On the Radar: Want Success? Focus on Chocolate | Think Realty | A Real Estate of Mind
Investing Strategies

On the Radar: Want Success? Focus on Chocolate

Knowing what you bring to the game can help you win at it

Sam wants to be a real estate investor. He attentively shows up to every local investor meeting, has a vision board, knows his “why,” opened an LLC, and even launched a motivated seller website. Every weekend, he selects a new neighborhood to walk while listening to real estate podcasts on double speed. He places “I Buy Houses” door hangers on owner-occupied houses that have over 50 percent equity and where the owners are over the age of 60. No calls yet, but all his favorite YouTube influencers are telling him door-knocking is where it’s at this year.

What if I told you Sam is an extreme introvert with very little cash. He’s working 60 hours a week at a stressful job to help his mother afford her memory care facility. The fact he’s able to squeeze in all this self-improvement is incredible. Knowing he’s an introvert and soliciting direct human contact makes him a rock star considering he’s so painfully shy.

He’s motivated and determined. He’s using the right strategy for the market, using data to talk to the right audience, and communicating in ways that make sense for his target audience. But he secretly dreads the business because he’s made a fatal mistake. Sam has a chocolate problem.

Chocolate is what you bring to the game of real estate: personality, experience, time, talent, and treasure. When you are clear on what you bring to the industry, it is far easier to back into the strategies that will keep you excited about the business.

Once you know your chocolate, it’s easier to combine it with peanut butter (the data) to make the magic happen — the Reese’s Peanut Butter Cup. Apologies in advance to anyone with nut allergies or those that don’t like chocolate. Hopefully, it doesn’t distract you from the power of this simple metaphor! Let’s explore ways to better identify your chocolate and leverage it to grow your business.

Personality

Are you an introvert or an extrovert? Being honest about who you are can be used to identify strategies that will align better with your personality.

If you’re an introvert, the thought of cold calling and door knocking likely sends shivers down your spine. You’re probably hoping the headlines of foreclosures come true so you can focus on process and property-focused strategies instead of people-focused ones.

Unfortunately, foreclosures are not likely to become a major source of deals this year. However, other process- and property-focused strategies like new construction, lot splits, accessory dwelling units, title issues, up-zoning, and other research-focused deals exist and work. Even if you don’t have a ton of cash, some of these strategies are more about finding and creating deals. If you can do that, the money will follow.

If you’re an extrovert, the current market is your oyster. Door knocking, cold calling, and people-focused strategies don’t bother you in the least. Your soft skills are extremely powerful in today’s market where off-market real estate is taking the lead and talking to people is what finds deals.

This isn’t to suggest you can’t challenge yourself and work outside your comfort zone. However, knowing that you can focus on strategies more aligned with your personality offers relief to some that feel they have to do things or be someone they don’t enjoy.

Real Estate Experience

You don’t have to have experience in real estate to be in the business. However, real estate is a business with its own rules, regulations, and language. If you want to be in the game, don’t you want to be the best?

Don’t let inexperience scare you. Newbie investors can easily and affordably tackle gaps in real estate knowledge by taking a real estate principles course. Easily found online or at your local community college, this course gives you a foundation and a vocabulary to plug you into the industry faster. You’ll know the difference between ROI and REO and Fannie vs. fanny. You’ll learn more about state laws, the process, and more than you’d like on paperwork. You may decide to take a few more courses and obtain your real estate license to create referral income. You’ll enjoy understanding more often what people are talking about at your local investment club, real estate podcasts, and forums.

Don’t assume having experience in lending, escrow, title, or as an agent makes life easier. Some experienced pros know the real estate language but transferring that to the world of off-market real estate is not always easy. Some of the best deals don’t always make sense to knowledgeable pros. They struggle with the concept of sellers accepting discounts on property. Some mentors actually prefer inexperienced newbies because they come with fewer bad habits and a can-do mindset.

For aspiring hyperlocal real estate professionals, new or experienced, ongoing education is not an option. It’s not so much about sharpening your tools as adding more tools to your toolbox. The more tools you have in your toolbox, the more capable you are of navigating a market, creating opportunities, being a resource to customers, and closing deals others miss.

Opportunity zone investments are a great example. Some investors overlooked this strategy when it became law because it appeared overly cumbersome. 1031 exchanges are well known and far easier to execute. What most ignored is that O-Zone investing allows investors to switch asset classes. Unlike a 1031 exchange that is reserved for like-kind investments, O-zone investing allows an investor to move from assets like appreciated stocks into real estate. Know anyone with huge gains in stocks or cryptocurrency looking to diversify?

A hyperlocal professional pays attention and consistently adds to their real estate toolbox.

Time

If you’ve been up late watching TV, you may have run across the get-rich-quick gurus telling you that real estate investing is easy. Something you can do in your spare time. HGTV completes a flip in under an hour, with commercials. How hard can it be?

