6 Things I Wish I Knew When I Started Investing in Real Estate by David Finkel

If you had the chance to start over again, knowing what you know
now, what would you do differently the second time around? What
a great question. It cuts to the core of the essential lessons of a
lifetime of real estate investing.

Here is my six-part answer to this question:

Realize it is never about the property
One of the biggest misconceptions about investing in real estate is
that the most critical thing is the property itself--its condition and
location.

The truth is that both of these considerations are secondary to
the motivation of the seller. If the seller is NOT motivated, then no
matter what the condition or the location of the property you still
are not going to get a great deal.

But if you have a motivated seller, then you have a great chance
of turning a handsome profit no matter what the condition or
location.

When this really sinks in, it revolutionizes how you prioritize your
search for finding great deals. No longer do you waste time on due
diligence and inspecting the house UNTIL you have made sure
you've found a motivated seller.

Finding this motivated seller becomes the most important activity
you can ever engage in. This is what you must focus your time,
efforts, and creativity on searching for.

This also means that the highest leverage activity you have as an
investor is to be sitting face to face with a motivated seller.

Don't allow non-motivated sellers to waste a minute more of your
time listing off all the wonderful features of their homes. You don't
care about the house until you've established the seller is
motivated.

Understand if you never ask, you'll never get
When I first got started investing in real estate I was scared to
death to actually make offers to a sellers. The root cause was my
fear of them rejecting me and my offer. In my mind the two were
one and the same thing.

Over time I came to realize that this one mistake kept me from
making offers that, in retrospect, I feel the sellers would have said
yes to. This ended up costing me hundreds of thousands of dollars
in lost profits.

Today I see many other investors falling for this same trap.
Sometimes it is the disbelief that a sellers would ever accept a
nothing down offer. Sometimes it is walking away from sellers with
a promise to "get back with them" (rather than making the offer on
the spot). The cost is still the same.

The most important lesson I learned from these experiences is that
NOT asking is an automatic no, and asking is never so painful as I
might have imagined.

Over the years I've asked for and gotten everything from
extensions on the term of a seller carry back, to money from the
seller for a repair, to free appliances.

Remember, if you don't ask you don't get. A great book on learning
how to ask effectively is The Aladdin Factor, by Mark Victor
Hanson and Jack Canfield.

Always maintain "walk away" power
The common denominator for all the borderline deals I've bought,
flipped, or lease optioned is that at some point in the negotiation, I
crossed over to the point where I felt I "had to" do the deal.

If ever you hear yourself saying these words, even if it is merely to
yourself, push back you chair, get up from the negotiating table,
and walk away.

I'm serious about this. If the deal is that good, a small break while
you take a moment by yourself won't stop the deal.

And by taking this time you might just keep your ego and your
emotions from pushing you to make a deal that means lots of work
and risk for little real profit.

It seems I fell into problems here incrementally. I'd put $3,000 into
a house to fix it up and then find it needed a $2,000 repair I didn't
know about. So I would spend $2,000 so I wouldn't lose the
$3,000, only to find out…

You get the idea here. Beware this slippery slope and know when
to cut your losses.

Remember, good deals are like buses--even if you miss one, there
will always be another one along before too long.

Beware of the "rehab" trap
Have you ever caught the bug? "Fabulous wealth can be yours if
you buy junkers and turn them into palaces."

There are millions to be made in rehab projects, but before you go
off and dive into this type of investing, you need to do some
serious soul searching. This type of investing isn't right for
everyone.

I've discovered that rehabs aren't for me. In my opinion they too
often take too much up-front money, too much energy to
complete, and too much time to turn them.

The first causes too much risk; the second cuts into your efforts
to find more deals; and the third eats into your margins and cash
flow and turns you into a motivated seller!

Knowing this, I've come up with rule that I follow: If it needs more
than minor cosmetic work, then flip the deal to another party.

I want to make it clear here that this is my personal bias and that
many investors love rehabbing properties and are well paid for it.
Still, it is just not for me.

If you are going to do rehab projects (and let me make it perfectly
clear that you CAN make a TON of money fixing up houses) then
make sure you listen to the following rules:

1.BUY RIGHT! Don't overpay for the property. Build a LARGE
profit in by buying right.

2.Make sure you factor in ALL the real costs, not just the
financial costs to rehab a property.

This means you must factor in the TIME cost to do or oversee the
project. You must factor in the EMOTIONAL cost of having to do
the work, having so much of your money on the line, etc. Finally,
factor in the OPPORTUNITY cost of having your cash, time, and
attention tied up for the duration of the project.

Reprogram your beliefs about self worth and money
Collecting money from a buyer can cause you to confront deeply
hidden pitfalls from your past about self-worth and what it means
to be wealthy.

This might be hard to accept, but in my opinion, it's one of the
biggest road blocks to making a fortune investing in real estate.
I've gone through this myself.

When I got started investing I had trouble selling the properties I
picked up. On one level or another, I didn't feel good enough about
myself to think it was OK for me to be making that much money
with so little effort.

My beliefs about money and what it meant to be "rich" made
making money a dirty thing for me. On some of the first properties I
sold, I was uncomfortable to even collect an application fee from
prospective tenant buyers.

It took several years to clear out this garbage and be comfortable
with the wealth that flowed into my life. My partner, Peter Conti,
was instrumental. He was a great role model for a down-to-earth,
ethical millionaire.

Who do you know that can be this kind of positive role model for
yourself? Spend as much time with these people as possible.

There is a great book on this subject called Your Money or Your
Life, by Joe Domingez. I highly recommend it.

Gather up as many positive references of people using money for
good purposes as possible. This will help you reprogram your beliefs
about what you can do when you have money.

Read biographies about billionaire philanthropists like George Soros
and Ted Turner who have literally given away BILLIONS of dollars
to worthy causes. Tithe 10% (or some percentage) of your profits
to groups you want to support.

This lesson deserves your attention and honest self-evaluation.

You'll never know it all, but you can learn enough
I was probably just like you when you got started investing in real
estate. I kept learning more and more, but never felt like I knew
enough. But then one day I realized when a person really knows
enough…

1.It's not when you know it all because you'll never it know it
all.

2.It's not when you know all the legal aspects and contract
clauses.

You know enough when you step out and take action,
acknowledging that you'll never know it all. This leap of faith is the
final ingredient of success.

About the author...

David Finkel is an ex-Olympic level athlete turned real estate
millionaire and one of the leading investing experts in the nation.
He and his partner, Peter Conti, teach people across the country
how to create multiple streams of income buying homes in nice
areas with nothing down and minimum risk. Over the past decade,
his students have bought and sold over $100 million worth of real
estate.

David shares his insights, secrets, and money-making systems in
his highly informative courses:

Seven MasterSkills of Highly Successful Investors

How to Buy Apartment Buildings with Little or Nothing Down

Intensive Training Video Library

The Protege Program

How to Find, Close, and Sell Properties Using the Existing
Financing