Bigger isn't Always Better - TheQuickHomeFinder.com

Bigger Isn’t Always Better When It Comes To the Number of Investment Properties You Have

There is an old saying that goes, “If it aint broke don’t try to fix it”. It wasn’t a long time ago that I was buying 7-8 Houses a month, fixing them up and then reselling them. I had developed this into a smooth running, lucrative operation. Then I got the bright Idea that if I can buy and sell 7-8 a month, I can buy and sell 80. This was a choice that eventually led me to bankruptcy. Twice in my life I have made a lot of money but decided to fix something that wasn’t broke and took a big loss, the last one resulted in bankruptcy.

It is easy to be seduced by thought of making more money because when you have something working for you, you gain a sense of confidence. Be careful that this doesn’t make you become overconfident though. As with most things in life, you want to be sure you are able to finish what you start. Pumping up the volume puts you at risk of not having the resource or structure you need to fulfill what your goal demands of you. The bottom line is that there are always good deals in Real Estate! I say measure your success one house at a time. Buy investment property, fix it up, resell it, rent, do a lease-option, but do it one house at a time.

One of the most common mistakes I see in business is where investors come into the business and think they need to do multiple houses at a time. In most cases new investors underestimate the cost and time it will take to rehab and sell the property for a profit. I suggest you double the cost you think it will take to fix the property, double the time you think it will take to rehab the property and double your holding costs (insurance, mortgage payments, taxes, lights, gas, rehab cost). Great deals in Real Estate don’t come in houses fixed and ready to sell. The great buys come from houses that need work. If you are just getting started, stick to cosmetic rehabs (paint and carpet), don’t take on major rehabs because it will take time to develop a rehab crew. The most successful people I see in Real Estate do one house at a time.

Doing one house at a time will probably help your overhead stay very low, with very little staff. You will limit your expenditure of time, money and aggravation which is a lesson I had to learn the hard way. I also learned about the pit falls of using hard moneylenders. For years I ran a business financed on money from Real Estate Investors, called hard moneylenders, who look at collateral and loan money with interest that can be 18% or higher when you figure in the closing costs. Despite what you may tell yourself, it’s likely that you can’t repair and market a house as quickly as you would like to.

What will happen is you will end up having multiple properties with high interest mortgages which is a recipe for disaster. At one time, my overhead was in excess of $50,000.00 per month. I had to depend on other people to do everything, including checking the work. A hundred percent of the money I was making went to paying down my debts and I kept telling myself I would turn it around tomorrow. I found myself with houses that were not finished and houses being lost in foreclosure and for taxes.

With my overhead still there and bankruptcy looming, I decided I would no longer find, repair and resell homes. Instead I would find great buys and sell them to other investors. Basically, I started my business over. I am 53 years old and starting over. I’m not saying this to tell you a sad story, but rather in the hopes that by sharing it, someone else can avoid the pain of my mistakes. I now have the knowledge to build a business with the proper foundation. I teach Real Estate Investing classes now that look for pitfalls and what is needed to do a successful deal one at a time.

Two more important lessons I suggest you learn for handling real estate transactions are as follows:

1. Use Title Companies. Whenever you purchase a home, always close through a title company with title insurance on the property. Title insurance is protection that insures the borrower or lender that they get the property with marketable title. They will only insure the property for the purchase price or for the amount of the mortgage.

2. Use a reputable lender. Go to Real Estate Investor Clubs to find out from other investors which companies are doing the best job. Beware of putting yourself in a situation where you are using a person who controls the lending, title work, the appraiser and the Real Estate Company. Keep an arms length distance within your dealings. If you are selling homes or wholesaling property, let the buyer find his own lender and make sure you get an independent title company. Make sure there is not a conflict of interest in the Title Company, Mortgage Company, and Real Estate Company. Keep the integrity in the deal. I am sure there are title companies, real estate companies, and mortgage companies, where there is common ownership that run very good businesses and can separate the conflicts of interests and profit centers. However, to protect yourself, make sure you receive proper disclosure of common ownership. You can always look at the volume of business they are doing in each business and check with the state Licensing Dept. for any complaints against the firm.

Ralph Marcus Maupin, Jr. Nick Name ‘Mark’ is one of founders of National Real Estate Network LLC. He teaches real estate investing and Internet Marketing for local Michigan College. You will find many free resources such as: Free Real Estate Forms, Terms, Articles and Real Estate Investor Clubs Locations at: http://MegaEveningEvent.com. For low cost Michigan Real Estate Investing CDs, DVDs, forms and E-books go to http://stores.ebay.com/Real-Estate-Investing-Guide

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