On Messages

My business partner and I have been hard at work getting everything set up. We want to present ourselves very professionally and set apart what we are able to do for our sellers and buyers from other operations and other investors in the area.  We feel that a web presence, a cohesive marketing message, and a lot of the details that many other real estate investors pass up on is the way to go about that.  To your left you'll see our logo.  We're pretty proud of it.  We worked with a graphic designer, presented our image of ourselves and a few ideas.  After a healthy back and forth this was the final product.  We feel it evokes everything important about our image that we want to convey.

Our original design idea was a pair of gloves.  The designer we worked with shot us 6 very radically different ideas and a championship belt jumped out as exactly the right thing.  Another round of feedback and we landed on what you see.  It was worth paying for this for the logo alone, even if we incorporate it in a clumsy manner.  A logo is something many other investors in the area will not have.  Many of the individuals who get into investing of any sort think of themselves as just that: Individuals.  We are an organization.  More importantly those who do business with us will also understand that even if they only ever see me -- we are a company that values the way it looks.  This gives an edge.  If you get the same financial offer, will you take it from the guy who scrawls it on a napkin, or the one who uses a company letterhead on a typed proposal?

Are you just bragging on yourself, here, or what?

Well...  A little.  But mostly I'm interested in explaining the importance of marketing, branding, image, etc.  We have a business name.  We have a logo.  We have a website (currently under development with another designer and soon to be released).

We didn't get tied to a single idea.  We came up with a lot.  We sat and brainstormed potential business names.  The first idea we had was UnReal Estate.  So we plugged it into a browser to see if that URL was taken.  It was.  We kept working on it until we came up with something that not only spoke to us as individual, but had an imagery we could leverage, as well as a website we could purchase a domain name for.  This might not be important to you and your business... But our main goal is to be more professional than our competition.  It's how we expect to set ourselves apart.

On top of a website we also did a lot of brainstorming of phone numbers.  A few posts ago I talked about registering Google Voice numbers to give you a custom vanity phone number for free.  Here's the list of what we've registered and are putting to use in our Pittsburgh area (724 and 412 are local area codes.  330 is northern ohio, which many people in the area also know).

724-315-7866 / 724-315-SUMO

412-407-3422 / 412-40-REHAB

330-227-4735 / 330-CASH-SELL

802-432-8993 / 802-HEAVYWEIGHT

They are all evocative and easy to remember.  The local phone numbers are important because many individuals like to know they are dealing with someone locally.  The 802 number just made us giddy when we were able to register it.

Why do you need 4 phone numbers?

Strictly; we don't.  It's a good idea, though.  Doing a custom ad campaign for your radio ads?  Want to answer your phone and have your voice mail respond directly to what was said?  Putting out bandit signs in a certain neighborhood for only one particular property?  Want your buyers and your sellers to call different numbers?  Every one of those choices and more are legitimate.  We'll likely end up using more than just four.  Once we get moving along an 800 number will probably be worth the investment.  If there's a single thing that says to me "professional" it's an 800 number.

Catchy Stuff

Heavyweight Real Estate gives some mental images and marketing ideas, too.  Tie-ins with local wrestling or boxing matches and possible sponsorships are a possibility.  Using phrases like "in your corner", "knockout", and "on the ropes" in our marketing messages are a must.  That my partner's grandfather was an amateur boxer many decades ago also gives us a strong family feeling for those who value that in their business partnerships.

We're very pleased with how our image is coming together.  Any zingers you've thought of for your own (or someone else's) business?  How important is it to you to see those little professional touches like a vanity number when choosing someone to do business with?

Who Would Buy a Wholesale Deal?

In my last post I talked about the basics of what it means to "Invest in Real Estate".  The simplest of the three forms of investing I outlined was wholesaling.  In the most basic of terms wholesaling is playing the middle-man in a deal.  This post is about why someone would buy from a wholesaler, and to touch on why one would sell to a wholesaler, which obviously covers in more detail why you might decide to wholesale properties.

The anatomy of a wholesale is pretty simple:  Find a seller, grab it at a good price, make sure there's a lot of meat in there, and pass it along to someone else who makes a very significant profit of their own.  That has a lot of "...but, why?" questions in it.

Why would someone sell to a wholesaler?

