Real Estate

One of my favorite movies of all time is The Princess Bride, and one of my favorite scenes is the epic fencing duel between “The Man In Black”  and Inigo Montoya (of the “You killed my father, prepare to die” type).  Immediately after the duel begins, Montoya asks The Man In Black, “who are you?” Getting refused an answer, Montoya says, “I must know.” The Man in Black’s response?  “Get Used To Disappointments.”

This is the mood I am in today: Getting used to disappointment.  I found a house on the market several blocks from my own a few days ago, and instantly fell in love (mistake number one). Not only was it in a better neighborhood but it had a huge yard, had natural gas heat, and was priced almost half of what other homes in the area sell for. With a few weeks of labor and a few thousand dollars this home would have been both the perfect investment and also the perfect home for me to move into.

This was on Monday. Today (Friday) I decided to begin my pursuit on this marvelous home and much to my surprise: the house already has sold (well, “pending” anyways).  Just yesterday the house was listed as “active” and today it’s gone. Had I jumped on this deal on Monday, I probably would have had it.

Real estate is often looked at as a “slow” investment – and it often times is.  However, there are many times in real estate that you truly have to be on the top of your game to get the great deals.  This lesson hit home with  me this week (no pun intended), and clearly I was not on top of my game this week.  But rather than moping around, feeling sorry for myself, I am using this experience as a learning tool.

So what did I do wrong this week? When I looked at my mistakes in pursuing this house,  I came up with three principles that I dropped the ball on this week. The following are those three principles that must be adhered to in order to find success in finding great deals.

  1. Be Decisive –  If you want to find a property, you need to decide that is what you are going to do. Successful investing requires focus. Great deals are not going to magically find their way into your hands from your indecision.  I don’t believe you need to be decisive all the time, focusing on scoring great deals every day for the rest of your life. However, when you are ready to buy – commit fully.
  2. Be Aggressive – Once you find the property you want, make it happen. Don’t wait on the phone for a day for a call-back. Make it happen. Be the one making the waves, not the one riding them.
  3. Be Resourceful – One of my favorite quotes of all time is “You don’t lack resources, you lack resourcefulness” by Tony Robbins.  When you are trying to make a Real Estate deal happen quickly, you will run into bumps. Lenders will buckle, investors will get worried, and people flake out. You must have several strategies and back-up strategies in place so you can overcome these hurdles.

I’ve written these principles not just for your benefit but also for my own. Even seasoned real estate investors need a good reminder that good deals will pass by if we sit by and let them.

 

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

 

We’ve all seen cartoons where the mad scientist (usually short with white hair) takes hold of two beakers filed with bubbly neon liquid, mixes them together, and creates a puff of smoke and some new evil product. I am attempting to accomplish something similar today, but not in regards to chemicals – but business theories. Today I am combining my love for real estate with my newly acquired passion for internet pay-per-click marketing in hopes of creating something explosive.

Pay-per-click (PPC) marketing is a fairly new phenomenon which you see every single day while you surf the internet. Marketers purchase ad space on Google, Facebook, or other online players in hopes that a customer will see the ad and click, bringing that person to their website and hopefully converting that viewer into a sale. I love the idea behind PPC marketing because the advertiser only pays when the ad works, unlike traditional advertising methods (such as print, TV, radio, etc) which payment is due even if no one responds.  Marketing is brought down to a mathematical formula, in which profitability is determined by simply discovering how much it actually is going to cost to have a lead turn into a sale.

My question behind combining these two is such: Can I sell my home faster using Facebook and Google ads to drive interest?

To do this, I test my theory, I did several things:

  1. I built a website around my house that is for sale (check it out here), getting $100 in free Google Adwords credit and $50 in free Facebook ad credits just for signing up.
  2. I designed a Facebook Ad, directing it only to advertise to people in the county that my house is for sale in.
  3. I designed a Google Ad, directed only at those in my area who are searching for terms like “house for sale” and similar.

It’s now time for me to sit back and watch how it develops. Will someone click on my ad, go to my website, get in contact with my Realtor, and buy my house? Only time will tell.

On a related note, I decided this might not be a bad gig to earn extra money on the side. I can build a website like 820NMartin.com for Real Estate Agents or FSBO homeowners, complete with a personal domain name, hosting, and site design for fairly cheap.

For those of you who are interested in building your own websites on the cheap, check out HostGator.com. They are one of the cheapest hosting plans out there, with mass discounts (enter code hgc25 at checkout to get hosting for $.01!) and if you sign up after clicking on that link, I get paid! (So click it, sign up, and we all win!  But seriously, even if you don’t wanna click on my link – they are great).

Has anyone else tried Pay Per Click marketing to sell a home? What were your experiences?

 

 

 

 

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

Most investors wait until their forties, fifties, or sixties to begin investing in real estate. While there is nothing wrong with investing at those ages, there is an underlying belief among many young people that it is not possible to invest until a person is well grounded and experienced later in life. In the words of Dwight Schrute: False.

