Most of the real estate properties you’ll encounter as a beginner or experienced real estate investor will need a lot of fixing, inspection, and costs. Finding a good property wherein the expenses won’t eat you up is challenging, and you have to make certain that you buy properties that you will be able to sell.

There are four main exit strategies in real estate investing:

• Wholesale, which will give you an active income
• Retail, which will also give you an active income
• Rental, which will give you a passive income
• Private Lending, which gives you portfolio income

Other techniques in flipping or keeping the property are just that — techniques. These four are the main exit strategies that real estate investors should focus on.

In applying these exit strategies, you first have to take a look at the property you’re buying. In real estate investing, you make money when you buy a property, not when you sell.

7 Steps In Buying a Property

1. You have to first tell the world that you by houses. So start by marketing yourself as a buyer.

In marketing yourself, you will be able to get more resources in looking for leads. Do not do so much advertising on ads and newspapers. They can help but not as much as getting leads from referrals and drive-bys. Most leads are generated from contacts and networks you have. Marketing yourself as a buyer will set you in this pace.

Concentrate on getting a pool of referrals. Make a marketing business card and also prepare a professional business card as you go along marketing yourself.

2. Develop two important skills in looking for good deals:

·        Identifying distress properties

·        Identifying distress sellers

You don’t just choose any property that you lay your eyes on. You have to pick them wisely. Remember, you make money when you buy, not when you sell.

In identifying which homes to pick and get fixed, inspect them diligently and wholly. Check if you should either fix the home or have it remodeled.

In looking for the owners of the properties or houses, there are five ways to go about it:

a.)   talk to the neighbors

b.)  check tax records

c.)   check for deed records at county clerk’s office

d.)  address correction request

e.)  check the utility companies

In checking for the owners, you will recognize distress sellers when they’re going through a divorce, job loss, failed business, or anything that has rendered them unable to make payments.

3. Find motivated sellers.

Making a deal with motivated sellers makes real estate investing easy for you. In finding motivated sellers, all you really need to do is ask the seller why he or she is selling the property.

4. Do the inspection.

When doing the inspection, check every corner and every side of the house. Check first if the property is really fit to be in the neighborhood or if it’s in the right place. Then check to see if the house needs to be fixed or remodeled.

Above all, see to it that you can take care of the expenses and that you’re sure you can sell the house.

5. Present your offer quickly.

In the real estate business, it is wisest to offer your deals fast, usually within twenty-four hours. Successful real estate investors would always say to make the deal and sell the property quickly. The same goes with presenting your offer to the seller.

6. Negotiate and Escrow.

Negotiations and completing the deal are inevitable, of course. Learn to say it right and how to do it right. Get to know the seller, his reasons for selling the property, and help him attain his goal of selling it that will benefit the two of you.

7. Check the title.

Always check the documents of the property. Check the title and deed of the property. Make sure it’s clear who the owner of the property is.

It is already a fact that there is a tremendous increase in foreclosures in the real estate market. This is primarily due to the generally slowing housing sales and the increase in the rate of monthly mortgage payments.

For real estate investors, this is an opportunity to reap lots of profit, and there is not only one but eight — eight! — ways to do it!

1. See if the owner of the house would like to sell it.

Without having to go through the trouble of getting the lenders involved, you can invest in the property directly with the owner. If the owner wants to sell the house, then what’s stopping you from investing in it?

2. Try to get a loan modification from the lenders.

A lot of houses are being repossessed nowadays by the banks and lenders, and around eight out of ten go back to them after auctions because the homes have low equity. Due to the increasing repossessions, the lenders would be more than willing to have the houses sold as soon as possible.

So if the owner of the house himself wants to sell it, then the lenders will be hesitant to repossess the home. They will offer a loan modification as a way of supporting the sale. A loan modification is done when the lender sees that the homeowner has sufficient income and can pay next month’s rent. The lender and the owner will then work the finances out to make it possible for the owner to sell the house. 

3. Short sale!

There are times when the owner would want to sell the house but that there is little or no equity to the house. When this is the case, the best thing you can do is do a short sale. The lender will agree to make a discount on the balance of the loan so that the owner can proceed to sell the house before the auction.

