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Understand This: The Real Money is NOT in The Real Estate

The Real Money is NOT in The Real Estate

Most people, both veterans and beginners, completely miss their “true asset” in their real estate investing.

They *think* that the properties are their best assets.

They’re wrong. Very, very wrong.

The true asset of a smart real estate investor is their ability to get a “repeatable tenant.”

The process of getting a repeatable tenant starts with knowing how to pick a specific segment of the market.

Then formulating a message to match that specific niche in the market. Type of home, type of sale, type of rent layered with emotional triggers.

Then knowing what types of multiple media to use to reach that market. Fax blasts, Kijiji.ca, Newspapers, Google Adwords, Facebook Advertising, Flyers, Radio, TV, Free Classes, Road Signs, Lawn Signs.

Then collecting cash… or actually “selling” the message... and maximizing profits.

And finally fulfilling the promise of the message.

These points, all working together, are the real estate investors true asset.

Why? Because if you know the above steps, you can apply your knowledge to any sort of property in any sort of community in any sort of city.

And that’s of real, measurable value.

How many times have you heard people explain that they had a HORRIBLE experience in real estate? And why did they have such a negative experience? Because the person sharing their horror stories thought the only important piece of the investing puzzle was the property.

The “average Joe or Jane” got into real estate because they didn’t want to “miss out on an opportunity” so they went off and bought a property.

They didn’t “choose a market,” they didn’t “craft a message,” they didn’t use “multiple media” to reach their market, they don’t understand how to or the importance of mastering the skill (by the way, we didn't invent these ideas, far from it, we first learned these concepts from a great mentor, Dan S. Kennedy).

No one explained to them that you need to tilt the game in your favour to maximum profits.

The real asset of your real estate investing is your intimate understanding of the diagram below.

Because once you understand it, you can apply this to any type of real estate investing.

You can be dropped in the middle of any city in North America with no knowledge of investing, but by following this diagram, you can quickly: choose a market, craft a message, get it out with multiple media, collect cash and fulfil your promise.

Let’s use Rent to Own as an example.

Who is your market in these investments?

Our perfect candidate is someone with good income and poor credit. They can afford our monthly rent requests but don’t have good credit so either can’t buy a home or can’t afford the interest rates offered if they were to buy. They want to live on a good street close to one of: schools, highways, shopping, bus/train routes.

What is the message for Rent to Owns? Well, the words explain themselves, don’t they? They can rent until they own. Does that message resonate with the market that we’ve chosen? Likely.

Now that we know the message we need to select the media that’s going to be most effective for getting it out to our market. Newspapers, Online Classifieds, Flyers, Directional Signs, Facebook etc. You can then measure which one generates the most effective leads by analyzing lead to application ratios by media type. This point alone allows you to focus your spending and out hustle the competition that isn’t putting in the effort to do the same.

How do we collect money? For Rent to Owns it’s with the proper lease agreement and option agreement. It’s with a system for showing the property that maximizes the money collected.

We follow certain steps on the phone, at the property, with the description of the programs to maximize our cash flow and our returns.

And finally, how do we fulfil the promise of having a “nice home you can rent until you choose to own?” We’ve selected a great property, verified by a home inspection, in a great neighbourhood with the help of people who have gone before us.

Now, out of all these steps, how many of them involve the actual property itself?

Not many.

Do you believe most real estate investors understand that?  That the property is just one of many steps and mastering the other steps may actually be of more value to you?

That’s what sets you apart. The understanding of this is what separates you from the masses.

You can be dropped in the middle of any city in North America and apply these steps to begin a successful real estate empire. Now, where do people “mess up” even after knowing these steps?

That’s easy. They under-invest in one of the steps. They too casually choose their market. Choosing too small a market is the easy way to never make any sizeable amounts of money. If you’re a fan of CBC’s Dragon’s Den show, you’ll notice that the “Dragons” consistently turn down amazing products and wonderful ideas because the size of the market is too small to make any meaningful money in.

