Why Do Would-be Real Estate Investors Fail?

Let’s face it, there’s tons of real estate investing information out there.  But of all the people you’ve seen at seminars lapping up the words of wisdom from the real estate gurus, or the people you see at Barnes and Noble skulking around til 11 PM reading all the real estate investing books they can get their hands on (A charge of which I am guilty!), how many do you think actually succeed in their real estate investing businesses?I don’t have exact figures, but based on my experience as a real estate investing information provider and coach, I would guess it’s close to only 1-2% of people who want to be real estate investors get into the business and stay in the business and make it profitable.Those figures are so disappointing.Why is it so hard? Why do so many would-be investors fail before they begin?  And why do others, who are able to take the first steps of their real estate investing career successfully, still fail to meet their goals long-term?I realized the deck was stacked against me as I begin as a real estate investing student at a seminar a few years ago.  I bought all the real estate investing courses, signed up for private coaching, and watched as many of the people around me fell by the wayside.  There were many times I wanted to quit, myself.  You probably have your own story of struggle in your real estate investing career.It’s the million dollar question.  Here are the conclusions I’ve been able to come up with.Why Do Real Estate Investors Fail In Spite of Great Real Estate Investing Information?1) The Myth of Get Rich Quick – Why do would-be real estate investors fail?Just because there are real estate investment strategies, such as flipping homes, that can be implemented quickly (60-90 days), that doesn’t mean that it is easy to find deals, negotiate them and close them in the first month or two after you start your real estate investing career.  In my experience, most people need to take a little time to become familiar with the real estate markets in their area, real estate terminology and strategies, and then get started implementing so they can practice finding and negotiating with motivated sellers. Even with a good deal closed, you might only walk away with $5,000 or so from a flip.  With a subject to or lease option deal, the property may take years to “ripen” in your portfolio before you are able to sell it for a significant profit.  The biggest money I’ve seen people make quickly is coming from rehabs and short sale negotiations.  Pursuing these types of deals can verge onto a full time job.  They do work, and work quickly, but they take a lot of time to implement.2) The Myth of No Money DownSo many times, I have heard students come on coaching calls with me and say, “I just lost my job, so I am really motivated to make this work quickly.”  or “My goal is to flip one house a month every month because I need some cash for start up capital.”  These sentiments are probably being perpetuated by the gurus out there who encourage people to think that real estate investing is a no-capital-required business.  Even after you get the formula down, it can take years before a paper-profit becomes cash-in-hand if you own rental property or do lease/options.The exception proves the rule and I’m sure it’s true that some people during some periods of time are able to make “thousands” quickly, when they need it most. For example, I know folks who get a lot of free deals off of craigslist or calling through the newspaper.  However, for the vast majority of real estate investors, some money is required for marketing to find motivated sellers if they want to keep their deal pipeline reasonably full.  In addition to marketing to find motivated sellers, deals take money for due diligence, legal fees, inspections, and so forth.  If you plan to hold property as a landlord, the costs escalate even more steeply.  If I had to put my finger on one major reason for lack of success in this business, besides false expectations, I would list lack of funding right at the top.3) The TRUTH in “It doesn’t work where I live.”  There’s a cliche in the real estate guru field that speakers like to joke about.  It’s that a lot of students like to say, “Your strategies won’t work where I live.”  Guru’s play it off as a joke, like the person is making an excuse for not getting started in their investing, because they “can’t.” The truth of the matter is, there is a LOT of variation in the performance of real estate markets across the country.  In some areas, like the South and Midwest, property values are relatively stable and properties cash flow well.  In other areas, Southern California, Florida, and Las Vegas come to mind, property values fluctuate wildly and you can make a fortune or lose your shirt on the changing tides of appreciation. It’s very important to understand real estate market cycles and where your market fits within the current phase of the market.  You implement to take strategies that work in your marketplace if you want to be successful locally.  Otherwise, you need to do what I’ve done and learn to invest where it makes sense, without being constrained feeling a need to invest where you live.  There are pros and cons to each strategy.  However, my point is that it’s not right for the gurus to mock people who raise this objection.  It’s a valid concern raised by thinking investors, even if it doesn’t help sell the guru’s real estate investing courses.So, I’ve raised a lot of concerns about the mis-information being circulated in the real estate investing industry.  Have I disappointed you too much?  I are you “off” of investing now?  If you are good – if you can be talked out of it that easily, I’m glad I got you out BEFORE you invested any more of your precious time and money pursuing a strategy that doesn’t appeal to you.If not, even better. it is certainly possible to take a realistic approach to real estate investing and make it work for you.  You can grow your net worth to millions, but it does take time and perseverance.  I hope you’re willing to stick it out.

