The Key to Growing your REI Business

If I had a penny for every time I was asked what is the best thing someone can do to grow their business I probably would have more than the current Powerball Jackpot. I have given the same answer universally each time. Without a doubt, the most important thing you can do to quickly grow your real estate business is NETWORK. Networking has a bigger impact than education (barely), marketing and anything else you do for your business.  Not only is networking a short cut to success but it also helps build long term relationships.  These relationships are the key to your business.  Networking is something that investors know they should focus on but rarely do enough of.  By making networking a priority you will not only gain more contacts but also gain more deals.  I have personally done deals with people I have met while networking. Deals I would never had a chance to be involved in without the connections made while networking. The deals referred to me from networking connections tend to be better and more in my wheelhouse. Regardless of where you are in your business you need to constantly focus on networking.  Here are a few of the impacts of networking as well as some of the best ways to get started.

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Why Network? BENEFITS!

  • Education. We are all unique individuals and all have different paths we choose to follow even inside the world of Real Estate. You can spend countless hours online gathering education but nothing replaces real world experience.  (Read that last sentence again) There is truly something to be gained by listening to everyone you talk to.  By listening to the people in your network you will gain your own unique perspective.  You may pick up a way to invest that you never previously thought of.  You may avoid a certain market that you learned is having trouble.  By simply exposing yourself to as many contacts as possible you will gather invaluable education.
  • Team Building/Contacts. Investing in real estate is without argument a team sport. Those that choose the “lone wolf” route may find some small success, to truly make it, one must have a good team. Even though you are in business for yourself you can’t do it all alone.  One of the first benefits of networking is the number of contacts you gain. Every person you meet in the business most likely has a handful of personal contacts.  When you meet one person you could gain access to everyone they know.  Getting to this point takes time but is certainly a possibility, so you must stick with it. The quicker you can call a contractor or realtor if you have a question the stronger your business is. Have an emergency HVAC repair? Electrical need? No need to blindly call people and be put at the bottom of their wait list.
  • Deals, Deals, Deals. You are smart, and it doesn’t’ take a genius to realize that with more people in your “circle” the larger your access to potential leads and deals. The real estate business is a numbers game.  I have often said you might have to talk with 50 people to find 5 worthy of a follow-up. The same is true with deals. The vast majority of leads are not even close to being “DEALS”, and you have to sift through them to find the jewels. With increased contacts you have several people that could potentially bring you deals.  You never know what investor you meet has an overflow of properties they want to get rid of.  An attorney you become friendly with may know an investor looking to partner up on future deals. An attorney that does evictions, might know a frustrated landlord wanting to sell.  The greater the number of contacts the more deals that could come your way.

Ok, So I Need to Network, but WHERE?

  • Investment Clubs. If you are looking for the best place to network start with local real estate investment clubs.  But not all created equal. The key is to NETWORK. So avoid the ones that frown on allowing attendees to talk, and those that focus solely on a travelling guru that comes in to just sell you something. Clubs are all around, and you need to get to many to learn which ones are of the best benefit to you.  Attorneys, mortgage brokers, hard money lenders and fellow investors are all represented usually at the best groups.  Not only will you take something from the education at these meetings but you will meet tons of different people.  These people can range from 20 years’ experience to just starting out.  Investment club meetings are the perfect place to find a new contact or to enhance an existing relationship, but you have to attend regularly. Going once and never attending again will not get it done. You must put in the effort to truly build relationships with others in attendance. For those in the Greater Chicago area, we HIGHLY suggest the WCRT. Get details at http://www.WCRT.org.
  • Local Networking Meetings. Successful people often do things they don’t want to do.  One of those things is attending local networking meetings.  For just an hour or two a week you are exposed to numerous contacts in your industry.  Even if your last four meetings seemed like a waste of time you never know who noticed you. A large KEY to networking success is consistency. (Have you noticed how much I stay on this point?)  Showing up at one or two meetings will not yield immediate results.  It is when you show up every week for months that you may start seeing people reach out to you.  Local meetings have people who are in your local market looking for others to connect with.  It may not be your ideal way to spend a Tuesday morning but it could have a big impact on your business. LOCAL is key! Remember the number one rule to real estate is Location, Location, Location after all.
  • Everyday Moments. There are many networking opportunities around you every day.  Everyone you talk to is a potential networking partner.  People like to work with people they are comfortable with.  Almost everyone you come in contact with should know you are involved in real estate. You don’t necessarily need to come right out and say it but they should know.  These could be the parents on your children’s sports teams, friends, family and co-workers.  At the coffee shop, the bar, the restaurant, dropping your kids off at school, etc. You can grab a business card from the wall the next time you are at the car wash or picking up a pizza.  You could spend two minutes putting a post on social media. There are several little things you can do every day that will put you on someone’s radar.  Once you have their attention you can set up a meeting and work on becoming a contact.

