Category Archives: Real Estate Know-Hows

Real Estate Know-Hows

How an Architect Can Save Your Listing

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achi

You likely have forged relationships with real estate lawyers, bankers, and appraisers, among other professionals, calling on their expertise when you and your client need help navigating an aspect of the transaction. Have you considered when you might need an architect’s point of view?

Recently, a real estate agent called me about a house she had listed that had a “unique” floor plan. The first floor was awkwardly designed, and there was no place that leant itself to an intuitive seating arrangement to simply relax and watch television. As soon as buyers walked in, they turned right back around and walked out. The agent told me that none of her buyers could envision living in the house.

Here’s where my perspective came in handy. As an architect, I’m an “idea guy,” and where people see problems with a home’s layout, I see opportunities. Like most architects, I have a vivid imagination and the ability to think and visualize in three dimensions. So when agents need a fresh set of imaginative eyes to look at a property, I’m the guy they often call.

So this agent wanted some ideas about how the house could be adapted to become more appealing to buyers. We spent an hour doing a walkthrough together, and I was able to visualize a simple renovation plan that she could present to her clients. I advised taking down a wall, moving a door to an adjacent room, and creating a proper entry foyer. The job would be far less extensive than she expected, and now armed with ideas, she was able to present the house in a new light. She had something to be excited about, and she could convey that excitement to her clients.

Focus on the Positive With Older Properties

Home inspections are designed to show buyers all the flaws in a home so they can make an educated decision about whether they want to purchase. Even if they like the location of a home, the home inspection report can take the wind out of their sails if it needs a lot of work. Soliciting the advice of an architect at this moment could help buyers keep their vision alive and refocus them on the positive aspects of the house.

I don’t tell them about rotted window trim or leaky gutters; I tell them about how they can open up the kitchen, let more light into the great room, add more garage space, add on a first floor master suite, or create outdoor living spaces, all while reassuring them about the structural integrity of the house. I advise on the feasibility of remodeling and the opportunities that lay hidden within a home. That feedback can help a buyer see the pros more than the cons and keep the transaction on track.

Build the Vision for New Construction

If you sell building lots or raw land, you know how important visualization can be. I’ve walked building sites with agents and their clients, and I ask the buyer what they would like their new house to be. Will it be private or will it make a statement? Will it need a walk-out basement? How large will it be?

Then we discuss the opportunities for each property. We talk about where the sun rises and sets. Which way will they approach the house? Where would the garage and driveway be? Is the lot too steep or does it have a drainage problem? Where are the view opportunities? Through this discussion, we end up determining which lot suits their goals for their new house best. The buyers can now more easily make a choice and buy a property with confidence.

Architects help practitioners and their buyers unravel the uncertainty that can block them from submitting an offer on a property. We don’t sell anything; we remove doubts and open doors to new opportunities. If you’re wondering whether architects “give away” free advice like I do, I can say that the smart ones will. For a few hours of their time, the architect can be introduced to potential clients who may be building or remodeling a house and need their services. Beyond that, the architect and agent get to know more about how they both work and relate to clients. If that goes well, it leads to valuable networking and mutual referrals.

If you don’t already know an architect, contact builders in your area for referrals or contact your local chapter of the American Institute of Architects. The AIA will have a membership directory that often describes each architect’s specialty. When you make friends with an architect, you will broaden your vision for properties while helping your clients be more confident in their decisions.

 

Credit to William J. Hirsch

William Hirsch, author of Designing Your Perfect House, is a member of the American Institute of Architects. He’s the former president of the Delaware Society of Architects and a member of the National Council of Architectural Registration Boards.

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Real Estate Know-Hows

3 Things You Should Do Before Applying for Your First Home Loan

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By Catherine Alford

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Buying your first house is such an exciting time. You’ve finally decided not to send a rent check to someone anymore, and you’re now off on a journey to get something all your own. Sometimes getting your first home loan can be a challenge, though. Not everyone will qualify for a mortgage or be ready to make the payments on their first home.

However, there are a few things you can do before starting the home search process to make sure your finances are in order so that you have the best chance of securing a home loan at a great rate.

Here they are:

1. Pull Your Credit Report

You are entitled to a free credit report from each of the three credit bureaus every year at www.AnnualCreditReport.com. Before you look at any houses, be sure to pull this report. If you are planning to purchase a house with your spouse, they should pull their credit report too.

When you get your credit report, look for any adverse accounts that may cause a lender to disqualify you from a home loan. See if you can settle any outstanding debts or fix any errors that may be on your account. According to a Federal Trade Commission study, at least one in five people have errors on their credit reports that could affect their ability to get the best loans, so be sure to scan your report thoroughly. Does every account on your report match one you currently have? Is there something on there you don’t recognize? If so, send a letter to the credit bureau and ask them to make corrections. This can help improve your credit score, which will make you a more desirable borrower to mortgage lenders.

