A Guide to Being Successful in Real Estate
April 25, 2020
Success in real estate does not happen by luck. You need to follow a solid plan, know the good drama, and make the right profitable offers to make good money. You need to be focused and follow your action plans faithfully to get to success.
This doesn’t mean that you have to be a millionaire to be able to make investments. To be successful in real estate, all you need is the right mix of three components – desire, time and commitment.
This article will guide you through the simple basic steps that you need to make big in real estate.
Why you Should get into Real Estate
Instead of asking what you might lose in real estate, you should start asking how much you have lost already because you are not into real estate investment.
Real estate can be more effective in getting returns than a day job could. It starts with where you choose to live, whether you are renting or leasing or purchasing a house – everything is related to real estate.
Not being part of it can cause more harm as you wouldn’t be aware of the right choices that can save money for you. Here are some advantages of real estate over other businesses:
- Price appreciation rates are usually 3% to 6% per year.
- Tax advantages
- Provisions for debt or leverage
- Rent can cover maintenance expenses
- High return on investment
Ways to Make Money in Real Estate
There are plenty of ways through which real estate can be used to make money. It is not just buying and selling of properties. More options mean more channels to maximize income. You just need to educate yourself on the market needs to choose a good way to make money through real estate:
Buying- Renting
- Rehabbing properties
- Wholesaling properties.
- Lease optioning
- Money brokering
- Consulting
- Property management
- Real estate agency
- Mortgage brokering
- Establishing affiliations
- Land developments
- Presenting seminars and writing books
- Buying preconstruction property
Whatever be the route you take into real estate investments, make sure you stay narrow and focused on it, so that you can take advantage of every opportunity that particular way provides.
A Plan for Success
Goal Setting in Real Estate
What is your vision?
Your vision will define how far you can go. Achieving success in real estate does not just depend on understanding contracts and laws. The people who make it to the top have the desire to reach somewhere and set realistic goals that can push them forward.
Most successful investors know very little about the technicalities. All they have is a concrete action plan.
Have you validated your ideas?
Once you have a list of goals, and a solid action plan, you should share it with people around you. Experts, mentors, people who know nothing about real estate. You might be subject to a lot of ridicule; some might tell you why these goals cannot be accomplished.
There are different types of people who will offer you advice on your ambitions, and you must know what to pay attention to:
- The first category of people is the ones who have zero experience and will invalidate most of what you say. You need to completely exclude their opinions from any decision making.
- The second category of people would be ones who have at least tried something, failed and ended up somewhere in the middle. Your gut might tell you to completely ignore these people, but there is a lesson to be learned from failure. Try to understand what caused their limitation. If they took a course, how long did they stick to it? If they tried a new technique, how well did they research it? What caused their failure could offer valuable insights that you can utilize later in life.
- The third category of people are the mentors and experts in real estate, and people you should be listening to. They have tried and succeeded, and they can show you what they did to get there.
Build a Team
While most real estate investors might choose to go solo with their business affairs, it is recommended to build a team and work with them. Here are some pointers to help you choose the best team members who share your beliefs:
- Build your team through good references
- Look for experts and experienced people from group three mentioned earlier.
- Present your business plan and goals professionally to your possible recruits.
- Focus and nurture referrals. About 60% to 80% of business deals come through referrals.
- Motivated sellers, buyers, and sources of money – your team members should be able to provide you with access to these three sources.
Some professionals you can team up with include real estate agents, mortgage brokers, people with money who can invest, escrow agents, real estate lawyers, accountants, appraisers, contractors, business people, insurance brokers, and other real estate investors
Foreclosures
The key to making money in real estate is finding people who are ready to sell below market prices. And surprisingly enough, there will always be people willing to sell for a lesser profit.
The reasons could be many like death, divorce, financial troubles, and property taxes and so on. But there is one particular motivation that can help you identify such sellers. It is foreclosure. If people don’t sell their houses before their lenders foreclose on them, they lose their house as foreclosure rates are very high.
So, a good way to get motivated sellers is to delve into the foreclosure market. It can happen when the owner is unable to make the payments on debt on time. Pre-foreclosures are even easier to deal with as the owner still possesses the property and is probably looking for a way to sell.
Similarly, tax sales can also be profitable as these are sales from people who have property tax dues. You will have to consider the order of debt, (that is who gets paid first) when handling these cases.
So, how do you find foreclosures? Here are some ideas:
- Partner up with police officers and fire-fighters
- Form connections at the tax office, foreclosure front, and other government agencies to contact you about possible deals
- Look into local newspapers for foreclosures announcements.
- You should also look in to finance companies to get some deals in real estate.
- Look for probate, estate sales, divorces, bankruptcy, foreclosures, and auction announcements
Make the Best Use of Newspaper Adds
Sometimes you don’t even have to dress up, get out and look for deals or meet with people. Simple work at home newspaper skimming can get you quite a good amount of contacts and deals.
Prefer to look into regional or local newspapers. Many good deals and motivated sellers can be found if you look carefully.
Look into ads such as for sale by owner ads, lease with the option to buy ads, and for rent ads.
Sometimes obituaries may also lead to a possible deal as the deceased usually leave behind a property to handle.
You can also look for investment ads and try to work with other investors.
Make Phone Calls
Phone calls have lost their respect over the years as many people tend to associate it with telemarketing. Hence, it becomes all the more important to learn to make appropriate phone calls and seal a connection with a potential seller, buyer or resource.
The best way is to be completely honest.
