In Part 1, I discussed the 3 keys to making money in real estate as a small investor. One, choose mastery and focus on one property type at a time. Two, once you find what you’re passionate about, study it like crazy. And three, I believe it is smart to start off with a property that’s close by.
In Part 2, I want to discuss what every successful owner of cash-flowing real estate concentrates on. I call it the 4Ms. I guarantee that if you put an emphasis on these four things, your property stands the best chance to make a whole lot of money.
Money + Marketing + Maintenance + Management = $ucce$
No matter if you’re an owner of a 7-unit apartment building or a small retail strip center, how well you handle the 4Ms will determine how much money you’ll make as an owner in the long and short run. These 4Ms are inter-connected to one another just like toes are to a foot and a foot to a leg and a leg to a torso. The one needs the other to work correctly. When just one part begins to fail, the others begin to suffer and will eventually fail too. But when all the parts are working like they should – it’s a beautiful thing.
You can see how money, marketing, maintenance, and management are all related to one another for success and in failure. For example, if you didn’t manage the money well, you’ll have no money for marketing and maintenance. Tenants will move out and costly deferred maintenance will start to amount. On the other side, if you do a good job of marketing your vacancies and addressing maintenance requests quickly, it’ll lead to a consistent stream of money from tenants and future rent increases. Lastly, if you manage the money, marketing, and maintenance well, you’ll have a very high-performing piece of real estate. Let’s discuss the first two Ms more closely in next few pages.
The first M. You see, money is currency and it needs be in circulation. And currency would not be currency if it did not circulate, right? The money you receive as rents must circulate to pay bills, pay yourself, and then back into the property to keep its physical condition in tip-top condition. Many investors who have failed have failed to put money back into their properties as they should. Properties of every kind have a lifetime – they don’t last forever on their own. Over time, you’ll need to save money for re-painting, roofing, siding, new appliances, etc. The easiest way to keep your property occupied of happy tenants and to attract reliable ones is to keep it looking pretty.
Secondly, the main goal in real estate investing is to make money, right? When we buy “income properties” we should put a heavy focus and watchful eye on the income. In fact, you should watch the money coming into the property and flowing out of the property like a hawk. For example, on properties I’m responsible for, I precisely know the following each month – a) how much money is collected, how much of it is delinquent, how much of it went to property expenses, how much went into reserves, and how much we have in the bank. You should know this whether you have 1,000 apartment units or 2 units. That’s how you must be. There’s no other way if you’re in it to make money.
The second M. Whether you have invested in a single family home, a 12-unit apartment building, an office building, or a retail strip center, a focused and targeted marketing program is key to making money in real estate. Marketing should be fun, creative, and aggressive. Do you recall the saying that, “something isn’t rocket-science”? Well, effective marketing is rocket science because it is very, very specific. One of the biggest landlord mistakes of ALL time is trying to be “all things to all people”. You gotta spend the time researching to find out who is the most likely customer for you property. Once you find that out – then market strategically to them. For example, marketing to potential apartment tenants, you’ll need different strategies and techniques to effectively reach and get the interest of Gen X, Gen Y, and Baby Boomers.
Here’s a cool bit of info I gathered: 70% of apartment renters begin their searches using the internet. 85% of all leads who actually rent come from internet advertising. And 70% of all of our leads come from free internet advertising!!