A few months ago, I read the book “Outliers” by Malcolm Gladwell. In the book, Gladwell makes a pretty compelling case for a 10,000 hour investment of time to become world class at anything. Honestly, that concept has been popping up in my mind a lot recently and specifically as it applies to real estate investing and even more specifically as it relates to making offers on properties.
Many investors have come to accept a general rule of thumb of looking at 100 properties for sale (far less if you are marketing to have sellers bring deals to you) in order to find one truly exceptionally good one to purchase. How long would it take to make 10,000 offers or to at least analyze 10,000 deals and make offers on the ones that made sense?
If one worked on their real estate business for 10 hours a day for 5 days a week that’s 50 hours per week. Then it would take 200 weeks of work to get to the 10,000 hour point. If you assume, on the high end, that you work 50 weeks per year, that is 4 years of committed effort to become successful as a real estate investor.
Many new investors think that going over a 10 hour recorded audio seminar a few times (maybe 30 hours worth) and reading a few dozens articles and tips on-line (maybe another 40 hours) that they are ready to invest. I commend people like that that are taking action, but there is still an immense amount of experience and information to acquire.
Last night, I took my 13 year old son to the hot tub at the gym and explained to him the very basics of how real estate investing works. It only took about 30 minutes to give him a very big picture overview of the process, but he is not ready to go out and make offers nor is he ready to deal with a property if he bought it. However, it is exciting to think that he could, if he wanted to, reach the 10,000 hour investment point by the time he is done with college.
Are you committed to investing 10,000 hours to learn the real estate investing business?
Until my next post,
James
P.S. Commit to excellence in your real estate investing business with us by upgrading to our Real Estate Investor Bronze Membership today.
In my last article, I shared with you how lease options and buying a property “subject to” were similar. While the mechanics of how they are implemented is very different, both offer you the ability to control a property–without getting a new loan–and, if you market and structure it correctly, can allow you to profit both on an up front deposit, on-going monthly cash flow and a large back end pay day when you sell the property.
So, what is different between using a lease with an option to buy and buying a property “subject to” the existing financing?
First, when buying a house “subject to” you are actually getting the deed to the house which will make you the owner of the house. This may give you tax benefits that you do not get with a lease option-check with you tax adviser for details of how that might apply to your unique tax situation.
Second, with a lease and an option to buy you have the option to buy, but you are not obligated to buy. That’s different than buying a house “subject to” where you are buying it at the beginning and need to be committed to following through with the deal.
So, it should be a bit clearer that you have more options with a lease option, but lose some potential benefits.
Until my next post,
James
P.S. Want to learn strategies for finding a variety of deals? Upgrade to our Real Estate Investor Bronze Membership now.
The title of this article: “What’s Better: Lease Options Or Subject To” is misleading because each one has its pros and cons. Neither using a lease with an option to buy or getting ownership and paying on an existing mortgage is always better or worse than the other. In fact, there are times when you’d be better off using one and times when it is to your advantage to use another.
In two previous articles, I discuss how “subject to” is similar to “lease options” and how they differ. In this article I will share an example of when it might be better to use one over another. Of course, there are other examples that you might discover based on your unique transaction, real estate market or personal situation, but here are two examples.
Here’s the first example: if you are uncertain about whether a real estate market is going up or down do you want to commit to owning a property? In times when the market has a strong chance of going down, it might be a an advantage to have an option on the property like with a lease and option instead of committing to ownership like you do when you buy a property “subject to”.
Here’s a second example: What if you are uncertain about where the seller will be in a year? I’ve bought houses from folks that were being incarcerated. Try closing out a lease option with someone who is in jail somewhere and is not feeling very flexible about the option at this point. It might have been better to finalize the transaction by buying the property “subject to” in that case.
Since there is so much variation between transactions, markets and your particular situation, you can’t automatically say that lease options are better than “subject to” or that “subject to” is better than lease options. You need to understand the pros and cons of each and make that decision with the help of your Dream Team.
Until my next post,
James
P.S. Want to learn more about actually implementing these strategies? Upgrade to our premiere Real Estate Investor Bronze Membership now.
A very effective, yet often overlooked method of marketing both your rentals and your houses for sale is door to door flyers in the neighborhood of your property. Residents who live near your property are likely to know someone – a friend, colleague or family member in the market for housing that they can pass your flyer on to. You may also attract the direct attention of a neighbor who is ready to buy or move up/down in their housing.
