Real Deal REInvestor Network

 I have for a long time subscribed to a model of learning what I want to know in bite-sized chunks over time a few minutes or hours a week for months or sometimes years.

This has enabled me to create a pretty nice arsenal of various skills that many of us would like to have, but never take the time to master or learn. It’s also helped me go very deep through short, focused bursts of study in narrow fields of study.

Most people would just say, "Forget it.  I'll  never be able to do it" when they consider things that they’d like to learn.  And they wouldn't even try, but you can make any complicated skill or the acquisition of a body of knowledge a very possible goal for you to eventually attain. 

I’ve always believed that if you do what others won't do and you can do what others can't do.

In business, that has led me to learn over the years any number of bodies of knowledge that have benefitted me in my career: real estate investment strategies and terminology, how to sell on the phone, the art of leadership, internet marketing lead generation strategies, getting business credit funding, copywriting to sell millions of dollars of stuff with a written letter, and so on and so on. As I pursued knowledge in these areas, over the years I turned those study sessions into real applicable skills that have helped me build multiple businesses that make money.

Personally, I’ve also used short time blocks of as little as 15 minutes a week to learn things that interested me that had little to nothing to do with my business interests like how to write better fiction, the art of conversational storytelling, how to control my mind and relieve stress (need to refresh that one regularly!), ways to easily build rapport with strangers, how to throw knives, and so on.

I'm currently learning a couple things in this manner:

1. How to recognize human micro-expressions and what they mean the person may be thinking or feeling at the time (video training course and interactive online exercises)

2. How to write better fiction (a goal of mine) by following the advice I was given in a writing workshop to copy by HAND word-for-word an  entire fiction book of the type I would like to write [an exercise that I spend an hour or so a week at, copying Dean Koontz's book "Watchers" page by laborious page into a legal pad in my chicken scratch hand-writing]]. That exercise sure is giving me a great visceral understanding of the structure and cadence of great fiction, the pace of dialogue, and how a solid plot is put together from paragraph to paragraph all the way through.

3. My friend and mastermind colleague Joel Bauer's 'Transformative Mechanisms' from his book "How to Persuade People who Don't Want to Be Persuaded" which are ways of using small sleight of hand in fun ways to tie in to an analogy or story you tell to enable you to make a point better in person with someone you're attempting to influence than you could ever do in words alone [example: sticking a needle through an inflated balloon, or guessing which hand someone is holding a marble in their closed fist]

And at any given time in the future, just as for the last 6 or 7 years that I’ve been learning new things like this, you can ask me what I’m currently learning 15 minutes to an hour a week and I’ll tell you. It seems small but it’s not. You may not be able to take a week to master a new skill you’ve always wanted to like how to twirl a baton—but an hour a week is 52 hours after a year. If you have a full-time job, you also may not have the time freedom to devote to your business that you would like to, but if you take 60 minutes per week to study then you’re doing more than most people, and at the end of the year you’ll have so much better knowledge and thus options than you did before.

Whatever elephant you want to eat, business or personal, no matter how ‘big’ it looks to you now, you can eat it the same way high achievers do: one bite at a time.

 

Let me share with you a few networking strategies of A player Entrepreneurs.

Look and Dress the Part

You don't need to dress formally, wear a tuxedo, or jet off to Milan for the latest fashions.  But…when in doubt, dress up – you can always dress down.  Some people wear a suit, and that’s cool…if you find you’re over dressed, you can always take off the tie.  In fact, though, business casual is usually no problem. We are after all, entrepreneurs and sometimes we “work” wearing our underwear! You can dress outrageous if that’s part of your “stand out” strategy…just don't let your appearance or actions be a hindrance to people seeing the real you and what you have to offer. Sharply-dressed, well-groomed and with excellent hygiene are extremely important for your success.

Find Your Deal-Making Style and Stick To It

Don't try to be someone you're not. There are different negotiation and JV making styles. Find yours by trial and error, but use it!

Just Do It!

“I only hear and I forget. I see and I may remember.  But I do and I understand.”

Thomas Edison’s quote is an eloquent and simple manner of expressing a simple fact, a fact that high achievers have always known: The best way to grasp information is to apply it.

There’s no secret, we can definitely learn by hearing, reading, watching, seeing, and analyzing…but when it comes to getting results with joint ventures you simply cannot learn better than to learn by DOING.

You learn best by doing. When you network with the JV mindset, you are coming to do joint ventures. Do it!

Smile

People want to network and JV with winners. Winners smile. Smile and get more JVs. Simple enough said for you?

Look for Opportunities to Triangulate

Learn to triangulate the deal if necessary. If you don’t have what they want or need, who does that you know? What do THEY want? Do you have it? Does the first person you’re negotiating with have it? Triangulate and watch your JV possibilities multiply.

