Author: A4KENYA

These days, a lot of attention is put on how to find money to do your real estate deals. But what if you’re someone with a bit of money to invest? How do you know what makes a good deal?

One of the easiest ways to invest in real estate when you have the cash to invest is to partner up with someone that has a great track record, is investing in the kind of deals that work for your goals and can offer you a deal that makes sense for your money. But how do you find them? And how do you screen them to make sure they are a good fit for you, and for your hard earned cash?

These days the easiest way to find prospective joint venture partners is to do a search online. Most of the folks running an investment business have a website or blog dedicated to explaining the types of deals they do and providing some sort of education and information. You could do a search for real estate investment opportunities and your area to find someone local.

But, personally, I think the best way to find someone to invest with is to drop into a couple of your local real estate investing club meetings. You can also ask your friends and family if they know of anybody successfully investing in real estate.

Once you find a few different people, meet with each of them face to face. In my opinion, you are investing as much, or more, in the person’s ability to manage the deal as you are in the deal itself. You want to make sure the person you’re investing your money with checks out.

Ask yourself and your prospective partner:

Does this investment fit my goals? If you want to learn about real estate along the way you might want to find a partner that is willing and able to teach you as well as invest your money. If you really want to be hands on with your deals then you will be looking for somebody that will work with a hands on partner and perhaps give you a greater share of the deal in exchange for your efforts. Or if you want to wash your hands of the whole thing, make sure you find someone capable of making good decisions once you’ve turned over your capital. You have to know what is most important for you – and then check whether this prospective partner and the deals they are doing will fit with your goals.

What is your track record? Past performance doesn’t always indicate future success but how this question is answered can tell you a lot about someone. We’ve earned one of our partners over 700% return on his investment in six years. We also earned the same partner 110% on another investment in five years. I rarely mention either of these examples to prospective partners because I don’t want to set expectations that high when much of that return was thanks to a rapidly increasing market. Instead, I will tell them that there are no guarantees in anything, let alone real estate but because of x, y and z I feel pretty comfortable suggesting a 15% – 20% return on most of the investments we do.

Listen carefully to how someone answers this question. If they tell you about their best deals and don’t mention the worst, dig into the bad deals they’ve done to get a sense of how they have learned from their past experiences. And to get a sense of how honest and upfront they are. Look for a decision making process and an ability to take responsibility for the bad deals. That’s far more important than finding someone who made a 700% return on someone’s money one time.

What is your credit like? Can I get a copy of your credit report? If you’re going to turn your money over to someone to manage I think you have every right to understand how your prospective partner is managing their own money. I would never trust someone else with my money if they can’t even manage their own. Nobody loves MY MONEY as much as I do so if somebody else isn’t loving their own money how can I feel comfortable they will give mine the attention and care it deserves?

Do you have references? Ask to speak with one or two of the people they’ve partnered with before. If they’ve never partnered with anyone you could speak to present or past coworkers. I believe a good indication of how someone will handle themselves in their investments is how they handle themselves at work. If they were good decision makers and got along well with others at the office then there is a very good chance they will get along well and make good decisions on your deals.

Asking these questions is a good start but it’s not enough. ALWAYS go and check out the deal yourself. It’s not about second guessing the expertise and experience of the person you’re working with, it’s about covering your butt. Look at the property to identify work that might be required in the near future. Walk the neighbourhood to make sure it’s a good market to invest in. And ask any questions you might want to know about how the property will be filled with tenants (who is doing that, how do they screen tenants, what do they look for in tenants).

Finally – determine if there are alternate exit strategies for the property. Are there other ways to get out of this deal if the proposed strategy doesn’t work.

Once you’re satisfied with all of the above then you can feel comfortable and confident moving forward to discuss terms of the deal and possibly get into real estate with a joint venture partner.

Dave Peniuk is a full time real estate investor with a passion for helping other investors succeed. Get his Real Estate Investing Starter Tips Guide free when you sign up for his weekly real estate investing newsletter at http://www.revnyou.com.

There are probably as many reasons to enter into a joint venture as there are people who use this business model both successfully and unsuccessfully. Some people enter JV’s to have someone who has certain knowledge on their team, or maybe times are tight and entering into a deal with someone else makes the finances possible, or any other of a myriad of reasons out there, but no matter what the practical reasons for entering into a joint venture may be, the number one reason should be that you respect them and they respect you.

