Think and Grow Rich
Think and Grow Rich
The Science of Getting Rich
The Science of Getting Rich

A Warning to Real Estate Investors

Matt Napier's Real Estate Warning to InvestorsSince the beginning of the Great Recession, there has been a debate on cash flow between real estate investors, many of whom learned some tough lessons when the Recession began (including myself). Specifically, the debate is: What kind of deals should you focus on and how is your money best used!? Should you focus on creating equity or focus on creating solid income and cash flow?

You may be saying that they don’t have to be mutually exclusive. While that is correct, many investors tend to focus on either building equity OR cash flow. To me, the decision of what kind of deals to focus on is made easy if you boil it down to one thing- how much money do you need right now to live the lifestyle that you are already living (provided it’s already a decent standard of living) and do you already have enough cash flow to live off of on a monthly basis? If you do not have enough to live off of, do NOT focus your efforts too heavily on equity build up. Instead, focus on cash flow (quick flips, wholesaling, and only rentals that will generate strong cash flow); investments that will put cash in your pockets within 1-9 months.

One of my mentors when I got into real estate investing nearly a decade ago, Del Hinds, who headed the SCREIA, made a point of continually telling me not to focus too much on gaining long-term equity, until I had enough to live on today. His famous words still haunt me- YOU CAN’T EAT EQUITY! I also had another mentor that swore to me, you better have a sure fire exit plan and back up strategy if it doesn’t work. I will explain that more in a minute, but for now, let’s talk about Del’s words. At the time, I thought that he just had a different approach to investing, but he was 100% correct. Although I’d built up a significant pile of equity in properties, that was slowly being squeezed out each month when the Recession hit and since I didn’t focus on strong cash flow from the beginning, the $100 to $150 I was making per property on gross rents (before expenses) barely covered basic maintenance and vacancies, meaning my true profit per month on rentals was close to zero.

This serves as a warning. If the economy goes into another recession (which is certainly possible given the lack of fundamental improvement in the economy and massive spending by our government) and you do not have more than enough cash flow to live on already and are focusing too heavily on equity, change your focus… FAST. Focus on wholesaling, rehabbing, and flipping properties, or if you do buy rental properties, ensure that you have at least 30 to 35% cash flow after PITI payments plus a 10% allowance for vacancies and a 10% allowance for repairs (I actually look for 50% net cash flow now). Just because there are enough properties with potential equity that we can buy all day long right now, don’t buy too many properties too quickly if the strong cash flow isn’t there, and if you’re choosing not to re-sell them right away. Your equity may get squeezed out and you may be stuck with a property that you can’t sell for what you thought, and then you’re holding onto properties that aren’t cash flowing well enough to make it worth your time. You’re one of the smart ones though; you know to focus on cash flow, and thus, you will be a successful investor.

Matt Napier

With nearly a decade of experience in specialized niches of real estate, Matt is considered a highly knowledgeable real estate investor in the Charleston, South Carolina area. Matt has dedicated himself to learning highly specialized skills which allow him to find high-return real estate investments for his clients and his investment company, The Napier Organization. His company offers high-return investment opportunities to select individuals and funds, secured by real estate. In his free time, he enjoys coaching new real estate investors on the technical details of real estate investing.


The Secret to Getting Rich

Stack of US Currency

Do you ever think about what your life would be like if you doubled your income this year? What if you doubled your income AND you doubled the time you spend doing what you love? Better yet, with the people you love?

Herein lies the secret to building wealth. If you think it’s impossible in this economy, it’s not!

In every shift of the economy — down or up — there are winners and losers, like with everything in life. It’s all on how you look at and play into your current circumstances.

Even in the Great Depression, people came out new millionaires. Today will be no different, but only if you know the correct path to get there. Building real wealth starts with focus.

The Secret? FOCUS

The key to being successful in life and with your business is FOCUS. Focusing on what you want and how you’re going to get there.

The key to being truly successful is knowing how and where to focus your time and efforts.

A while back I was talking with someone who sells fiber optic cables and computer hardware. He wondered if I thought it was a good idea to diversify and resell self-improvement programs online.

Here was someone who was doing fairly well with one business and about to take his eye off his primary source of income to try something he knew nothing about. Bad idea!