2. Increase Your Savings

When you apply for your first home loan, your lender will ask you for copies of all of your bank statements. They want to know how much money you currently have in your accounts. You should be genuine about this because you’ll have to explain any amount that you have in your accounts that is unusually large.

The best thing you can do is to prepare for this by increasing your savings. Work extra jobs, have a big garage sale, or cut back on your expenses and save the difference. All of this is good because you’ll want to save a large down payment as well so that you can own a large portion of your home from the beginning. A sizable down payment also helps to keep your monthly payment low.

3. Shop Around for a Mortgage Lender

When it comes time to get a mortgage, you shouldn’t go with the first lender who offers you a loan. Instead, email or call several lenders to get pre-approved for your mortgage. When you go through this process, you can see how well you work with each of the lenders, how responsive they are, and if you think they’ll help you moving forward with your loan. These lenders will often offer different interest rates and terms, and they will often have different fees. So, if you shop around, you’ll be more likely to get the best possible mortgage for you.

Ultimately, buying your first home is a very exciting time, but to ensure that the process goes smoothly, it’s important to do your research, make sure you are financially ready, and shop around for the best loan for you.

Credit to  Catherine Alford

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Real Estate Know-Hows

Let Your Tenants Paint, but with 4 Specific Conditions

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Landlords often paint their properties in shades of white or gray, which are great colors to choose because they are easy to maintain, and they make rental units easier to show.

Your renters, however, might prefer more vibrant and interesting colors in the place they call home and might wish to repaint. Is it ever appropriate for tenants to take the job upon themselves? If you agree to let your tenant change the paint color, who should pay for it?

1. Tenants Should Always Check with You First

Color harmonization can improve a person’s life. But even so, this is not a basic human right or need.

If your tenant paints without your blessing, you can deduct from their security deposit the amount it will cost to repaint, assuming they don’t return it to the original color before departing.

It’s wise to have a paint policy in your lease to make sure there are no surprises. If you allow your tenant to paint, here are some ways to go about it:

  1. Discuss a color
    Pick a suitable color scheme consisting of one or two hues. Sometimes, a tenant will feel as if it’s a vast improvement to simply change the color of a single wall.
  2. Go pro
    Consider hiring a pro to make sure the job is done right. If you do the work yourself, put extra care into protecting the floors and woodwork. If you let your tenant paint, you can deduct any money spent toward cleanup needed when they move out.
  3. Don’t paint wood
    Avoid painting woodwork and other surfaces that haven’t already been painted and that would have to be stripped to restore them to their previous unpainted state.

There is a good chance you’ll have to restore the original colors when your tenant moves out, but if you do an excellent job that significantly improves the look and feel of the unit, you might be able to rent the place with the new colors.

2. You Can Veto a Color

If your tenant feels out of place because of the color scheme, don’t laugh. The colors in a home can affect a person’s moods and overall sense of wellbeing. However, that doesn’t mean you should allow a tenant to paint the kitchen red. Reds and pinks are some of the most difficult colors to cover up.

Feng Shui and Color

Color plays an important part in the ancient Chinese art of space harmonization — or Feng Shui — and many interior decorators use Feng Shui principles to balance energies in the home. Color harmonization at home can help your tenant relax while boosting concentration. It can also enhance social interactions by helping visitors feel more comfortable.

Balancing the Elements

Although landlords and real estate agents think of white and gray as neutral, Feng Shui practitioners don’t. Both colors represent metal, and they give a space a sharp or crisp quality. Earth and wood tones, water colors (such as blue), or the reds and oranges of fire could be more relaxing, inspiring, and generally beneficial for your tenant.

3. Do a Good Job

Few tenants are professional painters, and even if you like the colors your renters use, you may not be happy with the workmanship.

But if you do allow them to paint anyway, here are some tips:

  • Acknowledge good work
    Recognize a good thing when you see it. If your tenants do a professional job, and the colors are attractive, don’t be too set on going back to neutral colors when they leave. Reward the tenants for their good work with a full refund of their painting deposit if you plan to leave the paint as is.
  • Allow them to nest
    Tenants are more likely to stay if they feel they have the freedom to decorate according to their taste, and they save you the trouble of having to do the painting yourself, which is part of regular maintenance.
  • Put it in writing
    Get a written agreement before allowing your tenants to paint. Among other things, the agreement should stipulate if and how the tenants are reimbursed if they pay for materials and labor.

With a few exceptions — notably New York City — no state or local laws require landlords to repaint when a tenant moves out. It’s important to know, however, that some small-claims courts have considered periodic repainting a condition of habitability in the case of long-term tenancies. That’s an incentive to give the green light (or the lime light, or maybe the emerald light) to tenants with the motivation to do the job themselves.