4. Call the lender and see if they will sell the loan to the house to you.

When the owner doesn’t want to sell the house, and if he or she refuses any help from you or any load modification, the best thing to do would be to negotiate with the lender directly.

Ask the lender if you can buy the loan to the house from them. You will be a note buyer in this scenario. In most cases, the lender will agree to your offer so that they won’t have to repossess the house.

5. Go to the auction and bid on it.

This goes without saying. You might have missed some good catches. When you see a good house to invest in, bid on it. Take care not to bid on houses that have no equity.

There will be a disadvantage in bidding on a house during the auction, however. You will not be able to inspect the house as you would like to. You will only be able to see the outside. You won’t be able to assess the house in this case. 

6. Make an offer to the lender after the auction.

While it’s not okay to bid on houses that have no equity during the auction, it doesn’t mean that you will entirely ignore them. Watch as the house goes back to the lenders (because there were no bids), and when you find it good enough for you, see the lender after the auction and make an offer to the lender.

7. Buy the house from an investor.

A lot of real estate investors wholesale property. There will not be much of a problem where two investors working on a deal are concerned.

8. Follow up on bankruptcy cases.

While bankruptcy stops foreclosures, houses that have been declared with bankruptcy can be brought back to foreclosure. Be sure to follow up on bankruptcy cases because the owners might just come to you for help when the foreclosure starts again.

You will see that these processes are closely ties to each other. This is proof that the most important thing in investing in real estate and making a profit out of investing is to look into the details and play it smart. There is an opportunity in every deal.

Successful real estate investors have always said that the key to success in the niches of real estate is having a system. It has been proven by many. There are also others that recommend making a unique system of your own.

Beginners in the world of real estate, however, may have problems in making up their own system. They may not be able to make one by themselves. Some would then resort to following the systems set by successful real estate investors. 

But there is one way that they can cope and realize their own style in this business. The way to start this is to be an entrepreneur.

As an entrepreneur, you’ll be able to approach your business in a systematic way, even without a system of your own. The lack of a system at this stage is not that important yet, because as you grow as an entrepreneur, a system unique and applicable to you will just come up.

The entrepreneur approach is almost the same in every business. The first thing you always have to consider in doing business is thinking of what your client really wants. First hear out what your client says he wants, and then think about what he really really wants.

For example, a client of yours is asking for advice to get more sales. So you start to think: getting more sales would mean a new and great advertising strategy. But as you look deeper into it, your client really wants his company to grow, through new advertising and more sales. And when the company grows, your client will be able liberate himself/herself through an exit strategy, having more money and living life more.

In knowing what your client wants, you’ll be able to make solutions for them which can help both of you set up your own systems in time.

The Four Personalities

An entrepreneur is four people in one. He or she has four personalities in him or her.

• The entrepreneur is a dreamer.

An entrepreneur is a dreamer, and he dreams big. He dreams of a great company that is going to be successful. He dreams up great strategies that might be impossible but improbable. He dreams of a lot of big things. These dreams will be his sketch of what to accomplish in the future. Without dreams, there will be o vision… and it might very well become a boring world.

• The entrepreneur is a thinker.

Naturally, he who thinks moves one more step forward. As the entrepreneur dreams, he starts to think if this dream was possible in anyway. With this, he will ultimately create a vision of what he could accomplish, and will accomplish.

• The entrepreneur is a storyteller.

A storyteller would tell his story in complete detail, and he very much finishes the story. An entrepreneur is the same. The entrepreneur thinks of every detail and every step that he has to take in order to reach the ending. The ending for an entrepreneur, of course, would be a successfully attained goal!

• The entrepreneur is a leader.

The entrepreneur is a leader, wherein he has a mission in life and he can lead others along with it. An entrepreneur strives on towards his goals, leading his staff along that road and working with them to fulfill it.

In real estate, an investor has to be a real entrepreneur… in the real sense of it. It’s not just about knowing what an entrepreneur does, or how he gets a deal. It’s about becoming one, being one.

