American Education Institute – Real Estate Investment Training

Remember that, as a real estate investor, your financial needs must supersede your emotional needs.  Another thing to remember is that, in real estate, you really make money when you buy and not (as you might otherwise expect) when you sell.  Primarily what this means is that you are buying today, and the deal must make good financial sense today.  If it’s good today, it will more than likely still be good tomorrow.  You cannot afford to make a bad deal today and somehow expect the market to change so that it become a good deal in the future. 

In short, this means you’d better be buying under terms you can also sell with.  Think:  assumable mortgage.  You want terms that are easily assumable by you today, so that they will still be easily assumable by some other buyer tomorrow.  If you never forget this, you won’t ever be tempted, for example, to buy under terms on Monday that you know already you won’t be able to sell under on Tuesday.  In other words, you should be thinking about selling even before you’re buying.

Here’s a tip:  Always ask yourself whether you could find another buyer to accept these same terms today.  If you start telling yourself that, no, you’d probably have to change something before you would likely attract another buyer–stop!  Don’t buy under these terms.  This is a pretty good indication that your emotions are involved.  For any deal—right now today—to be good for anybody, it also have to be good for everybody right now today.  A good deal is a good deal no matter who’s involved.  A good deal stands on its own.

The best way for you to determine whether a deal is good or not is to do a financial analysis.  This is explained in detail in my text entitled “100% Financing When Buying Real Estate,”  but for right now your best financial analysis is your own good Common $ense.

In the first place, trust your own eyes and ears.  Always inspect each and every property in which you might be interested before submitting any offer to buy it.  You don’t need to be a qualified real estate appraiser or building inspector to walk or crawl through every possible part of a building and to see everything there is to see and to listen to every noise already present inside and out.  This is a very basic thing, isn’t it?  Wouldn’t anyone’s common sense dictate to do this regardless?  You’re thinking about investing a small fortune here!  Shouldn’t you carefully inspect everything yourself to know what you’re buying?  Absolutely!  And yet, you would be surprised to learn how many properties are actually purchased without their buyers inspecting them.

You owe it to yourself to physically inspect every possible part or piece of a building in which you’re thinking of investing.  Do it systematically, carefully, thoroughly.  Start with the exterior and move to the interior.  Once inside, start with the lowest possible level and work you way to the highest.  Go from public passageways (in an apartment building, for example) and progress through each and every single rent able or occupied space.  You are entitled to do this. 

An owner selling a building has the legal right to enter and who potential buyers all individual units.  This is generally written into every lease agreement.  Renters are protected, however, by such wording as “during reasonable hours,” so you needn’t worry about disturbing anyone in an apartment.  The owner should have given all tenants reasonable notice of such a showing of their apartment.  If, however, your inspection does “surprise” a tenant of if a building owner refuses to show you some units or if he keeps putting you off and makes excuses as to why you can never see them, be suspicious!  No doubt there’s a reason for this behavior.  Very possibly there could be a problem here that you don’t want to inherit.  Remember, inspect all of the apartment units or do not buy the building!

Normally, your property inspection should proceed as follows:  Walk around the grounds, and examine both the land and the exterior or the building.  Do you see evidence of burrowing animals?  Do you smell evidence of skunks or other pests?  Is there an abundance of weeds and/or unkempt shrubbery?  Is thee a sewer or septic system?  If the latter is the case, check the plant life about the septic tank.  If this is too green or lush, that tank may not be absorbing correctly.

Does the building  foundations have any cracks?  Do you see evidence of dry rot in any wood?  Are there exterior cracks at the corners (evidence of settling)?  Are the porch or stairway steps level?  Does the roof show excessive wear?  Climb a ladder and see for yourself if, for example, the roof is flat and not visible from the ground.  (If possible, look at a peaked roof in wintertime.  If snow is done from the roof but still on the ground, this is a clear indication of poor insulation.)  Are there any signs of water leaking beneath the eaves or gutters?  Is the exterior paint or mortar in good shape?  Look carefully at the chimney.  (Use binoculars if the roof is inaccessible.)  Is that brick or stone and mortar intact?  Is it covered by a screen?  (See the following convenient summary list of what to look for both outside and in.)

On the outside of a property,  look for the following:

1.  Unkempt grounds

2.  Poorly absorbing septic system

3.  Foundation cracks

4.  Cracks in exterior walls, especially at corners

5.  Dry rotted wood

6.  Tilting porches or steps

7.  Worn roof and poor insulation (melted snow in winter)

8.  Evidence of water leaks

9.  Cracked or peeling paint/gaps in mortar

10. Unscreened or badly mortared chimney.

On the inside of a property, look for the following:

1.  Poorly functioning doors and locks

2.  Cracks around door and window frames

3.  Foundation cracks

4.  Badly stained ceilings

5.  Freshly painted ceilings or paint doesn’t match walls

6.  Stained ceilings/walls in closets

7.  Suspiciously damaged or unmatched new carpeting

8.  Non-working appliances, switches, and outlets

9.  Poorly functioning heating, cooling, plumbing systems

10.Accessibility of electrical panels and shutoff valves

11. Any leaks–in, under, or around any fixture

12. Hidden evidence of fire or other damage (check attics, crawl spaces and look behind removable paneling. 

Dr. Eric T. Martin / 100% Financing When Buying Real Estate / 6-13-09

Did you ever do this?  Did you ever go into an antique shop, for instance, or attend a garage sale and “discover” an heirloom so valuable or appealing that you can hardly believe it’s actually for sale?  Do you almost feel it should be priced higher, or that you even feel a little “guilty” for buying it?  Well, that may be a nice experience for a shopping trip, but this is a terrible attitude to have for investing in real estate.