4. Make Them Pay for All (or Some) of It

For some landlords, it’s a standard practice to repaint between tenancies, and once a rental is occupied, the paint job can be expected to last for at least a year. If you select quality tenants and choose quality paint, you won’t have to repaint for three to five years.

If tenants wish to repaint during the first few years of occupancy, it’s reasonable to expect them to pay for paint and materials. Over the years, paint ages and loses its luster. Repainting then becomes a maintenance issue, and responsibility reverts to the landlord. Every material, including paint, has a natural life expectancy.

A willingness on the part of both landlord and tenant to negotiate is always beneficial.

A common solution is for you to purchase the materials and the tenant to contribute their time and labor (as long as they do a good job).

 

Credit to Chris Deziel

Chris has owned and managed 4 rental properties in Santa Cruz, CA, and Salida, CO and is a DIY handyman expert for popular sites like Pro Referral.

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Help on the Way for Younger Buyers

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Young people come out of the gate facing two hurdles to home ownership — high student loan debt and tough rules for using FHA financing for condominiums, which are often the most affordable homes on the market. However, progress is being made on both fronts, according to speakers at the 2016 REALTORS® Legislative Meetings & Trade Expo in Washington.

On the condo front, U.S. Department of Housing and Urban Development Secretary Julián Castro used the meetings as an opportunity to announce progress on a rule implementing improvements to FHA condo financing.

The rule is under review at the Office of Management and Budget — typically a last step before finalization — and Castro said it would help make condo financing easier to obtain. “HUD’s rule is out the door,” he told REALTORS® yesterday.

The rule will be open for public comment after it makes it through OMB review and is published as a proposed rule. NAR’s priorities include easing owner-occupancy and commercial-space ratios, and making it easier for condo boards to get certified by the federal government each year.

Student loan debt remains a large problem, and it’s grown rapidly in the last decade. Today 42 million Americans have an average of $29,000 in federally backed student loans outstanding, according to Rohit Chopra, an advisor to the U.S. Department of Education who was also on hand at the meetings. Of these borrowers, 7 million are in default, and each day 3,700 additional borrowers go into default. “We have a lot of work to do,” Chopra told REALTORS®.

It’s not just millennials who are racking up the debt; baby boomers, either because they’re taking out loans on behalf of their children or they’re going back to school themselves, hold a significant portion of it, said Meta Brown, a senior economist at the Federal Reserve Bank of New York who joined Castro and Chopra at a session titled “The Impact of Student Debt on Housing Choices: Regulatory Issues Forum” on Tuesday.

The debt load, along with affordability challenges that only grow as home prices rise, could be playing a role in the drop in first-time home buyers. Jessica Lautz, NAR’s director of member and consumer survey research, says 32 percent of home buyers last year were first-time buyers, a 10 percent drop from historical norms.

To help pave the way for home buyers, Castro said in his portion of the session, the FHA is reducing the amount of deferred student debt, from 2 percent to 1 percent, that counts against a borrower’s debt-to-income (DTI) ratio. That means someone with $10,000 in deferred student loan debt would have a $100-per-month repayment obligation in calculating DTI, rather than $200.

Looking to the longer term, legislation is in the works to address the issue. Among the bills, the “Empowering Students Through Enhanced Financial Counseling Act,” H.R. 3179, would help ensure students are better prepared to handle debt, and the “Access to Fair Financial Options for Repaying Debt Act,” S. 1948, would provide more repayment options.

Mabel Guzman, chair of a working group on student loan debt NAR launched in 2014, said the group is making policy recommendations to the Board of Directors this week to help position the association on the issue.

 

credit to Robert Freedman

Robert Freedman is the director of multimedia communications at NAR.

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Real Estate Know-Hows

How to Get Started in Real Estate with only $10,000

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Written by Jimmy Moncrief

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Most people want to invest in real estate and own rental property to increase their passive income and net worth.

What holds people back is that they feel as if they don’t have enough money to get started investing in real estate.

Most people have heard of the old saying “It takes money to make money”, but I challenge you to reconsider that belief.

Here are seven strategies to help you get started the rental property business.

1. “War Zones”

You can buy houses in Detroit all day for between $25,000 and $35,000. These properties generally rent somewhere between $600 and $800 a month.

The downside: These properties generally have maintenance issues.

I know, however, at least five investors who started with less than $20,000 and now own over 100 rental properties after buying in “war zones.”

2. Tax Liens

When you don’t pay property taxes for a year, your house can get foreclosed on by the local county government (or whoever is in charge of collecting property taxes). Generally speaking, counties don’t foreclose unless there is at least three years of unpaid taxes.

You buy the lien in this investment strategy (not the property). If the owner pays the lien, you get the money you paid for the lien back plus interest. If they don’t pay, you own the property after a year.