When starting the joint venture, be sure to go over, agree to and sign the agreement paperwork. These agreements are legal documents that define what each person in the venture is contributing, what each person is responsible for, how disagreements are solved, and how to dissolve the union, in addition to other information about the venture. This agreement is similar to partnership papers, but instead of running a full business together, you are just operating this one venture together.

Starting a partnership or JV with family is tricky, because no matter what the paperwork says, if you hit a hard road everyone involved usually takes it personally. If you feel you can handle the emotional roller coaster that is working with family, great, but if you have an reservations, it is better not to enter into an agreement with let’s say, your brother-in-law.

If you are considering entering into a joint venture with someone who is considerably wealthier than you, this maybe another situation to avoid; the rule of money is that money rules. If you find yourself in this situation be aware that no matter what your joint venture agreement says, the I have more money attitude may come up again and again.

Never, ever put down money; hand over property, or any other asset without a signed joint venture agreement. If you do, you are giving your rights away and probably the assets in question as well. We would all love to believe that everyone out there is honorable or that we have the ability to know who is honorable and who is not, but the days of working a deal with a handshake are long gone. Know your rights and be sure that the other parties do too, and keep your assets and sanity.

Bob Mangat is A real estate investor, educator, trainer and coach to Canadian and US real estate investors. Having trained thousands he’s helped people realize how to create wealth, independence and security through real estate. An expert in lead generation and marketing strategies for the real estate industry. find out more at http://www.realestateinvestingincanada.net

Qualified land investment joint venture partners a lynchpin of smart investing.

The history of land investment and developed real estate are instructive. Having the right joint venture partners is a key component.

In the UK, Canada and American real estate circles, the 1980s story of Olympia and York (O&Y) is often cited as a lesson learned. The highly-capitalized firm ran into an unfortunate set of circumstances with its Canary Wharf (London) and Manhattan properties in the late 1980s and early 1992, ultimately declaring bankruptcy with $20 million in arrears to various banks and investors.

The family running the firm, the Reichmanns, were seasoned real estate professionals. However they were overleveraged in two markets that were going through a pronounced slump. Their story provides a sobering picture of how even experienced investors can get involved in property and land investments that sometimes fail spectacularly.

Still, real estate in general is the means by which many of the world’s greatest fortunes have been built. And it’s not a game of Monte Carlo-like chance: there are key characteristics of joint ventures in land that increase investors’ odds of achieving asset growth. They include:

• Experience in the type of land investing being undertaken – There are many ways to invest in real estate: existing commercial properties, raw land, industrial warehousing, residential development and real estate investment trusts (REITs). One or several partners in a joint venture should have expertise in the type of investment where you put your money.

For example, a raw land investment would best be managed by professionals who understand how to turn otherwise dormant property (or what might be currently used for agriculture, for example) into viable residential development. This requires acumen with local planning commissions, being able to judge the likelihood of a zoning change that would benefit the local economy. It is not a task for amateurs.

• Shared ROI interests – Some investors expect a return on their investment in one year. Others are patient to wait two, three, four or five years or longer. What doesn’t work is when a joint venture partner is on a different schedule and therefore wishes to exit the investment early. Investment managers should be able to project when a real estate investment will provide an optimal payout – and then deliver on that projection.

• Appropriate allocation of funds (e.g., focus on a single property) – To avoid the mistake made by Olympia and York, it is important that the fund investment managers have a demonstrable track record of success. Just as important, their funds and managerial attention should be focused on properties where economic factors are promising. For example, in the UK market a growing population and under-investment in the housing stock during the past ten years is driving high demand for housing. Whether those properties are built for sale or to let is a matter for further discussion, but suffice it to say people need to live somewhere and that need shows no sign of abating.

Ultimately, remnants of O&Y recovered some of the company’s fortunes in the UK and Canada (but not the US). They and their investors learned their lessons – and prove once again that great fortunes can be achieved with real estate and land investment.

Be certain to work with a personal financial planner when considering any type of investment, be it in real assets or traditional market-traded securities.

There are key characteristics of joint ventures in land that increase investors’ odds of achieving asset growth. For example, a raw land investment would best be managed by professionals who understand how to turn otherwise dormant property.

Creating a successful joint venture in real estate involves things you definitely want to avoid, and things which you should do because they are solid principles of real estate investing and business. First, the things you want to avoid.

