| Many programs, seminars and boot camps on real | | | | to seminars, I piled in the car and started looking at |
| estate teach a specific step-by-step strategy in an | | | | houses. But every time I looked at a house, I felt |
| attempt to help newbie's learn how to become a real | | | | confused and unsure about what to do and how to |
| estate investor. I have taken such strategy based | | | | know if this really was a decent investment property. |
| classes, and have taught them too. | | | | For some reason, I just could not seem to connect |
| The focus is usually on specific strategies and the | | | | all the dots |
| step-by-step process by which to execute that | | | | It seemed like my "career" was going nowhere. I |
| strategy. The idea is that this gives you a repeatable, | | | | went from one seminar to another hoping that each |
| easy to understand process that you can learn and | | | | one would be the one that would clear up all my |
| implement quickly. | | | | questions. Finally, out of sheer frustration I decided to |
| But after years of learning about real estate and | | | | get my agent's license. As a new agent I was |
| then years of teaching and consulting I have realized | | | | required to take some classes on Real Estate |
| that this approach can inhibit your ability to | | | | Finance. |
| understand how real estate investing works at the | | | | We learned to calculate net profits on a sale, buyer's |
| most basic, fundamental level. | | | | payments, and how to do comparable market |
| It is sort of like teaching a kid how to play baseball | | | | analysis. These calculations were not such exciting |
| by saying: | | | | stuff at the time, but several years later, when I |
| 1. Get a hit. | | | | made the jump to become a full time buyer for an |
| 2. Get on Base. | | | | investment company, this gave me the ability to |
| 3. Score a Run. | | | | adapt to the investment market quickly. |
| While this is an easy "strategy" for scoring, it leaves | | | | Using my baseball analogy, you might say "I was |
| the player with no understanding of the fundamental | | | | working on my swing." |
| skills necessary to get a hit. | | | | I did not know it at the time, but I was honing those |
| It's exciting to think about scoring the winning run, or | | | | fundamental skills that would later enable me to get |
| making $50,000 on one real estate deal. However, | | | | involved in bigger deals with higher level investors. |
| most people who can do that on a regular basis have | | | | Looking back on all this experience I can't help but |
| been working at their craft, diligently practicing and | | | | notice that the most successful investors, the ones |
| mastering fundamental skills. | | | | who are truly financially independent as a result of |
| These fundamentals are really the keys that unlock | | | | their real estate activity, are those who have |
| the door to investing success. | | | | mastered these fundamental skills. |
| Home run king Hank Aaron's success was in his | | | | Every property has a value, location and character all |
| mastery of the fundamentals of a proper batting | | | | its own. Mastering the fundamentals means being able |
| swing. That swing gave him the ability to break the | | | | to obtain key pieces of information, and then let that |
| most famous record in all of Baseball. | | | | information dictate the investment strategy options |
| A real estate investor faces the same challenge | | | | based on that information. |
| when trying to "hit a home run" and make big money | | | | The greatest single problem facing most investors in |
| with real estate. | | | | the current market is a lack of adaptability to |
| Like star athletes, you must master the fundamental | | | | changing circumstances. I believe that this lack of |
| skills of your craft, and learn to apply those | | | | adaptability is primarily the result of not understanding |
| fundamentals to every prospective deal. The bottom | | | | the fundamentals of Real Estate Economics. It |
| line is if you want to be a star in the "game" and | | | | sounds pretty highfalutin' but all we're really talking |
| make the big money you have to be good at the | | | | about are the Real Time Market Value, income |
| right things. But strategy based training tends to | | | | potential, and costs. |
| divert our attention away from the fundamentals. | | | | Each property will dictate to you what your best |
| Back in the early 1990's I heard Carleton sheets | | | | investment options are if you can gather those key |
| saying that rental property was the way to go. I | | | | pieces of information. |
| went to a seminar and heard another guy named | | | | Your starting point is to understand your market well |
| Russ Whitney saying that I should be finding houses | | | | enough to define an average of property values by |
| that were in bad shape and fixing them up. | | | | the square foot - NOT house to house, as with |
| Then I saw another guy on TV talking about how he | | | | comparable market analysis. |
| got cash back at a closing, and actually made money | | | | In a stable to improving market as we had from |
| by buying a house! It certainly seemed that there | | | | 1995 to 2005, it is easier to avoid mistakes when |
| were plenty of ways to make money in real estate. | | | | calculating value. But in a changing market where |
| Still I had what some people refer to as "Analysis | | | | prices are tending to shift down because demand is |
| Paralysis ". | | | | changing or slowing, it is essential to be aware of |
| Today I realize that my "analysis paralysis" was | | | | what I call the Real Time Market Value. Learning this |
| caused by a lack of understanding. The plain fact was | | | | fundamental skill is critical for hitting "home runs" with |
| that I simply did not know the fundamentals of real | | | | real estate deals. |
| estate investing. You might say I knew I needed to | | | | Fundamental Skill number one: Know Your Real Time |
| "get on base", but I simply did not know how to | | | | Market Value, and use this value to calculate your |
| "swing the bat properly". | | | | offer price. |
| After a few months of reading articles, searching real | | | | When you pay too much going in, few, if any, |
| estate websites, buying books and tapes, and going | | | | strategies will keep you from losing money. |