Sound too good to be true? It’s not. I know several people who have done this and have made some decent money.

The downside: There’s a lot of time involved with analyzing the liens and going through the process of taking ownership of the land. You also need to make sure you’re researching any title issues with the property. Most properties are tear-downs or land that is not build-able.

If you pursue tax liens, you might have better luck in rural areas. Major investors focus on large metropolitan areas and bid up the price to make the returns uneconomical.

3. Tax-Delinquent List

This strategy has you finding motivated sellers by searching your county property’s website for delinquent taxes. Here, you can even focus on high-end properties.

Every county is different, and some counties don’t even have a website, but here is typically how you’d go about your search:

  1. Find several streets in an area where you want to live.
  2. Search the county’s assessor of property website for those specific streets.
  3. Put in a spreadsheet of properties that were over two years behind on taxes.
  4. Write a letter to all the owners.

The downside: People who live in million dollar houses might be dismissive of you. Many might call you back, but it’s probably unlikely that most will want to address the property tax issue directly with you.

4. HUD Homes for Sale

You can search foreclosed homes on HUD’s website.

But how are you supposed to buy these homes with $10,000?

Here are two ways:

  1. Get a private loan for the rehab and the purchase. You can get private loans from a variety of sources, such as people you know and/or people who lend on individual real estate properties.
  2. Use bank financing and order the appraisal subject to completion. If the appraisal shows that you will build a significant amount of sweat equity, then the $10,000 down will probably be enough at closing. This depends on the purchase price and the lender.

The downside: There is a fair amount of paperwork and a lot of technical paperwork when buying a HUD foreclosure. And there is generally a lot of repairs to be made on these properties.

5. Eviction List

This is an underused source for deals. Going to eviction court is a great way to meet landlords who have had enough of the rental business. They are likely to sell using seller-financing. There are a lot of benefits with this strategy, as you can craft your own financing terms. Additionally, you likely have a very motivated seller, so you can purchase the property at a discounted price.

6. Property Management Companies

Property management companies are another source of deals. The property managers know owners’ intentions and whether they plan on selling. Additionally, they generally know how “motivated” sellers are.

Look on property management company websites. If they have a vacant property, particularly one that’s been vacant for a long time, look up who the owner is and call the owner or call the property manager to ask about the property.

7. Partners

This strategy allows you to go big early on. Maybe you know four people who can contribute $22,500, which gets you $90,000.

You contribute $10,000 for a grand total of $100,000.

Put the money in a LLC. Each person will own 20% of the company. The reason you didn’t have to contribute as much as the investors is that is you charged a deal fee for finding the deal and structuring all the work on the front end (finding the property, doing due diligence, financing with banks, and setting up a legal organization).

Many large multifamily investors use this strategy and charge the LLC a property management fee.

You can now buy a $500,000 apartment building with the $100,000 you raised by getting a $400,000 bank loan. Structure the bank loan so the property is able to cash flow with you being able to pay the loan to zero within 10 years.

Assuming zero appreciation and cash flow, in year 10, you will turn that $10,000 into a value of $50,000. Plus, you will have passive income from the apartments.

 

Credit to Jimmy Moncrief

Jimmy is a multifamily real estate investor and bank credit officer. He has written a complimentary bank negotiating guide on how to get around the 80% LTV rule

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Real Estate Know-Hows

How to Protect and Maintain Hardwood Floors as a Renter

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Written by Chris Deziel

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Hardwood floor maintenance is a snap, and easier than up-keeping carpet. If fact, a minimalist approach is not only easier for you, it’s actually better for the floor.

Whether your floors are real hardwood or laminate, it’s important to keep them free from gritty dirt that can scratch the finish. Beyond that, your floor should need only an occasional wipe down to keep it as shiny as the day you moved in.

Floor maintenance is critical if you expect to get your full security deposit back at the end of your lease. If your floors that have been finished with some type of polyurethane — which is most of them — they do not need waxing.

Here are six ways to protect and maintain hardwood floors.

1. Clean the Finish — Not the Wood

It’s rare to come across floors that have been finished with shellac or alkyd varnish, but if the floor in your rental unit is one of them, get specific cleaning instructions from the landlord when you move in.

In most cases, you’re cleaning polyurethane, an inert layer of durable plastic that’s water- and stain-resistant. Polyurethane, however, is vulnerable to microscopic scratches from dirt ground in by foot traffic.

2. Vacuum Regularly; Mop Occasionally

Even if you observe a shoes-off protocol, it’s a good idea to vacuum at least once a week. Use a soft vacuuming attachment, and leave the beater bar off. (The beater bar, while great for carpets, scratches floor finishes.) Don’t cut corners: lift the floor mats — otherwise knows as gritty dirt magnets — and vacuum underneath them.

