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September 2019

investing in real estate

9 Lethal Real Estate Investing Mistakes

1000 500 Sam Radbil

You are ready to start investing in real estate, but you want to be careful; you don’t want to make the same mistakes that others have, and while you have done some research, you know that there are some basic guidelines to follow as you start investing in real estate.

To help you become a sophisticated real estate investor, we’ve compiled a great list of nine common errors to avoid.

Are You Overpaying?

This might seem simplistic, but the easiest way to lose money on a real estate investment is too pay too much for the property. Paying even as little as $10,000 too much can cause you to go cash-flow negative and to be stuck with a poorly performing property.

If your monthly costs are $900, and you can rent your unit for $1200 per month that produces $300 per month in cash flow.

If you overpay and raise your monthly costs just $200 to $1100, you’re not leaving yourself much room to make money; you may try to get an unrealistic amount for rent, and your place may sit empty, therefore costing you more than $1000 per month.

Your dream rental property will quickly become a nightmare if you buy it incorrectly.

I’m Going to Get Rich Quick

We urge you to attend one of those real-estate-road-to-riches seminars, like the one shown above, that you’ll see online or even in your town.

These are offered by a number of people, but their story is always the same as they claim that by buying their book, taking their seminar or by signing up for costly consulting, you too can be a passive real estate investment millionaire.

Sure, someone, somewhere occasionally gets rich quick by investing in real estate, but in reality, those that do make a lot of money attribute it to hard work and perseverance with a little luck thrown in along the way.

By all means go to a real estate investment seminar but be skeptical about anything you hear.

Winging It When Investing in Real Estate

You need a plan. You need financing. You need knowledge. And you can’t attain these things by merely waking up one day and deciding that you’re going to be a real estate mogul. You need to form great habits!

Learn about the business, pay attention to those that have been the most successful and have a good idea of what you want to accomplish before you start.

No Homework When Investing in Real Estate

Do you understand mortgage terminology?

Do you know what REO property is?

Do you understand title policies?

Do you know the difference between gross and net profit?

Do you know what a buyer’s agent does?

You get the point — study the business you are about to become involved in.

I Don’t Need Anybody to Help Me

Successful entrepreneurs know their weaknesses. If they are not good at employee relations, they hire an HR person who is. They have lawyers draft their contracts and CPAs do their taxes.

Sure, you know how replace a toilet handle, but can you fix a ceiling leak that originates from another apartment unit?

Buttonwood, property management Toronto, advises, “don’t start investing in types of real estate until you have your resource team lined up. You can’t do everything yourself, unless you want to ride that lone scooter into bankruptcy court.”

Cash Flow Investments?

Cash flow for real estate investing

Understand cash flow because cash is king. A good friend of ours was a street educated business person and said that she used the checkbook method of accounting.

When she had money in her checkbook after paying bills she was doing well; when she was short of funds and bills were piling up, she was doing poorly.

Now we’re not saying you should employ that primitive bookkeeping method, but our friend certainly understood what cash flow meant and so should you.

Afraid to Do Two

If you are going to make significant dollars investing in real estate, you’ll need to have the capability to do more than one project at once. Good deals are sometimes fleeting, and you may have to strike quickly. If your preferred business method is plodding, investing in real estate may not be for you.

You are Too Single Minded

HGTV fixer upper real estate
Image via amazon.com

You buy a fixer-upper to renovate and your plan is to get the work done quickly and then flip it—just like they do on TV.

You’re ready for some cost overruns, and you have your demo and reconstruction crews lined up. You move quickly and the house looks beautiful. Then a water main breaks and floods the street and the city finds a labyrinth of caverns below ground. Suddenly, no one can even get to your property to view it, and potential buyer traffic is non-existent.

Now you have to start thinking about renting or even trading the home for another property. You used all of your lines of credit for the remodel, so you have a big problem and you have painted yourself into a corner.

Sure, you’ll eventually get out of the mess, but not until you get your rental machine going, or you are able to make a quick deal to get out.

If you would have considered early on that something bad could happen, you could have planned accordingly.

Bad Estimates (More Headaches)

Image result for headache

Cost overruns can kill you, and if you don’t get multiple estimates for everything like insurance, remolding costs, and even broker commissions, you are doing yourself a disservice. 

Yes, you too can make good money investing in real estate, but you’ll have a greater chance of success if you pay attention to the 9 pitfalls described above.