Next, they people pitching their idea/product/service on the show craft their message too quickly without enough thought, clarity and testing. We messed up this step ourselves by advertising with the message, “Lease with the Option to Buy,” before finally going with “Rent to Own.”

They then mess up by underspending on the media used to deliver their message. They’ll go with “free online classifieds only” or “advertise for one week and then stop.” The continued presence of your message in front of your market is mandatory. It’s an investment, NOT an expense.

Here’s an advanced thought for you. Many beginner investors never consider that the SOURCE of their lead is just as important as the COST of getting it. Would you spend more money in newspapers for fewer leads but higher quality ones? Most won’t and don’t. They don’t understand that the “value of a lead” is often determined by the source from which it comes.

Next, they don’t study, analyze and practice their “pitch.” They don’t turn on all the lights in the home, they don’t open the windows and blinds. They don’t choreograph the sales event for maximum results. They don’t cut the grass, they don’t wash the windows, and they don’t have all interested parties arrive at the same time.

Choreographing the showing of the home and the explaining of the product is shockingly under-practiced.

Finally, the acquisition of the property itself is frequently messed up by investors. They’ll buy too high and then can’t get enough rent to cover their expenses. They’ll buy in fringe communities that are losing people and jobs.  We have been guilty of not following our own rules earlier this year and were stuck with a property that we had to rent out in a community we’d rather not be in.

Following your own rules is often the toughest thing to do. We fight with it ourselves, regularly.

The process we’ve just walked through is the exact same one used by people like Brad Lamb (self-proclaimed Toronto Condo King).

A real estate investor’s understanding that the process from market to message to media to sales to fulfilment is their asset and that real estate just happens to be their current market of choice is hugely liberating.

You can take these exact same steps and apply them to any business. Think about this.

Who is Starbuck’s market? Howard Schultz didn’t just begin selling coffee. He built a business for the market of people looking for a “third place.” A place away from home and work to socialize, hang out and “get away.”

Their message is that you can get a “feeling of Europe” right here in North America. The media for their message? Store signs within a couple of square kilometres in every market they choose to enter.

How do the maximize profits? Double espressos instead of single ones, espresso shots in your smoothies, Tall, Grande, Vente sizes, snacks, breakfast sandwiches etc. etc.

Are you looking to start your own business?

Then these steps and the understanding of them is your real asset. McDonalds' asset is not their business cards, their corporate structure, their letterhead or their website.

All the things that the person from the outside looking in thinks is a business’ asset is not. It’s the ability to get a repeatable customer using processes for each of the steps in our stick diagram above.

When mapping out your next move, your next investment, your next business keep this in mind. Don’t discount the value of this. Knowing these steps have made us a lot of money and give us the confidence to land in almost any city in North America and do it again.

You can too.

We know you can ... and you will.

Until next time, Your Life. Your Terms!!

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0 comments on “Understand This: The Real Money is NOT in The Real Estate”

  1. Excellent timing, I needed this. It is also a good reminder of the fact, that "the majority is always wrong"...You are both very inspiring.Thanks.

  2. Totally agree and sound advice. It is not just the product, it is how you "Sell" the product.

    A good example is this: I have a property I rent in Orlando and I am getting $300-$400 more per month in rent than other properties with similiar characteristics and some are not getting it rented out. It is how you market it and show it. I did list it on Kijiji but got a lot of trashy inquiry. I decided to use a Real Estate Agent to list it and paid them $1,000 to find a tenant, not just any tenant but a "Quality" tenant, was it an expense no it was and "Investment". The tenant just renewed the lease and I even raised the rent by 1.5% against the advice of some friends in the same business.

    I did buy a nice property in a nice area with a nice view, but I did little things that added curb appeal that helped the house to "Sell: itself.

    The advice Tom & Nick provides is rock solid, no pun intended.

    Thanks for the tips guys.

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