Water is a universal solvent that dissolves scuff marks and stains, but it’s an enemy to hardwood floors. If left standing, it can dull the finish and create spots. Even worse, it can seep between the boards and wreak havoc on the wood, causing the boards to warp.

A microfiber string or pad mop with most of the water wrung out is best. Dry the floor with a non-abrasive cloth after mopping.

3. Use a DIY Floor Cleaner

Commercial hardwood floor cleaners are safe and effective, especially if you use one recommended by the manufacturer of your flooring. You probably don’t need one, though, because you can make a pH-neutral cleaner that does the job.

To make floor cleaner, mix the following ingredients in a bucket:

  • 2 gallons warm water
  • 1 ounce dish detergent
  • 1/2 cup vinegar

Vinegar is slightly acidic, which is why it’s a good cleaner. But not every floor manufacturer recommends using it because it could dull the finish. Minimize that from happening by applying the cleaning solution with a damp mop, rinsing with clear water, and drying the floor immediately after mopping.

4. Get Rid of Stains on Hardwood Floors

If you have pets and kids, your floor will likely wind up with super stains, stains so powerful that an all-purpose cleaner can’t even remove them. The trick to handling tough stains is to find a solvent that can dissolve them without damaging the floor finish. Here are three:

  • Isopropyl alcohol (rubbing alcohol): removes juice and wine stains. Moisten a rag and dab or rub. Stop immediately if the finish turns soft. That means it’s shellac, and you need those cleaning instructions from your landlord.
  • Acetone (or nail polish remover): the go-to solvent for paint and lacquer stains. It will also handle some juice stains. Pour it on a rag — never directly on the floor — and dab.
  • Hydrogen peroxide: rids your floor of some pet urine stains and the resulting blackening of the wood (as long as the spots are fairly small). Moisten a rag and leave it on the stain for a couple of hours.

Water Stains

Got white spots caused by standing water? Cover them with petroleum jelly, olive oil or mayonnaise. Then put a paper towel over the stain and wait overnight. The oils will seep into the finish and replace the water. In the morning, the white discoloration should be gone.

5. Avoid Sun Damage

Direct sunlight fades floor finishes and darkens the wood. If you get lots of sunlight through the windows, change the positions of your rugs and the furniture periodically to avoid transition lines caused by sun exposure. If the sun shines on a particular area of the floor every day, use curtains or shades to block it.

6. Try DIY Restoration

Refinishing the floor or restoring the finish is usually a job for the landlord. If your floors need this treatment when you move out, you could lose your security deposit if you damaged the floors more than simple wear and tear.

It’s possible to do a quick restore yourself using a floor restoration product. The procedure is simple: clean the floor and spread the product according to the directions.

But if that doesn’t work, and you damaged the floor, the money to fix it will probably come from your security deposit.

 

Credit to Chris Deziel

Chris has owned and managed 4 rental properties in Santa Cruz, CA, and Salida, CO and is a DIY handyman expert for popular sites like RedBeacon.

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3 Simple Steps to Building a Referral-Based Business

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With 20+ years working in the real estate sector, most of my best (and favorite) clients have been the result of someone else’s referral.

In any given year, 85% – 90% of my business is directly attributed to referrals. Imagine what your business would be like if every day your phone rang or your inbox received new messages from people who already trusted you because they heard great things about you?

It’s called building a referral-based business and it’s easier than you might think! Here are 3 tips that have helped me build a referral-based business that thrives.

Tip 1:  The Relationship

The relationships you build with your clients are vital to your business. Most agents and investors tend to focus more on the transaction rather than the relationship with the other parties involved with the deal. Transactions come and go, but relationships can last for an entire career and beyond.

Building trust, keeping the client’s best interest at heart and doing the right thing is the foundation for building a lasting relationship. It’s easy to feel compelled to get the latest tool or gadget that will solve all of your lead-generation problems. The issue with this approach is that most real estate professionals fail to develop lifelong relationships that can result in far greater business success over the long term. While many buyers go online to search for properties, the majority of them will be happy to continue working with the person who provided them a great service and opportunity in the past, not a stranger who electronically reached out to form an e-relationship.

Tip 2:  Build a Reputation People Can Count On.

When someone refers a friend, family member or colleague to you, they need to be assured you are going to provide the level of care that they were promised – so it’s important that you build your reputation around what you can deliver.

Building a reputation can be as easy as just doing what you say you’ll do. When you commit to a task and follow through, it builds trust. It is important to note that you must be consistent and don’t over-promise. If you commit to something, you must see it through or risk losing trust. Most people are quicker to share a bad experience than a good one, so you must understand your capabilities and act in accordance with them. If you’re not able to help, offer them a solution or refer them to someone who can.