Investing in your twenties (and thirties) is not only possible, but beneficial. This post will look at six myths that hold young people back from investing and why waiting to invest is both unnecessary and detrimental to your investment plan.

I Don’t Have The Time –

Let me tell you a secret that the older generation all know – as you age you don’t get any more free time. In fact, the older you get, the more obligations seem to compile. Kids, career, home maintenance, civic activities, etc all seem to multiply as you mature in life. Unless you plan on waiting until you are retired to start investing, you are never going to have “more time”. Don’t use “I’m too busy” as an excuse not to invest. You can’t afford to wait.

I Don’t Have Enough Money

Money is important in investing in Real Estate. While “gurus” have made millions of dollars selling the idea that anyone can invest in real estate with no cash, credit, or problems – the fact is it does take money to invest. However, that money doesn’t have to come from you. You can purchase your first property with nothing more than 3.5% down, which depending on the program and current lending standards, can be a gift from a relative.
You can also use your own sweat and muscle in the place of money. For example, purchasing a property through a hard money lender (non-bank individuals and companies who can finance the acquisition and materials for repair based on the value of the property, not the value of your wallet), improving the property, and subsequently refinance the property with no money out of pocket.

I Don’t Have The Credit

If you have made mistakes in your early years regarding credit, or you simply have never used credit and therefore don’t have any, investing is not impossible. It simply takes another set of tools to make it happen.

First, you need to immediately begin fixing your credit. There are dozens of books online and at your local public library that deal with the issue of credit repair. Study these, follow these, and soon your credit problems will be a thing of the past.
In the meantime, you can try flipping properties or wholesaling properties. Additionally, hard money lenders do not generally care that much about your credit. If you find an amazing deal, the funding will be there. Also, it doesn’t take good credit to write up offers, to find motivated sellers, or contact other investors to sell deals to. Wholesaling property is an excellent way to learn the business, meet other investors, and earn good money – all without any credit involved.

I Don’t Know Enough

Knowledge is foundational to any real estate investor, but your age makes no difference in your ability to learn. The first step I tell any would-be investor is to invest first in their education. The internet is full of great posts (such as the Bigger Pockets blogs, forums, and articles) and your public library is an unending source of knowledge. (see more about gaining a free real estate education on my website).
One major advantage young investors have over the older generations is your ability to learn. As you age, your desire to pick up a book and learn or take a class on a subject decreases exponentially. You are not that far out of high school or college, so use those skills to learn how to invest. (Now, I do know many older investors who continually sharpen their mind through books, classes and other learning tools. However, I am speaking of adults in general).

I Don’t Want To Lose It All

Investing, by nature, involves risk. However, a smart investor knows how to invest with careful criteria and sound judgment, minimizing risk and maximizing financial gain. This, again, is true at any age.
No one wants to lose when it comes to investing. Who, though, is at the greater disadvantage when it comes to risk? Someone who is looking to retire in five years or forty years? Clearly, the younger you start, the more time you have to make mistakes and still recover.
I am not suggesting that you make risky choices- jut the opposite, in fact. However, don’t let fear of losing stop you from winning big. When you have forty years ahead of you before retirement, you are allowed to build that nest egg into a war chest. Investing $10,000 and adding no additional funds for forty years at a 15% interest rate (the minimum you should shoot for with any real estate investment) will result in almost three million dollars at the end. Now imaging what adding an additional $10,000 per year would do ($23 million, in case you were wondering). No wonder Einstein called compound interest the most powerful force in the universe.

I’m Not Stable Enough –

This is one of the largest complaints I hear from people when I encourage them to invest in real estate at a young age. Young people, by nature, are much more unstable in our lives. We change occupations, get married, have kids, move across town or across the country. However, this is used more often as an excuse not to invest than a reason.
If you were planning on moving to another state in six months, perhaps it doesn’t make a lot of sense to purchase a home. However, you can still learn the ropes by wholesaling a deal or two during this time to another investor, picking up on skills that will follow you anywhere you move in the world. The houses may change style, laws differ, and your income fluctuate – but the fundamentals of real estate are the same where ever you live.

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

(This article is part two in a two-part series on stocks versus real estate)

Last time, I discussed the idea of the “hero stock” and why the idea of “just picking that one special stock” is absurd and dangerous to your money.

In an answer to this gamble, many financial advisers recommend a diversified (spread out) portfolio, using mutual funds to spread out risk over dozens or hundreds of large companies. This definitely spreads out the risk of losing all one’s money on a company that goes out of business.  The stock market on average over the past 40 years has provided an average return of around 10% per year. Stock salesmen love to point to this number and tell you that this return is better than anything you could get in real estate. Just give them all your money, plus their commissions, and they will provide for your future.