Open House Ideas

10 Open House Ideas To Bring You Customers

1000 500 Sam Radbil

An open house showcase is a tried and true way for generating buyer interest in your real estate property, and it is easy to see why.

Potential first-time buyers will have a tough time making a decision if all you provided is an online listing, so the solution is to give them something more tangible to ponder over, such as a live preview of the property.

With that being said, organizing an open house event is no small task, even if you’re a real estate veteran. Many factors will contribute to the success of your open house event, from the way you present the property, to the way you market the event, to the structure of your guest-list.

If this is your first time planning an open house, or if you’re looking for suggestions on how to take your existing events to the next level, look no further. Check out our list of 10 property showcase ideas that will get buyers knocking on your door.

1. Create a Welcoming Environment

The main purpose of an open house is to evoke a positive first impression from visitors, and this means making them feel welcome as soon they set foot on the property. In order to create a welcoming environment, make sure to:

  • Update the walls and fixtures
  • Keep clutter under control
  • Paint over scuffed areas
  • Replace missing light-bulbs
  • Stage each room with the appropriate furniture

2. Provide Factsheets

There is more to promoting an open house than just making it appear nice. More discerning visitors will look past appearances and will insist instead that you provide relevant facts and information about the property. One way to do it would be to present the facts yourself in person, but a smarter, more efficient approach would be to provide factsheets at the sign-in. Ideas for what to include in terms of information:

  • home’s construction
  • condition
  • flooring
  • square footage
  • number of bedrooms and bathrooms
  • lot size
  • land
  • location

3. Prepare an Engaging Script

Contrary to popular wisdom, products don’t really sell themselves. Even if your property well-built, richly furnished, affordable, and situated in a good neighborhood, people will still be reluctant to buy without some convincing on your part.

Nowadays, being too aggressive in your sales pitch will immediately turn people off. What you should do instead is frame your pitch in terms of a story. Don’t just bombard visitors with information (that is what the factsheets are for). Instead, explain how buying this particular property will impact their life for the better.

4. Send out Invitations through Mail

Most real estate agencies rely on email for sending open house invitations. There is nothing wrong with this approach per se, but an email invitation can feel a little cold and sterile, which are not feelings you want to evoke. So instead of using email, you can deliver invitations via regular mail. This will make your invitations feel more personal, and as you probably know by now, personalization is the key to marketing success.

5. Place Hangers on Neighborhood Doorknobs

In addition to sending out direct invitations, you can spread the word about your open house event by notifying people in the area. There are countless ways to do this (a couple of which we will cover in the coming paragraphs), but one in particular grew to become a staple in the world real estate. Of course, we are talking about placing door hangers on houses in the neighborhood. Door hangers are cheap to produce, flexible in terms of design, and they are fairly non-intrusive as far as marketing techniques go.

6. Use a Drone to Create Aerial Photography

Today, high-quality images are necessary for creating promotional materials, but they are no longer sufficient to set you apart from competitors. So, in order to take things up a notch and provide truly memorable imagery, you can use drone photography. Hire a professional drone photographer, and have them take photos of your open house from above. And if you want to take things even further, you can use the drone to record a video, and use it to promote the event online.

7. Set up Banners Around the Property

Never underestimate the power of traditional marketing. The real estate industry is a unique position with regards to traditional marketing tactics, such as putting up promotional banners. Banners can display all essential information about your open house event, so passersby can learn about your offer with a single glance. Pay special attention to your banner copy. Don’t be too sales-minded, and be economic with your words.

8. Live Stream the Event

Open house showcases are often recurring events, unless you get really lucky with your first batch of visitors. The problem with this is that you have to redo much of the preparatory work each time you host the event. Or at least you had to until just a few years ago, when streaming technology became mainstream. Now you can livestream the whole event while it unfolds, giving online leads a chance to take a peek as well. Naturally, you can reuse the recording for future events as well.

9. Use a Sign-in App

Having visitors sign up on a list during view is a long-standing open house tradition. It is also a major source of hassle, both for visitors, and yourself. Visitors usually want to look at the property straight away, and deciphering their signatures on a sign-in sheet is an exercise in frustration. Fortunately, nowadays you can use a sign-in app to streamline the whole process. An app such as Spacio will enable you to ask custom questions, sign in people on mobile devices, and send all collected data directly to your CRM system.

10. Send Follow-up Emails

Whether you made a sale or not, you can still extract some utility from your open house event by staying in touch with visitors (especially if you collected their data). All you need is their name and email address, and you can send out follow-up emails after the event to keep them invested in your brand. Thank them for showing up for the event, and offer them the option to get notified about future events. If you run an email newsletter, you can have them sign up to receive your regular content updates (which you should be doing anyway as a part of your digital marketing strategy).