Definitely avoid the following Partnership Killers:

Do not choose the wrong partner.

This is the greatest mistake partners make. It is the biggest killer of what would or could have been a great real estate partnership. Partnership Killer profiles include:

1. Someone who has a pattern of dishonesty, which may be subtle but could include little misrepresentations, small white lies about numerous aspects of business and life. Many good people do not do their due diligence on a prospective partner and are surprised later to find out that their partner lacks integrity and lies about many things. You have to dig here to find out if the person has integrity. A pretty big sign that they do not is when they don’t completely answer your probing questions into their own business affairs and financial history. A partner who is not transparent with you is dangerous and a Partnership Killer.
2. Someone who is dysfunctional in areas that are important in a successful real estate joint venture. You have to be a student of human behavior to some degree to be able to choose the right partner, or to avoid choosing the wrong partner. That is true of being able to recognize that someone is not what they seem, or that they have another personality you don’t want to have to deal with. But you cannot go by immature gut feeling. Gut feelings only are helpful if there is a level of maturity in understanding human behavior.
3. Someone who has nothing to contribute to the partnership.
4. Someone who is lazy and won’t contribute.
5. Someone who is too busy with a million other things and will never actually have the time to contribute to your partnership.
6. Someone with too much baggage, which could be far too much financial disaster that is dragging him into the pit of despair, or with too many problematic business relationships of his own, i.e. creditors and recorded judgments, and even serious relationship problems on the home front.

Now, let’s look at this from the other perspective, things you want to do. This starts with:Choosing the Right Partner.

1. You want someone who is honest and who has integrity. That is actually no small challenge in this day and age. A poll taken a couple of years ago indicated that 50% of all people in American society admit to regularly lying.
2. You don’t need someone who is perfect. There is no such person on this earth. You want honesty, not perfection.
3. Past failures are ok, provided this person brings valuable contributions to the partnership.
4. Your partners should be people you respect and admire.
5. Each partner should be someone with whom you have a kindred spirit. Obviously, you need to get to know someone before you jump into a partnership with them.

The Profile of a Powerful & Successful Joint Venture:

1. A powerful joint venture will generally consist of 4 to 6 people (could be more but the dynamics of selecting partners changes), with each of them bringing valuable knowledge and experience into the venture, and
2. That knowledge and experience involves an aspect of real estate or business that is important to the specific purposes of your venture, and
3. Each of the partners are pre-qualified by the above criteria.

The Purpose of the Joint Venture:The knowledge and experience of the individuals you will bring into the partnership will depend on the purpose of your venture. For example, if your partnership is to develop raw property for sale to builders or other buyers, you would want credentials like these, although this is not all-nclusive:

Developing Raw Property For Sale:

1. An excavator who has experience sufficient to do the dirt work;
2. An engineer/surveyor with sufficient experience to be able to do all the engineering and surveying required for the platting work;
3. Another engineer, if not the same one, who can do all of the plat drafting and submissions to the city or county;
4. A utilities man, if the excavator does not have the experience, who can install the utilities properly and to code (power, sewer, cable, phone);
5. An asphalt company that can pour beautiful roads throughout the project;
6. A real estate lawyer who knows real estate and all the contracts and negotiations involved;
7. A Realtor who can sell the lots to builders or individuals; and
8. A person or persons with financial resources, both cash and credit.

Buying Single Family Homes For Rental or Resale: Here you’ll want partners with different credentials, although still pre-qualifying with the above fundamentals.

1. An experienced inspector or builder who knows how to inspect;
2. An experienced contractor/builder who can do great rehab work;
3. A real estate lawyer who knows real estate and all the contracts and negotiations involved;
4. A Realtor who can buy and sell for the partnership;
5. A person or persons with financial resources, both cash and credit.

CONCLUSION:It is difficult to lay down these principles and rules and expect that a group of people could simply do it without years of experience in successful partnerships and real estate investing. It is critical that you draft a very good partnership agreement that clearly spells out all the rights and obligations of each partner and how each will share in the rewards. You’ve got to have an exit strategy, both for success and for failure. You need a good business plan in writing and
well planned spreadsheets (three, one for the best case scenario, one for the worst case scenario, and one for the most likely scenario). Someone has to be good at conducting partnership meetings, addressing conflicts among partners, and resolving challenges.

