From an outsider’s perspective, real estate investing is what they see on HGTV. Except, there’s so much more to real estate investing than finding a distressed property, rehabbing it, and making a lot of money.
So. Much. More.
From marketing to appointments to follow up to title issues to holding costs… the list could go on and on with what it takes to get a deal.
Let’s talk about some of the things you should know about real estate investing.
1. It isn’t like the flipping shows on TV
The shows on TV show the most exciting parts of a flip, but it’s only the tip of the iceberg. What they don’t show is how much money investors spend on marketing in order to find deals and complications that can arise during the process.
With distressed properties, you’re sometimes dealing with the children of the owner who recently passed away and emotions are high when they aren’t all in agreement of what to do with the property. Sometimes the title isn’t clean and it delays closing.
In addition, most investors aren’t at the site doing the work themselves. This isn’t their expertise and the work is typically hired out. Sure, they might go visit the property, but many investors invest virtually in other states so they never see the property, ever.
2. The hardest part is usually finding the deal
With finding deals, you typically have 2 options.
- Send out marketing to potentially motivated sellers and hope that a small percentage reach out to you (this is by direct mail, cold calling, texts, online retargeting, SEO, etc).
- You hustle and drive through neighborhoods, looking specifically for distressed or vacant properties and mail to them.
The first option involves money but not too much time. The second option is cheaper but can be very time consuming.
Most of the time, you’re marketing to thousands and a small amount of them will call you back. Of those who call you back, only a portion will want you to make an offer on the property. Depending on your buying strategy, your offer may not be accepted the majority of the time.
It can take time and effort to get a deal under contract, but if it makes you $30,000, at the end of the day, it’s worth it.
3. People will call and yell at you
If you’re mailing to properties that have high equity and homeowners over a certain age, that homeowner is probably getting a lot of mail just like the letter you’re sending them.
Every investor we talk to has stories about getting yelled and cursed at over the phone because of something that was mailed to the property.
You become a bit desensitized after a while. Politely let them know you’ll remove them from your list and wish them a good day.
Realistically, most homeowners who aren’t interested will just toss the mailer in the trash. If you’re lucky enough, you’ll get a few phone calls every time you mail to a large list that are just angry people.
Don’t take it personally.
4. Some people think their home is worth way over retail value
Speaking of people reaching out to you after marketing to them… Some people have absurd assumptions about the value of their property.
It’s typically because they’ve seen another property in their area sell higher than norm, they saw an estimated online value that was purely an educated guess for the value, or they added something extra to the house that they believe will add a lot of value.
Regardless of why they think their home is worth more than it is, it’s important for us to explain that we buy homes that are typically in need of repair and we buy at a discount in exchange for convenience. If their property is in good condition, you might mention that they might get closer to their number by reaching out to a realtor and selling it on MLS.
Occasionally, sellers will throw out a high number but when you start breaking down barriers, you realize they’re not expecting the price they mentioned. Talking to them about updates they’ve done to the property already or updates that still need to be done can be a good eye-opener.
5. People still have a negative impression against investors
It’s always said that a few bad eggs can ruin the reputation for the whole bunch (or something along those lines, right?). The fact is that most investors are wanting to find a solution for the seller who is more than likely in a tough situation. We go above and beyond to make the process easy, including cleaning out the property, donating items to charity from the property, providing flexibility on closing dates, helping set up movers, etc.
People still don’t quite understand what we do and that unknown, and they assume that we’re out to scam the homeowner and take their home away for pennies on the dollar.
This simply isn’t the case for 99% of real estate investors. Don’t let a tiny percentage of bad ruin the impression of all the other real estate investors who do good for the community while making a living.
6. We adapt our business strategies to fit the market conditions
Most of us aren’t solely a wholesaler, fix-and-flipper, or someone who buys rentals. We adjust our strategy from property to property and depending on the market conditions, lean towards strategies that are working best at that moment.
In a hot market, you don’t need to do a full rehab in order to get the profit margins you’re wanting. You can usually get away with just cleaning up the property and still making similar profits compared to a full rehab. This option is quicker, involves less holding costs, and allows you to focus on new deals.
7. We’re always looking for private lenders
In order for real estate investors to do volume, they need access to capital. Their own capital can only get them so far, so most rely on some sort of lending, whether it’s hard money lending, private lending, or more traditional funding.
Private lending can be the most lucrative because the interest is typically lower than hard money loans. It’s also a bonus when you talk to friends and family about how your private lenders are making a great return and it opens their eyes to the possibility that they can become a private lender too. It’s a natural conversation that without asking them if they want to lend to you, you’re able to explain the profits made from past deals.
8. Real estate investing can be a lonely business… if you let it be
This is especially true in the beginning when you don’t have a team. Besides talking to vendors and potential sellers, you’re typically a one-man operation or you might have a partner or spouse in it with you.
Unless you’re networking in your area by attending local REI Association meetings, it can be very quiet.
Real estate investors thrive when they’re able to connect and bounce strategies off of like-minded people. By hearing what’s working in other markets you’re able to keep a competitive edge.
This is why so many of the most successful real estate investors are in real estate investing masterminds, such as Investor Fuel.
9. We don’t take advantage of the elderly
As you get older, it becomes more difficult to keep up with maintaining your personal property. Property that you’ve likely lived in for decades. It’s paid off but has seen better days.
At a certain point, it becomes more of a burden than a safe haven.
Depending on the condition of the property, it’s likely that it would need a bit of work before it’s ready to go on the MLS.
We offer a convenient and easy option for someone who is “done” with the house and is ready to move on to their next chapter.
We help keep the community beautiful
By rehabbing distressed properties and finding new homeowners for vacant, dilapidated homes, we’re able to keep the neighborhoods we’re investing in beautiful. Instead of seeing a vacant property that hasn’t been touched in 5 years, you now see an updated home that is perfect for a new family.
There are quite a few situations in which selling on MLS is not an option. Real estate investors are the perfect people to contact in these situations and at the end of the day, it can be a win-win for everyone.