Become a Failure and Succeed Past Your Wildest Dreams!
|Obviously this is not the bit of advice that you would be expecting, but once you get this concept, success will be laid before you. You want to fail in the right ways limiting financial and legal liabilities. |
To give you a better idea of exactly what I am talking about you simply must know where I'm coming from and possibly a bit of my personal story will help make sense. Why? That is because over my 10 year real estate career my first five years were anything significant and needless to say 'fun'.
I found myself with 25 properties after the first five years. Not bad right? WRONG!!! I had 25 properties barely cash-flowing AND I also had my corporate job still to keep everything afloat. Definitely not what I had expected.
It all sounds so nice, right?.....become a landlord with no money down deals and you can be taking vacations on the beach six weeks a year while tenants pay you to fire your boss and live the life you've always wanted. Am I the only one here that bought into that? I didn't think so but there is always a silver lining.
So after my first five years of real estate investing I had graduated with an MBA from the school of 'hard knocks'. The only good side from those experiences was a sense of, 'well, I'll never do it that way again'. Believe me its not the easy and profitable way to learn in real estate.
Still determined and passionate about real estate beyond description I literally wrote myself a note which is the focus of principles I sorely want you to learn and burn into your short and long-term memory. This is my motto that I still live by on a daily basis today: 'What is the absolute worst-case scenario that can happen on this deal...and if it does, am I financially and legally prepared for the consequences?'
There is NEVER a no-risk scenario when it comes to real estate investing. Let me quantify that before anyone starts talking about contingency clauses and the such. You will always be risking at the very minimum your time that has value and not to mention even some marketing dollars to find the deals.
Now that doesn't sound as bad now does it. This in summary is what I mean: limit financial and liability issues as much as possible in real estate investing.
For example; if I know ALL there is about how to structure contracts to wholesale flip for quick cash to other investors and limiting any possible negative liability consequences, then what is my risk? Possibly only 'risk' would be a couple hundred bucks mailing to absentee owners. Even if not one deal is made, then that is a consequence I can live with.
Another example; if I finance this rehab project through a hard-money lender do I have enough reserves to make the interest only payments? What happens if I come into some unexpected repairs that are outside the LTV of what the lender will allow for repairs? If the house is still on the market after six months and hasn't sold, what will I be prepared to do? A little bit more serious risk that I need to look at in great consideration.
There is this guy 'Murphy' that shows up a lot of times in real estate deals. You know, 'Murphy's Law'! It means what- ever can happen sometimes does and it is most of the time not to your advantage. Just be prepared and it would be prudent to have some vision in working through all possible scenarios.
Recently I closed on a property making $7,000 as a quick flip. This property I secured through my probate marketing simply gaining an option on the property with no legal liability to perform if I didn't buy it or get someone else to buy it. I knew there was a chunk of equity in the property but it was heading straight to foreclosure. Not enough equity for investor offer, but GREAT deal for a retail buyer. So after tieing up the property under contract I then advertised 'handy-man' special. Then I had $100 in advertising invested. I can live with that risk if I don't make any profit on the property.
From there I found a buyer the next day with an 800 Beacon score! Never had that happen and probably won't again. Went through the loan process controlling the whole approach. Loan went through to underwriting and termite/inspection report revelealed some moisture damage as required by my state to report. Loan wasn't going to close until repairs done even though was sold 'as-is'.
The house then needed $725 worth of repairs in order for the loan to close. I paid the repair bill and now I've got $825 in the situation. If the loan STILL doesn't close and I lose my $825, I still can live with that risk. Funny things and not in a 'ha-ha' kind of way can happen at underwriting so nothing is still guaranteed.
After all the dust settled, I realized a $7,000 net profit after the repairs and advertising expenses were paid. I had a total of $825 at risk in the entire situation and if the deal never closed then that is an amount I could live with as a loss----definitely NOT be happy with but I wouldn't lose sleep over it at night.
If you're concentrating on deals and real estate holdings that literally keep you awake at night when you should be sleeping.... start asking yourself how you can limit those risks to a bare minimum.
This whole business is about QUALITY of deals and not QUANTITY. Continue to invest in the education of yourself and limiting your worst-case scenario downsides, then build up to a quantity of quality deals! That is called putting your real estate business in overdrive for true financial security that corporate America just can't provide for you like real estate can and does for investors on a daily basis.
To your success and good hunting as luck has absolutely NOTHING to do with it!
|Scott Rister is a successful full-time investor living in Dallas, TX. Closing 72 deals in one 9 month period, Scott's property acquisition company, One-Stop Realty, LLC maintains current holdings in four states.|
After building a sizable portfolio of keeper properties that was not getting him where he wanted to go, he discovered the art of wholesaling. Since that time he's done hundreds of deals and focuses exclusively on motivated sellers using technology and a targeted marketing approach.
Scott Rister's approach is based on the belief that the successful real estate investor will leverage the best use of his/her time by implementing systems that can run on auto-pilot with minimal maintenance.
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