If you are in this for making a profit or to achieve yur long-term financial goals, you cannot afford ever to become emotionally involved with a vintage home, or fall in love with what you think is an heirloom house.  If you’re being to be successful in real estate, you are going to have to be as detached and aloof as that antique seller who’s willing to part with someone else’s grandfather’s gold watch.

That watch, like every real estate property you look at, must be valued in terms of dollars and cents.  Most likely that antique dealer obtained the watch for a fraction of what he wants to charge you for it.  You need to do the same.  You need to buy properties for less than what somebody else is willing to pay, and turn around and lease them or sell them for the maximum amount that the market will bear.  If you have enrolled in a real estate course to help you possess your “dream home,” you are probably taking the wrong course.  You cannot afford emotional involvement in any of this!

Your most important guiding principle for survival and success in real estate is cash flow:  Buy, improve, mkarket or lease, and pay all the monthly bills for less than the property is earning for you.  If the property starts costing you more each month than you bring in, you most likely need to sell off that property–no matter how appealing it is to you to keep it in your possession.

Typically, the role of amotion with most property buyers decreases as the total price increases.  Most people can remain detached from a multimillion dollar office building fairly easily.  Buy when they are looking at a sweet home in a nice neighborhood priced at, or above, the prevailing market, it becomes increasingly more difficult to stay aloof.  The tendency for most people is to view such a home in terms of their own living in it.  If it’s decorated right, well maintained, and has neighbors most people would welcome living next door, emotionally they could be prepared to pay more than it’s worth.  Remember this when you sell, but forget about it when you buy.

In my text entitled 100% Financing When Buying Real Estate the student learns how to buy somebody else’s grandfather’s antique pocket watch.  In terms of real estate, you will learn to keep your emotions out of your purchases altogether and buy based only on what the property is worth in terms of its market value–all by itself and within a completely uncaring marketplace that pays no attention to your particular family history.  Always think of real estate as a commodity, never as someplace where you yourself would like to live.

Dr. Eric T. Martin / 100% Financing When Buying Real Estate / 6-7-09

When you begin your real estate investment activities, whether you know it or not, you are playing a “numbers game.”  This is not a lottery, an illegal racket, or running numbers for some neighborhood bookie.  No, this is merely the same legal–and necessary–activity engaged in by every successful salesperson on earth:  bang on enough doors until you get a “yes.”

This is how the game is played:  You must contact a goodly number of people.,  Of that number, you are just naturally going to find some people who are interested in what you have to offer, which in this case is an offer to buy by means of creative financing.  Of the number who are interested, a few people will just naturally be motivated enough to receive from you a flexible purchase offer.  And finally, of those few who are serious enough to receive you offer (and possible bargain awhile with it), there ought to be one who will take it.  Bingo!  That’s how you buy your properties creatively.  You are literally selling your buying services.  And you’re just looking for a customer.

As you might imagine, this works something like bowling.  The more pins you have up there, the easier it is to hit one.  In order to get that middle pin (the king pin), however, you have to “strike” them all.  You might roll a ball and hit one or two pins, or more, with your first turn, but if the king pin is the one you need (or, in this case, your most flexible seller) you’re going to have to roll a strike.  In real estate investing, in order to find your own king pin (the “king” of the “castle” you wish to buy?)  you are going to have to make contact with every other pin (seller) out there.  Miss one, and you risk missing your “king.”

In less abled and more practical terms, it’s logical–isn’t it?– that the more potentially flexible property sellers you contact, the more successful you can expect to be.  Make for yourself yet another written goal of contacting 28 seller a week.  That’s four per day, every day, every single week of the year.  If you call 28 seller, yo may expect to look at 6 properties.  Of that 6, you should expect to make offers on half, or 3.  Of those 3, you may expect to purchase 1.  “Twenty-eight to six to one” —make that your mantra.  Write that down. Make that your goal.

And think about this, too,while you’re at it.  There have been studies which have shown that for every three people in this country, two are already in the process of buying, selling, leasing or renting real estate, or they know of someone else who is.  That’s two out of three of everybody!  As you begin to play your numbers game, those are certainly number you can live with, aren’t they?

But you have to keep at it.  If you stop, you’ll miss the king pin.  And if you never strike the king pin, you’ll never Strike It Rich.

Dr. Eric T. Martin / 100% Financing When Buying Real Estate / 5-31-09