Investor and REO Mentor
Just as the Law of Cause and Effect is a natural law which can never be broken, never before have the basic fundamentals of playing the real estate game been so vitally important to your success. Here are six fundamental steps that I have found vital to continued success in this present real estate market.
1. How much do you know and how experienced are you?
Assume you know NOTHING about the real estate game every morning when you awaken!
Starting your day believing you know exactly what to do and when to do it (just because it worked for you last year, last month or last week) is just NOT the best way of playing the real estate game these days. Ignorance may not be bliss, but it is definitely a more helpful mindset to assure you will be open-minded and prepared enough for whatever is heading your way.
Action Step #1 It does not matter how well you’ve done, you are still only as successful as your last deal. Seek the guidance and company of players who have survived prior games, honed their skills by trial and error, and who have earned the right to continue playing (and winning) in today’s real estate market.
2. Know your target market thoroughly!
No matter how many times I jump up and down telling people that they need to spend time learning their target market before they actually go out and start making offers, writing checks, or chasing deals, very few ever listen to my suggestion. This is the equivalent of going out to buy a car without ever doing any research on any of the statistics about the past performance of the vehicle. That’s the way I used to buy a car when I was young. I’d see somebody driving something I liked and immediately I had to have one too!
So off I’d go to find and buy my new dream car at the first dealer I found; hardly ever negotiating on price, as long as they had the right color. There’s just no other way for me to say this: buying real estate in any area where you are not thoroughly aware of what’s going on in that market is just plain stupid!
Action step #2 Choose a specific target market, whether it’s a local city that is easy and convenient for you to physically travel to, or one which is located out of state. It doesn’t matter to me where or how you decide to invest as long as you study that specific market and know it better than anyone else. The deeper your understanding of the elements that comprise your chosen real estate market, the higher the probability of your ultimate success.
3. Keep one eye on the broader national events and both eyes on your local news. Learn to interpret the daily news.
Today it’s not just enough to read newspaper and Internet articles, you must learn to interpret exactly what you’re reading. Every writer has a perspective, just as every newspaper has an agenda. You must understand the source of the articles and their political leaning. Unfortunately, this is the world we live in today.
Action Step #3 Read at least three articles from different sources daily. Pick a source that writes for and services a broader audience, more than just the real estate community. This will give you a better chance of finding objective articles that at least try to give you both sides of the story. Although we research over 52 different sources daily and I read articles from both sides of the political aisle, my favorite is still The Wall Street Journal.
4. Develop a simple plan that is both easy-to-understand and implement, which will get you to the money you want or need to make with ease.
Every time I speak at an investor club, invariably there’s always more than one person in the audience ready to tell me about their new multiphase, untold-streams-of-income-generating, newfangled, surefire-millionaire-making “How to Get Rich with Real Estate” plan (which of course hasn’t produced one penny for them YET). It’s amazing how many ways there are to invest in real estate and how many methods people come up with to take advantage of different segments of the real estate market. Honestly, I’m just not that bright or greedy, which I think is at the center of what helped me become hugely successful very quickly. My limitation of not being able to handle multitasking was actually my salvation in becoming financially free. I sincerely cannot handle too many things at one time. One thing at a time is about as complex as it gets for my brain.
For example, I basically focus on buying smaller, average-quality-built, 2-to-3 bedroom, 1-to-2 bath houses, which are approximately 1000 to 1500 sq. ft., and from two to four residential incomplete units, generally built from 1950s to 1990s. My goals are to purchase one per week, to sell at least one property per month, and to keep one or two as rental properties. I try to buy at 50 to 60% of present market value, and my goal is to refinance the ones I keep within a six-month period. My goal when I refinance them is to remove 100% of my investment dollars from property and still have at least a $100 monthly net income/cash flow after all expenses have been paid.
Do I always accomplish my goal? Of course not! This works about 50% of the time; the other times I end up with a little bit of my money still invested in each property. That’s okay with me as long as it doesn’t suck up all my available cash. I have some friends that buy houses like I do; others focus on locking up multi-residential units (apartments) at solid Cap Rates. Some hate the risk of owning, and just control a ton of real estate with Lease Options and Master Lease-type contracts FOR ENORMOUS MONTHLY CASH FLOW. Still others hate to sign on the dotted line for bank financing, and focus instead on buying directly from owners/sellers with exceptional flexible seller financing. I really don’t care how you decide to get wealthy in this business. However, I do care that you find an easily-repeatable method that consistently puts cash flow into your bank account monthly!
Action Step #4 Find what you love to do in real estate, or maybe just find what is presently working for someone else, and MAKE SURE IT WORKS! Improve on it if you want. Then, do it a lot!
5. Fact: a plan without daily systems is as useless as a car without gas.
What good is it, but to just look at and dream of what you could do with it? In order to make anything happen, well, YOU have to MAKE IT HAPPEN! Yes, timing helps, favorable financing helps, easy-to-find, low-priced properties (as in plentiful REO’s, Short Sales, FSBOs) help. Even your wife or husband being an experienced General Contractor will help. Believe me, however, there is NOTHING — absolutely NOTHING — that can keep a determined individual from reaching the place he or she sets his mind to reach as long as they START walking in the direction of what they choose to achieve. Simple Daily Action Steps are the true secret to accomplishing anything worthwhile. There is no other secret to success.
Action Step #5 Sit down and write out a series of daily action steps that YOU MUST take every day without fail. Each must be directly related to accomplishing a very important task and soliciting a very specific response, and it must be quantifiable /measurable.
6. Are goals and results important to your ultimate success? Or are they sometimes limiting? Results are important in everything we do.
They are the yard stick by which all success is measured. Whether in sports, the military, or business, anticipated results are the driving force behind most, if not all, decision-making. However, focusing all of our attention on the anticipated results can sometimes increase our concern or elation about imaginary outcomes which are not only unrealistic, but may limit our response in the present. The best example of this that I can give you has to do with my original goal back in 1995 when I first decided to start investing in real estate in the Antelope Valley, just after going through bankruptcy. I set goals to buy 10 single-family homes, rent them, eventually pay them off, and then someday, each of those homes would be worth $100,000 in value. This meant that I would ultimately end up with $1 million net worth as well as $10,000 a month income. Did that happen? Did I accomplish my goal? The truth is that by the end of the 10th year, I ended up with ten times more money than I ever imagined I would. This taught me a huge lesson and helped me to understand that sometimes our goals can be somewhat limiting; sometimes, if not always, the level of success that we as individuals are capable of achieving lies way beyond our present ability to imagine.
Action Step# 6 Set a goal; make it real and important to YOU. Know the “why” behind achieving it. Write it down in as much detail or as briefly as you deem necessary. Then try very hard NOT to dwell on it at all. Don’t waste a moment of your precious time re-reading it for fear of forgetting your direction. Keep ALL of your attention on the DOING! Stay ENTIRELY FOCUSED on the DOING! Do the things you MUST DO DAILY, and forget about results. And someday you may awaken to find that your results have surpassed all your imagined outcomes tenfold.
Tony Alvarez is teaching How to Become a Real Estate Hit Man in 2012! for North San Diego Real Estate Investors Association Saturday, September 29th. There is a special discount for this weekend NOT listed on the website. Call Denise at 714-828-8220 for details.