If you want to be ahead of the others in the business, what do you do? What does a successful real estate investor do to be on top of the herd?

1. Have a Plan

It helps when you know what to do and what the others are doing. Determine what your end result and goal is and commit yourself to accomplishing it. Having a plan allows you to stay focused and organized in making a deal and negotiating.

2. Operate In a Niche Market

It helps to stick in one market niche. You’ll be able to focus and look for potential deals. You would know what to do with them and how to go about them.

It is actually recommended that you expand to other niches, but only occupy a portion of it. For example, you specialize in foreclosure deals. But then one of your deals went under bankruptcy. Going into the bankruptcy niche will have become an advantage on your part. But as you specialize in the foreclosure deals, you decide to operate in the bankruptcy deals only when one of your deals go bankrupt.

3. Educate Yourself

One reason that a person becomes successful is because he or she knows what to do. Even the most successful real estate investor educates himself. This is because of the changing times and conditions of the market. You have to work knowing what the conditions of the market and the homeowners are to make the deal successful.

Educating yourself can also help you expand your marketing strategies and management plans. You might be able to come across information that can be valuable to you and can help you with one of your deals.

Even when you’ve reached the top, education will never stop.

4. Understand Market Conditions

Studying the market conditions of real estates, an investor can see that there is growing competition in the market. Rising interest rates and housing prices also make it harder for you to deal with negotiations and numbers. As a real estate investor, you have to have an advantage over the others to stand out and make it big.

5. Use Systems To Simplify the Hassles and Headaches

Creating systems and using them help you become organized. Most successful entrepreneurs use their own systems, systems they are comfortable with, to keep their businesses smooth and sailing.

6. Stay Focused and Find the Deals

Deals make out a real estate investor. Using your knowledge, your system, and after studying the market conditions, you should find the deals that you can fix and negotiate.

Making the Deal

After entering the niche and educating yourself about it, it’s time to find your potential sellers. Know how to locate prospects. There are a lot of resources you can make use of to find sellers and properties. You can surf around the Web, drive around you area, or look into foreclosure listings.

When you’ve selected the area and niche that you want to cover, it becomes important for you to make yourself approachable and accessible. You not only should come to sellers and properties, you should also make them come to you!

A marketing strategy will allow you to make yourself known to your area. Send out mailing lists, develop marketing campaigns, or put out flyers or newspaper ads. Your marketing strategy should target your potential sellers. There should be a unique detail to your advertisements that can make them come to you and call you first before the others.

Talk to the sellers. Get acquainted with them and get acquainted with their property. This will help foster a comfortable relationship between the two of you and can make the negotiations go smooth.

You should secure your financing or funding as soon as possible. A lot of people would complain that the one thing that is holding them back in making a deal is that they lack the money for it. This should not be the case. There are a lot of financial resources out there — hard money lenders, private money lenders, banks, and more!

In closing the deal, you should have an exit strategy available. Your exit strategy can either be to hold onto the property you’ve bought and have monthly earnings, or you can sell it off to another investor. 

With the many tips and advice being given by successful real estate investors, it can become difficult for beginners and striving real estate investors to take in everything. All those mounting information will become a jumble in the head in the process.

That’s why it is important to have a system in investing in real estate, a system that you have researched on and one which you have tested and corrected.

T – time tested

R – results proven

U- unique

E – effective

S – save

Y – your

S – self

T – time

E – energy

M – money

This will become the code of the TRUE SYSTEM of real estate investing.

Within this system, the process of real estate investing can be broken down into ten steps. This process will be your guide in how to buy right and win, gaining wealth and profit!

THE TEN STEPS

1. Put together a “Power Team”

Your power team will be made up of the entire team that you’ll be working with throughout the process of investing in a property. The power team consists of realtor or brokers, lenders or bankers, home inspectors, contractors, appraisers, attorneys, accountants, and other people who are necessary to start and finish the project.