Think People Not just Profit

Solve people’s problems and you’ll get paid. That's the best networking and joint venture tactic of all. Help others!

Never forget that long term internet marketing success— and business success…and for that matter LIFE success— is based on the relationships you establish.

The relationship is more important than the deal.

Remember that, and you're ahead of the pack!

Follow Up, Follow Up, Follow Up!

If you say you’ll call/email/respond at a certain time, do it. Become known as a businessperson whose word is their bond and you'll never lack for JV opportunities.

Always follow-up. Circumstances change. Your rejected offer of today could look great in three months. Follow up. Follow up. Follow up!

Don't Just Socialize…Connect!

Be professional always, upbeat and smiling at all times, courteous and accommodating, and seek to connect with your new relationships— not just talk. Ask questions. Ask questions. Ask questions. Listen. Build rapport. Seek not just to chat, but strive to connect with your potential JV partners on a deeper level than surface conversation and you will make excellent progress towards cementing a potential joint venture with that person.

Make a Great First Impression

Use the “halo effect” to your advantage. People see us subconsciously through the lens of our first impression we made on them. Don't let this be sloppy, rude, arrogant, incompetent or another negative.

Invoke the Law of Reciprocity.

Give and then receive later. Give, give, and give some more and you will always receive (and not even always directly back from those you gave to!).

This is a universal principle and will work for you WITHOUT FAIL if you apply it.

LIMITING BAD INVESTMENT DECISIONS

 

 

Well we have certainly heard it all in recent months: the recession is over, the stock market is recovering, and foreclosures are down.  Nationally, spin doctors continue to spew this propaganda, while the facts are blatantly obvious:  unemployment still continues to add to the body count (summer jobs don’t count) millions of homes continue to move forward in the foreclosure process (although the timeline from start to finish is well over a year nationally) & as for the stock market; markets in China & Europe are delivering up to $6 to $1 compared to the U.S.  For many this happy news simply makes it more difficult to identify a solid investment option.  Or does it?

 

Even with all the carnage, or perhaps because of it, there is no better time to invest, specifically in Real Estate.  I believe it was Warren Buffet who mentioned something about capitalizing “when there is blood in the streets”. He may know a thing or two.  The issue most face in building wealth is limiting bad decisions (yes even the best make them) or limiting those short term/sighted decisions that create long term adverse effects.  At the root of these decisions: our EMOTIONS.  

 

A recent Barclays Wealth Global survey noted a large percentage of wealthy investors ( a pool of approx 2000 w/estimated net worth ranging from 5-15mm yearly) not only realize their tendency to make a decision based upon their emotional state, but would welcome help in dealing with the problem.   The most successful @ dealing w/ “failures of rationality” utilize a set of control strategies to limit these moments or lapses in good judgment.   

 

As a purveyor of time tested & proven real estate investment strategies I have found these control strategies particularly helpful in establishing viable & sustainable investing plans.  Of course no one is perfect & there is always some risk, however, incorporating these seemingly trivial strategies into your daily routine may just save you from yourself:

 

1.)  Establish & use rules to help (yes even entrepreneurs need rules) make better financial decisions; like spending only out of income & not capital. 

2.)  Set financial deadlines; like saving a pre-determined amount by years end.

3.)  Refrain from impulse investing; i.e. wait a few days after making a big decision to execute it.

 

4.) 

Perhaps most important is: Use others to help you reach your financial goals.  I am passionate about real estate investing as a means to build wealth; yet I realize that without my power team in place to identify, analyze, & manage the acquisition & sale process (just for starters) my dreams of blue skies & white sandy beaches, may very well turn into a nightmare on Elm street!                            

 

Spent some time reflecting recently on the energizing and amazing 3 ½-days Rainmaker Summit and 1-day Global Ambassador Program presented a couple of weeks ago by Bill Walsh’s Powerteam International.  The days were long but well worth every minute.  The group of entrepreneurial business owners participating was of high caliber.  The presenters and coaches were tops!  This was a personal and business development educational event that also built community and great connections.  When you find yourself in the midst of excellence it is good to share a bit about the experience.  Since you couldn’t make it… I’m highlighting portions of the event for your consideration.

 

Many readers may have experienced similar events, but many may not have attended such a personal and business development coaching session.  This kind of training should be a life-long occurrence; it serves the seasoned as well as the new entrepreneur.  Just being appraised of what was presented may serve as a benchmark of your awareness of the tried and true as well as of current trends.

