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Real Estate |
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Finding, Fixing, Financing, and Flipping - The Short Course
Most people get involved in Real Estate investing to make money. Pretty self-evident - or, is it? What would you say if I told you that everything you have been taught about Real Estate investing and making money "rehabbing" your real estate investments is wrong? Well, at least, much of it! Let's take a look at something that all too many people don't think about in their real estate investing - something that seems to be a secret formula to bringing in the most cash from your real estate investments. While it is often true that the total price of a property that has had a lot of work done on it is more than one that hasn't, what has that "price difference" really cost you, the Real Estate Investor? With enough time and effort, we could go through dozens of scenarios to figure out just what a loss of time, money and effort it is to go through a house and "rehab" it, but let's keep it short and talk about some things that really happen in real estate investments - a "reality check" if you will... I like to be sure to get everything out of a real estate investment that is possible, but, there is a balance between the Time, Money, Effort and Appreciation the customer will get out of what you put in, as opposed to what they would rather do themselves... And they are willing to pay you for the privilege! I call this the "M-E-A-T" of a real estate investing deal, and it is a simple equation you can apply to all your real estate investments. In the table below, look at the M.E.A.T. result for each Function. ____Function____ _M_ _E_ _A_ _T_ _Total_ Painting (full) _2_ _5_ _5_ _6_ __18__ Kitchen Redo _7_ _4_ _3_ _6_ __20__ Bath Redo _6_ _6_ _3_ _4_ __18__ Landscaping (full) _4_ _6_ _4_ _4_ __18__ Painting (LAZY) _1_ _2_ _4_ _3_ __10__ Landscaping (LAZY) _2_ _2_ _4_ _3_ __11__ You can see from these figures, the appreciation factor of the customer is often the same - whether you put lots of time, effort and money into this real estate investment or not. The reasons for this are as varied as the people looking at any given house, but how many times have you heard of people going into a house - just after it was fully "rehabbed" and they turned right around and put the paint they liked throughout the place? So, why did you waste your M.E.A.T. on doing it yourself? Because you thought it would be prettier? That you would get more money from it? Because you think that's what real estate investing is all about? I challenge you to think about this - every time you get involved in any real estate investment... Just how much more M.E.A.T. did you really get from your real estate investment - your total return? The cash you got was more - maybe - but so was the WORK. You can sell houses just like you get them - and get 90% or more of the price you will after all that effort, even without ever seeing the place! When you use the LAZY way, you put very little extra into any given real estate investment, but raise that return by another 5% (which means that it brings in almost the same total as you get otherwise - without the added cost and work! So, who makes more profit from their real estate investments? Those that do less work! Plus, there's more time, energy and money available to put into the next real estate investment - while those other folks are still remodeling their last deal! In a year's time, you can do 30-50 houses this way - by yourself! How many can you rehab in a year - by yourself? Now, where is the bigger profit? By now you can see just what I meant by the training you had before being 'wrong'... You've been taught to "fix and flip" your real estate investments - but, unless you are doing the fixing directly at the request of the end user, you are likely wasting your time, money and effort for no additional appreciation factor, so, overall, you are wasting it for nothing. You are throwing away the M-E-A-T of the deal! Just how much did painting that living room in your last real estate investment cost you? Since you missed another deal that might have $20,000, $30,000 or more in it, I would suggest you spent a LOT on it! Think about this before you start your next real estate investing "rehab" project - just how many other deals could you do if you didn't put all your time in on fixing? Then, add on the energy (effort) that it saves you. Most people think about the money part of real estate investing, but leave out the rest of the equation when calculating the total value of their real estate investments. I think that is a big mistake. When you can get 90% or more of the same price from any given real estate investment, but do 1% or less of the work, keep 95% of the energy for other projects and 95+% of the money it would cost you - why would anyone want to do any "rehab" job - ever - in their real estate investing business? Now, there may be times you find a house you want to live in that needs some work. That is a fine time to consider doing a "rehab" job - you aren't doing a real estate investment (other than for appreciation), but any time you are working your real estate investment business, take a serious look at the M.E.A.T. of the deal - before committing to spending all your time, money and efforts. Steve Majors - The Lazy Investor
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