Do these things and you will have a Powerful & Successful Joint Venture in Real Estate, and you will make a lot of money in the next five years.

Chuck practiced real estate law for 20 years before coming back to his first love, real estate sales and transactions. He practices on the beautiful Olympic Peninsula in Washington.

There are many reasons why you would consider joining with another person to undertake a development project in Joint Venture.

Usually the most basis reason reveolves around something you don’t have.

Some of them may be:

1. I own land … have capital & capacity to borrow … but no experience.

2. I have capital & capacity to borrow … partner has land … both have no experience.

3. I am ‘time poor’ … work full time and can’t be personally involved …

Let’s suppose you want to find a land owner who will put their land
into the Joint Venture, (JV) and their land will be their major contribution to the deal, plus some borrowings.

Let’s consider the implications of entering into a JV in the first place.

After all, in a JV you have to take into account another persons attitude, decision making process, (or inability to make a decision), whether they have a logical and sensible mind … the list goes on.

So, getting into a JV must have a good payback for you. Whatever you lack is usually the reason for entering into a JV.

I have noticed over the years that JV’s have a prime motivator, the driver of the deal (you), and the other person is along for the ride.

For example: the other party may have a wonderful property (site) and wants to develop it, but does not have the knowledge. You “love” the site and know that you could make it a very successful and profitable real estate development. You approched the land owner.

Another example: maybe two individuals who have saved their capital, however individually it is inadaquate to undertake a project. Combining their capital and borrowing capacity will allow they to proceed.

I prefer a JV where both parties are equally motivated, have different skill bases, but each regards the other as contributing equally.

You know the feelings that can occur, “I’m working harder that you …
all you do is the phone and number crunching work … I’m always out
and about on site dealing with the real work.”

Don’t forget why you got together in the first place.

So there are many reasons for JV’s. However, you must be clear as to why you are doing it, and it must be secured by a legally prepared JV Agreement.

A lot of ‘practical people’ hate legal documents … a JV Agreement is a legal document and both parties must understand what it says. If one of you is a bit slack on this point, it is up to the other to sit them down and go through it … it’s important!

Why?

Suppose the JV deal hits a rough patch and your partner says, “I didn’t know that … why didn’t you tell me … I left all that legal garbage to you … blah, blah.” Got It, have the arguments at the beginning of the deal … not later.

A JV Agreement sets out what each party will contribute, both money and effort, and sets out each parties obligations. It also sets out what happens if the parties ‘fall-out’ with each other as well as the division of profits or losses.

There is a lot more at stake if you JV with your rother-in-Law, other relatives etc … the term ‘on-going-nightmare’ is a phrase that readily comes to mind.

And if one of those family JV’s brake down, it doesn’t matter how many pages are in the JV Agreement, or what the words say to prove thatyou are “RIGHT,” … as far as YOUR Brother-in-Law is concerned, you are a ‘expletive deleted.’

Just thought I’d get that out of the way!! OK?

One more thing … doing a JV with a rich person, when you are many levels poorer then them, is also not smart.

Why?

Well, in simple terms, when ‘push comes to shove’ money rules …
The golden rule says, He who has the GOLD, RULES.

Also, if the rich guy tell you not to bother with a JV Agreement … he appears to be saving you money … tempting eh? … what he’s really doing is taking away your legal rights.

Yep, you’ll have less rights than an employee. If that’s the deal … better to be an employee!

In my my ebook I emphasise the importance of getting the Structure Work of the business organised – you will build a much better development business from a secure foundation.

When you are doing your interviewing of the associated professionals, try to see if they, personally, have any entrepreneutial tendencies.

They may have land, houses, houses for renovation etc but don’t have the ‘TIME’ or ‘SKILLS’ to do the work themselves.

Don’t come out and ask them straight away … follow my ebook, do the work you want to do; that is assessing them … but keep your antenna out for any signs of a common interest.

OK, back to getting hold of some land.

Get to know the local real estate agents; I mean know them well.
Remember what I say in the ebook.

Call in and buy them a cup of coffee, take them out of their work place;
what about dinner after work; really spread yourself around.

Invest your Time in finding good, well informed, dedicated agents. Believe me they are in your business community … it’s your job to find them.