There is no excuse not to take a few minutes and network every day. If you put the time in IT WILL PAY DIVIDENDS IN THE END.  These results are sometimes immediate but most will have a long lasting impact.  If you hold up your end of the bargain on a deal you can bet people will want to work with you again.

 

Choosing the Right Coach/Mentor

We will just quickly touch on whether or not you need a mentor or coach. EVERY truly self made successful person has had a coach/mentor to lean on throughout history. But let’s give an example that most in Chicago can relate to. Michael Jordan was widely considered they best NBA player, but he didn’t win a championship until he got Phil Jackson on the bench. MJ also had a team of trainers, a strength and conditioning coach, etc. Despite being the best player of all time, he still needed a coach. SO DO YOU!

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But the key here is you need the right coach. For years, the Chicago Bulls did well, but couldn’t get to where they needed to be. They had Doug Collins as coach. They opted for Phil Jackson and suddenly 6 Championships in a decade. So the RIGHT coach is key. But how do you find the right coach? Which is right for you? Well, you have to interview both the coach and have an honest interview with yourself. Here are some keys in picking a coach:

  1. Is the Coach ACTIVELY doing what you want to do yourself? – Prior to asking a coach this, you need to ensure you know what it is you want to do. In Real Estate Investing, did you want to be a “wholesaler” or do you want to be a landlord? Don’t be talked into “Wholesaling” simply because the guru/coach tells you to do it. NO, follow where you want to go. Once you decide that, ensure you coach still ACTIVELY does that. If you want to buy rental properties, then find a coach that is actively buying rental properties! John T. Reed, loves to rate Gurus, but his own bio says he hasn’t purchased a property since the Reagan Presidency. Do you think laws, markets, etc have changed in 30 years?
  2. Be Honest about your own shortcomings and weaknesses – When taking on a coach, they might be successful at investing, but they didn’t do so by being mind readers. You have to be willing to admit your weaknesses. Be willing to be straight forward and ask a question or two that you worry may make you appear “stupid”.  The mentor/coach should also be able to see the strengths and weaknesses in not only you, but in themselves. If the coach/mentor isn’t able to admit their shortcomings up front. It may not be the right match for you.
  3. How do you learn/teach? – Each person learns differently. Some people are visual, others need to learn by doing, and some need to see the written word. By this point in your life and career you should know which you are. Find a coach that can work with you on that. Do you want in person hands on coaching? Then find someone willing to do that and not just do e-mails and phone calls.
  4. Do they know the area you want to invest in – From town to town, village, and city; even neighboring jurisdictions all have different codes. Some have rental registrations, licensing of landlords, etc. There is one town in the western Chicago suburbs where if you renovate 40% of the home, you are required to install fire sprinkler systems (YEAH IN A SINGLE FAMILY HOME). How would you like to get an offer accepted, start the renovations only to find out that huge hit to your budget because your mentor from Arizona wasn’t able to guide you properly? How long does it take to get a permit approved? Can you apply for it prior to owning the property? Does this make the time to market/occupancy longer extending your holding costs?
  5. Do they genuinely want to help and get to know you and your desires/passions?  –  Are they teaching/guiding others simply to stroke their own ego? This sounds terrible to say, but it happens. So you have to ensure the person doesn’t just want  you to be a testimonial, but genuinely wants to connect with you, embrace you, and help to not only make you a better investor, but a better human being.

First Rule of Real Estate

It seems these days you can not go a week without hearing another so called “REAL ESTATE EXPERT” claiming they are coming to town and giving you the amazing opportunity to “join their team”.  Maybe it was the latest star of “FLIPPING XXXX” just enter any city where the X’s are.

