The Art of Patience in Real Estate Investing

February 18, 2009


The Art of Patience in Real Estate Investing
by James Miller

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I have a friend who is working on buying his first property. Besides looking for his own personal residence, he wants it to be a good investment.  He is looking for a deal.

He is looking at a REO (Bank Owned) property that has been siting for a while. The condition was pretty rough, so the bank decided to put about $5000 into it to replace carpet and paint the place. A surprisingly good move on the banks part.

The fun part for me is that I see a lot of what I felt and did when I was looking for my firs investment property. I see his excitement and energy.  I also see how he is too close to the deal and starting to justify things.

Today he called me and told me that they are only off by $1400 in price, and that he is feeling a lot of temptation to call up the broker and tell him that he will accept the banks last offer.

I preempted my next statement by telling him that it really comes down to how badly he and his girlfriend want the property. Since they are also looking at if for a residence, there can be some emotion involved.  And I would hate to see him lose the property if he really wanted it.

As I had walked through the property for him, I then followed up with these two thoughts:

“It is a good deal, but not a great deal.”

And

“Banks are a lot more flexible than they let on.”

He had told me that the lender claimed that under no circumstances can they come down that extra $1400, they are already at their bottom dollar.

If this was an individual, I may be more inclined to believe it, but in reality nobody understands the time value of money more than a lender. They have to know that the longer they sit on a property, the more it is costing them.  When given the choice between a $1400 hit and waiting another six months before getting a seller, I have to believe that the bank will eventually cave in.

There is always the chance that my friend will miss out, that some other investor or individual will decide on buying the property at that price, but if you can position yourself so that you are ok with any outcome, you will always do all right.

Patience is the real key to buying, especially when starting out, where everything looks like a deal and you are so hungry to start investing , you can barely stand it.

Here are the basic steps to placing an offer on a property so that you can rest at night.

1) You need to quickly evaluate a property as best you can.
2) Set the price/ terms you are willing to buy it for
3) Negotiate to do better than the Price and terms
4) Be ok if you get an accepted offer, and willing to walk away if you don’t

I also noticed that my friend was commenting on how his Realtor was pretty close with him and he felt comfortable that he was looking out for his best interest.

He then later told me how the Realtor had commented that $1,400 was only going to be an extra X number of dollars per month on a payment.

This is a common technique that is used to sell. Taking a number that seems large and breaking it into terms that seem smaller. We have all heard some advertisement that talks about how something only costs “31 cents a day” or “less than your daily cup of coffee each morning”.  This technique is used to break down our barrier to a pricing objection, by making it seem to be an insignificant amount.

When I heard that the Realtor did that, I told him that he might want to be wary about whose side the Realtor was really on.

I can only imagine how the enticement of a commission in these slow times can be tempting, maybe even to the point of bending morals.


The “right” Real Esate Investing system

February 11, 2009


The “right” Real Estate Investing System
by James Miller

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One of the confusing parts of getting started in Real Estate investing is that there are so many different ways to do it and so many guru’s out there touting why their way is the best.

I am going to let you in on something it took me a while to discover.

It all works.

Yep. Just about everything you see out there every one of the late night infomercials, every guru you have ever hear talk at a seminar and fought the urge to run to the back of the room to buy their CD’s or Boot camp. All of their stuff works.

But it doesn’t work for you.

Here is the difference:

It doesn’t work because you are doing something wrong.

I run under the assumption that there is a way to make just about every money making opportunity I  have ever seen work, but the limiting factor is me.

As an example, I had a hard time getting used to the idea of putting up “I buy houses” signs and ads all over the place. It just seemed too cheesy to me.  One of my partners was fully on board with this phrase.  She took the time and money  to have vinyl letters made with this phrase and her phone number on it and placed them on her car.

I could barely ride around with her in that car I was so embarrassed by it.  I was wondering what people must think.

She had spent $60 on those letters and gets an average of three calls a week from someone wanting to sell their house.  There are also people who come up to her at gas stations asking about it.  She has even been pulled over by a police officer who wanted to sell his house.

Because I wasn’t comfortable with the idea of that cheesy phrase,  “I Buy Houses” didn’t work for me.

Guess what most of my house buying advertising says now?

Too often we get in the way of our own progress by wanting to change a proven system, or not following through with what we are supposed to do because we don’t feel comfortable with it.  Often we want to save some money by changing things.

If we try something and then later give up. It is very easy to blame the system or the person who taught us, but the true nature of why we aren’t successful is that we have done something wrong.

We are the ones to blame, yet we never do see ourselves as the culprit.

If you look at Real Estate, there are thousands of people who are successfully short selling, successfully flipping, successfully assigning contracts, lease optioning and buying using land contracts.  People have been using creative techniques to make money in this business for decades.  So there is a way to do it.

There is a path to follow to get the goal you want.

But you will never get there is your focus is on finding the “right” program.

They all work. You just need to make sure you take the one you have and do it the right way.


The big picture on how to get property moving

February 1, 2009



The big picture on how to get property moving

by James Miller

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My thoughts on the Real Estate, and economic,  slow down is that people in today’s society are truly only worried about the monthly payments on their obligations.

The amount of debt doesn’t really bother most people as long as they can get what they want and keep up with those payments.

It is my contention that the only real way to trigger the sale of property thus kick start at least the Real Estate economy is be keeping interest rates low.

A low interest rate on a mortgage means a lower monthly payment, and the ability for people to afford a larger home.

We got into trouble with easy mortgages earlier when people were allowed to jump on teaser rates that increased after a short time, or negative amortization loans that deferred interest by adding it onto the principal balance.

When the other shoe dropped and these payments went up, borrowers faced the hard truth that they were unable to afford the home that they had bought, even though they were “qualified” for it.

I am not suggest that we bring back those sort of loan programs, but instead that inroads are made to keep mortgage rates low.

I would much rather see the government spending money and effort to keep borrowing rates low than spending money on a bailouts.

It is an economic fact that home buyers also spend money filling thier homes with durable goods. In this way a home purchase has positive rippling effects through the economy by creating demand for more tangible goods.

I have also heard (but fail to cite reference to)  that a manufacturing dollar cycles through the economy seven times, as the manufacturer of durable goods needs to pay those who make his raw materials and that company must do the same.  This creates jobs in many industries.

Compare that to a “service” dollar that makes only one go around in our economy, right into the pocket of person providing the service.

Think of an accountant or barber.  There are no other materials that go into their product outside of their effort.

It is my hope that the powers that be realize the biggest bang for our buck will be through the continued reduction of interest rates.

Please feel free to share any thoughts you may have with regard to this idea.