If you are local and don’t mind running around the neighborhood yourself, this method will only cost you a few hours plus the cost of printing. If you’re not available for the distribution, or just have better things to do, paying someone to distribute flyers is very cheap and incredibly cost effective if it results in a sale or a qualified tenant placement. Just remember to do a quick drive through of the neighborhood to ensure the flyers have been distributed if you’re paying someone to do it.
As for the content of the flyer, it’s worth it to take some quality photographs of the interior and exterior of the home. If your main selling point is the quality of the property, be sure to feature these in full color along with some of the basic specs of the home. If you are advertising a rent to own that’s a really great deal, make sure your analysis of the numbers is prominent and easily understood. Also, be sure to emphasize that this property is in their neighborhood and that this is an opportunity for them to choose their new neighbor. Lastly, don’t forget to include full contact information: your telephone number, fax number, email address and 24 hour recorded information line if you have one.
A more expensive variation of this method is to use direct mail to target your property’s neighborhood. Again, you’ll want to tailor your marketing message to let them know that this is their chance to mold the neighborhood by helping to select the new neighbors. To maximize your exposure, try using both flyer and direct mail distribution methods, timed several weeks apart to make sure that as many neighbors as possible get your message that you have a great property for sale or rent in their neighborhood.
Check out the Real Estate Investor Wiki for some general guidelines on using real estate flyers in your marketing campaigns including access to my recently updated how to hire a flyer delivery person which has independent contract agreements and the marketing to use to find them plus much more for our Real Estate Investor Bronze Members.
Until my next post,
James
I just posted up on the Real Estate Investor Calendar of Events the newest scheduled webinar called “Real Estate Investing Strategies Working Right Now”.
In this webinar I will be covering the strategies that are working right now in today’s real estate investing market. This is based on my own personal investing, the feedback I get from running our local real estate investor group, feedback from the thousands of real estate agents I am networked with around the country from running our network of 280 real estate investor websites as well as the tens of thousands of real estate investors I am networked with from the same investor websites and that have purchased courses and consulting from me over the years.
This is a free webinar for Real Estate Investor Bronze Members (along with the other 100+ real estate courses they can download immediately upon signing up). To sign up for and to be on the live version of the webinar, just login to the Real Estate Investor Wiki and select it from the list at the top of the homepage showing upcoming live webinars or, once you are logged in, click here: Real Estate Investing Strategies Working Right Now (requires you to be logged in).
If you have any specific questions you want to see answered during this webinar, please do post a comment below, ask during the consulting session immediately following the webinar or contact us.
Until my next post,
James
As both an active real estate investor and a currently inactive real estate broker associate who catered to investors, I have the conversation about Flipping versus Buy and Hold a lot.
So, I wanted to share with you some insight into the differences I see between the two.
First, I need to admit that I am primarily a buy and hold investor, but I do occasionally fix and flip a property to supplement cash flow needs. I am moving move towards quick turning properties.
With that being said, here is how I see the differences between buying property to immediately resell or buying properties for long-term wealth accumulation.
Buying properties to resell immediately requires that you have systems and a team in place to help you purchase, fix up/rehab, market and sell properties.
Buying properties as long-term rentals requires that you have a team to help you purchase, fix-up the property for tenants, and get houses rented. Either you need a property manager to manage your tenants or you need to manage your properties directly. Even with a property manager, you still need to manage him or her to make sure he/she is performing the job satisfactorily.
In my experience, a fix and flip property requires more personal interaction. I find myself more involved with handling the purchase, and overseeing the rehab and sales process. On the other hand, my experience with acquiring rental properties takes very little of my time. Perhaps this is because I have great teams already in place.
The biggest difference between buying houses for fix and flip versus buy and hold comes down to finances. Both require cash or access to cash via credit or a partner, but rental properties that you buy to hold long term with relatively high levels of debt, typically don’t produce a significant amount of income in the short run. In fact, having a positive cash flow of $100 to $200 a month, when you factor in repairs between tenants and improvements to the property like the occasional roof, means that you really don’t have any cash flow at all when you look at the numbers over a period of several years.
On the other hand, buying to fix and flip can generate chunks of cash relatively quickly… in a few months on a fast rehab and sale. Wholesaling properties can generate cash even faster.
So, if you are trying to generate immediate profits, I suggest looking at buying to fix and flip. If you have income from another source and are looking at real estate as a wealth building asset, I would strongly suggest you consider long term buy and hold.
Until my next post,
James
P.S. We teach a variety of short term solutions to cash flow and long term wealth building strategies to our Real Estate Investor Bronze Members. Sign up today to access a wealth of training materials (over 100 real estate courses) plus on-going training and free real estate investor consulting sessions.
