Many real estate gurus sell products on the hottest “real estate investing technique“. While it's important to know which types of investing strategies are working in the current market, that's only a small part of the equation.
You can spend 10's of thousands of dollars attending seminars and buying courses, but the truth is that you can learn all the different ways to creatively buy-and-hold, fix-n-flip, rent, or wholesale deals in less than a week.
Just like in day trading, most of the success from real estate investing comes from “intangible aspects” of the business. For example, new investors put a lot of value and focus on the technical aspect of how to structure deals, but don't understand why their phones aren't ringing and they aren't closing any deals.
3 Aspects of a Successful Real Estate Investing Business
Even though I've made hundreds of thousands of dollars in real estate, I'm by no means a real estate investing expert or guru. Following the 80/20 principle, my personal goal is to partner with investors who are really good at finding and structuring deals, then add value without taking up a bunch of my time. For example, I'm providing financing for purchasing properties and marketing budgets. I've also hired staff members to help with administrative duties. At the end of the day, I'm making a killer return with hardly any work.
Even with my “hands-off” approach to playing the real estate game, I've found 3 components that separate the wildly successful investors from struggling wannabes:
1. Negotiation & Influence Skills – By far, this seems to be the most important aspect of real estate investing. Even though I don't personally talk to buyers or sellers, my most successful investing partners are the ones with the best communication, sales, and negotiation skills. There are a ton of people who know how to mail yellow letter campaigns, post bandit signs, and farm neighborhoods, but it's the rare investor that can sweet-talk his way into a profitable deal.
2. Marketing & Follow-up Processes – There are a lot of broke investors who have studied every investing strategy under the sun, but those who do a lot of deals have simple and effective marketing processes. Something not a lot of people know is that most of your deals come from referrals and old contacts. Investors who just buy “hot leads” from lead gen sites miss a BIG piece of the pie.
3. Transactional Know-how – Real estate deals are like fingerprints – No motivated seller or deal is exactly the same. Sure, knowing how to process a short-sale versus a mortgage assignment is important, but it's even more important to have the skill of quickly determining possible solutions when you're talking to a seller. That way you'll be able to decide if you can create a profitable deal and not waste time with marginal opportunities.
How I've Passively Earned 15% in my Lending Portfolio in the Past 7 Months
Some people get into real estate looking to supplement or replace their income. This is fueled by late night infomercials by get-rich gurus. Some people wholesale deals to other investors looking to make a fee. Others look for fixer-uppers to rehab and flip. I'm in real estate to earn a return on my capital, build equity, and collect passive cash flow.
They way I've been earning an incredible return in real estate is by providing short-term financing to my investor partners. In an earlier post, I outlined my transactional financing plan, and how my annual goal is to passively gain over 22%.
But isn't this type of financing risky? Sure, I'm lending to speculative real estate investors. However, my current default rate is ZERO. This is because I only fund deals that I wouldn't find if they defaulted, because it would just add a slam dunk deal to my long-term portfolio.
Before the real estate bust, I was on the front lines of the riskiest type of lending – sub prime. In fact, I was the “Director of Specialty Lending” at a publicly traded conglomerate real estate builder. My job was to work with banks to find loans for anyone with a heart beat. No credit, income, or assets? No problem! We could get you a $417,000 house with NOTHING out of pocket!