My Secret Weapon for Real Estate Investing Success

Real Estate Investing Success

We are just about to lift conditions on a beautiful 4 bedroom 2 bathroom home sitting on a quarter acre lot in Nanaimo. The home has nice high end finishings throughout including heated floors in the main bathroom and kitchen, beautiful hardwood floors and crown mouldings. It’s lovely. It’s so nice, in fact, that our home inspector said “You paid WHAT for this place??”

He was shocked at the price we purchased this home!

In the past we were able to find deals that cash flowed. We even picked up properties for under market value. But I would not say that we were identifying and negotiating deals that were significantly under their market value like this one. And the reason we’re able to find smoking deals like this one is because of my new secret success weapon. It’s a weapon we’ve deployed in the last 18 months and it’s resulted in an enormous change in our business.

The weapon is so deceptively simply I hesitate to even share it with you …

The weapon is focus! Or as our 12 Months to $1 Million club members hear us prattle on about week after week, it’s about BEING AN AREA EXPERT.

It’s not about chasing deals all over the countryside –it’s about finding an area that has good market fundamentals and that you can spend time and energy getting to know fairly easily.

When we share this with people at club meetings, in group coaching calls or even with friends they exclaim how much work that is. And I am certainly not going to try and convince you that it’s not work because it is. It takes a few hours invested weekly over at least three or four months before you can really begin to call yourself an area expert. It takes market watching, researching the sales stats, open house visiting, viewings, conversations and drive by’s. And most of all it takes some patience.

Here’s the thing that I think most people are missing though … and that is the fact that the deals you’ll find in Arizona, Florida or the East Coast of Canada might be cheaper and have slightly better cash flow than the deals you’ll find closer to home … but the question I ask you is: WILL YOU FIND THE BEST DEALS?

I can say with 100% confidence we’re finding deals that fit perfectly within our investment plan – they deliver us monthly cash flow, our partners 15% – 20% annual ROI on their money, and they build our wealth. I can also say that we are finding the absolute best deals in our market area given the strategies we use.

Are there other deals? Yes. Are the deals we find the only deals? Heck no!

But when we can buy a large home in great condition, on a large lot, and have real estate professionals telling us how impressed they are with our purchases (and the prices we get them for!), we know our secret weapon has been launched and is hitting it’s target.

So –what can you do  to launch your own secret weapon? Ditch the deal chasing … settle into shopping in an area nearby where there are jobs, schools, transportation options, recreational amenities and more people moving in than are moving out. With that selected, get even more specific and:

  1. Pick a property type. For example, we focus on homes that are a minimum of 3 bedroom and 2 bathroom. We do not deal in ranchers unless they are over 1500 square feet. Homes must have a usable back yard. Ideally not older than 1970 although we will make exceptions for homes in great condition. Depending on where you want to invest you may want to focus on condos, townhouses or smaller homes. The safest property type to go with are homes that fall into the starter homes category. Every area has a home type that is considered a starter family home – find that home type and price range and focus on it. There is always a market for starter homes – in good times and bad. They are the most liquid homes in any area.
  2. Pick a smaller area or two within your city of focus. This is the game changer. It’s pretty difficult to become an expert in an entire city very quickly. Different pockets of a city attract different people for different reasons. With different features, amenities and home owners you find the price points are different. Thus, to truly be able to spot a smoking deal you have to be intimate with a smaller area. You want to spend time focused on a pocket or two of a city that amounts to about 12 – 20 blocks max. That is it. It seems like you’re limiting yourself but really you are simplifying. When you cut out the clutter you can spot the really good deals and act quickly before everyone else wakes up to the price point (which is what happened to this home we’re about to get firm on … Julie saw the price drop and said it’s time to move on that one. Sure enough we saw it, put in our offer, and all of a sudden it’s getting shown like crazy but we had moved quickly to lock it up before anyone else did).
  3. Spend time getting to know the properties that fit your criteria in your sub market. We probably went overboard as we physically viewed nearly 100 properties in the last six months. Online we probably looked at 5x’s that number. But we know the market very well now. There are very few real estate agents that know the market as well as we do now. And that is how we can spot deals that are on MLS and worth $40,000 more than we’re buying them for – without putting any money into them. Instant equity thanks to this secret weapon.
  4. The final ingredient isknowing which strategy to use in your target area. Some areas that we focus on won’t cashflow well as a regular Buy N Hold but they will work beautifully as Rent to Own’s. And in another area, a Buy N Hold strategy is perfect because the prices are 10-20% lower but rents are only 5-10% lower than higher end areas. So when you are picking 2 or 3 locations within your target city/market to specialize in, know what strategy will work there. And how do you know what strategy will work in your chosen area(s)? Well, that’s a whole other article, but simply said, you’ll know because you’ll have done your research on rent rates in that area, how many For Rent signs you see there, the type of people that live in the area (are they blue collar, white collar, immigrants, students, etc.), and the property types in the area (multi-units, single family homes, starter homes, luxury homes). Knowing the answers to all of those categories/questions will help to define which strategy is best used there.

This weapon is simple but it’s deceptive in it’s simplicity. The hard part is not getting distracted when someone starts telling you about a hot deal they found in another market or the deals you’re hearing about in US sunny states. The really hard part is staying focused. Trust me – I know! But now that I know how powerful my secret weapon is I am finding it so much easier to turn away from the juicy sounding commercial deal someone sends me or the fix and flip potential of a deal in a different market. I remind myself that I can work less and make more just sticking to what I know and know very well. Plus my wife not so gently tells me to stay focused … that helps too.

Published November 18th, 2010

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