A lot of people are jumping into real estate again. They’ve heard the news that the market has reached the bottom and that this could be the best market of our generation. They’ve heard the good news that there is still a lot of distressed housing out there and that real estate can be purchased at big discounts.
One big hurdle that everyone has to get over before jumping into today’s market is FEAR. It is a dirty four-letter word that holds back action and success for many people.
5 Commons Fears
- Chicken little – the market is just terrible…
- You are “too late” to get in for the best deals
- Landlord “HORROR” stories
- ALL deals are always done with banks & brokers
- I don’t know how to get started
All of these fears are really just excuses because there are solutions for all of these purported problems.
Here are five traits of real estate investors who are capitalizing today and making a killing investing in real estate. Each of these strategies for investing will help you overcome your own personal fear and allow you to move forward in today’s market.
Here’s your roadmap for success.
1. Eliminate Bank Financing
Bank financing is a major pain to use. Yes, you can get fantastic interest rates right now, but you have to go through a huge pile of documentation, loan applications, provide copies of your leases, and practically offer blood out of your right arm to get the final loan approved.
You will be asked to put about a 25% down payment on your acquisitions. How many houses can you buy if you have to keep pulling money out of your checking account for BIG down payments? NOT MANY!
Besides the tough under-writing on loans, the big down payments, there are more problems with bank financing associated with risk. Risk with banks comes in the form of full-recourse loans and personal guarantees that can put all your future investment at risk.
If you eliminate the need for bank financing, you are free to buy as many houses as you want.
2. Buy Houses with OPM (Other People’s Money)
Buying houses is capital intensive. If you use your own money, you will eventually run out of funds and that is not fun!
What does it take to eliminate bank financing? There are two ways to do it.
First you can get seller financing. The good news on seller financing is that it is easier then ever before. Did you know you can structure your seller financing to provide you with zero interest loans? How good would your monthly rental cash flow be if you did NOT have to pay any interest?
The second way to eliminate the need for bank financing is using OPM (other people’s money) by jumping into the world of private lending.
Millions of people are struggling to figure out what to do with their investment accounts. They are tired of losing in the stock market and tired of earning less than inflation in Certificates of Deposit (CDs).
As real estate investors, we have the best solution to offer, which is investing in local real estate assets using joint ventures. It’s the ultimate winning combination.
3. Invest for the Long-Term
Everyone has choices to make with their time. You can work for income with a job or even earn a high self-employed income as a paid professional (Attorney, Physician, etc).
The other option is to invest for the long-term in assets. Would you invest your time now for many future paydays in the form of net worth, equity and monthly cash flow?
Another characteristic of highly successful real estate investors is that they invest for the long term buying rental properties. Buying and holding rental properties creates a nice positive monthly cash flow, while tenants pay down the debt on the purchase.
In today’s market, houses can be purchased cheap and rented high. We are buying houses at prices from the 1990s and renting them at rental rates from 2013. That is an easy formula that leads to success for real estate investors!
4. Buy Houses Based on Numbers, Not Emotions
A lot of new investors get caught up in the emotions of a house. They see the property with elements such as historic charm and character and then they know they can restore it to its former glory. That’s an emotional approach. Don’t go there.
There are four must-know numbers before you buy houses:
- After repair value (ARV)
- Cost for repairs
- Market rent
If you focus on these numbers, you will find success by leaving your emotional ties to a house or neighborhood behind you. Think and act like an investor, not as a homeowner, when buying investment real estate. Focus your efforts on executing an acquisition that will lead to success for your exit strategy.
5. Be a Lifetime Learner
Are you tracking with me on these first 4 characteristics of highly successful real estate investors?
I hope you are ready to move forward with your own plan to create cash flow and build your long-term net worth. A lot of investors fail because they do not invest in themselves.
Personally, I have a Masters in Engineering Management, but I am a lifetime learner, and that is the 5th trait of being highly successful. You need to commit to invest in yourself first. Take time to read as many real estate investing books as you can, take time to participate in the CREonline Forum, and take time to invest in your real estate investing training.
It takes time and commitment to succeed. Invest in yourself.
This article is reprinted here with permission from Creative Real Estate Online at http://www.creonline.com.