Never Confuse These Two Things About Real Estate Deals

by | Feb 1, 2018 | Blog

When it comes to investing in real estate, there are just some deals you are not going to be able to acquire. Best to know this from the start and get over it quickly. Someone else is going to get the deal instead of you, either because they were focused on solving the seller’s problem, beat you to getting it under contract, or more often than not, offered more money than you. Whatever the case may be, you didn’t get it. Also, it certainly won’t be the last time either, unless of course, you completely stop making offers.

Hey, it happens to everyone. I hear investors all the time say they lost a deal to another investor who was willing to pay more for it. And if that’s why you didn’t get the deal, stop thinking you “lost” it. You didn’t lose it. If you did your due diligence, and offered the right purchase price (i.e., one where you can make the profit you want), get over it and move on to the next deal.

Are you questioning whether you offered the correct purchase price? If so, that is totally normal, and you need to ask yourself the following questions:

  • Did I determine the correct ARV?
  • Did I do enough due diligence to determine the complete scope of work?
  • Did I offer the right price based on these factors along with the profit I wanted to make?

If you answered “YES” to all of these, then you should feel good about your offering price, and not confuse losing a deal with someone else making a mistake that’s going to cost them money. However, if you low-balled the seller, then we are talking about a completely different situation. In this market, there’s no room for being too greedy. Whatever the case, don’t beat yourself up over it.

Most of what we are seeing right now is investors paying too much just to get a deal. Why are they doing this? They are very new and don’t have enough experience yet. Emotions are taking over their decision making, especially when pressured from a wholesaler to buy the deal before someone else does.

If this sounds like you, don’t get sucked in. No matter what your deal flow looks like, it’s a dynamic market. This means that deals are happening all the time. Real estate deals happen every day and that’s not going to change. Be patient and find the one that works for you.

You have a Real Estate deal in Texas and looking for someone to help you with hard money loans? We can help! We have a three-time award-winning hard money lender, with offices in North, Central Texas, and South Texas

Did You Know There Is An Over-Under In Real Estate Investing?

by | Sep 28, 2017 | Blog

You may have heard of the over-under in sports gambling. That’s where you bet on whether the combined score of both teams will be either higher or lower than that number. But did you know there is an over-under in real estate investing? That’s where an investor overestimates the ARV, underestimates the scope of work required, and basically pays too much for the property.

You might be asking what’s the similarity here? The answer: Whether you are gambling on football or gambling on your deal, you can lose money doing both. And with real estate, the losses can be much greater than some insignificant football wager. Still, many investors don’t even realize they are doing this, let alone think they are gambling. Let’s break down how this happens so we can understand how to avoid it.

Overestimating the ARV

Here are the most common things that contribute to inaccurate ARV’s:

  1. Taking the wholesaler’s word for the value without doing any due diligence.
  2. Looking at the comps and picking the highest one.
  3. Using the tax assessed value for the ARV.
  4. Thinking the appraisal is “too conservative” and this deal will actually sell for more.

If these sound familiar, beware that there are huge risks associated with these approaches that involve losing money.

Underestimating the Scope of Work

Even more than ARV, the scope of work required often falls short due to the following three reasons:

  1. Prior to purchase, major items were overlooked or unforeseen due to improper assessments. Things such as foundation work, roofing, HVAC, and plumbing, are the most common and have the most significant impact on increasing the overall costs.
  2. The investor believes they can get the work done for a much lower cost than is actually possible.
  3. Believing the wholesaler’s rehab estimate without doing your own due diligence.

Avoiding These Pitfalls

An accurate assessment of the value of the property starts with getting an appraisal. Using any other approach will only lead to problems. If you have been on the I.M. Blog section of our website, you know that this is something that has been emphasized since the beginning. The appraisers we use are experienced with investor deals and know how to evaluate a property that needs to be rehabbed. Also, they are never told to be conservative with their assessments.

If you are not experienced in determining the overall scope of work required to reach the ARV needed, get with an experienced contractor to help you understand the true cost of the project, so there are no expensive surprises. There’s always going to be something that pops up unexpectedly, but missing major items can be avoided. Be realistic and don’t gamble with your investment.

Have a Real Estate deal and want a hard money loan to flip? We are a 3-time award-winning hard money lender, with offices in Dallas, Austin, San Antonio, and Houston.

Make Goal Setting Easier On Yourself

by | Jan 11, 2017 | Hard Money Lender

Many of you may know that there have been studies that show that those who write down their goals accomplish significantly more than those who don’t. I know I’m preaching to the choir with some of you here. While others might be thinking this is so cliché and such a waste of time.

If you think it’s a waste of time, follow me for a minute here: How are you ever going to get where you want to be with your real estate investing if you don’t have some idea or goal in mind? How will you be able to measure if you are getting there? Do you really want to leave it up to chance? Wouldn’t it be better to take charge and have a plan?

If you want to go to the movies, do you just hop in the car, start driving and hope you end up at a place with the movie you want to see? Of course not. How much more important is it then, to have a goal for the really important things in your life—like building real income and wealth?

So you need a goal to plan your path and measure your progress. For your goal to be measurable, it needs to be specific. The hard part sometimes can be figuring out what your goals should be. Hey, I get it because I have struggled with this too.

Keep in mind that there are basically three types of investing strategies for single-family real estate: buying rentals, flipping houses and wholesaling. Utilize one, two, or all three of these strategies, with a singlegoal for each like:

  • Buy one rental house this year to increase your positive cash flow each month by $400.
  • Flip two houses this year for a combined net profit of $40,000.
  • Wholesale three houses this year for a combined net income of $25,000.

These are just examples and you can use them, tweak them, or write your own. These are good goals if you are just getting started. If you already have your own goal, great! The important thing is to write it down. Just don’t get bogged down into having too many goals and then never accomplish any of them. Keep it simple and specific.