In most cases the person with a property they no longer want doesn't care how they get the money you've promised them, as long as it arrives in their hands at the date agreed upon, they will walk away happy.  As far as this person is concerned you are a buyer.  They have something they are selling, and you came along and bought it.  If you are structuring deals properly you won't technically be buying it...  You'll be assigning the contract to someone else, or doing a simultaneous close.  Both of these are just contractual terms that basically mean that you never owned the property.  You found a buyer for the seller, and you built a profit into that deal for yourself.  But the why is because the seller is getting paid.

Why would someone buy a wholesale property?

Buyers, in an economic sense, are those who create demand for a product.  Many buyers in the real estate investing business have more money (or access to more money) than they could reasonably tie up in deals.  The plain and simple answer is that you are providing a sensible product at a price that makes a reasonable profit.  A buyer will buy from you as long as the property will profit them.  When you wholesale a deal the goal is to structure it in such a way that it's attractive to a buyer.  Your value to a buyer is that you have a deal and they have money.  To be a successful wholesaler you just need to have marketing in place that generates deals that buyers wouldn't find on their own.  You provide a unique deal to them, and it changes hands to them.  They'll rehab it and make (in most cases) a lot more money than you because they did a lot more work.

If a rehab makes more money, why bother doing a wholesale?

There are a lot of reasons, but one of the main is risk.  In a wholesale you are exposed to very little.  This is another reason you'll generally make less money wholesaling.  You're doing less work, exposing yourself to less risk -- so your reward is smaller.  Another reason to wholesale is because you lack the team necessary to rehab.  Rehabbing takes experienced contractors who can do the work cheap and efficiently.  Finding a contractor who does a good job can often not be as easy as you'd like it to be.  If you're incapable of fixing a property it's a much better idea to sell it for a few thousand dollars in your pocket and let someone with the resources do the repairs and make the tens of thousands.

Won't a seller and a buyer just cut you out of the deal?

Sometimes they will.  Sometimes a seller will see the contracts and learn they could be selling the property with the profit you would be making in their own pocket.  Sometimes the other side of that where a buyer will go around you and buy it at the price you negotiated with the seller themselves.  This doesn't serve the buyer well.  You found one deal that was going to make them money.  You are likely to work with them again in the future and make them (and yourself) even more money in the future.  Some individuals would rather have a small gain now rather than build a healthy business relationship.  It will happen sometimes.  The real estate investing landscape is used to this sort of deal happening, though -- so it won't be as common as many fear.

There are bound to be a million other questions that I've missed.  These are the obvious ones that jumped out at me when I first heard of the concept.  What would you like to know about wholesales?  Investing in real estate in general?

What does a "Real Estate Investor" actually DO?

We've gone over why I chose it, why I'm qualified for it, and even some helpful tools in doing it, but; We haven't covered what it is, exactly, that one does when they invest in real estate.  Well in today's post I will go over the basics of all of that!

A lot of different people use the term real estate investment and mean a few different things.  It is a slightly broad umbrella.  Even when I'm talking about my exact activities I mean a bit different than what others may.  There are 3 rough categories of what investing in real estate can cover and I'm certain I will go into plenty of detail on each of them eventually.  Right now, though, we're looking at big top-down ideas of wholesaling, rehabbing, and buy and hold strategies.

Rehabbing

Television sets our expectations for a lot of things.  Did you know that juries in a court of law are demanding stricter evidence because of cop dramas?  Well, the big sexy thing you see on television about real estate investment is Rehabbing.  The basic premise is that you find a property for cheap, you fix it up, and you sell it.  It's a pretty simple proposition, it's easy to follow, and people get it.  Find something damaged and broken down, repair it to be at least as good as everything else in the area, and find a buyer.  As long as you have the connections to get this job done and the ability to do it on budget it's a "straightforward" idea to execute: Buy, Fix, Sell.