Real Estate Auctions (How Do They Work)

The popularity of auction sales of real estates is increasing day by day despite the dominance of the traditional process of real estate selling. Earlier these auctions were labelled as dishonour sales done by the distressed sellers when there was no other way to liquidate a property. But this view has changed as the number of real estate auctions are increasing day by day because sellers of residential as well as commercial properties are opting to auction their property directly or turning to real estate broker houses to get top price as per market rates from the auctions.Auction opportunity arises when a seller’s mind is auction oriented with a hope that the property will fetch a fair market price. To get a fair price, his equity position in the auctioned property should be strong. With a strong equity position in the property, he will save the cost of paying a sales commission. The time of auctioning should be perfect, when the market is soaring high. The auctioneer should also try to avoid bearing high carrying costs associated with the property.A profitable auction opportunity is created when there is limited supply of a particular type of property whose demand in the real estate market is relatively high or the market is declining with limited buyer’s interest in this traditional sales process.When a property is offered for auctioned, a sense of urgency arises to bring the interested parties together on a particular day and the sales process creates a sales price through competitive bidding among the participating parties.In early days of real estate auctions only the properties in bad conditions or subjected to foreclosure were auctioned. But now sellers are shifting to real estate auctions to sell their homes. This transformation has occurred because the earlier believe that a seller will not take the risk of auctioning his property at a lesser price than its market value has changed. Real estate auctioneers are at a liberty to set a minimum price which is more than its market value that he will receive in any case. In addition by setting a minimum price, he will no longer have to bear the risk of buying back the property if it does not reach that price and will also save the cost of paying the required sales commission to the auction house.Many real estate owners prefer to go for a direct auction instead of going to a auction houses to avoid payment of sales commission to real estate brokers which is about 8-10 percent of the property’s value. Also the property owners have absolute control on the auction sales process. This is essential when a real estate takes lot of time to sell and the owner is represented by a real estate agent or broker. Many times, it is wise for a real estate owner to auction a property not in use to cut down maintenance expenses. Real estate auction is an exciting event both for the auctioneer and the bidding parties therefore they are always well attended.Since auction is the best way to get true market value for the real estate, the magic of an exciting real estate auction works for the marketing of these properties for sale. Onus rests on the auctioneer to create demand or an urge to make a bid in the buyers/bidders mind and to attract the attention of the potential buyers/bidders. The potential buyers of the property are then registered after it is ensured that they are financially qualified. It is to be ensured that a considerable sum is paid by the buyer as a down payment which is non refundable and both parties are willing to close the deal as soon as possible. It is necessary to make sure before the auction that the buyer is financially secure so that the seller will not have to wait for receiving the entire payment. Many times it has been found that real estate auctions remain incomplete because the buyer or successful bidder is turned down for mortgages.The following factors should be kept in mind before a real estate is auctioned by the property owner-. He should consult experienced and professional auction consultant who have specialized in real estate auctioning.. It should be ensured that the marketing campaign of the auction event focused properly to have a high impact.. Importance should be given on direct mail marketing to targeted bidders/buyers.. The auction event should be advertised in print and audio visual media to have a greater impact. If possible the consignment should be assigned to a reputed advertising agency to make the ad campaign more attractive.. The auction event should also be advertised through internet and email.After the promotion or advertisement campaign is launched, the auction event takes place within a few weeks on completion of official formalities. Sellers are informed about the auction date before hand after the auctioneer is ensured that the sellers/bidders are able to meet the preset terms and conditions laid down by him.Following are the advantages of real estate auctions for the seller-. The property owner is able to make a quick liquidation of their property.. The auction is successful in creating a healthy competition among the bidders.. Their property is exposed to a wide range of prospects.. Closing is accelerated..The sellers are well aware about the date and time when the property will be sold.. Auctions are successful in considerably bringing down the amount of time a property is on the market for sale.. Auction gets rid of number of out of the blue events related to property sales.. Auction reduces the burden of negotiation process from the sellers mind. He is able to sell the property according to the terms and conditions set by him.. In contrast to conventional sales processes where it is mandatory for the property owner to make necessary improvements and renovations to get a fair price, these properties are auctioned on as-is-where-is basis. Potential buyers receive enough time to make a decision on whether to make a bid or not after having a good look at the property to be auctioned. Therefore it is sold with no emergency and the seller gains from it.The buyer also enjoys innumerable advantages from real estate auctions, they are-. He can set his own purchase price.. He purchases the property at a fair market price.. He does not have to make long negotiations or bargains to finalize a deal.. Auction reduces the time to purchase a property.. He will not have to worry about emergencies because purchasing and closing dates are known to him beforehand.. Buyers are well aware that sellers are predetermined to sell.