2. Locating Properties

In locating properties, you can either look for it in your area by driving around and looking out for notices of sales or foreclosure, or you can look in the Internet and do a wide search on properties that you can invest in. The following are some sites that can help you search for property:

www.ocwen.com

www.homesales.gov

www.foreclosures.com

www.resales.usda.gov

www.buybankhomes.com

www.firstpreston.com

www.hud.gov/homes/

www.homesteps.com

Other sources to know where to find properties are just around you. You only need to ask. Ask your family, your friends, associates, or people in the business. You can look it up on record services or auctions, too.

3. Research Property

Once you’ve found a potential property, you normally don’t go in and take the plunge. First, you need to do a thorough research on the property — its area, the market, the deed, insurances, mortgage, and a lot more.

Here is a list of websites that can help with your property research:

www.hpapts.com (Hendricks and Partners publication and website)

www.city-data.com (for specific city information)

www.census.gov

www.bea.gov (Bureau of Economic Analysis)

www.rentslicer.com (market rents)

www.huduser.org

4. Inspect Property

The home inspectors in your team can handle this. But, of course, you should still know what the property has and needs.

Here are websites that can help when you’re looking for home inspectors:

www.ashi.org (American Society of Home Inspectors)

www.hometeaminspection.com

5. Financial Analysis

A financial analysis is needed, and it is crucial that you have one. You need to come up with a solid assurance that this project won’t go down the drain. Project budgets and calculations as to how much the property will cost you and how much it will bring back to you.

One of the bases in the financial analysis of whether or not a property is worth investing in is the CAP rate. It is the rate of return on net operating income considered acceptable for an investor and it is used to determine the capitalized value of a property. The higher your CAP rate, the better results you’ll get. A cap rate of 10% is considered a very good deal. Just remember that it has to be your personal CAP rate and not the market CAP rate.

6. Negotiate and Structure Your Contract

The results of the deal will mostly be determined by how well you negotiate and structure your contract. So it is important that you pay close attention and be very critical of how you handle this process.

Within the negotiations, always ask for seller financing. Ask if the seller will be willing to pay all or a portion of the closing costs. This may not always be the case, but it would never hurt to ask.

Compare the market value of the property, and try to reduce the offered price of the property for the needed maintenance. Make sure to estimate construction costs, holding costs (mortgage, insurance, utilities, etc.), and estimate the time needed to cover them all. Estimate the other finances that have to be considered, such as the required profit for a great deal, the income to be generated to determine the profitability of the deal, and the closing costs.

Always confirm 1031 funds if there are any, prior to making your offer and prior to closing escrow. Make sure there are no prepay penalties, and negotiate a lower sales price if you find that the property has defects and requires maintenance. Confirm that there are no hidden leases existing and base your estimated income based on actual copies of the leases. It is clearly evident that you have to obtain all the documents and contracts on the property to make your decisions and for the negotiations to go smoothly.

Make a clear inventory of the property. Makes sure specific equipment are privately owned by the seller, and require an inventory list of the things that go with the property. Research and ask for the building plans, engineering, bids, and estimates that have been completed or are in the process of completion.

These are mostly some critical points that you shouldn’t forget when going through a negotiation. Remember that negotiating is just equal to producing your profit!

7. Buy it Right!

When buying and investing in a property, there are precautions and check-ups to be made with the property. First of all, you have to procure landlord insurance for your protection before doing anything with the property. Obtain bids on all the necessary components of rehab and check on the lights, plumbing, and other utilities. Make a proper budget plan for the rehab, and immediately put your rehab team to work. Time also costs money, so it is important that you optimize every second of it.

Develop contract with the default language, with specific penalty clauses, and clearly define your terms and conditions regarding payment and costs. Don’t forget to obtain copies of insurance and licenses, too!

In your rehab and improvement project, it is normally wise to start with the exterior of the property. Remember that every second counts, so you might want to start advertising the place after you’ve renovated the outside. You can work on the inside even if the advertisements are still going since it’ll be the outside that will first be shown to the public.

In offering your price for the property, remember not to offer too much too soon. You should proceed with this negotiation as conservatively as possible. Remember that you have to buy it right!