 

The focus was on unlocking your passion and becoming inspired about your true personal and business ‘vision’.  Clarifying your ‘vision’ and then your ‘why’ begins the process of empowerment which ignites the power to pull you to your biggest goals, living your dreams.  The ‘why’ is always what keeps you motivated when the temptation is to quit.  If you haven’t identified your vision, your core foundation for being, it is essential to do so.  Taking the time to really discern your ‘vision, why, passion’, will make such a difference in all that you do in life.  Those currently participating in the MMM Challenge application process with the Real Deal Community are being asked to look at this very issue.  If you have already built your current business with a clear vision and why, it might be a good time to take stock and see if you are really on track.  Are you congruent with what you say and believe versus what you do?

 

Another key focus of the event was on having solid business plans and systems.  Planning must include the systems that will help to keep you moving forward consistently.  Systems are critical to a thriving business.  For example, the McDonald’s system is instrumental in its international success.  Success or failure often hinges on the quality of systems that have been put into place, or lack thereof.  Systems serve to make your processes repeatable at the same level of quality time after time.  Small business owners, like so many of those in real estate investing, often have to do all aspects of the business themselves.  This solo operation may lead to inefficient systems which can make the business cumbersome and sluggish.  It really takes a team!  Real estate investing is a business and you should be looking at your venture as such.  Realizing early on that you are starting a business that requires planning, development, and the implementation of effective, supportive systems, can help you avoid serious and expensive mistakes down the road.  Many investors that I have run into don’t really view investing as a business and often think that it suffices to just go buy a house and flip it.  And, for some that works, for awhile.  Now there are lots of gurus out there that say they have the ‘magic bullet’ for a winning system.  One pops up about every other week; they take turns.  Once you know you have the need for systems, or need to update yours, be sure to do your due diligence about which system you build, use or buy.  Thinking though your business model is crucial to supporting your success.

 

And, here it was again.  Every time I turn around (not only at Rainmaker), a consistently repeated part of the product development and marketing plan that seems to be getting extra emphasis is value, value and more added value.  Value has always been part of the business proposition but ‘value’ is truly becoming a key way of distinguishing yourself from the pack, from all the clutter out there.  Sometimes the added value is a small thing but can make an impression that keeps bringing the customer back, and referring others.   What are you doing to make yourself memorable?  How do you differentiate your business? Would your customers refer you to their family and friends? Why?

 

It is important to keep your train on the track once you start the journey.  Given that you clarified the vision of where you are going and why, and developed your plan and systems, it is necessary to measure your results so that corrections can be made that further your business success.  Since there are only 86,400 seconds in a day, time organization and accountability really assist you in staying on track.  Is this aspect covered in your business plan and systems?  Staying focused and on target will make a significant difference as you build, maintain or grow your business.  Master mind groups, accountability partners, as well systems benchmarks/metrics, can all help you stay on track.  If you aren’t using a great time management system, then it is time to decide which vehicle will be one that you can work with effectively.  Then use it religiously!

 

Do you have a brand?  Once you know who you are as a business, and what you are offering, be it wholesale products, commercial JVs, short sales, notes buying, tax liens, or any range of those products/services, it is so very important to build your brand.  You guessed it, differentiate yourself from others, or join your competition and work together as affiliates who help one another grow their related businesses.  Having a brand isn’t enough.  You must advertise that brand.  Online and offline presence is essential.  Your  social media brand will need to be promoted.  Syndication is one way to connect your activity throughout the social media world and drive traffic to your website or Word Press blog.  If you are using Word Press as your interactive website, you probably won’t need an informational and/or store website. And now, Face Book is moving to the use of the ‘i-frame’ that will allow you to move your website on to your Fan Page.  Be sure you have a clear brand and a unique selling proposition.  If you aren’t sure how to do that, there are many who excel in that service who would be more than ready to serve you.  Then again, you can take the time to research and study branding and then review-copy-alter the best of the best concepts that you find online and in other publications. 

 

Offline marketing has years of proven strategies and tactics, though some of those are shifting with the move toward online marketing. Sheila Stewart, an executive business coach with a proven track record and years of experience in marketing and advertising, provided a plethora of ideas about marketing strategy, advertising and sales.  It was clear that the integration of offline, online, and mobile ways of finding, and then meeting and exceeding customer needs, should be the integrated thrust for today’s business marketing.  Have you identified your strategies in this arena?  There are many pieces to fit together but the sooner you start to understand the pieces, how they fit together, and how they serve you, the better off you will be.  Finding virtual assistants (VA) to help put some of these tactics into place can be fairly inexpensive.  However, it sure helps to have a basic understanding of what is happening with online and mobile marketing in order to hire and manage your VA’s effectively.  And, be sure to have a seamless approach that integrates the best marketing strategies and methods to serve your targeted market segment(s).