Tip 3: Stop Prospecting and Start Cultivating

How should you spend your marketing time and effort? The answer is simple: build relationships, serve your customers and ask for referrals.

When you focus your attention on your relationships, generating leads is more fun too! You’ll look forward to picking up the phone to chat with them and you’ll enjoy taking them to lunch. Lead-generation won’t be a chore, but an opportunity to connect with some of your favorite people. What better way to replicate your best clients than by spending time with them? Here are some ways I have found success in generating referrals:

  • Make the call. Sometimes there is a specific reason for a follow-up call with a past client, but often you are just calling to check in and talk about the market or a home you saw on caravan. So many times I’ve made impromptu calls and heard them say, “I was just thinking about you, my friend is planning on selling”. It is a win-win and I am more than happy to take the information and follow-up. The important thing is that you are calling to remind them you are still there. If someone doesn’t hear from you, they’ll assume you’ve moved on. It’s the single most important reason for the call.
  • Write a hand-written note. Set a goal for how many notes you want to write each day and write your daily notes before you check your email. A good hand-written note only needs to be two or three quick sentences… simple phrases like “Thinking of you today” or “It was nice talking with you” will suffice! Everybody appreciates a handwritten note.
  • A short visit to your key referral sources. For example, in the autumn season, you can drop by with a pumpkin carving kit. Over the Fourth of July, you can bring a BBQ item or an American flag. The point is for you to get face-to-face time with your current and potential clients and when you’re working by referral, face-to-face communication is the best by far.

So there you go – 3 tips that can help you build a business that levels out the peaks and valleys of real estate sales. Before I sign off, I will say that it is important to set goals and stay at it. Implementing a referral-based business takes time, so track your activities and be consistent with your prospecting. These efforts will help you achieve your goals and before you realize it, daily lead-generation, client calls and handwritten notes will become part of your subconscious.

 

Credit to Kathleen Finnegan

Kathleen Finnegan brings more than twenty years of selling real estate, office management and investment ownership to her role as real estate agent at Berkshire Hathaway Home Services in Calabasas.

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8 Tips for Real Estate Investing Success

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As you prepare to become a successful real estate investor, I encourage you to take the following tips into consideration. They have helped me greatly as I have navigated my way through the world of real estate–and life in general. I hope these tips will make just as big of an impact on your life as they have had on mine.

Tip #1: Create a game plan.

Decide what you want to accomplish and outline the steps that you must take to get there. Who will be involved? How will you meet them and gain their cooperation? How much time will it take? Where will you find this time? How much will it cost, and where will you get this money? What’s the risk? How will you handle it?

This plan will serve as your guide each day, so you need to get it right. That brings us to the next tip…

Tip #2: Have an expert review your plan.

The first real estate investing plan I created involved me single-handedly buying 100 houses in a year. And it listed several different marketing strategies that were completely cost ineffective. I had a friend of mine (who isn’t even involved in real estate) review the plan, and he said it looked good. How silly of me!

About eight months into working this over-reaching and misguided plan, I had an expert investor review it. He tore it apart, and together we reconstructed a better plan with more realistic goals (buy 12 houses, not 100) and a more effective marketing plan. 

Shortly thereafter, I bought 6 houses, and I actually felt good about my progress. Six out of twelve feels much better than six out of 100!

Tip #3: Don’t give up.

The life of a new real estate investor is filled with countless highs and lows. You’re on a high when you think you have a property all locked up to purchase, and then you hit a low when it suddenly falls though at closing.

Or you’re on a high when you finally do close on that house, but you hit a low when you hit a 3-week dry spell and it feels like you couldn’t get a seller to agree to your price–even if you paid double.

I hit a personal low when I was jobless and $5,500 in debt from fruitless marketing attempts. But I got up early each morning and worked toward my goal of financial freedom. Even though a voice in my head told me to give up, I never did.

That’s probably the #1 key to success: Don’t give up. Even someone who’s as dumb as a box of rocks will eventually succeed if he doesn’t give up.

Tip #4: Take baby steps.

When you break it all down, big goals, big dreams, and big plans are nothing more than a series of miniature action steps or “to do” items. When you dissect the daily life of a successful investor, you’ll find that he or she does 8 to 12 things each day that are real estate related.

One item might be “Watch DVD #5 in the new investing course I bought.” Another item might be “Call the title company about the name on the warranty deed” or “Meet the inspector at the house on Watson Street.”

All of these little tasks each day add up to what is, or what eventually will be, a large and highly profitable real estate investing operation. So don’t toss that “to do” list by the wayside, thinking that your small efforts today don’t mean much. They mean everything.

Tip #5: Become comfortable with discomfort.

I was actually nervous at the first real estate investing meeting that I attended. I was wondering if I would say something stupid or if I wouldn’t fit in. After all, most of the investors in the room were 40 or 50 years old, and I was 22.

