How to Triple Your Productivity: Learn To Delegate

One of the major things that separates true real estate investors from those who end up quitting or failing is the successful investor’s ability to delegate tasks. Despite the “lone ranger” image that some investors hold of themselves, real estate investing is a team sport. Get the right contractors, realtors, inspectors, finders/bird dogs, and lawyers on your side, and not only will you be surrounded by specialists, but they’ll be making you money.

If you can spend a little money and do 5 deals a month, you’ll be way better off than someone who doesn’t spend that money, and as a result, can only do 1 or 2 deals. That $300 you save by fixing the plumbing yourself won’t look so good when you’re cramped underneath the kitchen sink with a wrench while your competitors are closing another deal. Not only that, but every day that you’re not selling your property means another day of taxes and interest to pay.

Some tips for delegating tasks effectively:

1. Get the Right People: Find the best people for your team. Don’t spend time with unlicensed contractors and those who are cheap for a reason. You don’t want to spend exorbitantly, but find qualified professionals who are worth more than they cost.
2. Make Them Like You: Reward them for a job well done. Bring them continuous leads. Be likeable - nobody likes working for a jerk.
3. Don’t Over or Under-manage: Psychologists have consistently proven that 1) People work best and are more motivated to work when they feel they have some control over their work, and 2) Productivity decreases when workers are unsure of what to do next. Find a healthy balance of these two things; avoid unclear work orders or excessive micromanagement.
4. Set Clear Expectations: Protect yourself. Get everything in writing. Document all communication and interaction. Follow up projects. Ensure that things are being carried out according to plan.

Tools of the Trade: Keeping a "Buyers" List

My last entry was about the importance of motivated buyers and how to identify and attract them.  Most of these motivated individuals will not be appropriate for your current properties, but could be your perfect customers at some point in the future. Follow-up and continued communication are crucial, and that is why many investors compile a “buyers” list to keep track of these high-interest individuals.

Similarly to a tickler file, a buyers list does not have to be an actual list, per se. It could be a bunch of papers inside a file folder, or could be stored on your computer and/or online. The only requirement is that it must be an easily accessible collection of information on potential buyers.

A software-based solution such as SmartInvestorPro can be excellent, or you could use a file on your hard drive, or a physical file folder containing individual sheets of paper. Whichever approach you take (experiment with them to see which one works best for you), there are a few crucial pieces of information that must be collected, and many others worth considering:

Contact Information - Fairly standard. Try to collect as much of this information as possible (since buyers may not be settled in any particular location and may be hard to track down).

• Name
• Address
• Email address
• Phone #
• Fax # (if applicable)
• Skype # (if applicable)

“Buyer Profile” - The buyer’s preferences. This helps an investor avoid unnecessary phone calls, saving time and increasing the quality of your interaction with potential buyers.

• What size property would the buyer be interested in – a single family with 3 bedrooms and 2 bathrooms, or some other type of property?
• Which neighborhood(s)?
• Why is the buyer motivated?
• Property specifications: is the buyer looking for a big yard? A location close to a good school or the airport? Close to shopping and major roads, or a more private location?

Financial and Logistical - The “nuts and bolts” that help shape your opinions and structure your contracts.

• When could the buyer move in?
• Would the buyer be interested in a “terms” purchase (such as a land contract or PMM)? Would the buyer consider an “all-cash” purchase? Does the buyer only want to rent?
• Can the buyer qualify for a traditional mortgage? Are there any previous financial difficulties worth noting?
• Does the buyer have enough cash for a down payment?
• Is there a previous property that needs to be sold before the buyer can reasonably purchase this property?

Notes/Other - Anything else of interest.

• Names of spouse and/or children, if applicable.
• Important days or deadlines that may affect motivation or purchasing ability (new job, beginning/end of school year, end of an existing lease contract)
• Follow-up questions to ask.
• Any observations, personal information, summaries of discussions.

Finding Motivated Buyers

I tend to preach a lot about finding a buyer as soon as possible, preferably before you even close your purchase contract. I emphasize this point because there’s no better way to ensure profit than by having a definite resale strategy while finalizing your analysis of a deal. “Analysis paralysis” is one of the biggest deal-killers, and by reducing the uncertainty of the exit strategy, you can relieve yourself of the fear that prevents investors (and wannabe investors) from reaching their maximum potential. I know this because I’ve been there myself.

Some people mistakenly believe that buyers should only emerge after you list the property for resale, but the truth is that motivated buyers are constantly looking for new opportunities, especially “buried treasures” that they hear about before everyone else.

How is it possible to find a buyer so quickly? By finding interested buyers beforehand.

Motivated buyers make themselves known. They may be disguised as sellers who need to find a new place to live, or may materialize as other real estate investors – always looking for a new rental property or an assignment deal. They will be the people who inquire about one of your other properties, but who didn’t end up buying that property because they came too late or it wasn’t exactly what they were looking for. Chances are they’re still looking.

Conventional wisdom says that you have to make yourself known to the buyer. Not necessarily. Selling a house is like conducting a job interview: there will be a lot of interested people available, but only one will be the perfect match. If the opportunity is good enough, the potential buyers will be marketing themselves to you. Try posting a classified ad in the newspaper or on craigslist: say something like “Looking for buyers interested in 3-bedroom, 2-bath property in North County – Call us to find out more.”, or “Can’t qualify for a loan? We offer alternative purchase arrangements,” and see what happens. You’ll probably find at least a few interested buyers this way, and often many more.

Any one of them could be the perfect buyer for your next deal.

4 Ways To Avoid The Housing Bubble

If there are two things that everyone knows about real estate investing, they are: “I don’t have the money to get started” and “It’s too risky”. These people never end up investing. The risk argument usually has to do with the uncertainty of the market, or “the bubble”. True investors do deals that are successful no matter what the market’s mood. Those with money can buy and hold to ride out the inevitable swings; the rest of us can work quickly enough to ignore the bubble entirely.

The transaction costs of real estate exchanges are prohibitively expensive for most people to play real estate like they do the stock market. Instead, real estate investors make money by providing a service that is inherently valuable. There are four main ways to provide a valuable service and get out quickly enough to circumvent any market losses:

1. Buy and sell concurrently - by profiting from the spread between two long-term contracts – usually selling at an increased rate to someone who couldn’t otherwise buy – as part of a terms deal. By including appropriate contingency clauses and keeping a buyers list, you can structure both contracts to begin at the same time, creating a steady flow of profit.
2. Sell a better product than you buy – rehab and “flip” an unattractive property. Aim to be out of the deal within 3 months, and if you do things right, it should never take more than 6 months from beginning to end. Build in a fairly large profit margin, and have a comfortable “hedge” margin for any disasters.
3. Help others avoid greater losses - by working around foreclosures. Get to know the people at foreclosure auctions and buy from lenders who want to get the properties off their books. Better yet, work with the defaulting homeowner before the lender even forecloses. Either way, you can get the property at a deep discount and resell it, with a profit margin that negates even the most catastrophic market.
4. Don’t buy in the first place - negotiate and analyze as you would with any other deal, including the necessary contingency and assignment clauses in the contract, and then assign the purchase contract to another investor who will buy the property and carry out the deal by him/herself.