Rehabbing is where many (most?) real estate investors focus their efforts.  It has a reasonable margin of profit, you're dealing in concrete goods that even if things go sour you can usually find someone else to buy it for as much as you did and get out with only your time wasted, and the net gains are commonly in the mid-10s of thousands of dollars range for only a few months worth of work.  You could get an impressive middle-management job in a tall building downtown somewhere and make that sort of cash in the same time frame...  If you only did one property at a time.  The ultimate goal is to be managing multiple projects at any given time.  As Andrew Carnegie (that's "car NEG ee", to all you non-Pittsburghers, not "CARN uh gee") said in one of my all time favorite quotes: "I would rather have one percent of 100 people’s efforts than 100 percent of my own."  Eventually a successful rehabber will (usually) position themselves as the head of a competent team that can work with little or no supervision.  There are exceptions to this, but blood, sweat, and tears only leaves you bleeding, dehydrated, and upset.

Wholesaling

Wholesaling is the fancy term in commerce for "middle man".  A wholesaler in all markets that I'm familiar with finds a seller, finds a buyer, and orchestrates a sale between the two of them while getting paid for his time and efforts.  Most books go through warehousing and fulfillment after publishing; That is a wholesaler.  Many grocery stores have the same arrangement; They buy food from a central location that carries all of the goods they need and buy it in one package deal.  The wholesaler has contracted with individual farms.  Real estate wholesaling is the same scenario.

Performing a wholesale is an exercise in mutual benefit.  Many rehabbers are busy putting repairs to buildings and dealing with buyers.  Many have a larger team that needs to stay busy more often.  A wholesale deal benefits anyone doing the actual work by finding a cheap deal, and getting the original buyer and someone who intends to repair the property together and is paid in the middle.  Wholesaling is a useful venture for an investor because it's easier, it requires less work, and the risk is much lower.  The key to wholesaling is having or making seller connections that other buyers don't have.  All you have to do is have a property that has a lot of profit in it for the right person, take a little bit of that profit for your efforts, and sell it with plenty left over for the next person.  You make less money doing wholesales, but they're safer and smaller.  They're a good way to get started.  Wholesaling will be the focus of my ventures initially.

Buy and Hold

Also referred to as "cash flow properties", a buy and hold is exactly what it sounds like:  Owning a property and renting or leasing it to someone who needs it.  Very often this involves being a landlord directly, but the larger players use management companies who take a small percentage to administer them.  Again Carnegie knew his stuff here...  Having a team do the work for you allows you to do more work.  Yes, absolutely, your profit percentage will be lower.  Would you rather have $1,000 dollars in your pocket every month and be managing those properties yourself, or would you rather have $800 dollars each month with all the time in the world, and the ability to keep duplicating that result?

Once you have an established bankroll that you can tie up in financing of one sort or another, you can go into a buy and hold strategy which allows you to see a cash on cash return that well exceeds the safe investments of 1-2% of CDs or even the juicier 8-10% of mutual funds or stocks.  (I am not a certified financial planner. I do have nearly a decade of financial experience, but do not take anything I write here as legally binding and authoritative advice.  There are always risks and you should discuss all of that with your financial professionals of choice.)  The best properties can easily yield 20%+ returns.  The benefits of a buy and hold property are a regular passive income.  You have to do very little to maintain the cash coming in, and as long as you make the right choices initially the costs to you for upkeep will be well below your profits.

How to Communicate

There's the telephone, there's email, there's in-person meetings, semaphore, etc.  They're all pretty important in general and especially in business ventures.  Why you would use one type over another is really not the focus of my blog -- that sort of material is outside of my focus and heavily psychology dependent.  Just keep in mind not to text most people.  If they're not a voice communicator; email them.  Texting is only appropriate for some of your marketing efforts.  This is my opinion, of course, your mileage may vary, but it's a good standard practice.  Save the texts for your boyfriend.

How to say some things, when to say them, and even what tools to use -- that's another issue.

Firstly; using tools effectively and in a professional manner will put you heads above the competition.  Know how to leverage free and cheap tools out there.

First off Google is probably going to be your best friend.  Google Documents (soon to be renamed Google Drive) allows you the ability to have multiple people have a single copy of a document.  And edit it simultaneously.  This is great for anything you need to work on with your team.  My team and I have got all of our buyer and seller leads in Google docs, and when we're taking notes in conference calls we'll often open one to jot things down.  This keeps someone from having the single updated copy, it keeps it accessible, and even tracks your edit history.  Use it, you'll love it.