Conclusion

Open house events are a great way to showcase your real estate property in a positive light. Use them to develop a stronger relationship with potential buyers, raise awareness for your business, and hopefully close down sales. And if get stuck at any point during the organization, bookmark this article and look it over to remind yourself of what you ought to be doing.

investing in real estate vs. stocks

Why You Should Invest in Real Estate before Stocks

1000 500 Sam Radbil

It’s great that you have some extra cash to invest, and it’s come to down to investing in real estate vs. stocks. So, how do you know what to do?

You like the quick pops you can get from equities, but lately you’ve been worried about volatility and the effect of lower interest rates on the market. You’ve also been looking at some supposedly undervalued companies, but you’re also concerned about a value-trap situation like GE or even Bank of America.

If you ask us, we’d take real estate as an investment any day over stocks, and following are seven great reasons why:

It’s Tangible

investing in real estate vs. stocks

When you buy a stock, you are purchasing a piece of a company. The only problem is that you will have no say in the company’s day-today operations. You’re an owner, but virtually a silent one.

Sure, you can team up with other shareholders and vote at a shareholder’s meeting, but you will be one of millions of stockholders, and your lone vote won’t have a significant effect on the way the company does its business. The Green Bay Packers are publicly owned, but most shareholders have no voting rights, so while you are a company stockholder you can’t call the coach and tell him to call different plays.

Well, you could call him if you had his number, but our point is that you have no real power just because you are a shareholder of the Green Bay Packers or a large public company. You’re basically along for the ride.

If you buy a piece of real estate, especially a first time buyer, you can see it, touch it and manage it if you want to. You can drive past every day and make sure that it’ still in good condition. It’s there and it’s a tangible item. And, you can make decisions about repairs, rentals, upgrades and marketing. If you decide that investing in real estate vs. stocks is the way to go for you, you’ll be in control.

You Make the Decision Based Upon What You Actually See

When you buy a stock, you can see the prospectus, read reviews online and then basically take a chance.

If you’re a Peter Lynch guy, you’ll buy shares of Kohl’s Department Store, for example, if you’ve had a great shopping experience there. What goes on in the boardroom, however, will be hidden from you, and you may be the last to know when surprises are about to rile the market.

When buying real estate, you can actually “kick the tires.” (That’s what your dad did before he would buy a car. People used to think that if the tires were sound a used car was a good buy.) Anyway, you can certainly ascertain if a property needs work, and most people get a professional inspector to help them unmask potential problems before purchasing real estate.

Less Volatile

Ok, if your city decides to put a sex offender residence facility next to your property, you may see a quick downward price trend, but those who like investing in real estate vs. stocks will usually not experience quick property value declines. Even in severe recessions, housing price decreases usually take some time to materialize, and you should have time to get out before a housing crash manifests itself.

Less Fraud

If you like penny stocks you can get burned in a hurry. If you like unicorns and startups, the same thing can happen. If you like futures, just beware. There are lots of scammers out there and “pump and dump” schemes are a cloud that often hangs over certain stock market areas. 

When you buy property, however, you won’t enter into a transaction until you receive a fresh title policy form a reputable insurance company, and few banks are going to give you a mortgage on a apiece of property with a clouded or even minimally questionable title status. With a little diligence, you’ll be sure that the seller of your property actually does own it.

Inflation Hedge

When some ponder investing in real estate vs. stocks, they point to inflation as an overriding decision-driving factor. Investopedia.com says:

“For the majority of U.S. history – or at least as far back as reliable information goes – housing prices have increased only slightly more than the level of inflation in the economy.”

Only during the period between 1990 and 2006, known as the Great Moderation, did housing returns rival those of the stock market.

The stock market has consistently produced more booms and busts than the housing market, but it has also had better overall returns as well.”

While we understand the statistical relevance here, we are in a unique environment with a top-heavy stock market and record low interest rates and we’d feel much more comfortable with an income-producing four family than with 200 shares of Samsung stock.

There is a lot of geo-political tension, and we feel real estate is in a better position than stocks to defend itself against these threats.

Real estate is tangible, solid and slower moving than stocks. Even though stocks may seem easier to sell at time, we like the traditional and concrete value that real estate presents.

And if you’re looking to buy some real estate without much money down, you can always contact us to get started.