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Why The Classical Real Estate Model Is Still Holding Up

November 15, 2011 By Leave a Comment

Now that the national housing market has hit a bit of slump, you don’t hear about them as much in media’s feature stories but I remember about six months ago when every other day CNN Money was covering some new concept real estate company that was slashing commission rates and how it all was going to mean the end of the classic model of real estate commission system.

I remember, because it was around that time that after three years in real estate, I had gotten my brokerage license and had setup my own real estate firm. The concept of reinventing the wheel sounded awfully attractive especially since we were trying to find our own little niche in the real estate world. And what better position to be in than to provide full service real estate for a mere fraction of the cost? Who wouldn’t want that, right?

Actually not very many people. I understood later why. The cost of selling the home to the home owner is secondary to the actual sale of the home. In other words, the sellers cares more about whether their home will sell versus how much it will cost them to sell it. Discount real estate companies have had good success in hot markets where properties virtually sell themselves like California and Florida. But in the middle class America, real estate remains a trust based business and although counterintuitive, lower priced services are usually deemed to be less trustworthy.

For instance, when we first started the company as a discount real estate firm I had this “brilliant” idea about how I was going to offer to sell about 30 homes for absolutely free. The plan was to get enough exposure of the homes I was selling for free to make up for the effort. Would you believe it that people would simply not want to do it? They didn’t want to sell their home for free. The low cost (or in this case, no cost) idea has a “too good to be true” appeal to it that makes it seem shady even when sincere to begin with.

I think the real estate classic system will hold up for quite some time if not ever.

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Simple Tips For Real Estate Investors

November 15, 2011 By Leave a Comment

Real estate is just like any other discipline. Most of us immediately would understand this. You must spend some time and effort to become good at it anything. However in today society full of quick fixes it is so easy to fall pray to something that we know is just too good to be true.

I am an investing real estate broker. I do my share of investing for myself but I also handle a pool of local investors that are active in my local market.

Every so often, more often than I could care for, I come across that “newbee” investor. I always smile and my heart goes out to them. I also started with the big dreams and goals. I did order the tapes and the books. I got my $500.00 worth of education when I started. I think there is something that most books, tapes and seminars miss or do not emphasize enough.

One thing is to learn all the theories and techniques the book, tapes and seminars teach. That is all great and good. The other is where the rubber meets the road. The Action part.

There is one little thing that most new investors do not know or choose not to do. Again, books can tell you to do this. Show you the reason behind doing it. Give you examples of how it might work, etc. What are we talking about? Exactly that!

It is necessary for you to actually go out and talk to the people. Talk to the sellers. Talk to the buyers. Talk to realtors. Talk to pretty much every one in this business.

What do you want to talk to them about? I have learn that the more ignorant you sound and actually make them believe that you are, the more results one is going to get. I have learned the hard way to let go of all my knowledge in front of people. People are people. They have their one issues and their one stuff that you and I will never get to fix. So leave that to their doctors and let them fix it.

You and I are in the business of doing something with real estate. We can’t get in to that business unless we make certain that we have our people skills right down packed. People skills are natural to some people.

My wife is the perfect example of that. She can get pretty much anything out of anyone. It is a natural thing for her. Maybe that is why she got me!!

When ever I can, I take her with me to do my talking for me. Something that I have learned to do is to shut that voice inside of me whenever I am in front of someone I want to do business with. I force myself to just listen and listen very well before I talk. The next thing that one must do is to feed back to them what they have given to you. This is critical. It is the step that most forget. One has to learn from other professionals and apply it to one business. In this step you want to behave like a Doctor or an Attorney.

What I mean is that you have to tell them back what you have just listened to, but you have to change it a bit and put it in your own words. What would this do? It is going to make sure that everyone is on the same page. And if you missed something then it will give the chance for the other person to clarify what is missing.

The danger in this critical step is to start to argue with the other person about what you are saying and what you thought that they said. Always be careful about that. At this point is not about winning an argument (you said I said stuff) is about understanding. Once you get a clear understanding about their needs and repeat them back to the other person, tell them your needs and watch how they are more open to them.

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How Millionaires Make Money From Real Estate

November 15, 2011 By Leave a Comment

Intelligent use of real estate can enable ordinary people to become millionaires in about 10 years or less.

A lot of statisticians say that on average across the board, property has doubled on average every 7 to 10 years in the last 146 years in Australia, this has happened in many other countries also. This statistic depends on location, quality of property and the price you pay for it of course.

How you can use property to create wealth

For instance, Bill and Mary are earning $50,000 a year and they want to replace their income. I am going to suggest that just by buying two investment properties, they could achieve this. Let us look at how they can buy two investment properties for them to retire. $50,000 a year is approximately $35,000 per year after tax. So would you be committed to buying 2 properties in the next decade if you could retire from them?

In year 1 of the plan, we are going to buy one property. The properties I tend to buy are often around $300,000, which we will use for this strategy. The second year we do not buy any property and the third year we buy our second property. In ten years time, these properties could be worth $600,000. That is 10 years after you buy them. (Always make your plans conservative as it could take 10 years or longer.) I generally buy properties in capital cities because these properties will continue to grow.

If the property doubles in 10 years, this is $300,000 in extra money we have made over 10 years per property, i.e., $300,000 each, now worth $600,000. You have earned $300,000 from capital growth. Bill and Mary need $35,000 a year net to replace their current incomes. They are probably thinking if they buy the property, they have to work harder. If they buy and sell to make a profit, they generally have to pay capital gains tax. In this strategy, we are going to buy a good property and keep it ideally forever. It is worth $600,000. They need $35,000 net cash to replace their income. Where can they get that from?

What about a line of credit?

A line of credit allows us to draw equity/cash out of property by setting up a bank account from which to draw this down. They can draw out $35,000 in the first year, then do the same in year two and three.

In years 4, 5 and 6 they could take say $35,000 our of the second property. It is just sitting there so why not use it? If they do not use it, when they die, someone else gets it, so they might as well use the money they have made.

Six years after the first property is worth more than $600,000, being in a capital city, it may be worth $900,000 plus. That gives them another $300,000 sitting there available to use. They have not finished using the first $300,000 and now they have another $300,000 and the property keeps going up in value whether they like it or not. This means they have more than they need for retirement.

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