Re: What is Wrong?! Investor’s Block?! (long) - Posted by Alex Gurevich, TX
Posted by Alex Gurevich, TX on May 18, 2001 at 13:39:37:
First of all, no need to be ashamed of anything. That’s the nature of the beast - there are ups and downs. Look at the national economy, for example. You’ll have years that are better and years that are worse.
It’s normal. On occasion we all become a victim of circumstances beyond our control (i.e., fire, vandalism, etc.) On occasion we all make bad decisions, or just get passive for no apparent reason.
All those things slow us down.
Don’t kill yourself and don’t over-analyze. Understand this - you are doing precisely what you can with the resources and limitations you have right now. There are ways to do better, but they require developing new resources.
It’s great that you believe you should get busy and you did. But that’s not enough. As you already learned you were missing on a lot of opportunities.
You did, mentioned several objective reasons for your slowdown: lack of readily available funds (over 65% LTV), increased competition, lower margins, lack of time to transact and react quickly when someone calls.
Let’s look a little closer at these issues. In fact, several of them are related to each other: when you have one, you have the other, and vice versa.
- Lack of readily available funds. You were relying on credit cards and credit lines to carry you until recently, but you are now maxed out. Credit cards are a good source of short term capital to swing the deals. However, it also tells me you have not been doing enough volume of transactions, or you would have run out of your money much quicker.
Solution: work on developing alternative sources of funds - either partners or private lenders. I personally don’t like to split profits, so doing business with partners is not my thing.
Private lenders are terrific resource for paying down payments, reinstating foreclosure arrearages, just plain tapping into your existing equities and writing yourself a $20,000 check to go and play or invest in a new project.
I’ve borrowed close to $1,000,000 from private lenders in my area over the years in small increments of $10,000-$40,000 for just these purposes.
Work on developing and cultivating relationships with a few private lenders and you’ll never run out of money.
Increased Competition. There’s nothing you can do about it. With the abundant amount of educational information available today on money making opportunities (including real estate) there bound to be more and more people coming into this business. Your job then is to be better, faster, more responsive, more educated and HAVE BETTER RESOURCES to handle different situations the homeowners are in.
Responsiveness. Obviously, if you have 8 hours a day job, your response time will jump HIGH as compared to the full-timers. Can’t do much about it. Got to go full time to compete effectively.
How do you do that? Well, your focus should be on replacing your paycheck in the FASTEST POSSIBLE WAY. That means concentrating on building a steady monthly cash flow from the houses you buy and sell.
I know we all enjoy a $5,000-$10,000 checks much better than a $300-$500 monthly check. Flipping for cash will produce larger checks. Flipping with Lease/options, for example, will produce smaller, but long lasting monthly checks.
Get enough of those, and learn how to increase the amount you collect monthly and you’ll be FREE from your JOB.
- Lower margins. Again, that’s a function of (a) increased competition and (b) the fact that there’re just not enough houses out there that can be bought at 40-50% discounts in any balanced marketplace.
These great deals with large discounts do happen now and then, but they are typically not in the majority. Can’t count on them all the time. There are many more deals you can buy at 15%-25% discounts than those at 50%.
One of the skills astute investors possess is the ability to squeeze more dollars out of what doesn’t seem like a killer deal and do A LOT of them. It sounds like you have already learned some of those skills. So getting your resources in order will help you to make much more money.
Hope this helps a bit.