All that Glitters May Not Be Gold…

I’m currently mentoring a couple of investors who are really excited about the business of real estate investing.  I like to feed off of their excitement and I enjoy listening to them when they talk about something new that they’ve learned and want to use in the business.  However, this also brings up the very tricky subject matter of what deals to take on and which ones to leave for a later time.  As with my last article, the experienced investor may read this and say, “Yes, I get it, I went through that period of my career where I looked at every deal with rose colored glasses but I’m smarter now.”  To that investor I would say that yes, you probably are smarter now but we must constantly be taking our own temperature (so to speak) to determine really where we are at that moment in our real estate business.  Even though you may have bought and sold 100 or 200 properties and you have years of experience, there are always going to be new and possibly distracting opportunities that people are putting in front of you.   I recently got an email from a friend who has an exciting opportunity in Costa Rica that he’s been talking about for a year.  He organized an LLC and is looking to raise millions of dollars specifically for this project.  Every time I speak to him about it, it sounds better and better.  There’s always an update from him about how he just had another investor get involved and the project is looking great, etc.  Of course, I’m sitting here and listening to this and each time I get more interested.  But the reality is that at this point for my particular situation, there is a greater chance that this opportunity would only take me farther away from my goals and into an area that I’ve done very little research on.   Which brings me to the subject of what one of my investors-in-training said to me recently.  He said, “Dave, I have this opportunity in Texas that is a pre-construction deal that I think I am going to do.”  Keep in mind that what he and I have been working on has been almost entirely the wholesaling side of real estate, where he is taking the least risk possible with the greatest potential reward.  And now he approaches me with something that he knows very little about, hasn’t had enough interest to even research the market extensively, has no real contacts to speak about in the area and knows no one who has actually been successful with the project.  These are all things that I asked him about to which he knew almost nothing.  However, the one thing that stood out in his mind was that the potential return on investment was in the mid six figures.  In other words, once he heard about that and looked at the website and heard the sales pitch, everything else didn’t matter as much.  The hard questions that need to be answered anytime we look at a deal, he seemed to justify in his mind that it was worth the risk.  They say that love is blind but sometimes we as investors are blind as well.  We hear that one thing or we believe that somehow we have the inside scoop and that we need to act now to take advantage of an opportunity or it may be gone forever.   While there is some truth to the fact that some opportunities need to be seized at a particular moment, for the most part, there are always going to be good deals available if we want to find them.  I’m not advocating that we scoff at every opportunity and pass on everything but I am saying that the same amount of time and work that made you good at one thing in real estate will be required to be good at another area of real estate (or any business for that matter).  A statement that summarizes this idea goes something along the lines of “Trust, but verify.”  This is true not only of real estate but also most aspects of life.  Even when creating a new business relationship with someone, I may trust what they are saying but I’m going to ask the questions that reveal whether or not they have an intimate knowledge of what they are speaking about.  To do that, I must first have an intimate knowledge myself by doing the proper homework.  Only then can I look at an opportunity and say that this one is not fool’s gold. For information regarding real estate mentoring opportunities, please contact info@maybachrealestate.com.

Know When to Hold ‘Em and When to Fold ‘Em

This blog is dealing with the topic of when to proceed with a real estate deal and when it’s better just to step away from it.  I had a recent situation that inspired this article and I decided to put it on paper because it involves an important topic concerning this business of real estate and something that many other investors ask me about: what is a motivated seller and how can you tell the difference between someone who is motivated and someone who is not?  From the question, it would seem obvious but you must remember that you must first define in your own mind what it means to be motivated.   For my purposes, a motivated seller is someone who is absolutely ready to do business and is craving for me to help them.  It’s not someone who wants to have multiple conversations to get to know me, followed by me coming out to snap some pictures of the house, followed by another week or two of them having an attorney look at the documents, followed by another week of them discussing it with their spouse.  I don’t care how great the deal may appear, if your seller does not NEED your services, then you’re probably setting yourself up for a lot of wasted time and a big disappointment in the end.  If you have to consistently call the seller and convince them as to why your service is important, that again is not a motivated seller.  If you find that your day consists of calling back people who are in foreclosure and always following up with old leads, you’re probably not generating enough new ones and your business is going to be stagnant and lead to disappointment.   I recently went out to northern New Jersey to get a 4 family house under contract that had two mortgages and would have been an ideal property to spend time on and probably would have turned out to be a winner.  The house needed repairs as well so a short sale would have been a strong option.  The owner had called me twice, I explained the process and he seemed motivated by the standards of my definition.  However, when I showed up at the property, the owner was 20 minutes late.  Ok, nothing to get too excited about but I was watching a little closer.  His next item of business once he showed up was to spend about 20 more minutes arguing with a tenant.  Now I was starting to feel as if he was eating into my time.  I normally spend less time than that in total at the property.  Finally, after I had snapped a few pictures, I took him aside and said that I would like to go over the documents which I had already briefed him on over the phone.  It was at that point, that he asked a few questions that to me indicated there was still a bit of indecision on his part.  I think in the back of his mind he believed that his realtor might still get the property sold.  Meanwhile, the realtor had the property listed for over 6 months and there hadn’t been any offers above what he owed on the property.   So I stood there a minute, did a mental evaluation of where I thought I was with this seller, stared him in the eyes and said, “You know what, at this point, I’ve decided not to do business with you.”  I thanked him for his time and went to the car where my driver was waiting (I usually pay a notary to drive me).  As I walked away the guy attempted to try and open up talks again with me and even was knocking on the window as I began driving away.  But I had already made my decision.  He had a combative spirit and even though I could have had the papers signed and another deal to work on, I said that this one was a motivated seller in sheep’s clothing.  Even though I wasted an hour, I still looked at that deal as a win for me because earlier in my career, I might have walked right into that one but this time, I knew when to fold ‘em.  For more information regarding our real estate mentoring programs, contact us at info@maybachrealestate.com.

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