On top of that there's Google Voice.  Having a "vanity" number is a professional touch.  How much trust are you really going to engender with your out-of-state cell phone number with your "This is Jim, leave me a message" voicemail?  Google Voice is your cake, and some would say you even get to eat it, too.  First off -- you can get a different Voice number with every email you have with them.  Want to track where your marketing efforts are doing you the most good?  Use a different phone number on every batch.  Use Number 1 in your newspaper ad.  Use Number 2 on your signs.  Use Number 3 for referrals.  You can pick the area code (most of them are available at this point), and even try to spell out words so it's easier to remember for your potential clients.  Over and above giving you so many choices on the front, the back end is where it gets amazing.  You run the business from 9-5?  You do the morning shift and your partner does the afternoons?  You can set Voice to call your phone 9-1, his phone 1-5, and go straight to voicemail without answering during off hours.  Usually at home where you get bad cell reception, but want to catch all the calls?  It'll ring both your home phone and your cell and route the call to whichever picks up.  Often on a loud construction site taking care of your properties?  Free transcription of voicemail.  Want to keep your personal life separate from your business?  You can assign infinite groups their own voicemail greetings, down to the individual.  All administered from your computer or your smartphone.  For the rest of this year, it's also free to make outbound calls in the United States (and Canada, I think?) for free.  They extended it last year, and might do so this year, too.  Or, you know, you could use your Skype number... that doesn't do half of that.

Taking pictures or videos of your properties to view at home, or share with your team?  Have Google's Picasa automatically upload all of your pictures, and then share them with just a few buttons to anyone that needs access.  Plus, they're online where they can't be dropped in the toilet.

Once you get someone's email address -- you should email them.  You can set up an email autoresponder with GetResponse.  What's that do?  Oh, just email them as often as you want with progressive marketing materials.  Someone not interested in doing something immediately?  Put them in a specialized campaign with your autoresponder for long term deals.  You getting a lot of people who just need money fast?  Set up a special sequence of emails touting all of those benefits to those people specifically.  Do whatever you can imagine with it.  Just don't annoy people with your email.  If someone gave you their email, they're usually going to expect to hear from you -- just don't abuse that trust and they may decide you're the right one to work with.

Get business cards printed up.  When you talk with someone about what sort of work you do; hand them out.

Make a welcome packet to take with you when you visit a prospective seller outlining how you do business, what your benefits are.

Do the same thing with buyers.

And, and with your emails, cards, and print items; You should be using the same color scheme and logos on all of them.  Tie it all together and make an impression.

There are other people out there doing real estate investment, too.  If you're like me they're going to have more experience, more connections and more comfort and confidence in doing it all.  What you can do is look more professional than them.  90%+ of them are not using a custom letterhead on their emails and other correspondence.

It's not difficult to brand yourself as more put together.  Do it, so you have the edge.
If you're more organized and you look it you won't even have to be the highest offer.  You make decisions based on who gives you the best feeling in business all the time.  Look better.  Sound better.  If you provide the better looking product people will assume it is the better functioning product.  Many will opt for less money if they're being taken care of better.

Position yourself to be the better product, and act it.  It'll eventually become true.

All on the Table

Yesterday I talked about how I came to my decision to invest in real estate.

Today I suppose it only makes sense to lay bare what I feel are my essential qualifications to be teaching you, as well as myself, how to build a business in real estate investment.

My employment history is varied and I've never enjoyed having a traditional job and never really liked any of those particular jobs any longer than it took me to master the skills necessary to perform them with aplomb.  The ones I've held on to and tolerated the longest involved a great deal of freedom of action, self scheduling, and no direct day-to-day supervision in the traditional sense.  I think this sets me up to be pretty happy with real estate as a choice moving forward.

In no particular order (by importance, chronologically, or otherwise) I have delivered pizzas, done everything you can at a call center (inbound customer service, inbound and outbound sales, trained, managed, started a program), sold insurance at various agencies, worked in various sales positions both retail and in-home, freelance marketed, and performed insurance inspections for underwriting.  It is a storied employment history that many hiring managers will immediately look at see "someone who can't commit" and "a hiring risk" due to my short history with so many employers.  A great number of entrepreneurs and self-starters start out in just the same place, so I'm not afraid of it.  I embrace my broad history and skill set for what they are:  useful experience for both living and working.

