Real estate, like so many other businesses, is all about the relationships you develop and running the numbers before you make an investment. It has become easier to network in this day and age due to the Internet and social media platforms.
Did you know sites, such as LinkedIn, allow you to seek out the decision maker of a company in a matter of minutes. But what do you do once you make the connection?
Networking Keys for Investors
Some keys to networking are:
- Build rapport. Try to find something that you and your prospect both share in common, whether it is kids, sports teams or a hobby.
- People do business with people they like and trust.
- Stop talking, listen and show genuine interest in the person with whom you are trying to build rapport.
- In the words of the great Steven Covey, “Seek first to understand, then to be understood.”
- Do as you say and say as you do. If you have an appointment to jump on a call at 9 AM, you better jump on at 9 AM. Stick to your word.
Don’t be afraid to tell people what you do for a living. I have memorized a short elevator speech that gives a concise description of what I can offer potential prospects and how I can add value to their lives.
Finally, try to enjoy networking and don’t view it as a job. People can sense if you’re faking it, or if you’re in it for your own personal intentions. Choose events that you will enjoy. My favorite is taking people out to lunch, where I feel the setting is more intimate yet casual.
Analyze Before You Buy/Make an Offer
It took me a long time to learn this particular step, and once I did, my investing career took off. Real estate is all about the numbers. If the numbers don’t work, move onto the next deal. Early on, I would fall in love with a property, and convince myself that I could make the numbers work. Avoid this huge mistake by approaching real estate as a business.
In multifamily investing, I focus on three specific benchmarks: Cash on Cash, Debt Coverage and Cap Rate. Once the property can be acquired by satisfying these benchmarks, I further analyze the property to see if there are any value adds to the asset, such as raising rents or lowering expenses. I only purchase a property based on actual numbers, specifically the last twelve months of performance, and expect a 10% Cash on Cash, a 1.2 Debt Coverage Ratio or higher and an 8 Cap.
It is no different in other niches in real estate. When a fix and flipper is buying a home, he has to perform an after repair market value of the property to estimate his profit. A wholesaler needs to know current market values before putting a deal under contract. Not knowing market value will lead to failure in real estate.
Current market conditions are making it more difficult to locate these deals, but I have learned to be disciplined in the buying process. All savvy investors understand that you make money when you buy in real estate. When analyzing multifamily real estate, there are other amazing benefits that are often overlooked.