Focused Investors

Entrepreneur’s minds go a hundred miles an hour in many directions. This can be great at times and at other times not so great. In the case of real estate investors, it tends to be the latter. Real estate investors have a habit of learning how to make money in one aspect of real estate investing and then another and then another etc.

Before the investor realizes it, he/she is just doing what comes easiest and not considering the most profitable exit strategy. Or worst, the investor has not fully learned one strategy and is not maximizing profit. How can you solve this issue? FOCUS!

Investors usually progress in the following order: bird dog, wholesaler, flipper, landlord, and lender. This is not mandatory but it tends to be a natural progression for many. At the beginning bird dog will usually only bird dog because it is all they know how to do. Naturally, by being in the real estate investing community, they begin to learn how to wholesale.

At this point, the wholesaler will still be pretty focused but then he/she begins to buy-fix-sell properties. This is where it gets tricky. Should the investor wholesale a property he/she finds or invest in the property himself/herself. This question comes up every time the investor puts a property under contract.

Then after a few homerun deals the investor decides it is time to begin keeping a few homes as rentals. A few months go by and now the question to wholesale, fix-sell, or fix-rent begins soon after placing a property under contract.

Then the investor learns how to do a subject-to, how to flip notes, how to be a lender, etc. Now you have all kinds of ideas and decisions to make when considering a property and once a property is in escrow. A jack of all trades and a master of none, in real estate, in my opinion, can be dangerous. This real estate knowledge over load has led to the demise of many newbie and seasoned investors.

Seasoned investors can experiment a bit more because they tend to have more funds available and usually go back to doing what made them profitable. On the other hand, newbies will take a few different paths in real estate investing until they find what they like/love or fail and never look back.

In either case, I suggest you master what has been the most profitable for you. Market for that strategy, master that strategy, and teach that strategy. Maybe even combine your most profitable strategy with another strategy. For example, wholetailing is the most common. This is when an investor purchases what would normally be a wholesale deal, does a little cleaning and/or minor cosmetic renovations, and sells the home closer to retail price. In this example, the investor’s core FOCUS might have been wholesaling but decided to do a wholetail because of the potential profit.

Keep in mind that I am not saying you should not be aware of all the different strategies there are to invest in real estate, but rather stating that you should master one then another instead of floating around. Once you decide on a method that not only works for you but you also enjoy, stick to it. All the other strategies should only be considered after the fact. For example, I am currently looking to ramp up my rental portfolio.

Therefore, all the homes that I submit offers on will be contracted with the understanding that they will be rentals. Keeping in mind that I have been flipping houses for a few years now, there will be a transition period, due to funding/financing.

My goal for each acquisition will be to find a private lenders that will provide long term financing for rentals and/or commercial loans for a rental portfolio. If no funding can be secured, the home will be fixed and sold with the private financing currently in place. Eventually, once enough private funds are available each property acquired will be fixed and rented, unless it does not cash flow and it works better as a flip.

Each time your real estate investment strategy changes have some procedures in order, maybe a flow chart. This will make each decision faster and keep you more productive. In my situation, I am looking to cash flow a certain amount per month.

If the cash flow if not available, I begin to consider the property for a flip. If fixing and selling the property does not give me a certain return and/or dollar amount, I wholesale it. If the property will only make a very little profit as a wholesale, I offer the seller my real estate broker services.

As you can see there is no guess work in this flow chart. I want rentals, so I focus on rentals and everything else comes second. Without this FOCUS my production would suffer and so would my income. Keep learning new ways to invest in real estate but use that knowledge as an asset and allow it to compliment your core investment strategy. FOCUS!