When a client or potential client asks you about fix and flip, fix and hold, wholesaling real estate or any number of real estate investment terms and concepts, it’s tempting to think you’ve got a perfect client – one who understands the game and wants you to help them find multiple outstanding real estate investment properties.
Maybe, if they truly know what they’re doing. Be skeptical.
Lots of myths around real estate investing
The folks who sell real estate investment education, run high priced seminars and/or sell books that make it sound easy to earn a ton of money in real estate may make it look easier than it is.
There are a ton of examples floating around, from the thirty-year-old who is reputed to have optioned a multi-million dollar property for pennies on the dollar and made a fortune a month or so later auctioning off the property to the contractor who found a property way below market that needed some fixing. He spent just a bit more than $6,000 over a couple of weeks and more than doubled his money.
Lots of problems too
What you and your client rarely hear about are those who buy a property and get into trouble. Usually they get into trouble because:
- They paid too much for the property.
- It cost way too much to fix.
- They couldn’t get it sold at the price they needed.
It really doesn’t matter what kind of property is involved. Single family homes can make good fix and flips or they can fail miserably. The same thing is true for condos, commercial properties, specialized properties of all sorts, etc.
Fix & flip, etc., is a numbers game – period
You want to be sure you’re clients aren’t headed toward trouble. Help them understand that fix and flip, buy and hold, lease options for investment, wholesaling, trust deed purchases – all of them – are totally dependent on the numbers and nothing else. If, when the property finally closes, your clients have earned more than they spend (including their time and frustration and the stubbed toe that took them to the doctor), they’ve actually made some money. Anything other than that and they are fooling themselves.
You know that folks make money all the time with real estate investments – and those who do pay strict attention to all the money going out and coming in.
Help the client not fall in love with the investment property
The problem that many novice and would-be real estate investors have is that they fall in love with the property. While this may be fine when their looking for their dream home to live in it’s a horrible strategy for investing.
If you want a client for life, you’ll do your best to dissuade these lovers and steer them toward a different property or maybe away from real estate investing completely.
If you let them buy (and yes, I understand you can’t actually stop them) a property that’s too high priced or will require fixing beyond the client’s ability or in a neighborhood that’s hard to sell anything, when the investment goes south they are likely to blame you.
Help them understand more about what they’re getting into so they can make a truly informed decision. Do this and you may indeed have found a client who will buy properties from you over and over again.
Got questions about real estate investing and marketing to real estate investors? Ask ’em here and we’ll get an answer for you.