They come to Chicago, have a few “pep rally” style meetings in hotel conference rooms. You go, the crowd is pumped up and before you know it, they are telling you if you pull out your credit card, you can be on their MASTER or VIP team for just a few thousand dollars. Now of course, the “star” you heard on the radio or saw on late night TV isn’t there personally. They are comfy in their home thousand of miles away.

Here is a question for you, is real estate in San Diego the same as Chicago? What about Las Vegas? Boston? The answer is obviously a huge and resounding NO. The basics might be the same, but the specifics are far different. Did you just shell out thousands of your hard earned dollars to ignore the first rule of real estate only to learn “BASICS”?

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LOCATION, LOCATION, LOCATION. It applies to real estate, but also to REAL ESTATE Coaches and Mentors. Did you know there is one western suburb where the average time to get a permit approved is about 4 months and you can only apply after taking ownership of a property? That is four months of taxes, insurance, loans, etc. Before you can even begin working! Would you San Diego based investor coach be able to warn you of that added expense? What if you bought in July thinking it is a 6 week project. Now you finish in December and the market is dead in the winter? YIKES!!

Guess what, there is a southwest suburb that requires all new homes and major rehabs to install fire sprinkler systems into homes. YES IN SINGLE FAMILY HOMES! Can you believe that? High Pressure lines. Having to install a larger diameter water pipe from the street to your home. Extra insulation just on all that extra plumbing, and increased insurance costs, not just for you, but also your buyers!

This is why you need to find a coach/mentor that invests presently where you plan to invest. They can help you with those items, not to mention connections to reliable contractors, suppliers, laborers, etc. The value of that is tremendous!

 

Remember, LOCATION, LOCATION, LOCATION. Want to invest in the Chicago area, get an active Chicago area investor and mentor!

Be A Professional

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BE A PROFESSIONAL

Recently I was at a networking event for real estate investors. OK, so that is a regular occurrence for me, as I suggest it should be for you as well. But on this night there was a woman in attendance that got under my skin. Not that I was doing any deals with her, was asked for money by her, etc. No, rather she got under my skin because she was flaunting herself as an expert, attempting to get others to do as she had done, and telling people that her way was the way to do it.

What is so wrong with this? Well, it comes down to the difference between being an AMATEUR and a PROFESSIONAL. The woman was claiming to be a successful buy and hold investor (Landlord). So here were a few red flags:

  1. She had only done it for less than a year.
    • Less than a year? Um, this is buy and HOLD, not buy and claim to hold. Have you ever had a bad experience with a landlord? a neighbor? Heck, how many times did you date someone for a year and it was great, then it fell apart? As a landlord, at least one with REAL EXPERIENCE, you will run into a problem tenant, or major issue
    • Less than a year? God forbid the market might change. Then what? What if interest rates go up (and they will again)? Will her strategy still work?
  2. She was at her first meeting and wanting everyone to worship her.
    • This scares me. People that come in, claiming to know it all, immediately send off alerts to me. I have been around for decades now, and I have seen this all to often. She touts herself as the great thing, people trust her, maybe give her money. Boom, it all goes south.
    • Relationships are built over time, not forced immediately. Want me to trust you, build a rapport first
  3. This point is why this post is being written. She said in order to save money on loans and get a lower rate, it was perfectly fine and safe to own investment property in your own personal name! Um, hello what? She felt there was no need to make use of an ENTITY. (AMATEUR ALERT!! HIGH ALERT)

I nearly lost my mind at that. I mean really? Others questioned her and she said, “Well I have an insurance policy so I am safe”. Yeah, sure, do you believe that an insurance company will actually not find a loop hole to leave you high and dry? Look, let’s get into the real meat of the argument.

Why PROFESSIONALS use entities such as a LLC?

She said that the trouble of forming and maintaining a company isn’t worth protection from the theoretical threat of a lawsuit, particularly when affordable liability insurance is available.

Ok, sure you can get insurance and it might pay out on small claims. With that said, real estate investors that rely solely on insurance as a means of protection from personal liability take a significant risk. Liability policies typically have limits, exceptions and carve-outs. While the chance of a loss that exceeds policy limits may be remote, if it happens, the consequences can be devastating.

