By Than Merrill
At my real estate seminars I am often asked by my students what area of the business they should study first. With so much to learn and so many different niches it can sometimes seem overwhelming for many new investors. I see a lot of investors flounder the first couple years because they don’t know where to spend their time. I started buying rental properties and quickly learned this was not the niche to begin with. Likewise, I spent a lot of time studying areas of the business which were meant for year three and four of my development. I strongly urge my students and most investors to start out wholesaling and rehabbing until you build up significant capital reserves. However, whatever your niche of choice is you must understand and spend significant time studying how to find deals. In fact, FINDING DEALS SIGNIFICANTLY BELOW MARKET VALUE is your number one job. In order to do this you must begin to think of yourself as a marketer first and real estate investor second. So congratulations you are NOW A MASTER MARKETER not a real estate investor.
Real Estate Investing Basics Tip #1 – The Best Investors Understand Marketing
Marketing is the first area of the business you should study as a beginning real estate investor. Marketing is what makes the phone ring and generates leads. Leads are the lifeblood of your business. They are the oxygen your business breaths. The more leads you have the more money you will make. If you don’t have leads, then you won’t buy any properties. If you don’t buy any properties then you can’t make any money. If you can’t make any money then you can’t build a business. As a result you should spend the majority of your time figuring out how to get your phone to ring with motivated sellers. (The same thing can be said for dating!)
Successful marketing is an art, and those who understand marketing set themselves apart from other investors. There must be a mindset shift as an investor. You are not in the business of flipping homes. You are in the business of generating leads from people who want to sell their home under market value. If you can do this you will control the market and you will figure out the rest of the business very quickly. If you have a potential $80,000.00 dollar pay day on the other end of the phone believe me you learn quickly. (Ask me how I know this!)
There are many different forms of marketing you can utilize to get your phone ringing. Direct mail, billboards, TV, cold calling, and networking are all marketing strategies you can use to find deals. The key is to narrow down your market and find your target, develop a compelling message with an irresistible offer, and consistently touch these people with multiple marketing mediums. Then you will want to develop marketing systems so you can repeat this process over and over again.
Real Estate Investing Basics Tip #2 – Wholesale Properties to Build Your Cash Cushion
Once you find the deal now you have to find someone who is willing to buy the deal from you at a higher price. This is where wholesaling comes into play. Wholesaling is the business of finding bargains and selling the deals to bargain hunters at a higher price. You are not adding value to the property. Wholesaling properties should be essential part of every real estate investors business. It is a way to generate income with little to no risk. Many times, you never take ownership of the property – you simply are the transaction coordinator. In essence, you are bringing a buyer and a seller together. Through your marketing efforts, you locate deals and then you assign them to other investors that you locate through your various forms of marketing. If your marketing machine is in motion, you should have no problem finding buyers. Successful marketing and networking in the real estate community will enable you to find wholesale buyers.
Real Estate Investing Basics Tip #3 – Rehabbing for Large Profits
Rehabbing is when you redevelop the property yourself instead of wholesaling the property to someone else. This is where the larger profits lie. The reason is you will be selling the property to a retail buyer who will be willing to pay full market value for the property as opposed to a another investor who is looking for a discount.
Rehabbing is an entire business in itself and there is a lot you need to learn about this niche. It is important if you choose to include rehabbing in your business that you spend time educating yourself first. Learning pricing of labor and materials as well as whom are the qualified contractors in your area is essential to rehabbing properties.
Being able to add value to properties through renovations is a not only very profitable, but also very rewarding. You are providing a great service, not only to the city in which you do business, but also to the end buyer of your newly remodeled home. When you become experienced at rehabbing you will have the confidence to be able to take on projects that many people would never even consider. This separates you from the other investors and creates more opportunities for you in that real estate market.