Appreciate that Agents are essentially self-employed, irrespective of whether they work in a Real Estate Agency … their ‘mind set’ is independent.

They back themselves and their abilities to provide a sales service at a
level that “consistently” provides them with a ‘good income.

That ‘good income’ by the way, will leave most of their ‘client’s’ income
looking a little anaemic.

The ‘good agents’ are busy; their ‘time’ is money; literally. So don’t mess them around.

Don’t talk to them as though you are the Aga Kahn! You’re Not. There’s always a guy richer than you … maybe the Agent!

Why am I making such a big point about agents.

I believe “people” get the agents “they deserve.”

I have heard people talk to Agents as though they were some grubby leech on society and are doing them an honor even to talk to them.

To be a successful agent these days you have to be very good. Many are highly educated and choose real estate as a career for the freedom,
individual reward and great returns.

What comes out of your mouth + body language tells an agent a great deal about you. They then wonder why the Agent never calls then … Dong!!!

Keep your ‘ego’ under control. Their sales success rests on their ability at ‘reading people.’ Remember what I say in my ebook!

When you are in the development business, you are in the business of:

Getting People To Do … What You Want Them To Do
Within The ‘TIME’ AND ‘Costs’You Set.

That means that you have to be in control of ‘How You Treat People.’
Agents know a lot of people … maybe, they even know those people who want to JV with you.

While you are doing this “work” don’t forget to do what my ebook tell you
to do about research.

Last idea for finding JV people – talk to your friends – put an advert in the local newspaper seeking expressions of interest from people interested in doing what you want.

OK, you’ve found a partner who has the land and you are comfortable with the relationship after several meetings.

Important question! What value does your prospective partner put on his land that will be put into the JV?

Just throwing a few figures around to give you an example.

Let’s say that market value for his land right now is $300,000. But he wants to put into the JV at $400,000. So if your JV Agreement involves you gaining a share of the profit, your share will be $100,000 less. Got It?

Now let’s say that part of your skills contribution to the JV includes a
rezoning of the land to a higher level and you achieve that for the JV.
That rezoning may take the land from a single unit (house) dwelling zone to a six dwelling unit zone.

Your efforts have increased the land value significantly … no, not six times, as house properties are valued differently to multiple unit properties. But it may have increased by 3 or more times, depending on your market.

Once again the $100,000 will come off your share. Now that may be OK by you, because you are just starting out on your first development … it is always better to KNOW what you are agreeing too.

I hope this information helps you in your consideration of entering a JV.
but please remember, don’t just read my eBook … study it … take notes in a special hard cover Development Copy Book that you will buy.

Writing things down is an aid to learning and remembering.

My LAST DON’T … Don’t start any of this JV stuff until you know my eBook
inside out. You must not just be able to ‘talk the talk’ – you must know what you are talking about.

What I am all about, is helping you to do residential development with the RISK reduced.

If it takes four years study to get a basic Degree and say another five years to get some experience, why would you think that you can enter the development business with little study — no experience and expect to be profitable?

“Residential Development Made Easy” is written by Colm Dillon, the ‘Real Estate Development Coach’ and is the only ‘How To Become a Residential Real Estate Developer’s eBook on the web; it’s selling in 38 Countries, from his experience of developing $1.2 Billion worth of real estate – read more on his web site http://realestatedevelopmentcoach.com/realestatedevelopment.html

The thought of a Joint Venture attracts a wide range of people. There are no perfect reason that why people like to enter in to it. People think that getting in to real estate development in partnership will have a good pay back.

People must be aware that why they are doing real estate development joint venture project and they should make compulsory that it must be secured by legally prepared and binding the agreement.

Joint venture projects is basically based on the prevailing market value and location of the property which actually needs a good investment too. Actually it is formed due to lack of enough money. If you do not have enough money but wanted for money growth, then you select the way of partnering. It is a joint force to make something happen which cannot be done by an individual.

When partnering in joint venture real estate projects the individual will be sharing the risk, capitalising and becoming a part or a share holder of a bigger thing. Moreover in this everyone should aware that along with the work and investment, the profit will also be shared.

In joint venture people always think of bigger percentage of profit. But everyone should understand that the profit should be equally shared among all the investors. The individual should always remain calm and control in all decision making.