 

 Austin William Walsh, a 19 year old entrepreneur with his own business since age 16, covered the role of Face Book in social media and how one must truly understand the sales funnel, how to drive traffic, and how to utilize social media as a part of that funnel.  Social media is continually evolving as we see with Face Book out-pacing Google.  Overall, there was a substantial focus on building and using Face Book Fan Pages for business, and how to build and monetize your brand.  Probably an understatement, but doing business online will be essential in the near future, if it’s not already, especially in real estate endeavors.  If social media is an area that you aren’t utilizing or just starting to look at, it is definitely worth your time to familiarize yourself with the dynamics of this marketing medium and make it a part of your business plan. 

 

There is definitely a major trend toward the use of short videos in all online presence.  Get your flip-cam and start to explore how to use and edit.  Videos are already beating out ‘text’ advertising.  A new emerging company, MOJO, headed by Ira Rosen out of Scottsdale, is positioned to capture the mobile market through the use of video that can readily be dropped directly into the text message being sent out to the mobile world of i-Pads, Droids, Blackberry’s, etc.  MOJO knows that video email utilization, currently not on the market, will only grow and provide business owners the capacity to have direct access to existing and potential customers.  This mode of direct customer contact will result in a higher percentage of text messages opened due to the embedded videos.  Video has a much higher capture rate than text.  The industry is definitely moving toward mobile strategies.  Soon we’ll all be making our own 30 second spots and connecting directly with the world!

 

One other note of interest about MOJO was my conversation with the principal, Ira Goldman.  He is an older entrepreneur who told me he didn’t even know how to use the computer three years ago.  Ira connected with a young man in his twenties, Cory Sanchez, who had a technical background and a great idea.  This connection led Ira and Cory to building a primarily ‘twenty-something’ staff to support a million dollar idea.  Ira and Cory were definitely on fire about the video product they are bringing to the market.  The real point to share here is that there is a great need and value to pair skills and wisdom regardless of age.  If you think you can’t jump into the online world, then you are right.  You can’t.  If you take action, pursue ongoing education, connect with the right partners, VA’s, etc., then YOU CAN!  I am a firm believer that you can learn new things if you are open to it.  It is a right, privilege and choice to learn new things; it is a choice to stay open to possibility.  Who of you are holding the next greatest idea, invention or service?  Are you open to the realm of possibility of pursuing joint ventures that are collaborative and mutually supportive?  Can you be an old dog that can learn new tricks?  Can you be a young buck open to the wisdom and experience of those older than you?  Merge the best of both worlds and see what you can come up with that will serve the planet in new ways.

 

Speaking of blending ages in business, as a result of this Summit I now have a new master mind partner who is in middle school.  He attended the entire event, sat taking notes on his laptop and already has a business building personalized backgrounds for Face Book Fan Pages, LinkedIN, Twitter and YouTube.  Got to love the spirit!  He will definitely provide great insight into anything that I am working on, and it will be easy to support his entrepreneurial ventures.  As a former teacher, a Dean of a middle school, and a professor, I must say I was impressed.  And, as for college student and entrepreneur Austin Walsh, whom I mentioned earlier, he already makes a six-figure income and speaks internationally.  He noted that when he is goes to a party, which he loves, he is busy looking around the room to see how he might, from a positive perspective, monetize the situation.  Austin is acutely tuned into cause marketing as well and really comes from his heart in his dealings with people.  How many of you are thinking that way?  How many of you are taking action?   I absolutely love to see resourceful young people who are not totally programmed for the ‘moo-baa’ herd mentality of life.  Are you involving your children, nephews and nieces, in your business in real ways?  Do they have a sense of all that goes into your business?  Have they participated in some way?  Do they get to see you win?  Fail?  Do you encourage their entrepreneurial spirit?

 

As a side-note away from the Summit, while on the topic of role modeling for and encouraging entrepreneurial spirit in youth, I’ll share how one of my accountability partners involves his ten year old daughter. This investor does a hearty business with gut rehabs and buy and holds.  His daughter goes along when he goes to work on houses and gets to see what happens to ‘ugly houses’ that eventually transform into ‘desirable’ housing.  She has helped to sweep and knock away cobwebs, helping her dad in small ways.  She also comes along to our accountability meetings and does her homework, but still is exposed to the process of our group holding each other accountable.  She even saved her own money to buy her first laptop computer.  She’s not being rushed into overly mature ways of being, but is learning about business, work ethic, the value of money and her dad’s role as a businessman.  I daresay she will be prepared to take on life as a successful entrepreneur at an early age if that is her choice.  It is my hope that you are modeling entrepreneurial behavior for any young person in your life. 