I certainly do not want to scare off anyone who comes here reading this and thinks to themselves "I don't have half of those skills.  I can't possibly do all of this alone."  I shall address that sort of thinking in three parts:

Firstly; This is nonsense.  You can always learn any skill that you need to, at least to a minimal competency.  Especially if you're the type of person that wants to pick up real estate investment as a hobby, side business, or even as a full-on career.  The internet is rife with tools on how to learn any given skill.  It's exploded with tutorials over the past couple years especially.  Search whatever you need to do in YouTube and you'll find a large pile of how-tos at your fingertips.

Secondly; If you truly can or will not learn something to the point that you are comfortable doing it yourself you can always hire someone else to do it.  Honestly your goal should probably be to hire on people to take over most of these roles for you eventually, anyway.  In the current economy of 3rd quarter 2012 a lot of people out there are hungry for supplemental income.  Put a post on Craigslist in any metro area in the United States and you'll be bombarded by applications and resumés.  The right people will work with you and take pay when it comes in, or can be payed a small amount per job.  Whichever seems to fit your scenario the best is what you should do.  There are no real rules, here.  This is a theme you will find in real estate investing.

Thirdly and similar to the second point; Find others to work with and partner.  There are already real estate investors working near you and doing so successfully.  Seek them out and work with them.  If you're in Pittsburgh you can work with me.  I might have connections in other markets by the time you're reading this, too.  Ask!  The point is that, like so many other things in life, you don't have to go it alone.  Find someone else that's just as committed (or more so) than you are, and strike out to learn the ins and outs together.

Real estate and I together has always been a forgone conclusion to me.  My grandparents owned a few rental properties and my mother managed them for them for a while.  It's kind of in my blood.  This certainly helps, but if you've come to the decision to invest in it it won't matter if you were the same.

So.  My experience.  I've rambled a little, and as I become a more proficient blogger that will probably stop.  Be patient with me as I find my footing on how to chop up ideas and stay laser-focused on topic...

The focus of everything I've done before is that much of it is people centered.  I worked with customers.  My job has always been one flavor or another of "get X person to buy Y thing".  Real estate investment is about marketing.  I will have to market for buyers.  I will have to market for sellers.  I will even have to find people to work for me.  Finding effective ways to communicate with other people that land somewhere on the continuum of real property ownership, building relationships with mutual trust, and executing mutually beneficial arrangements is all there is to it.  Sure that's the top-down high level view of it all, but we'll get to the details.

Aside from the nebulous "I know how to sell" and "I know how to talk to people" here are a few particular current jobs that I think will be very useful:

I am currently part of Steel City Investments.  As I mentioned yesterday, I met up with a friend from high school at the 3 day seminar and he was in a much more solid financial position than I am, so he was able to hit the ground running on his own organization.  I work for Steel City because it gives me very useful experience, builds a working relationship, and allows me to make some money while getting my feet wet.  When our leads come in I am the first point of contact for any potential sellers.  I talk to them, find out their situation, and see if we might be helpful to them in their current situation.  More than half of them are not someone that we can help directly.

I also do home inspections right now.  I'm not a full licensed inspector.  I just do simple floorplans and photographs of any problems with properties.  This has given me an eye for housing-related problems.  It's all very easy to learn, but I can spot a problem with a roof or a foundation almost by instinct at this point.  I know what's normal in the Pittsburgh area for homes, inside and out.  This is useful for any number of reasons in knowing what might need repaired come that portion of things.

I am comfortable talking to people.  My sales background in insurance had me talk to people about death, what happens to their families when horrible tragedy strikes.  I've been a travel agent.  I have gotten people through ruined vacations because of my business's fault as well as because of hurricanes and everything in between.  I am not afraid to ask them questions about the condition of their home, their life, and money.  A lack of fear from rejection or similar conversations serves me well in business actions.

My training and management experience gives me the flip side of the coin of many social interactions.  I know how to present ideas in a favorable manner, I know how to direct different personality types, and I can break down complicated ideas if necessary.

Finally each of these jobs has one central skill at its core:  Communication.  I am comfortable speaking to someone in person, on the phone, writing email, or even typing things out on paper.  Communicating with other people is essential to marketing, sales, and just plain life.