To become a joint venture partner in real estate, find qualified partners who have antonymous services which will help you to develop your business. Discuss jointly to make a good partnership for both. Making the strategies in advance is very important to succeed in the process. Always think about win-win strategy. Take action on your strategy and make sure to achieve your common goals. Monitor your performance and seek ways to continuously improve on the relationship.

The main reason you do partner with someone is to make things happen that could not happen without the partnership.You must strengthen your partnership relationships over time, and the partnership projects will expand as your relationships grow. You have decided to take the risk in order to do something more, or better, or different, so you’ll need to structure it to get the rewards you think you deserve.

http://www.thecoastlinegroup.com/

The owners of multi-family income properties have enjoyed a period of calm since the last major change in accounting practices took away much of their tax advantages. But looming on the financial horizon is the coming inflation that we will be facing because of current governmental deficit spending.

I think the biggest shocker for many investors who accumulated 10, 20 or 50 or more rental units is what happens when they go to sell. Bulk sales seldom go smoothly as buyers see an opportunity to take advantage of a motivated seller. This is especially true if there is a probate involved and estate taxes are due. But careful financial planning can alleviate much of these problems. The best alternative, if it is still available, is to sell in bulk to hedge funds if they still have ravenous appetites for income producing properties.

What can’t be planned into the equation is what interest rates will be when the properties have to be sold. Interest rates fluctuate “inversely” to the value of the asset. Most common in the financial markets is the daily action of Treasury bonds that trade in the trillions of dollars. As interest rates go up slightly, the principal value of the bond declines and vice versa.

The standard in the industry for calculating yield is the CAP or Capitalization Rate. This number is the Yearly Income/Total Value (or Cost Basis) and expressed as a percentage.

If you purchase a property for $100,000 that has a 7% CAP and interest rates drop to 6% your property will be worth $116,600. However, if for the same property, the interest rate rises to 8% CAP, your property will be worth only $87,500. Interest rates have historically risen as high as 14% on FHA mortgages and 18% in CD’s in banks. If we get back to 9% CAP rates on rental income properties, your $100,000 property could be worth as little as $72,000! Your choices are take a loss, be a landlord forever or find an unsuspecting new investor who is enthralled with “passive Income” and tax benefits.

What does all that mean? Simply put, if you are contemplating buying rental properties you should not be willing to accept a yield of less than a 9% to 10% CAP rate. If you already own rental properties, this may be the best possible time to start reducing your inventory by selling to hedge funds or other investors.

One problem that very wealthy people have is finding an investment that is both somewhat safe and gives an income. Traditionally, larger commercial apartment buildings and commercial properties have filled this need. Typically these properties trade in a somewhat narrow range of 6% to 8% CAP rates until the seller needs to sell and then he is fair game for “scavengers” to get the property.

When it comes time to sell these properties, what saves many of these landlords is doing Seller Financing. This technique allows a buyer to come in and bring much less money to the closing table. Historically, many of the loans on these properties are also transferrable without the buyer qualifying for the loan. I mention this because we recently asked for owner financing on a large apartment complex. The seller said he would give 60% of the purchase price with four points at closing and 15% interest.

I asked him the most important question an investor could ask a seller, “Why are you selling?” and he answered, “We want out of fixed income investments!”

Likely the hedge fund that we are attempting to sell this property to will eventually package it into a Real Estate Investment Trust (REIT) and sell it to the unsuspecting public at a yield (CAP) that slightly exceeds Certificate of Deposit (CD) rates at the time of the offering. The hedge fund will make millions of dollars and the public will essentially be holding a “bond” portfolio that will be liquidated in the years to come, most likely at a loss. How do I know, because it has been done many times in the past – same old, same old. Wall Street wins every time over the trusting public.

In summary, if you intend to accumulate passive income through rental income properties, don’t accept CAP rates of less than 10% to give you some insulation from future swings in the interest rate market.

To your limitless success

Dave Dinkel has over 40 years experience in Real Estate Investing which has given him a unique perspective into the Market. Learn the proven methods of today’s successful Real Estate Investors. Visit Dave Dinkel’s site to get you started as a Real Estate Investor today! Click the link Now http://www.davedinkel.com

The recovering residential housing market continues to offer lucrative investment opportunities for first time and experienced investors looking to fix and flip a house. However, a new challenge is emerging out of the recovery: a shrinking tolerance for mistakes. The single largest mistake beginner real estate investors make today is trying to do it all themselves or relying too heavily on friends and family to execute on the real estate investment.