 

Ross Goldberg, an SEO expert and author, also presented his perspective on creating web-based traffic.  He supported the use of content based links as a viable way to increase your website ranking despite other alleged guru’s suggesting other methods were now more effective.  Ross noted a number of tactics useful to drive traffic to your website, including:  social media marketing, Digg and other similar sites, RSS feeds, blogs/directories, videos, press releases, article and e-book marketing, squeeze pages, affiliate marketing, and web directories links. Don’t know what all of those tactics entail? Check the web and start to understand the pieces and which will work for you.  No matter what the marketing presenter’s background throughout the event, the point of commonality was their emphasis on how to achieve effective online marketing.  Do you think that you might want to pay attention to this aspect of your business?  Yes, or yes?!

 

The topic of Google AdWords was presented by Perry Marshall, Internet entrepreneur and the most quoted authority in the world on the subject of Google AdWords and pay-per-click advertising.  Perry shared information on how to increase your click through rate and reduce the cost of your advertising budget on Google.  He also offered split testing techniques.  Entrepreneur Scott Rewick, the One Hundred Million Dollar Man, continued the internet discussion sharing his many year’s of wisdom on low-cost media buying strategies that attract new customers.  All the presenters were great and filled their presentations with lots of useful content.  It is good to learn from those who have been very successfully involved in the industry for years. 

 

And, not to leave out real estate, Marco Koslowski, shared his Luxury Home Sales program.  He deals with properties $700,000 and higher.  Interestingly enough most of these homes that are currently being auctioned off are going to international buyers.  America is on sale!  Marco is such a positive and animated presenter who is the embodiment of a rags to riches story, now owning eleven different business and ready to launch a new clothing line.  Marco persisted with hard work, failing before winning, and developing systems and fine tuning them, all recurrent themes for those who eventually make it to the top.  There isn’t an overnight get rich quick elixir.  You have to get involved, get your hands dirty and your mind fired up, and just do it!          

 

No way have I touched on all the topics covered and the incredible team of presenters at the Rainmaker Summit.  Topics such as asset protection, building business credit, and more, was also covered.  The long weekend’s value for me was ‘priceless’.  The networking and connections alone were worth the time.  In order to keep your self fresh, on top of trends, aware of new methods of doing business, refreshing that which you already know, and further challenging yourself to grow, invest in yourself.  Attending such an event has the potential to open your creative juices, unwrap your potential, create new partnerships, and help you get un-stuck if that is your situation. 

 

I invite you to identify a seminar or workshop, such as the Rainmaker Summit, that you feel is worthy of your time and funding and go for it.  It’s time to enrich your self to richness!  Since you weren’t there, I hope that you have gleaned a snap shot of what I consider quality continuing education, an invitation to the ongoing process of achieving personal growth and greatness.  See your ‘vision’.  Support it with your ‘why’.  Build your plan and systems.  Be accountable.  And, passionately take action KNOWING you can do it! YOU CAN!  Now go do it!

 

 

Let me share with you a few of my favorite tips to make the most out of attending seminars and work the room for profit finding and connecting with new customers and/or new joint venture partners.

Speak Efficiently and Effectively with New Connections

Create your own elevator pitch. You can find a worksheet easily by searching online to help you put your thoughts in order and then just refine it down to a 30-60 second in-person commercial you can use when you meet new people. Who are you, what do you do, what can you offer to them and why should they joint venture with you now? Why should they buy from you? What is your "memory hook"? Ask Jon Goldman of Brand Launcher about this powerful tool for building a memorable personal brand that will get you noticed and remembered.

Meet and Talk with the Networking Event Organizer & Enlist their Aid

If you don't already know them, or even if you do, tell them what you're doing NOW, meet with the organizer and introduce yourself. Let THEM know you're looking for customers and/or joint venture partners and what criteria is your desire in new JV partners or customers.  If the organizer is smart, they will connect you with others, and they have ears in the room as well that can be on the lookout for more potential people you should meet and possibly JV with right now, or other event attendees who may need what you sell.

Create Win-Win Joint Ventures

Strive to create win-win scenarios when you position joint venture deals. You win, they win. We all win!

Set Appointments for a Specific Time to Talk After

If you have any free time, make an appointment with them WHILE you are there for later. Get it down on everyone's calendar. Don't let life and the infinite details and time-wasters of everyday minutiae get in the way of your new customer prospect relationship or potential JV opportunity. If it's important, schedule to talk again NOW.

Be Ready to Learn and Take Notes

Have an idea capture and follow up system that works for you (have you considered a digital voice recorder? I use an Olympus digital voice recorder for myself) and a small notebook or index cards in my back pocket…(aside tip: later you can use something like www.instantconference.com  which records phone calls for free: I use it on calls when discussing business so there’s a record of what everyone said and committed to…and for coaching sessions with my students- once we're done I just send them the sound file)

Whatever you do, get those big-money ideas captured in some form so you can access them later at your fingertips.