Find Something You’re Good At…And Become Rich Doing It

If you want to be successful, the key is finding something you’re good at. Focus your efforts on helping people…and become rich doing it.

If this man were to branch out and begin selling self-improvement programs online, odds are he would have no time to grow his current business. His finances would suffer over there all while trying (and failing) to build a new business online.

You should not try to diversify yourself across too many niches. You need to focus your business and marketing strategy to ensure the best results.

For example, every successful business owner knows they need a marketing strategy to attract new clients and make more money. But most don’t know how and where to focus their marketing. They try a little of this and a little of that and get little in the way of results.

Focus Your Efforts Strategically

Knowing how and where to focus your efforts is a habit of successful people.

Know who your customers are and where they are. Then direct all of your efforts towards finding them there and attracting them to your business.

Finding a proven system for getting prospects’ attention, generating leads, converting leads to clients, maximizing sales and generating repeat sales can easily double your income while cutting your time on the job in half (or even more).

Where Will You Aim Your Focus?

 

Now I’d love to hear from you, so my question today is: What area of your business will you choose to focus your efforts on this month?

Leave a comment below, and I’ll be sure to follow up with you.

Now that you’ve decided what area of business to focus on, it’s time to take action. Download my free report “Taking Action” to take the first steps toward your financial goals today.

take action

The Secret to Getting Rich is a post from: Brian Tracy's Blog

Episode 77: [Rehabbing] Selling Your Finished Rehab with Melissa Johnson

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Show Notes

Here are the downloads we mentioned that you could get on the show notes page:

What are some of the things you do before putting the finished product on the market?

  • Re-run comps
  • Final walk through
  • Staging – where get staging stuff from

How to work with our Realtor Laura to get the property on the market?

  • Docusign docs
  • Take pics and upload – what kind of camera and lens?
  • Agent sets up showing and feedback notifications

With the real estate market still going strong here, how fast have the houses been selling?

  • The fastest closing was up on the market on Thursday night, by Sunday it had 42 showings and 13 offers.
  • Not every property is like this. The sweet spot is between $140k – $165k for San Antonio properties that fly off the market.

How do you handle when we get multiple offers?

  • Use spreadsheets with all of the details of the properties, locations, contracts, and people offering.
  • Separate each thing that’s a negotiation point for when you come to the contract phase.

I know we’ve accepted offers before in the past only to find out the buyers couldn’t qualify.  How do we now avoid this problem?

  • Look for how someone is paying for the house. Melissa prefers cash for the house. Conventional financing is ok, and FHA would be the last one to look for only because FHA tends to have more hoops to jump through.
  • Ask for a proof of funds if the buyer is paying cash.
  • Who’s the lender? Melissa has a “black list” of lenders that are a no-go for the final sale.
  • Look for a lender letter attached to the contract.

So a common situation is where a buyer will get an inspection and ask for tons of repairs.  What is our procedure for handling which repairs we’ll agree to do and which we won’t?

  • Anything electrical (especially in the attic) should be taken care of before buyers even get an inspection.
  • Having a good agent will help the buyers not to be worried if you have an inspector that’s freaking them out by nit picking.
  • Always double check your punch list!

On FlippingJunkie we get the question all the time about the FHA 90 day rule.  What is that and how do we deal with it?

  • “Payment terms need to be conventional or cash”.
  • Between 90 – 180 days you will need 2 appraisals, or if the resale price is over %100 of the purchase price.  

What do you do after acceptance of an offer to make sure all is on track to close?

  • Start doing property updates with your title company twice a week.
  • Set up a schedule for the updates so that everyone is on the same track and staying focused.
  • Property updates every Monday from our realtor to the lenders to make sure everything is still on track to close.

What’s your top tip for being more efficient in this part of the house flip process?

  • Add a special touch when you’re selling a home to a buyer. Melissa puts little gift baskets for the new buyers to have.
  • Always work with your realtor and title companies to make sure things are moving smoothly.

Links

YouTube.com/FlippingJunkie

Flipping Junkie: Flipping Houses Videos

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Ratings and reviews allow the podcast to be seen by more people, which will help me achieve my goal of helping as many others as we can to get started in the house flipping business and change their lives.

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The post Episode 77: [Rehabbing] Selling Your Finished Rehab with Melissa Johnson appeared first on Flipping Junkie.

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