Equip yourself with the art of negotiation and persuasive techniques. Here are the critical components to a proper phone calling. Block time in your schedule to focus on making the phone calls.
Set a goal for the number of calls you can make in an hour. A good number would be 20 at the least. Your first call should be about gathering information.
Use the following techniques to help you make efficient phone calls
- Relax with a few deep breaths before the call
- Don’t care too much. Be worry-free and have fun
- Posture yourself to show yourself as a busy real estate professional regardless of the number of years you are in real estate.
- Show genuine interest in the people you are talking to. Don’t make it all about real estate.
- Build a rapport and make them feel comfortable talking with you. Be likable.
- A way to be likable and connect with people is to match their style. Listen and follow their style of conversation.
- Open your conversations by an honest upfront approach. If you are new to real estate, tell it. If you have doubts, get them clarified. Being honest can disarm people and make them more comfortable in talking with you.
- Remember to get an answer to the key question when calling about a property.
Look Around
Look for neglected properties like vacant homes, for sale signs and rent signs around an area. This is another way good for finding motivated sellers.
Networking
As mentioned earlier, indulge in networking to cultivate your referrals as they have the highest probability of bringing in business deals. You can only make a dozen calls every day and only a few of them will pan out to become a deal. Work with people who can bring in good deals with their network connections and experience.
It starts with fellow real estate investors, government agencies and local auction houses.
- Real estate agents
Agents have access to listing services and connect you with potential buyers and sellers.
- CPAs, accountants, bookkeepers
These people work with their clients on financial planning and will themselves be looking for options to sell or invest on behalf of their clients.
- Government agencies
Some good places to find motivated sellers would be codes court, eviction court as well as courthouses like divorce courts, probate court, and bankruptcy court.
Form connections at the tax sales department to get to know about any good deals that you can help with.
Additionally, try to gather information on damaged properties that can be put to sale — like houses developing mold, damaged by fire and water and such.
- Bankers and mortgage brokers
They can help you find good deals and may also fund your deals.
- Attorneys
Active attorneys can link you up property settlements and deals related to the cases they take up.
Some more professionals who have a wide network and can help you linked up with homeowners and investors are:
- Contractors
- Utility workers
- Post office workers
- Police officers
- nursing home workers
- Real estate association
- Other investors
Offer Attractive Referral Commissions
Show yourself as a capable real estate business person with the contacts you collect through networking. Offer something in return like a fixed cash amount for anyone who helps you close a deal. Make flyers and cards on this information and pass it on to your connections.
Negotiating
Negotiation is a critical skill that determines your profits in real estate. The basics of negotiating skills can be summarized as:
- Build a good rapport with people. Be nice, ask simple questions like where they live, their situation and let them talk.
- Disarm by being personable and find out their needs and plans. Be honest and upfront about your proposition. Ask why they are selling? And find what their exact needs are. Some might be just tired of collecting rents, some might suffer from foreclosure or some might need money for an expense. Don’t just stop with a generic answer as “I need money“. Find their real motivation.
Ask Open-Ended Questions
Do not name a number first. You might lose an opportunity to go lower than that. Don’t jump to conclusions and wait for the other side to reveal their expectations. Do not show your emotions no matter how desperate you might be. Be disinterested in general and try to gather more information.
Find if they are ready to accept less than the asking price. When they quote a price, even if it sounds a good deal, try to ask and see how much lesser they are ready to take and be okay. Find their rock bottom price and only then should you quote your number. The rest of the negotiation depends on their reaction to your price. If they can’t go any lower, fix it or if it is possible to continue until you get to that point.
Besides the price negotiation, you will have to negotiate on terms like closing costs, time and any other related matters. Negotiate on every problem that comes across during the talks.
Don’t give up on a deal unless it is not getting a win for you in any way. You can always say that you have to check with a partner and remove yourself from the process amicably.
Property Analysis
Find out if a property is actually bringing a good deal or not. What makes a property a good deal depends a lot on the current market conditions. Be aware of these conditions to make wise decisions but don’t let them stop you from investing.
Property analysis starts with these three questions:
- What is the worth of the property today?
- How much will repairs cost?
- How much can you get the property for?
Once you have a good picture of worth, repairs and cost you can get a good estimate on profit. Additionally ROI and cash flow can be considered but don’t rely on these factors too much.
Contracts
Contracts can be confusing, overwhelming and seem complicated. Don’t let the complexity of a contract make you lose good deals. Don’t worry too much about paperwork and leave such responsibilities to a trust-able real estate lawyer included in your team.
In most cases, it is advised to keep it simple and use one-page contracts. Be sure to include a contingency clause, proper disclosure, earnest money, names, dates, clear title and insurance, assignment of payment of closing costs and risk.
Financing Options
Financing is the good old way to invest in real estate if you choose to buy a property. Some ways to finance are:
- Cash
- Credit
- Existing mortgage
- Using someone else’s cash or credit. This could be your partner in business.
Create an identity package to make people trust you and take over their mortgages. Your identity package should be able to showcase yourself as a professional. It should contain business and personal information that helps increase your credibility like testimonials, your work experience and so on.
Growing Your Business
When you have finally made some good deals, made offers, talked with people, got some good connections and you keep getting more responses — you are well on the track to success. But going the next step requires extra effort. You can no longer call yourself a novice. It is time to take the business to the next level and grow it bigger.
Invest in advertising. Start budgeting money for advertisements and make your brand more visible.
Learn more and spend money on educating yourself on the nuances of real estate. Attend seminars, workshops and widen your scope in the business.
Keep doing what works for you.