But by the third meeting I attended, I became comfortable with the crowd. Had I quit after the first meeting, I would have missed out on the very information that enabled me to buy so many properties.

I’ve learned that one of the biggest keys to success is persisting though uncomfortable situations until they eventually become comfortable. This is where true growth occurs.

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Tip #6: Do what you say you’re going to do.

As a real estate investor, your reputation means everything. They say it’s a small world, but the world of real estate investing is even smaller. So be honest, be courteous, and for heaven’s sake, do what you say you’re going to do. If you say you’re going to buy another investor’s house, by golly, you better move mountains–if that’s what it takes–to buy it!

Otherwise, your name will eventually become mud, and you’ll have a tough time buying from not only that investor, but just about every other investor in town. Believe me, I can count at least 10 local investors of the top of my head who I will NOT do business with because their word means nothing. And I know several other investors who won’t deal with them either. You DO NOT want to be black listed.

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Tip #7: Be on time.

Showing up late is just about one of the most disrespectful things you can do to another real estate investor, inspector, contractor, or anyone for that matter. It shows them that you don’t value them or their time, and time is MUCH more valuable than money. Money can be replaced. Time cannot.

When someone shows up late for a meeting with me, they instantly lose credibility. And there are countless other investors who feel the same way I do. On the other hand, when an investor or business associate shows up on time or early, it makes me want to smile, reach out my hand, and strike a win-win deal.

So be on time. You’re much more likely to create trusted allies who can help you along your path to success.

Tip #8: Eliminate certain activities.

I’ll wrap up with one more tip that is closely linked to the first tip, “Create a Game Plan.” That game plan will involve a series of goals and steps or “to do” items that you must follow to become successful. But what many people don’t seem to realize is that for all of these things to happen, certain activities in your current schedule must be REMOVED.

For example, if you’re going to attend two real estate meetings and make five offers per week, what must go? Possibly TV time. Possibly a friendship. Possibly your workout plan. Of course, what has to go is unique to each of us, but you must realize that if you’re an extremely busy person, you’ll have to make some TOUGH sacrifices.

But these sacrifices are only for the short run. If you have to quit your exercise program to have enough time for real estate, for example, then so be it. You can resume in two years after you’ve achieved financial freedom through real estate. And you’ll have more time to exercise than ever.

Early on in real estate, I gave up friendships, exercise, sleep, vacations, and leisure time. How much you give up depends on how quickly you want to become financially independent.

It can be a tough to integrate all of these tips into your daily routine at once. So for now, I encourage you to focus on the one tip that you think can benefit your investing business the most. After you’ve turned that tip into a habit that’s part of your daily routine, then move on to the next. Keep moving forward and never give up, and you’ll be a successful and financially free investor in no time!

 

Credit to Doug Smith

Doug Smith has bought and sold over 40 properties using almost every method–wholesaling, rehabbing, landlording, subject to, lease options, and more. He is the founder and president of MyHouseDeals, a company that provides a constantly-updated list of bargain-priced investment properties in some of the nation’s largest metro areas.

 

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Real Estate Know-Hows

7 Ways to Help New Agents Succeed

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When prospective agents come into Matt Schwind’s office, he asks them why they want to get into the real estate business. Many say they love houses or HGTV, but those answers are red flags, says Schwind, managing broker for the Bettendorf, Iowa, branch office of Ruhl & Ruhl, REALTORS®.

“The real estate business isn’t about houses. It’s about people. And if you can’t communicate with people — not by text or e-mail, but face to face and on the phone — then this isn’t the right business for you,” he says.

A big part of Schwind’s job is to recruit and coach new salespeople. Unfortunately, a high percentage of new agents barely make it through their first year.

Schwind and other brokers have some tips on how owners, managers, and team leaders can help newbies buck the trend and make it through year one:

1. Emphasize to them that they’re starting a small business. “I explain to them that if they were going to open a coffee shop, they wouldn’t expect to make money for the first three to six months,” Schwind says. “Real estate is the same way.”

Saving enough money ahead of time or having another source of income (like a spouse’s salary) is the only way to actually make it through those lean times.

The top 10 percent of earners in real estate made $178,770 in 2014, according to the U.S. Bureau of Labor Statistics. The median annual wage was $43,430 in May 2014. But the lowest 10 percent earned less than $23,880.

“It’s a tough business. New agents have to be realistic. They probably will go backwards a little financially before going forward,” Schwind says. “You will give up about two years of your life to enjoy the next 10.”

2. Be realistic about prospecting. David Bracy meets with his new agents every Tuesday. They talk about prospecting methods, and he offers advice and ideas for staying on track.

