the reality in real estate. Lawsuits pop up unexpectedly, framing beneath the walls may be rotten, the property may be rezoned unexpectedly... you get the idea. Every deal is a liability.
That means you need to do as few deals as possible, and you need to make them real income-producers. It's better to do three deals per year, earning $50,000/deal, than thirty deals at $5,000/deal, so you need to start finding better deals.
Where, you ask?
Winning the Popularity Contest
Networking needs to be your first priority; not something you do occasionally when it's convenient, not something you do that's ancillary to your primary business. Networking IS your business, because it's through people that you'll find these spectacular deals. You need a vast network of people, some to perform services for you (i.e. lenders), and some to find deals for you.
So where do you start networking?
Real estate investment clubs, to be exact. Your competitors will be your best source of information for many, but not all, of the people you need. Take them out for drinks, food, partying, dancing, whatever, but whatever you do, make friends.
Incidentally, all of these people, from lenders to appraisers and onward, you must know on a personal basis. Meet them in person, get their life stories, talk about their favorite sports teams, whatever, but you need to establish not only a professional relationship, but a personal one.
Start by finding out what hard money lenders and local banks they use, because they'll tell you all about them freely and openly. They'll also be pretty open about the appraisers and realtors they use, so get these contacts too, and while you're at it ask after property management companies.
Realtors can occasionally send a good deal your way through word of mouth, before a property is listed on the MLS, but don't count on a lot of great deals from them. Property management firms, on the other hand, may send some excellent deals your way, from current or past clients who are looking to liquidate. Besides, if you're looking to become a landlord, you'll need their services eventually if you don't already, so lay the groundwork now for reduced rates.
Contractors and handymen are a huge source of good deals, because they're on the ground in the neighborhoods you want to invest in, so they can make excellent bird dogs. Many real estate investors don't want to spend a lot of time getting to know handymen and contractors, but it's worth the time and effort. Find some good ones, keep them happy and friendly, and make sure they know that you'll make it worth their while if they refer a grand slam deal to you.
Your new pals among your fellow real estate investors will be less likely to give up more sensitive contacts, such as their wholesalers, and especially their bird dogs. For these, you'll have to either find them through other sources, or create them yourself. To find wholesalers, start by calling up your newfound hard money lenders, as they work with wholesalers all day (or may be one themselves). Your realtor or appraiser may be able to turn you on to some wholesalers as well, so ask around with them, and you can always find a wholesaler through their ubiquitous "We Buy Houses" signs.
A note of caution with wholesalers: they WILL try to rip you off, regardless of all their sweet talk. Negotiate hard, and if you don't like what you smell, walk away.
Bird dogs are the hardest, and most lucrative, contacts to build. As we already established, try every contractor and handyman you work with, but beware they might try to create a bidding war. Next, try your existing tenants, as they often hear about neighbors, or friends or family, that need to liquidate quickly. Walk around the neighborhoods where you want to invest, walk into the local bars and restaurants, meet people. Talk to small business owners, employees, and generally people that are around and hear all the local gossip, and tell them you'll pay generously for great tips on real estate deals. Tell them to call you IMMEDIATELY if they hear of someone needing to sell, or thinking about selling about selling a property they've inherited or owned for a long time.
It is through people that you'll find your deals, so you need to know them, and they need to like you. You need to be the most popular person in your market, so start buying people drinks, start building closer relationships with your tenants, and remember that networking IS your business.
Brian Gregory is a real estate investor and landlord who believes that hard work does not necessarily lead to more profits. If you need any real estate or rental forms, here's a link to some free rental forms, and an excellent real estate blog for more reading.
No comments:
Post a Comment