The problem is – with stocks and mutual funds, you are giving up the most important part of your ability to make money – your brain. You are completely dependent upon forces out of your control to make money. Yes, the stock market has traditionally provided a generally stable return, but this return is miniscule to what you could earn in real estate.  Are mutual funds better than nothing? Yes!  Anything is better than burying your money in the ground (or a checking account). An average return of 10% is better than losing money to inflation. However, average returns are for average investors.

By reading articles like this one – it is clear you are not a typical “bury in the ground” or average investor. You want more.  Real estate investing will give you more. Why? One word: leverage. Leverage is the ability to use borrowed money make you money. When you buy a stock, $20,000 lets you buy $20,000 worth of stock. With real estate, however, $20,000 will let you purchase $100,000 or more worth of property (or $500,000 if it is your personal home).

Lets look at an example.

You have $20,000 this year to invest. You want to decide between buying diversified stocks or real estate. Let’s look at both:

  1. $20,000 invested for 10 years and receiving an annual interest rate of 10% could be worth $54,140.86 – a gain of about $34,000. Not to bad. This equates to an average annual gain of almost 17%.
  2. You purchase a newer three-bedroom, two bathroom home in a family neighborhood for $100,000.  You put a down payment of $20,000 (the sellers pay closing costs). Total mortgage payment (on the resulting $80,000 at a 5% bank loan) is $430 per month. The home rents for $1200 per month.  After paying taxes, insurance, a maintenance guy to fix stuff when it breaks, and a other incidentals, you cashflow about $450 per month or $5400 per year. Putting this money back into the loan (not that you would have to, but to compare apples to apples from the stock scenario above), after ten years you will owe nothing on the loan.  Zip. Zero. Additionally, property in the US has appreciated at an average of 3% per year. So, you now own a property that is worth $135,000. Even taking out your initial investment and the cost it would take to sell, you have over $100,000 in equity, equating to a 50% return on investment – three times higher than that of the mutual funds. This 100,000 can now be used to invest in something bigger, better, and with more value.

At the risk of sounding too biased, there are drawbacks to real estate investing.  For one, the money is not liquid. This means that if you suddenly wanted to pull out all your money, it would take time.  Stocks are much easier to get in and out with.  Additionally, stocks do not require any extra leg work. You don’t need to drive by the stock, get phone calls from the stock, or evict a stock.  However, personally I could not invest in something that I couldn’t materially participate in. Perhaps its a lack of trust in others, but I want to have complete control over the destiny of my money. When I make or lose money, I want to make it or lose it by something I did or didn’t do.

This scenario is not a once in a lifetime deal or even a great deal. It is a very conservative look at investing. I believe in maximizing return by purchasing properties well below their value, adding tens of thousands of dollars in equity before even closing on the deal. In the house scenario above, I would have paid $60,000 for it instead, adding hundreds to monthly cashflow and tens of thousands in immediate equity. That is true real estate hacking.

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

(This article is part one in a two part series on the battle between stocks and real estate.)

“If only I had bought Apple stock when I had the chance! It was $X per share and now look at it! I would be so rich by now”.

No doubt this story sounds familiar to you. I’ve heard it dozens of times about dozens of stocks. “If only”. It is this story that drives millions of Americans to faithfully throw thousands of their hard earned dollars into the hands of stockbrokers with the hopes that they can pick the right stock and they too can be rich. It is completely absurd. The stock market is the worlds largest lottery, and as Dave Ramsey says, a lottery is just a “tax on the poor”.

For every one “hero story” of a stock soaring from bottom to the top there are hundred or thousands that disappear from the stock market entirely, giving investors a loss. In fact, in 1988 the Wall Street Journal did an experiment which pitted professional stock brokers against someone blindly throwing darts at a newspaper stock sheet. The results? The professionals only slightly beat out the darts, embarrassing the brokers and confirming that picking the right stock is a gamble even for those who’s whole life is dedicated to it.

When people look back and say “If only I had purchased X stock in X year, I’d be rich” it might be true. However, cheap stocks are cheap for a reason – they might not go anywhere. The vast majority do not.  Clearly, if we could hop in our Delorean and fly with Marty back to the past we could tell our old selves what we should invest in. This just isn’t plausible in our world, so we must find another way to invest and secure our future.

Next time I will look at a favorite among personal finance gurus called the mutual fund and why average returns are for average investors.

 

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

I received this email yesterday from my good friend, designer, and creative genius Krister from Plank Island Studios (www.PlankIsland.com) and found it hilarious and very true. If you are a homeowner you will especially appreciate this.

 

 

 

 

How I View My House:

How I View My House

 

 

 

 

 

 

 

 

How My Buyer Views My House:

How Buyers View My House

 

 

 

 

 

 

 

 

How My Lender Views My House:

How my Lender Views My House

 

 

 

 

 

 

How My Appraiser Views My House:

How My Appraiser Views My House

 

How My County Tax Assessor Views My House:

How My County Tax Assessor Views My House

 

 

 

 

 

 

 

 

 

 

 

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

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