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Most investors new to real estate get mesmerized by a technique for
acquiring control of real property and or a technique for turning a
quick profit. These "techniques", often taught by "gurus" at RM5,000 -
RM8,000 for training, workshops and seminar, emphasize no need for
extended time and financial commitment (lease option, subject to) or
emphasize quick turn profitability (Auction, Buy during financial
crisis, etc). These are analogous to the technical or chart reading
aspect of stock market investing, (similar on real estate investing) it
doesn't matter what property you find, just apply the technique.
The truth is that any of these techniques can be successfully utilized
given the right set of circumstances. However, they are applicable in
only a very small percentage of cases, and usually after an extended
negotiation or as an afterthought to the property acquisition process.
Successful real estate investors concentrate on the property itself
rather than on a specific technique. This not only allows the investor
to concentrate directly on where most profitability resides, but also
opens a much wider array of potential "deals" for the investor to
consider.
Plan on doing many deals each with a small amount of profit rather than
a few deals each with substantial profit. Many property investors both
experienced as well as new are thrilled with a small (under RM10,000)
profit on each deal. Since unexpected expenses always seem to creep up
when least expected in real estate investing, the actual profitability
of these transactions range from half the expected profit to no profit.
In order for the investor to earn enough income to warrant the time
commitment, monetary commitment and risk involved, he would have to
participate in a large number of deals annually.
And since it always takes many negotiations to produce a single deal,
and many property inspections to find a single property worth
negotiating on, real estate investment will become a full time real
estate business. To be sure, there are people who successfully play the
low profit high numbers game; most real estate consultant come to mind.
But if working 70 plus hour a weeks and buying, rehabbing and selling 50
plus properties per year sounds like a worse life than the corporate
world you're trying to leave, you probably want to find a different
approach.
In my many years investing in real estate, financing real estate
ventures, and observing successful real estate investors, I have come to
the conclusion that participating in a small number of highly profitable
transactions not only produces more monetary success but also leads to a
much more leisurely, less stressful and more satisfying experience. I
personally don't believe any serious investor need look at any
transaction with less than a RM50,000 profit, with the goal of
eventually only considering deals with a RM100,000 plus profitability.
If you don't think these kind of deals are available.
From real
estate investment seminars to real estate investment clubs to the
professionals real estate investment books for sale, one would think
that the single family house is the only property type available. And
with the tens of thousands of new real estate investors as well as the
invent and expansion of the franchised rehab businesses, the single
family house as a real estate investment has become a very competitive
and crowded field.
Whereas just five years ago a homeowner needing to sell his home had
very few and limited options if the home needed major repair, he now has
a much larger market demand to sell into. The homeowner can sell to a
much larger choice of investors interested in purchasing his home, he
can obtain refinancing money to repair his home even with credit scores
so low they would not have even been considered five years ago, or he
can auction his property and probably receive a cash offer at fair
market value.
All this has made finding a below market priced single family house
investment like finding the proverbial needle in a haystack.
Rather than competing in the crowded and overly competitive single
family house residential market, with its limited profit potential and
heavy time commitment, real estate investors would have geometrically
increased chances for success if they spent the same time and energy
learning about the various areas of commercial real estate. Not only is
this field significantly less crowded and significantly less
competitive, but the real estate investor is able to earn significant
returns on far fewer transactions. To be sure, there are tens if not
hundreds of types of commercial properties and transactions; the
successful real estate investor will educate himself with a good
overview and then decide on a area of concentration. Rather than waste
time fighting for the left over scraps in the single family residential
market, the investor can be breathing the rarefied of the commercial
real estate market.
Having no sustainable plan
"I want to make a lot of money" is not a sustainable business plan. "I
want to specialize in Auction property" is not a sustainable business
plan. "I buy property for cash or mortgage" is not a sustainable
business plan. Enough said. If you don't know how to develop a workable
plan for real estate investing buy a book on business plans, take a
small business administration course, or better yet attend the seminars
and workshops.
It's possible to purchase real estate with no money. Yes it's possible
to flip properties for large profit with no or little dollar invest. Yes
it's possible to pay down payment for property for RM1. Sellers,
especially housing developers, take you seriously and are willing to
sell their property at large discounts or zero down payment. Beware of
poor housing project for this type of offer. You think the housing
developer are so kind to you? They are businessman and profit oriented.
They will only giving out all kinds of incentive if their sales are not
advancing and low demanding.
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