All of this wrapped up together (and much more, of course) makes me who I am.
It is why I feel I'm the perfect candidate to teach you and myself how to do all of this.

Histories and Beginnings

What this blog is and will be is a place where you can share my journey from some normal guy not doing anything with his life upwards to a successful real estate investor. There's always the chance that this will fail, sure -- but I've become far too familiar and comfortable with failure. It's about time I stopped all that. I hope that this blog will serve as both inspiration, a guidebook, and general school of hard knocks advice, and probably the occasional side-track, too. Come along with me and learn an exciting new trade that will always be in demand! Or just sit on the sidelines and watch. If you're reading and have any input to give you are most certainly welcome here.

So it shall begin.

Here's the thing: I'm not really all that special. I like to say I am, and I am a little smarter than the average person (so say the tests), but I've done diddly squat with all of that... So what's it count for? Pretty much nothing apart from giving me this warm fuzzy feeling every now and again. It's very not useful.

I took a major step several months ago: I shelled out $200 to go to a 3 day seminar on how to invest in real estate. Whether or not I describe this event in a few years as "life changing" has a lot to do with this blog and where it goes. This seminar was hosted by Fortune Builders and had some ex-NFL player who's on television now named Than Merrill who owns a business that does real estate investing. It was certainly educational. I drew a whole lot of information out of it and pieced a lot of stuff together that's been brewing for a long time. It was almost coming together.

Rewind... 9 years ago? (Give or take.)

I was living in Parkersburg, West Virginia. It's not a very exciting place. What it did have was me and my girlfriend. Well -- she walked out (one of the few relationships where it had nothing to do with me, honestly). I launched into a bout of depression. Even when depressed, though -- I keep mentally active. Probably a self defense. I keep my mind active and engaged with something and it keeps me from being too mired in the problems. I played video games while listening to an audio book. Actually all sorts of them. I listened to Robert Kiyosaki (better known as Rich Dad), Tony Robbins (of 7 Habits fame), Zig Ziglar, etc. But the one that really did it for me was this huge 20+ chapter book that broke down how to invest in real estate. I listened to it. Then I re-listened. Then I took it with me on a drive to Missouri to visit my buddy in the army, and listened to it again on the 12ish hour trip one-way and back again. I apologize for not knowing the title, but I may be able to dig it up again in the future.  It outlined everything in detail about how to do this stuff.  It even broke down into some very specific tips on how to do some things.

I was motivated enough that I found a real estate agent and started going out with her a couple times a month and looking at properties that she thought were a good fit for me that fell into what I could finance with my pre-approval from my lender.  I had bids in on three properties, and was the day before closing on my first 3 unit property.  Complications arose with my employer, though, and they refused to verify my employment.  I was a 1099 worker and hadn't done anything with them in the last few weeks because I was busy with this new stuff and they decided to get petty.  So everything fell apart.

Jump forward back to nearly present time.  I go to a free two hour sales pitch for real estate and I think to myself "If everything this very successful man has described to me is available for 200 dollars or less I'm in."  Before he finished his sentence ending with "one hundred ninety seven dollars" I was on me feet and headed to the back tables to pay for my new education.

Those three days were useful, absolutely.  If you have a chance to do that seminar with Fortune Builders I recommend it if you plan to go into this business -- they tour nationally, and you can find them on their website ( http://www.fortunebuilders.com/ ).  I took what I think is roughly 50 pages of notes over those three 8 hour days.

Since then I've done very little with it.  I've done some searching, and a little bit of poking at things, but nothing very serious.  The most significant step I've taken is being the screening agent for someone else who is working very seriously at getting into investing himself.  An old high school friend who I met at the seminar.  After a few meetings we decided that we would be a very good fit for each other, and we've got half a dozen potential deals floating out there right now.  One or two of them are likely to stick and I'll see me first paycheck from these efforts before the end of the year.

This isn't enough.  My army buddy and I talked over this past weekend and decided we needed to work on our discipline and build a business in real estate investing in a serious way.  Today is the first day where serious effort and changes to bring about a better life for both of ourselves and everyone around us begins.

I am going to outline my entire process, my efforts, my business goings-on, and everything else I think is relevant here.  Failure isn't an option I can put up with any longer.

This first entry is the gateway to the start of it all.

Welcome aboard.