Monday, July 14, 2008
There is SO MUCH opportunity right now, it's a riot! Auctions and REO purchases are all the rage as I write this. Short sales are happening, too, but the universal theme on those is, "you've got to have a lot of those in the pipeline" to make up for the losers --- and the only "buyers" are end-users.
As for the auctions, the banks are just now (July 2008) loosening up the terms of their reserves (here in So. CAL) to effect actual investment grade deals.
That all said, if one doesn't know their farm, they won't recognize a deal, unless it was SO obvious a blind person would trip over it ---- and then they would be self-doubting and suspicious anyway.
You know, that's the theme of the real estate business.
There's just no short-cuts other than knowing your farm.
That's why 95% of the would-be investors are scared to pull the trigger. They don't know if they're shooting at a good deal, or shooting themselves in the foot.
Nevertheless, sifting through a bunch of crap is still the name of the game. I'll call this "Frog Kissing". It takes time and money to "frog kiss", or wade through a ton of responses from even highly refined and tailored direct mail prospects. It's just the law.
We've got to expect that we'll kiss a bunch of liver-spotted, warty reptilian organisms before we finally discover the prince/princess!
Even then, turning the frog into a prince, isn't just a matter of kissing the thing. No. The devil's in the details.
Meanwhile frog kissing is what we do as investors. That's why RE is so profitable, too. Very few people want to spend the time, energy, and money doing that.
The squeamish, lame, and/or lazy won't do the spade work required to find those green, slippery buggers. What's worse is the newbie frog kissers get things backward. They look for princes/princesses instead of the frogs. We don't really find the princes/princesses by looking for princes or princesses. No. We can only find the "royal gems" by looking first for the frogs, and well, "kissing them" first.
That is, looking first for "problems". Or better; recognizing problem properties or owners with problems. Then analyzing the numbers (comps, repairs, etc.); making offers; waiting for counter offers; being patient; and finally being willing to "unsuccessfully" negotiate a deal --- over and over again. That last part is important. The impatient investor often is unwilling to "lose" a deal, and then puts himself in a weak position, or worse --- "marry" the frog.
Meanwhile, the impatient investor thinks by insisting on bargaining that the frog will by sheer force become that prince of a deal. Wrong!
Frogs don't become princes because we're desperate and settle. Frogs show themselves as princes when we care less than the "frog" sellers do. That means that we search patiently for the frog that will become a prince only by making many, many profitable offers in the first place; by knowing our farms better than anyone else, and being willing to kiss as many frogs as it takes for the princes to appear! That's always just a lot of plain ol' frog lips to wade through, huh?
So be patient, know your farm, make lots of "profitable" offers, care less than the frog sellers when negotiating, and eventually one of the frogs you kiss will turn out to be your Prince.