Real estate is a business. If it were really that easy, everyone would do it. Marketing for deals, negotiating, closing, managing rehabs, creating teams, and selling all take time. Be honest about how much time you can dedicate to the business. Some strategies require less time while others are very time-consuming.

If you have a demanding job, your work probably won’t appreciate you taking seller calls you’ve generated off bandit signs. Not responding to leads is a huge waste of time and money as well as poor customer service. If you can’t answer the call, find a partner or hire a virtual assistant to manage and qualify incoming leads.

Delegating pieces of the business that aren’t your strengths is also just good business. Leverage bird dogs and students for door-knocking and maybe hire a design student to build your website and design direct mail. Outsource to marketing companies that can help you with outbound direct mail campaigns and refine your inbound digital ad campaigns targeting your ideal prospects.

Outsourcing or partnering on the things you are not good at allows you to spend time focused on high-value activities you’re best at. Always be looking at tools and technology that integrate and automate to help you grow. Chances are you already use technology that integrates with other tools you pay for; you just never spent the time to learn what you already have.

Talent

Talent is another layer to understanding your chocolate and one of the most overlooked. I grew up in the business fixing houses with my dad. I left for New York City to be a professional actor at 19, only to return to the family business a decade later. A creative in real estate? Yes, and some of the skills I learned as a creative New Yorker transferred beautifully into the real estate business.

Peter Fortunado has a great saying: “Use what you have to get what you need to get what you want.” What unique knowledge or skillset can you leverage in the real estate business that helps you differentiate yourself from everyone else in the market?

Have a sales background? From being a waiter to selling cars, a background in sales typically includes skills in negotiating, building relationships, and working well with people. These soft skills are incredibly valuable in our industry.

Others have unique job experience that gives them an inside track to unique leads. Like the insurance agent that has inside knowledge of burnouts, mold infestations, and claims processing. Or the pest control specialist that understands how to identify and remedy extreme termite infestations when others would run in fear. Or, a city planner that understands zoning, planning, and that a huge employer is coming to town that will forever impact the market.

Whether you’re a systems analyst that brilliantly systematizes processes to a creative genius that can connect to the masses, there’s room for you in the business of real estate. Please do not miss this powerful piece of information that helps identify your chocolate.

Treasure

Yes, cash is king. We’ve covered some of the strategies that don’t require money. However, when online influencers sell you on no-money strategies, they are typically referring to a handful of strategies that are often difficult and inappropriate for most.

The most popular strategy is becoming a wholesaler. Introduce yourself as a wholesaler at your local investment club and watch eyes roll. Wholesaling has become synonymous with newbies with no money, experience, or willingness to do what it takes. Even worse, “wholesalers” are demanding time-wasters that think showing up to a meeting warrants free lunch with a mentor that will train them for free and send them free, qualified leads.

Yes, wholesaling exists. But newbies often don’t appreciate that today’s wholesalers are real professional companies that spend tens of thousands of dollars monthly on targeted direct mail, text campaigns, targeted digital ads, SEO-optimized content creation, and managing outsourced cold-calling teams. You’re competing with the likes of HomeVestors and Sundae.com that make it their business to attract, negotiate, and close these leads in volume to fix and flip or assign deals to other local investors.

Bird-dogging is another term for wholesaling but comes with a little less baggage. People that market themselves as bird dogs are strategically spending time and resources targeting the right people and the right properties that they know their ultimate buyers want.

Creative financing deals also get tossed around as a strategy for people without money. However, this strategy is far more appropriate for seasoned pros that know how to legally structure transactions and fully explain to the seller what’s happening and the associated risks with creative strategies.

An example of this is subject-to investing. Maybe a homeowner gets told that their remote work option is expiring in June. They only put three percent down so there’s no way to sell the property and pay commissions without writing a personal check. A subject-to transaction would allow the homeowner to sell the property to an investor while leaving the existing financing in place (subject-to the existing financing). They are expecting the investor will dutifully make payments on time to protect their credit. The investor does so but is surprised when the bank calls the entire loan due. The seller claims the due-on-sale clause was never disclosed and the investor is not in the position to pay the loan off. Attorneys are not cheap. An inexperienced investor may get caught off guard, but an experienced investor knows how to make this work and protect themselves and the seller.

This is not to suggest that creative real estate transactions don’t exist. However, it’s more of an exception than a rule. It’s sad to see newbies hang their hopes on strategies that will often leave them empty-handed and frustrated. Many give up.

With or without money, there’s a way to safely succeed in the business. Don’t let the lack of capital stop you from the hustle. Don’t let the abundance of capital make you a lazy target.

Refining Your Chocolate in 2021

There’s no shame in being new. Even experienced pros need to reinvent themselves from time to time when the market shifts. In 2021, focus on your chocolate. Be honest about the time you can devote to the business, the financial resources you can commit, and the unique talents that will help you differentiate yourself in the market. When you have clarity, I promise the peanut butter (the data) is far easier. You will spend less time and money connecting with your perfect prospect, helping you close more deals, and in a niche that has you jumping out of bed in the morning.