Capture the Diamond Ideas of Others

Another interesting idea I learned is to carry your voice recorder, Flip Camera, or just a notebook and ask people their one best idea of "What's working NOW". I usually use a flip camera. Bring your digital camera or digital video recorder and who knows, could you not maybe create the beginnings of a product from these answers and connections?

Ask them: "Tell me your best internet marketing tip", "Tell me your best coaching strategy", "Tell me what internet marketing technique is working for you and your students right now?" and give them reciprocity with a second follow up question- "Can you tell everyone how they can get in touch with you if they want to learn more?". Doing it on VIDEO is best!

 Provide Massive Value Above What You Ask in Return

Potential JV Partners and prospect customers are easy to find at the right seminars and networking events if you keep your eyes open and provide value to them, are enthusiastic and believe in yourself, and are persistent.

Think "how can I provide massive value to this person?" and they will want to do business with you, either as a customer or a joint venture partner as appropriate.

When you’re looking for potential business connections who are both experienced and successful, you’ll find that these entrepreneurs are consummate capitalists. They understand the capitalist system of giving value to receive value.

And they are most open to helping others when something they want or need is offered to them in return. Find out what that "massive value" is and offer it!

People are always looking for ways to get more business, aren’t they? I want to encourage you to not overlook your existing customer base—the people who already know who you are and have already done business with you. Service your existing customers. Let them know that you care about them. These people represent one of the easiest ways to get more business.  

I just put out a post through social media the other day on one of the groups that I control that said something like this; every day imagine that people you meet have a lanyard around their neck with a huge placard that says make me feel special. 

What do I mean by that?  What can you do to go out of your way to make people feel special? What can you do to wow them? What can you do to make sure they want to stay connect? You provide good service. You follow up. You inquire about their lives, and you show that you remember each of those things.

The next time you speak to them, you add value for them without having to sell them something. What do you do the next time? You add more value. What do you do the next time? You ask them to add value to you, perhaps by referring people in their local business area or their centers of influence, to do business with you in the way you've already done business with them. 

Again, never forget when you're looking to get more business and find new prospects to talk to about your product or service, go to your existing customer base and ask them to refer people to you. 

Anther great way to get more business is to open your mouth.  You know—that thing God gave you one of. Of course, he gave you two ears and we've all heard that old joke about what you should use most. Use your mouth. Have an elevator pitch. Be able to tell somebody exactly within at least five seconds or so, what it is that you do, how you do it, how you can help them or someone that they know and ask them if they know someone. 

Let me give you an example that works in real estate investing. Let's say you're looking for private investors for your projects, it might be rehab projects or commercial projects if you're raising money from equity partners. One of the quick ways you can find out whether somebody is able to do something with you is simply to ask them.  

 Do you happen to have any money that's not placed in a secure investment of at least 8-12%? Do you have any money in a money market account that you'd like to be getting four times that? These are simple and quick questions—hooks you can put at the end of your elevator speech that will get somebody who is your perfect prospect as a private investor to raise their hand and say, “Yes, tell me more about that.” 

   Of course, that's when you let them know, “Hey, in order to tell you more about that we need to do x, y, and z.”  (That's a legal question not a marketing question.) However, you've got that person to follow up with so you can do so at your own time and put them through the process you have for accredited investors and qualifying them.  

Let’s take a look at two different strategies that are used in both commercial real estate and residential.  These strategies require different approaches and have different risks.  A brief definition of a momentum play is purchasing a property that is already cash flowing with little or no changes.  This is often done in areas where rents are on the rise.  It reminds me of a blue chip stock ~ slow and steady.  Repositioning a property requires upgrading a property, including upgrading the clientele.  Often these properties require significant rehab work.  The show Flip This House is based on repositioning.

Momentum plays are less risky and thus have a lower return on investment.  The capital investment is lower.  Generally, a momentum play requires a 20% down payment and some money for capital reserves.   This property is already cash flow positive and the goal is to look for ways to improve that cash flow.  No large sums of money are necessary for rehab, improvements, or negative cash flow.  This is a good place to consider investing for a first commercial project.  Let’s take a look at an apartment example.

We always buy value plays, as noted in previous blogs.  The apartment building is $1M purchase price with a $100,000 NOI (cash flow not including debt service).  Debt service is $80,000 on an annual basis.  That means the $200,000 in down payment earns 10% annually also known as 10% cash on cash.  That is $20,000 annual cash flow to you.  The first year you increase rents, reduce maintenance costs, and start charging utilities back to the tenants.  Overall, you increase the NOI to $120,000.  Now your cash flow is $40,000 annual cash flow and the value of the property is $1.2M.  Not bad.