The best advice I can give you if you don’t know what goal to set is to make it easier on yourself by starting with a single deal, with one investing strategy, and write down one goal to accomplish for 2017. This will give you some momentum, which will only build the further along you get. Hope this helps you have a successful investing year.

If you are into Real Estate and you have a deal in hand and looking for a Hard Money Lender in Texas, please contact us today and we will discuss the details accordingly.

The Power of a Mastermind Group

by | Jul 20, 2016 | Blog

Most of you have probably heard the saying, “No man is an island” by John Donne, a 17th Century English author. I heard someone say this at the first mastermind meeting I attended as the reason they wanted to be part of it. It has resonated with me to this day. Translation: no one person is 100% self-sufficient. We all rely on others at different points in our lives. Not only in our personal lives but also in business. Having a team that you can depend on in a business environment is critical to your success.

Now this might not be intuitive if you’ve never been in a mastermind group before, but I want to make it absolutely clear that one of the most valuable assets you can possibly have for taking your real estate investing (or any business endeavor) to the next level, is a mastermind group. I can tell you in all honesty that I would not have the portfolio, the resources, or the knowledge base I have today, without my mastermind group. In fact, most of what I know about real estate investing came from being part of my mastermind group.

I learned how to buy deals correctly, protest property taxes, find the best real estate attorneys, create special provisions to my leases, find my property manager, find my CPA, as well as excellent tradesman for any type of work—all from my mastermind group. I’ve learned more than I can possibly relate here, but literally, I’ve found resources on anything involved with real-estate investing from difficult situations with tenants and clients, code enforcement, the city, contractors, etc., from my group. I have also done multiple deals with everyone in my group—we all do business with one another. I cannot stress enough how it’s more powerful than you can possibly imagine. So if you are currently not in a mastermind group, I encourage you to get one started ASAP.

So What Is a Mastermind Group Anyway?

The mastermind group concept comes from Napoleon Hill’s book Think and Grow Rich. If you haven’t read it, I highly encourage you to do so. At least read the chapter on the mastermind concept. For now, you can watch YouTube videos where Napoleon explains the concept if it’s completely brand new to you.

Basically, the concept is this: the whole is greater than the sum of the parts. That is, 1 + 1 = 3. The point is that 2 brains together are actually equivalent to 3 brains on their own. This principle works exponentially the more minds you add. So imagine the power of 15 people. This synergy will produce valuable information that will propel your real estate investing faster than anything else.

Who Do You Need In a Mastermind Group?

There is no hard and fast rule about who must be in your group. For example, our group consists of full-time real estate investors and everyone owns rental property. We have agents, brokers, an appraiser, some lenders, an accountant, a financial planner, and some wholesalers as members. However, we weren’t looking for those types of backgrounds when we got started, it just happened to evolve with those individuals over time. Just to give you an idea of the volume of business we do, combined we close over 100 transactions each month.

What’s key is that those in your mastermind group are open, honest, and trust each other. We have no secrets, and no one would ever go behind anyone’s back in a deal! We discuss everything openly and I consider everyone core members of my real estate investing team.

Starting Your Own Mastermind Group

So how do you start a mastermind group for yourself? Begin by networking with people in the real estate investor community (i.e., local investor clubs, meetup groups, etc.) Find those people that are at your level or higher—those that have different backgrounds but share your goal of getting to the next level in their real estate career.

Focus on finding someone with similar interests (wants to build a rental portfolio, flip houses, etc.) and start meeting with them on a regular basis. Then, add a 3rd person that you both agree to bring into your group. Have a meeting or two with them and then find another person and add them. Don’t rush into adding too many people at one time or feel like you have to build a large group immediately. This is about quality, not quantity. You need those individuals where you can build strong relationships of trust.

Setting the Ground Rules For Your Mastermind Group

As with any organization, it’s important to have a set of rules or guidelines that everyone can follow so that meetings will be taken seriously, and you will make the most productive use of time. After a few meetings, it will become easier to get a feel for how you want to structure it. You certainly don’t have to do it the way I am going to describe, but after 10 years of meetings, I have found the following to be most effective:

  • Group Size: No more than 15
  • Frequency: Every other week for no more than 2 hours
  • Agenda: Roundtable discussion where each person has about 5-7 minutes to discuss what they are working on and/or bring up any issues they are seeing or experiencing in the market. Maybe have a guest speaker occasionally that adds value to the entire group.
  • Participation is Key: You want a group where everyone participates in the roundtable discussions. If you have this, meetings take on a life of their own. This is where the real “mastermind” takes place. Once everyone has heard from the rest of the group, the meeting can take on a new form where members can jump into the conversation and share what they believe would add value and benefit the entire group.
  • Attendance Policy: Try to get everyone to commit to attending every meeting
  • Adding New Members: Pace yourself here and do this slowly by getting consensus from the group on specific people to add.
  • Removing Members: It’s important to have the right people in your group to have the most success. From time to time you may need to remove more than one person, so don’t be afraid to do this. Anyone who never shows up, is toxic in the group, is a pessimist, or brings the meetings down, needs to be removed. If you don’t, you will regret it because other members will leave your group. To remove someone, simply send an email with a message like this: We have had some members that have not attended any of the meetings. I am requesting that anyone who does not want to participate, to please let me know and we can remove you from the group email list. Or, give them a call them to explain the fact that you (and your group) feel that they may not be the right fit for the group and that you are going to remove them from the email distribution list.

Conclusion

Find the right people, the right venue for having the meetings, and have fun with this. After your first meeting, you will experience the value I have described, will look forward to every meeting, and will soon watch your real estate investing accelerate to the next level.

If you are a Real Estate Investor, looking for a Hard Money Lender, contact us today!