Here is a list of websites where you can get contractors for your team:

www.angieslist.com

www.everycontractor.com

www.renovationexperts.com

www.nahb.com

8. Get property appraisal

The appraisal of the property can be either done by you or a recommended contact of your lender. Always ask first if your lender has a list of appraisers. This will also help in fostering your relationship with your lenders and in building a healthy network in real estate investing.

If you’re going to choose the appraiser yourself, ask and confirm if they have any errors and omissions insurance. Most lenders do not actually accept appraisal without errors and omissions insurance so be particular about this one.

Here are some websites that you can look up for property appraisal:

www.zillow.com

www.firstamres.com

www.housevalues.com

www.cyberhomes.com

www.realestateabc.com

www.naifa.com

www.appraisalinstitute.org

www.ana-appraisers.org

www.appraiserdatabase.com

9. Refinance for Tax Free Proceeds

The financials continue to be first priority, from the start to the finish of the deal. Refinance for tax free proceeds and go over your income and profit. Remember that proceeds from loans are not taxed.

10. Retain property or do a 1031 Exchange

You have either the option to retain the property and get residual income and monthly cash flow or you can sell the property and do a 1031 exchange to protect your equity.

Throughout the process of investing in a real estate property, remember to be critical. At first glance, consider looking at purchase price, the amount of money needed to fix it up, the rent, the existing market pressures, and the uniqueness of the property and the benefits it can give. Do not forget to base your purchase price based on today’s value.

To be a real estate investor and talk to people who’s about to sell their properties is to be confident in your words and actions. Let’s face it. No one would be interested in you if you talk like a boring salesman. No one would believe you if you seem so scripted and robotic. No one will listen to you if you feel small and unprepared.

This is why before getting there on that front door and ringing that doorbell, you have to be a master of your words and actions. Because if the first thing a person sees when he or she opens the door is a fumbling, slow, and soft spoken man or woman, they’ll be dubious when you state that you’re willing to help them with their property. Who would? Would you believe that a very unsure guy could possibly help you solve your problem with your property?

In approaching a possible client and taking hold of a deal, you must say the right words, say them right, and show them that you’re sure in everything you do and say! Communication is one of the main factors that will either give or deny you a great deal.

The Handshake

Let’s start with the first contact with the homeowner. Naturally, you shake hands as a sign of the start of a business relationship.

While it may only be a form of contact to some, it should be more than that. This is the first sign of contact, and you are conveying your confidence along with it.

Your handshake should be firm and sure! A firm handshake gives the homeowner the feeling that you’re ready and confident in helping him or her. A limp and loose handshake, however, shows that you’re not that enthusiastic about your job, that you are not confident. It also somehow shows that you’re not the type who’s in control of a situation.

Words, Body Language, and Tonality

Words, body language, and the tone will set off what can be a fruitful conversation… if you say and do things right, of course.

Being polite and respectful will give the homeowners the impression that you’re there to help them out. It would be offending to most people if you would just barge in and demand that they do business with you.

Words aren’t the only determining factors. People would say, “Actions speak louder than words.” Simply put, nobody would believe you when you say you’re sad when you’re laughing or when you say that you’re happy when you look downtrodden.

The tone of your voice also conveys to the homeowner if you have the confidence and if you’re in control. If you know what you’re about, then your way of speaking would be easy-going and smooth. If you’re unsure of what to say, the homeowner will get a hint of it by the way your tone is slightly rising or softening.

Combining these three elements will make up a confident air and composure in you. Employing only one or two of the three won’t really cut it. You need all three to make a good impression and make the homeowner remember you. After all, it’s not really what you say that they’ll remember. They’ll only remember how you made them feel. And if you carry on with your business with that determined and confident atmosphere, you will surely be remembered to be one who can be called on for the job!

Downswings VS Upswings

You might have noticed that some people, when asking a question, swings their tone upwards while others state it like a sentence or a request? What did you think of the two different approaches?

Consider this sentence and try to say it both downswing and upswing:

I can tell you the options you can take. Would you like to hear it?

