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Emotions Buy Homes :: Math Acquires Equity (A Must Read for Agents and Investors)

Agents – read closely and get yourself multiple sales for one client:

Investors – read this and don’t drive your agent nuts and acquire lots of equity

My employees chuckle when they see a graduate from one of my seminars walking around with their spread sheet and AVM report. I chuckle when an investor says, “my wife/husband didn’t like the paint color“.? Evidently I’ve failed to properly communicate.

You may have read it before but I use a golf tee (or ball) as an example in my Real Estate Investment QuickStart Workshop to illustrate the point. Holding up the tee I ask, “what do you see?“

The room generally falls quiet even after people realize what it is I am holding until after a short pause the brave one always pipes up and shouts, “a golf tee!“

“I see,” I reply, “frustration. Beautiful sunny outdoor days with friends. A backache. Ninety dollar greens fees! A new higher handicap.”

I pause. They chuckle.

“When Tiger Woods sees this same item what does he see?” I query.

Then in unison as if they have all received some great enlightenment (which, of course, they have) they exclaim, “MONEY!“

From that moment forward I take them on a mind ride down the street and into a subdivision. Some homes are quaint and cottagey while others are foreboding or sanitary. Then there is that one with the oil stains on the drive and the mailbox skewed to a -10 degree angle (away from the postman). The lesson is that we stop seeings homes and start seeing equitable opportunities.

Homebuyers see a ratbox … a dog house. I see in that picture what Tiger sees in that tee. You, as a real estate professional, MUST learn to use the numbers and stay within the formula to show investors what it is that sparks their flame. It is not always the ugly home. It could be the million dollar builder closeout – that’s why it is important for your investor to have a Business Model and for you, as as equity locator, to know what that Business Plan is.

Learn what the factors are for successful investing whether the Business Model is long term holding, rehab flipping or even take down reconstruction. There is one real estate agent with whom I have worked for years and she had an extremely good 2006 just on referrals I sent her over the years – she still runs the numbers by me on every deal.

As a parting note let me say that if you are “showing homes” to investors you are failing to do what they require you to do. Oh you may hit one now and then. We have a rule with out investors: do not ride around in a car with an agent and waste their time and yours. Tell the agent what it is you want (Business Model) and ask them to send you the address of every property they can find which fits into your investment horizon.

Then instead of having the agent lug you all over town narrow it down to five or six you want to see and do a drive by on your own. If you like it from the outside and want to see the inside THEN call your agent – but if I EVER hear of you looking at a property before you have crunched the numbers I will personally drive to your home and make you sit through the QuickStart Workshop again!

You should know how to quickly calculate PITI payments, how high the rent will go to net the 75% you need for debt coverage and, if the property needs rehab, about how much you think it will cost times two. You should also know, before driving to a property, the AVM of the property and the area and any other key economic factors directly effecting the immediate area within the next five years. And that’s just the beginning. Otherwise you may as well through a dart at the MLS website and see where it sticks. Assess, Plan, Execute – but that’s another blog.

Sure, I do conference calls. Isn’t that convenient?