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SHOW NOTES FOR EPISODE 380: THE REI DO-OVER
There is one constant when it comes to real estate investing – it is generally unchanging, solid and consistent. But, at the same time, it is always changing. Does that sound contradictory? It is, but, in reality, they’re both right! For the real estate investor, change must be factored into everything you do. In this episode, Bill examines the importance of regularly monitoring, revising and adapting your real estate investing plan as a part of prudent management and for maximum returns.
Tip for the day
- Rentometer.com
- Great way to quickly find out market rents in any U.S. market
The REI Do-Over
In the last few months, I have been emphasizing the need to develop a LIVING strategic real estate investing plan. One that helps you to achieve your goals! The most successful real estate investors have a plan and the WORK that plan to meet and even surpass their goals.
Let’s say, for example real estate investing goal is to acquire a fourplex during 2020. You research what is necessary to make that a reality:
- You have to ask yourself (and hopefully other experienced investors) questions like:
- Where will I buy it?
- How much will it cost?
- How do I find one and what steps are necessary?
- What is my buying criteria
- e. age of building, school ratings in the area, etc.
- After you’ve got good solid answers for all your questions, you outline your plan. For example, it may require you to:
- Devote 10 hours a week to efforts required to find the right
- You call agents/brokers
- Do direct mail
- Network with other investors
- And so forth…
And, after your plan is written and mapped out, you begin implementing it. And as you are implemented, you are recording the details of how and what each step accomplished to bring you nearer to your goal. And as you carefully track and monitor your successes as well as your failures, you constantly REVIEW, REVISE and RE-ENGINEER as you go along to make the plan more effective and on task to help you best achieve your goals.
If something doesn’t work:
- You tweek it, try again
- If it still doesn’t work, you either get rid of it or give it the time it needs to succeed
You should be constantly monitoring and testing so that eventually, over time, have a tried, true PROVEN plan that will work not only this year but in successive years as well.
There is one constant when it comes to real estate investing – it is generally, unchanging, solid and consistent. But, at the same time, it is always changing. Does that sound contradictory? It is… kinda. But, in reality, they’re both right!
The things in real estate that are solid, consistent and unchanging
- Real estate is always a good investment
- It will always have tangible value
- And as history shows, even it goes down in value, it almost always goes back and likely, increase even more in value over time
But, there are also the things that are always changing:
- Market conditions change
- Economies
- Community transformation
- Government regulations
- Tenants
SO WHY DO WE HAVE TO REVISE, CHANGE, ADAPT AND RE-ENGINEER?
- Sometimes we don’t have a choice
- Local or national factors force us to do something
- And sometimes we purposely want to change to:
- Make things better, reduce stress or alleviate problems
- Make more money
- Grow and expand your business
- In either case, we always need to factor in that a change MAY be necessary
WHEN YOU WANT TO CHANGE
- You want to grow
- Faster/more aggressive growth strategy
- You realize you are not generating as much cashflow as you had hoped
- Didn’t factor in: vacancies, capital needs, bigger ex
- You want out. It’s not what you thought
- Strategic Change
- You’re tired – want to move from very active strategy to a more passive strategy
When I first started investing
- I just wanted passive cashflow. Steady income in my retirement. A way to fund what I really wanted to do – not another job
- I bought 3 Turn-Key properties
- Turnkey sounded too good to be true – just what I wanted
- Yes it was TOO GOOD TO BE TRUE
- In place tenants disappeared after I bought
- Property management was unresponsive
- Could find good tenants
- Never had time for me
- Neighborhood declined over time or it wasn’t as good as I thought
- I changed my strategy to make things better
BUT WHAT HAPPENS WHEN YOU HAVE NO CHOICE?
- The market changes
- Recession
- Major employers move out
- Natural disaster – Hurricane, tornadoes, earthquakes, etc.
- Area/neighborhood goes bad
- Property values decline rapidly
- New freeway
- Homeless housing is opened in your area
- The local or national economy changes
- You’re losing money
- Poor property management
- Expenses are higher than expected
- Unforeseen capital expenditures
- Utility costs
- Bad tenants
- Massive evictions
- Damaging property
- Have to reduce rents
- Bad loan
- Strategy no longer works
- Flipping no longer works
- Little or few foreclosures
PEOPLE WHO PLAN FOR CHANGE
Many of us start out in a different place
- If you have little or no cash
- Start wholesaling (flipping contracts)
- Start flipping
- AirBNB – create cash flow to buy rental properties
- Making $5-40K per transaction, start buying rental property
- You have the cash (IRA, 401K, HELOC )
- Buy a bunch of single family home rental properties
- House Hackers
- After one year
- Look to buy another
- You are Leveraging-Up
- Start with one or a few small cheap houses
- Trade out for better, bigger properties
DO YOU WANT TO CHANGE?
- Tired of all the work required to wholesale, flip – move to more passive rental property
- Has portfolio of rental properties didn’t realize who much work it was – want to move to multifamily
- It’s easier than you thought and you want to do more for bigger return
- Add new strategies
- Introduce AirBNB
CHANGE FOR OPTIMIZATION
- Marketing
- Spend less to get more
- Increase spend for bigger results
- Reduce Expenses
- Increase Expenses
- Hire more staff
SOME OF THE BENEFITS OF CHANGE
- Save tons of time
- Cut your acquisition research time in half using a virtual assistant
- Boost direct mail response rates 50% by going from one color to four color poscards
- Double your rental income by…
THE BOTTOM LINE
- Whether by choice or my factors outside of your control, you need to always:
- Have you figure on the pulse of your business and the market
- Always evaluate, monitor and revise the fruits of your efforts
- Optimize until you
- And all this works best within the framework of a dynamic, living strategic real estate investing strategic plan
Well, that’s it
DISCLAIMER: Many of the above strategies take knowledge and have a higher degree of risk. You need to do your research and/or work with someone who is experienced to reduce your risk.
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