Sometimes a friend may have a knack for what color to refinish the hardwood floors, or who to use for repairing a roof, but rarely do these close acquaintances come to the table with the focus on return on investment (ROI) necessary to be successful today. First time investors often worry that going outside their circle of friends and family to find a vendor partner to run property rehabilitation might cut into profits. This wasn’t as much of an issue when the fix and flip market exploded during the economic downturn and profit was nearly guaranteed. Investors who purchased properties in 2007 or 2008 were making money and gaining valuable experience — the market was hot and purchase prices reasonable so novice investors could have made any number of mistakes and still realized great returns on their investments.

Assessing an Ever-Changing Market

Property values in many regions of the country have recovered and fewer distressed properties are making it to the market so the market is less forgiving. Those who were investing in the downturn learned their lesson and what mistakes not to repeat when the margins were far wider than they are today. Investors who are now counting their fix and flip successes in the double digits resoundingly say an investor must be able to make an accurate assessment of the property’s value and calculate a realistic cost for the rehabilitation — and execute to achieve the desired margin. When it comes to investing, working with the right vendor partners — from appraisers to contractors to suppliers — was the hardest lesson learned.

There’s no easy way; investors have to be ready to work and understand and mitigate risks across the investment lifecycle. They also need to know that their insulated network of family and friends may be free or ready to do a project at a discount — but they may not be the best people to turn to. Many investors think the more work they can do themselves the more ROI they’ll see. Evaluating new vendors takes time — but it can be time well spent if it makes an investment much more profitable by avoiding lost time and revenue from the mistakes less experienced investors and their friends are likely to make.

Third party experts can provide immediate pay-off by utilizing proven best practices and proper planning which can go a long way towards avoiding big mistakes. Appraisers can help determine as-is and after repair values and a general contractor can ensure you are receiving a proper assessment of rehab costs. Investors can use this information to determine whether the property has the potential to achieve the returns they are seeking before buying.

Once it is determined that the end product can achieve the desired ROI, a knowledgeable and reliable team of professional partners are critical for keeping a project on track to actually deliver those returns. These include an array of service providers, such as valuation companies, real estate agents, materials suppliers and most important, a general contractor attuned to the local market.

General Contractors: The Key to Achieving ROI

The single greatest lesson successful real estate investors have learned is how to hire one of the most important vendors: the general contractor. To do this, an investor must look outside their network to evaluate contractors and find the right fit. The investor’s cousin who is handy with a hammer may not be the right choice. Hiring an experienced, professional contractor at the outset ensures their experience in the market is going to help improve the bottom line when it comes time to sell or rent the property.

Choosing a contractor begins with a background check to identify if they have had a recent bankruptcy or foreclosure events, any fraudulent or criminal activity on record, and is financially solvent and capable of seeing your project through completion. The investor should ask for a minimum of 5 references and call each and every one of them. Let me repeat: yes, 5, and yes, call everyone one of them. Keep in mind that the references supplied by vendors are almost always likely to be positive, so as you narrow the list, be sure to go see some of their work in person.

When rehabbing a property the investor also needs to know they are hiring a renovator, not a builder. A novice investor should have someone running their project that has performed rehabs on similar properties. They want a contractor who knows the neighborhood. This is important as they will know the finishes that are consistent with the surrounding homes and won’t recommend granite countertops when this would be the only house on the street with that expensive upgrade. Additionally, they should know the local climate enough to know there may be particular issues, such as mold. This may seem obvious, but investors moving from the Sun Belt to the Rust Belt — following markets primed for fixing and flipping — are not uncommon and unfortunately they are not aware of risks inherent in the new market as their knowledge doesn’t always transfer seamlessly.

At the end of a project, when the property is sold, the lessons learned with a network of skilled vendors on the team will have prepared the investor for their next project — not sitting back reviewing the laundry list of mistakes and who to hire to fix them. By hiring the right experts, from appraisers to contractors to suppliers, investors can find success and then share it with friends and family as they choose — a much better outcome.

There are many ways to find good deals. Some of the best ways are quite simple. Remember, though, that the key to success in anything is persistence, and perseverance. The best way to start looking for good deals is right in your local newspaper. Look for properties that are for sale in the area that you have chosen to work in. Also look in the price range that is ideal for an investment. The best market is usually middle class, or slightly lower, or slightly higher. If you work in the high end market, those types of houses do not usually make good rentals. And if you work in the lower end, those properties may be difficult to sell, and are not the best neighborhoods to work in.