Repositioning a residence is fairly simple and well understood.  The investment is for the purchase, rehab and carrying costs of the project.  Generally, the object is to sell the property for a quick profit.  When looking at repositioning a commercial property, there are significant investment requirements.  Rehabbing a commercial building means both construction costs and significant negative cash flows during construction.  A reposition play usually involves decreasing vacancy, increasing rents, and increasing the quality of tenants.  The rewards can be extreme.  One needs the financial backing to complete the project during the turnaround before running out of cash.  Repositioning a commercial property is a good choice for the experienced investor with deep pockets.  Let’s take a look at another apartment example.

The apartment building has a $1M purchase price with an NOI of $20,000.  Debt service on this project is $80,000 as in the example above, however you’re only getting $20,000 to pay that.  You’ll need to invest more money to make the payments on this project.  Vacancy is running around 50%.  Rents are way below market value, but the condition of the property dictates the lower rents.  Rehab cost estimates are $200,000.  You will need at least $200,000 for a down payment + $80,000 holding costs + $200,000 for rehab costs.  So why would anyone buy this building?  Upon completion of rehabilitation and stabilization of rents to market rents will provide an NOI of $300,000.  Once complete, this project will cash flow $220,000 and have a value of $3M.  Notice there is a bigger appreciation play and less cash on cash in this example.  This might be good for experienced individuals looking for high appreciation.

While the reward is higher when repositioning a commercial property, the investment and risks are higher.  Be cognizant of the type of strategy that is right for you and your investors.

Dealing with Rejection
National advertisers will tell you that in a direct mail campaign, you are really doing very well if you get a 1 or 2% response. What will make you get out of this business, keep you from trying harder, and stop you from doing as much as you know how to do, is rejection. Rejection is the big killer of real estate investors. But if you filter out the people who aren’t qualified to give you a resounding YES, you will be further ahead on your deals.
If you have to buy from somebody whose property was for sale, you’re buying from a very small sliver of the total population. You’ve got 33 times as many potential deals, if you stick to properties that are not for sale.
So, if you’re going to use the mother-in-law method, you can’t be talking to people whose houses are listed for sale or whose warehouses are handled by a management company. Those people are not going to tell you what the emotional motives of the buyer or seller are.
First, they won’t know their motives and second, they wouldn’t tell you if they did. They have a completely different goal in life, which is to keep you away from those people. They think that those people will make a mistake and sell too cheaply, perhaps causing them to lose part of their commission.

Key Point
• When you buy, you should buy hoping you will never have to sell, and structure the purchase consistent with that idea. Only enter into deals that are bound to survive for a long
time because the cash flow is excellent or assured.

Playing with Monopoly Money
Look for sellers with substantial equity, those with that “monopoly money.” Buy properties that make the cash flow work. ‘If someone has lots of monopoly money, he’s got two or three ways to sell you deals, so you can be fairly certain it’s going to cash flow. Although a seller may quote you a price that’s a good deal less than the property is truly worth, don’t count on people doing that very often. Take advantage of the fact that when you have considerable monopoly money, you could discount your price. If you don’t discount, then give equity or debt on such great terms that the deal will cash flow.

In my last post I shared with you an actual deal under contract.  As a reminder, here are the particulars: ARV  =$85,000, Repairs = $10,000, Sale price = $42,000 with a 30 day cash closing.  In this case the investor is looking to wholesale the deal for a quick profit of $8000 - $13,000.  Let’s explore some of the other exit strategies and options.

Fix and flip using hard money: If the market is moving in the area, the investor could seek funding via a hard money lender (5 – 7 points, plus 14% interest).  In this scenario, the investor will pay an additional $5000 or more in interest and around $2000 in closing costs.  That brings the total cost to $59,000 with a potential profit of $26,000.  The investor would need to get the repairs done quickly and get the property back on the market.  If a realtor is used to sell the property, the potential profit would be around $20,000.  Before choosing this option, the investor would want to have a reasonable expectation of selling the house quickly.  That may mean lowering the asking price, thus reducing the potential profit and increasing the risk. This strategy probably is not the best choice for this property.

Fix and flip using a private lender: Using private money can make these deals extremely profitable.  Generally you can offer private lenders as little as 8% interest making the holding costs reasonable.  In this case a private lender provides $55,000 for the purchase, repair, transaction costs and all holding costs.  If this money is used for six months, the interest @ 8% is only $2200.  That brings the total cost basis to $57,200 and a potential profit of $27,800.  Again, the investor must evaluate the market and determine if there is a reasonable expectation to make a timely sale at or near the asking price.  This is an example of why you really need to build a network of private lenders.