LLCs Limit Personal Liability

First and foremost, LLCs limit personal vulnerability to potential lawsuits related to the property. Consider the situation in which the owner of an investment property leases it to a tenant who decides to throw a big party, during which one of the tenant’s guests falls over a balcony. In today’s legal climate, it is quite possible that the injured guest would pursue a claim based on the “unsafe condition” of the rental dwelling. More often than not, the owner would be named in any lawsuit resulting from the incident.

If that rental property were owned by a real estate investor individually, he or she would be named in the lawsuit and would have to defend his or her personal assets from the plaintiff’s claims. In contrast, if that property were owned by an LLC, the owner’s risk exposure would be insulated by the protection of the company, leaving only the assets owned by the LLC (as opposed to all of the owner’s personal assets) exposed to potential lawsuits.

GAME, SET and MATCH. I mean after all, we live in a world where a woman ordered a hot coffee in a drive-thru. Put that coffee between her legs in a car. The coffee spilled and she SUED the place because the coffee was… HOT! Hello, you will get sued!! It will happen!

So let the RED ALERT go if anyone claims to be a professional and says that owning a property in your own name is Intelligent. IT ISN’T!!! Don’t be an Amateur, and certainly, never take the advice of someone that stayed at a Holiday Inn Express last night!

Shiny Object Syndrome

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Caution – Shiny Objects

For years, I have stated that the vast majority of people that claim they going to be real estate investors fail because they suffer from SOS… Shiny Object Syndrome. Like a cat: people can be completely focused on an email, project, etc. and then, like a cat, something shiny floats by, catches their attention, and they are off to the next thing … completely distracted from what they where just doing.

It seems to be a trend that’s growing: real estate investors are getting distracted by too many ideas or the latest fad, going off in a million directions and never completing anything. This loss of focus is costing you hundreds of hours a year in lost productivity, lost hours, lost dollars.

SOS – Shiny Object Syndrome. It’s not quite ADD/ADHD. It’s more that a new idea captures your imagination and attention in such a way that you get distracted from the bigger picture and go off in tangents instead of remaining focused on the goal.

We think of a new idea, we hear of a great new gadget or marketing technique, and ZOOM, we’re off! There’s great energy and excitement in starting something new.

For investors, it is a new technique, a new guru, or the latest deal done by another member of your local REI Club. Everyone wants results NOW, as we are born of the Instant Gratification generation. We microwave our food to have it ready in seconds. We pay our bills on line, and even are used to having live reports from the war front. We want success now, but the reality is that success is built over time. While others may have short term success and even thrive for a few deals in a row, but if not built properly where you stay the course, the foundation crumbles and the bright glow fizzles out. Just like fashion, the trends change, fade away and become outdated, but some items are classic and are great over time.

Should we ask Michael Jordan if losing focus on Basketball to focus on Baseball was a wise choice?

STAY THE COURSE!!! Pick a path to success and stay on it! Keep walking the path, and you will get there.

THERE IS NO SHORTCUT TO SUCCESS!

 

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Don’t Give Up – Swing Again!

The other day, I was chatting with a friend that said she didn’t want to ask a guy out as she was afraid to get hurt again. I asked if she thought all men were the same. Obviously, in dating/love, we only really get it right just one time in our lives. We screw it up time and time again, but then all the wrong ones are forgotten, the heartbreak a distant memory the day we find the right one. Wouldn’t you agree?

Michael Jordan is widely regarded as the greatest basketball player of all time. He was cut from his High School team initially; didn’t give up. In fact, according to NBA.com he only made 49.7% of the shots he took for his career. Yes, he missed more than he made. Ok, so maybe we can attribute that to defense. Ok, well he only made 83.5% of his free throws. Meaning he failed 16.5% of the time!

Walter Payton is arguably the best running back to ever play the game of football. Did you know that Walter fumbled the ball 86 times. 86 times he dropped the ball and gave it to the other team.

Do you get the point yet? Don’t let a small setback or a deal gone wrong hold you back from your dreams. If people quit at the first sign of failure, then we would have no sports! Even Abraham Lincoln lost elections at first! So just because you swing and miss, doesn’t mean you walk to the dugout. It means you swing at the next pitch! Even if you strike out, you head to the batting cage, work on your swing and crush it the next time at the plate!