Try to say it upswing. Listen and fathom how it would seem to you if you were the one it was addressed to. How did the speaker seem to you? It would seem that the speaker is unsure of how to proceed, right? The speaker placed handed control over to the one he or she was addressing. The upswing tone made it seem like the speaker was weak and was not sure of how to handle the situation.

Now try to say it downswing, like a simple request. Doesn’t it sound more confident to you when it was stated downswing? It made your statement sound firm and serious. It made you sound like you’re in control of the conversation even when you’re asking if the homeowner would like to hear it or not. Hearing this kind of tone, the answer would most likely be a “yes.”

Tag Phrases

There is a tool in the English language that you can use to reinforce and bring in the homeowners to a conversation that you control. These are tag phrases. Some example of tag phrases are as follows:

… don’t you?

… haven’t you?

… that’s what you want, isn’t it?

… won’t that be great?

As you can see, tag phrases are mostly masked as questions, but are phrases that are used to offer gentle reassurances to the listener. These tag phrases are used by many highly trained people that focus on bringing in the attention of the listener into the conversation. It also serves as a reinforcement to your offers and you will be able to be more assertive, confident, and in control.

Keep It Natural

Polishing your communication skills isn’t only about making a script, memorizing it, and practicing in front of the mirror. There is one thing more that’s important, and that is to keep things natural and easy-flowing.

Don’t try to sound so scripted. You could try practicing a few lines but you don’t have to sound like it when you’re in front of the homeowner. The more scripted you sound the more the homeowner will think that you’re not sincere about helping them. The results may not be good.

Being natural and friendlier, however, can help to make the results favorable to you. Making your first conversations with the homeowner simple, easy, and natural can lead to a fruitful conversation. The homeowner will be more willing to open up and be attentive to you when you sound more conversational.

In the real estate business, everyone goes for the best price for the deal. It is with this thought that people would first consider every option that is being offered to them before settling on the winner. It is with this thought that real estate investors try to outwit one another so that they’ll be able to get the deal.

The general picture of this heavy competitive market is that investors try to outrun one another using price as the main factor. If one offers a price, the competing investor tries to offer a better one.

But it doesn’t always have to be about the price. There are people who would go for deals that have more benefits than just a good price. And, believe it or not, using this approach may be your ticket to the top!

You’ll notice that in general people do what their colleagues would do and think that working harder than the others would make you successful. That isn’t always the case. That is especially not the case when you’re in a competitive market wherein majority of you are seriously fighting to succeed over the rest.

In a market that’s full or hardworking businesspeople, it’s not enough to just work hard. You also have to work smart!

There are a few in the real estate business that have discovered a way to compete with each other without worrying about what most would worry about — the price to offer. Most investors worry about how much to offer to get a deal. Clearly, this isn’t smart way to get deals.

There may have been instances wherein an offer that is much higher than yours was chosen? Have you thought of why that happened, when your price was better?

It’s because price isn’t everything when you’re making a deal.

One thing you have to consider when trying to get a deal is what the seller wants and needs. Practicality would inspire you to think that they need the money. They do, yes. But that isn’t the only thing that they would want when you consider their emotional and psychological needs.

A person about to move out of his property would still be trying to adapt to the idea that he’ll lose his property and move into a new one. This uneasiness and the transition period to changes can be used as your weapons in getting a deal from them.

Instead of focusing on price, you focus on the seller’s needs. This is because most often than not, it’s these needs that will be prioritized more than the money.

So how do you use these needs to your advantage? Cater to it. Offer selective services that will be greatly appreciated by the sellers that they won’t care if your price for the property isn’t very attractive for them.

Here are some ideas and services that you can use for this strategy:

• Offer them a place to stay in for some time to help get used to the prospect of moving to a new place
• Offer to do the packing and moving of their stuff to their new place
• Hold back a portion of their profit which you will only give them when they have moved out of their sold property

These are just some of the services that you can offer to help the sellers accept your offer and do business with you.

In the business world, we call this a unique selling proposition. This is a well-known tactic used by many businesspeople to stand out from a very competitive market. Real estate business is no exception in having a very heavy competitive atmosphere and one way to stand out and get to the top is to offer something different and unique. Talk about working smart!