Sell at retail: Based on the negotiated 30 day closing, this one is unlikely to work well.  It would have been possible if the investor had negotiated a 90 day closing or used an option to control the property.  In this scenario the investor markets the property to a list of first time home buyers.  He sets the price below market value, let’s say $80,000.  The investor advertises that the first time homebuyer’s credit will be matched with a full price offer within 30 days.  The investor advertises that the new owner will have an opportunity to pick out colors and countertops (something that needed replacing).  That brings the cost basis to $60,000 ($42,000 purchase, $10,000 repairs, and $8000 tax credit match) and the sale price of $80,000 brings a potential profit of $20,000.  The nice thing is the repairs will only be done after the closing.  The buyer has a new home that has $13,000 built in equity and gets a check from the government for $8000 to do more updates or furnish their new home.  This strategy requires a little more time than 30 days and a list of retail buyers.

Free and clear, seller carries the mortgage:  If a seller is motivated by the hassle factor and doesn’t need the money right away, this may be a strategy.  In this case the owner does not have a loan on the property.  The owner may not want to pay the taxes for the sale of the home all at once.  Whatever the reason you negotiate a sales price higher than they are asking.  Crazy right?  Not so fast!  Let’s say we offer $55,000, no payments for six months, and then monthly payments of $200 for five years with a balloon payment of $43,000.  Notice I didn’t mention interest; these are principal only payments.  The money for repairs would need to come from personal resources or a private lender.  Now you can sell the property with a rent to own or on contract to someone else.  With the rent to own you get a non-refundable option credit (NROC) from a new home owner.  In this case, we sell the home for $85,000 on a two year rent to own with a $5000 deposit.  You collect rent for $800 a month minus $400 costs ($200 to original seller, $200 for taxes and insurance) for a monthly cash flow of $400.  At the end of two years the new buyer has to finance the deal and pay you $80,000 ($85,000 - $5000 option) at which time you pay off the original owner $50,200 ($55,000 - $4800 from monthly payments).  You pocket almost $30,000 at closing plus you’ve made $400 on a monthly basis (tax free if done right) for the last two years.  There are many caveats to this strategy; however it can be a great builder of both cash flow and long-term wealth.  The same type of thing can be done by selling on contract.

There are many other strategies that can be used.  It is important to know what is going on in your particular market and have the contacts to make an exit strategy work.  If you don’t have a list of people looking for rent to own, then that may not be the best strategy.  That is why it is important to build your network and your list for the particular types of transactions you like to do.  I’d like to hear comments back on other strategies that might work in this situation.

When we were in the car, I asked my mother-in-law, “How do you sleep at night?” She didn’t understand what I was talking about, so I said, “Are you kidding me? You stole that woman’s house.”
She became very indignant and said, “No, I did no such thing. Mrs. Moore needed to get to Detroit, so I bought her a ticket. In addition, she has plenty monopoly money left over,” and so she did. She’d been in that neighborhood for 21 years, bought that house probably for $15,000, and still owed $15,000 on it. Now, she had $36,000, so she now has $21,000 in cash.
They had paid less than $25,000 for the house in the first place. So, she’s getting $10,000 profit. I hadn’t thought about that.
My mother-in-law said that Mrs. Moore wouldn’t have taken the money if this weren’t really what she wanted to do. Then she mentioned that Mrs. Moore hadn’t even called her husband to discuss the deal, which I’d completely missed.
Now, not only was she a wise investor, she also had considered the tax laws. When my mother-in-law died, she had 43 savings and loan depository accounts all over the country, including Omaha, Honolulu, two or three in California, two in South Carolina, and three in Texas.
The pivotal tax consideration was that the FDIC guarantees depository accounts up to $100,000. She had all of these accounts because when you fill one up to $100,000, you’re not going to put any more money into that account—you open another one. So for each account, she probably had more than $100,000 in each, so you do the math!
My mother-in-law’s three questions kept her in the business for over 25 years and she did it very successfully. Forget the fact that she was buying houses at 40% and 50% below market. You can see that only a tiny fraction of the people out there would sell their houses for that kind of discount.
She didn’t find these deals very often. Usually, she would buy two or three houses a year, at the most. If you’re getting seven or eight people every Saturday and you’re only buying a house once every quarter or even less, that’s quite a few people telling you NO.
However, she almost never was rejected. If you went out to see that many people every Saturday and made an offer to every one of them, you’d be rejected at least 28 times in a month probably. A year might go by and you’d buy only one house. You wouldn’t last very long, if you got that kind of rejection.