“If they come in and tell me they only had three appointments that week, I already know what is going to happen to them in six months: They won’t be in the business anymore,” says Bracy, vice president and managing broker of the Koenig/Rubloff Realty Group of Berkshire Hathaway HomeServices Magnificent Mile and Gold Coast offices in Chicago.

New agents need to understand that they’re not going to get paid if they’re not producing, says Eric Bramlett, broker-owner of Bramlett Residential in Austin, Texas.

“They see the TV shows and are looking for a quick buck in real estate,” he says. “But you actually have to pound the pavement and make lots of cold calls.”

3. Endorse office presence. As much as technology allows agents to do business outside of the office, there is a huge disadvantage if they aren’t involved in the synergy of the office atmosphere, Schwind says.

“If they stop coming into the office, they aren’t engaged in the business,” he says.

Schwind encourages his new agents to come to the office at least 40 hours a week and attend all the company trainings his brokerage has to offer.

4. Consider setting up mentorships. By officially placing new agents side by side with senior agents, they’ll not only get on-the-job training but also connect with an established pro. Rookies can go out on home tours, assist at open houses, and tag along on listing appointments before they do it on their own, Schwind explains. Make sure the mentors are rewarded for their time too.

5. Value customer service first. Schwind doesn’t hang photos of his top salespeople in his office lobby. Instead, you’ll find pictures of his company’s top-rated agents in customer satisfaction.

“It’s one of the things we value highly,” he says. “Those rewards are given quarterly, and they can’t be bought.”

New agents are eligible for the award, which are based on customer surveys and feedback, and Schwind finds it motivates his team.

6. Teach them the ins and outs of open houses. An open house is an opportunity to meet potential clients, so tell your new agents to invite the neighbors, Bracy says. “Eighty-two percent of those who walk into an open house buy real estate in the next 12 months,” he adds.

Don’t talk about the dishwasher; instead, coach agents on how to get open house guests to talk about themselves, Bracy says. He gives his rookies a script and series of questions for interacting with open-house guests.

“They need to create the condition where that person is talking twice as much as they are,” he says. And for safety, Bracy always has multiple agents at every open house.

7. Help newbies connect with an experienced closing team. A new real estate agent and a new mortgage broker are a bad combination, says Bramlett. Ideally, a new agent should be paired with a closing team that can answer questions or quietly step in if they see a potential mistake.

“A good closing team will typically know more than their role in the transaction,” Bramlett says, adding that it’s a key part of giving new agents the tools and resources to stay on track.

“I can’t make a new agent be committed,” he says, “but I can show them the way.”

 

Credit to Lee Nelson

Lee Nelson is a freelance journalist from the Chicago area. She has written for Yahoo! Homes, TravelNursing,  MyMortgageInsider, and ChicagoStyle Weddings Magazine. She also writes a bi-monthly blog on Unigo

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Real Estate Know-Hows

Understanding Cooperative Compensation

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Q. I am representing a buyer for a property listed in my MLS. The full-price offer my client submitted was countered, and the listing agent lowered the cooperative compensation listed in the MLS by half a percent. I made a copy of the MLS listing showing the cooperative compensation when the offer was first submitted. What is the rule on making changes to cooperative compensation after a purchase offer has been submitted?

A. Changes in cooperative compensation are covered by Article 3 and Standard of Practice 3-2. However, it’s worth keeping in mind that sharing commissions, as opposed to the details of cooperation, is not itself an ethical obligation. Article 3’s duty requires that “REALTORS® shall cooperate with other brokers except when cooperation is not in the client’s best interest. The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker.”

Standard of Practice 3-2 provides direction on how and when cooperative compensation can be changed, both to be effective and to determine whether a violation of Article 3 might have occurred. “Any change in compensation offered for cooperative services must be communicated to the other REALTOR® prior to the time that REALTOR® submits an offer to purchase/lease the property. After a REALTOR® has submitted an offer to purchase or lease property, the listing broker may not attempt to unilaterally modify the offered compensation with respect to that cooperative transaction.”

While an ethics or arbitration hearing panel would make the decision, it seems clear from your situation that the change in cooperative compensation made by the listing broker after you submitted the purchase offer would not change the amount you were already entitled to in this transaction. It also seems that the listing broker attempted to unilaterally lower the offered compensation and would be in violation of Article 3. Once you have submitted the offer to purchase, the cooperative compensation in that transaction can’t be changed without your agreement. That understood, it’s equally important to remember that simply asking selling agents if they’d be agreeable to renegotiation of the cooperative compensation payable isn’t a Code violation.

 

Credit to Bruce Aydt
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Columnist Bruce Aydt, ABR, CRB, is senior vice president and general counsel of Berkshire-Hathaway HomeServices Alliance Real Estate in St. Louis and a former chair of the Professional Standards Committee for the NATIONAL ASSOCIATION OF REALTORS®.

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