You can find out a lot about a property or an area just by reading the newspaper. The next step of course is to call and ask about the property. Always be prepared with a pen and paper. Some questions to ask would be:

1. Where is the property located?
2. What type of construction is the building?
3. What is the area zoned for?
4. How many bedrooms and baths are there?
5. Is there a basement or attic?
6. Is there a garage or a shed?
7. How many units does the building consist of?
8. If it is more than one unit, are the utilities separate, and who pays, the landlord or the tenant?
9. What type of flooring is inside?
10. How old is the roof?
11. What is the property size?
12. What is the square footage of the house?
13. What are the annual property taxes?
14. What condition is the house in?

Some ads in the paper or on the internet will be houses that are listed with a real estate agent. These are good ads to call on because you can learn a lot from a real estate agent, and they will have other houses to show you. That is the next best place to find good deals, through a good real estate agent. Try to find an agent who is familiar with investment property. If you find a good real estate agent who understands what you are looking for, it can be very profitable. There are a number of good reasons why you want to have a real estate agent as part of your success team. Experienced real estate agents generally have a lot of education and experience. One of the keys to success is to use other people’s experience, and other people’s education.

Agents are also good at negotiating. They are good to have as a buffer between you and the seller. They are knowledgeable about the neighborhood, and can help guide you with regards to pricing whether it be when submitting an offer or listing a property. They are usually on the cutting edge when it comes to market information. They can help you obtain valuable information you need when it comes to active, pending, and closed sales. They can give you valuable information such as how many days a property has been on the market, or how many bedrooms or bathrooms may be in a particular house. Agents are always networking, and sometimes an agent may find out about a house before it hits the general market. Real estate agents have access to the multiple listing service (MLS). This service has a world of information on properties that are currently active on the market, pending, or sold. This is all valuable information you will come to appreciate. A good real estate agent has capable negotiating skills, which will come in handy when submitting your offer.

Excerpted from The Informed Real Estate Investor. A Step by Step Guide to Becoming Rich in Real Estate. Pat Esposito is an entrepreneur, an author, and a runner. He is also the founder of Selfpublishauthors.com

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Crowdfunding has been around for a bit now thanks to sites like Kickstarter and Pozible. But Equity crowdfunding is a different in a fundamental way. In sites like Kickstarter you are essentially making a donation to the person or company making the offer. Despite the promise for a reward there is nothing concrete that binds the issuer to fulfilling that to the person making the contribution. You don’t get any legal stake in the venture or project being promoted.

In Equity crowdfunding you get a stake in the project, this can take the shape of debt or equity or something else depending on the structure of the deal. This is now fundamentally the same as pooling money for investment purposes and falls under all the regulations that the local securities regulatory body (ASIC in case of Australia) has for investment offers.

The difference is the delivery mechanism (online) and user experience, ease of use. But the underlying legal structures have to obey the law of the land. Let’s take a look at a few of the existing structures in Australia.

An undisclosed private offer

This is the simplest of them all and commonly used for joint ventures and private deals. Under the 20 12 rule you can raise upto 2 million from upto 20 retail investors. Retail investor simply means anybody who is not a wholesale investor. And a wholesale investor is someone who has made at least 250K each in the last two years or has 2.5M in assets. This is a general definition and there is more to it, but the simple idea is it is someone who is quite wealthy. The government believes and rightly so that those who have done well for themselves and are well aware (sophisticated) of intricacies should be able to access deals without hindrances. They can then decide for themselves whether or not it makes sense. And if they deal goes south it is their own responsibility for not studying it enough.

The Government wants to protect retail (Mom and Pop) investors from being exposed to “buyer beware” offers. Hence there is a limit of only 2 Million per issuer (someone who makes the offer) per year. And only 20 small investors can participate in that offer so it does not become a free for all. There are significant restrictions around making a specific offer which is made under these provisions in a public manner. You cannot be seen to solicit investments publicly and not make a full detailed disclosure about its details.

You are supposed to only make 20 offers and these are meant to be personal offers.

In the next post we will look at what an Introducer does.

Do check our property investment platform at http://www.estatebaron.com