By Alex Anderson

Editors note: Real estate investment software blog is happy to share the following article about real estate investing because we believe the content might be helpful to real estate investors. We are not, however, affiliated with the author and make no claim regarding the author’s services.

One thing that many people do not realize is that learning to invest in real estate is a process. They dont realize that because they often only see the end result - a prosperous person with a Midas Touch, or a person who always finds themselves in an avalanche of great deals. They think the person is simply lucky.

Someone who has truly begun their own real estate journey knows, however, that these successful investors are utilizing a skill they have developed over time. Perhaps they have developed a knack for being in the right place at the right time, and in a sense that is indeed luck. However, that seeming luck developed over years of learning. These investors learned where to go so that deals could find them.

Its like considering a hunter lucky because he tends to find deer in the woods, while you never see any in the city. The hunter is lucky because he knows he has to go to the forest if he wants to find deer. Its mindbogglingly simple when you really think about it.

Ken McElroy, who wrote “The ABCs of Investing,” one of the Rich Dad book series, said that, if you begin to do the things that investors do, you will start to see patterns. You can use those patterns to determine your course of action. Its just another way of saying, “Fortune favors the prepared mind.”

People who just dont get that concept, or who refuse to accept it because it is attached to the concept of work, tend to be magical thinkers and get-rich-quick schemers. They think there is something mystical at work, when the only thing really at work is the investor. McElroy says that there are some people who just dont really have the desire to do the work. Those tend to be the magical thinkers, and they are that way because they want to be.

However, if you do have the desire to do the work, and all you need is to be told what work to do, then there is hope. You can learn the technical skills. Those are the people, McElroy says, for whom he wrote “The ABCs of Investing.”

Elsewhere in the Rich Dad series, Robert Kiyosaki, who started the series, said that the people who do lose big in real estate investment are typically the ones who jump in without first taking the time to learn about investing. They simply dont know how to do it. That is what people dont understand about getting rich, and more specifically about real estate investing, that it is a process. You are no more going to swagger into the arena, plunk down your money and make a killing any more than you would swagger into a hangar, jump into an airplane and start doing loop-de-loops. That approach is likely to get you killed. That approach in real estate investing is likely to cost you a lot of money.

But if you take it slowly and allow yourself to make plenty of small mistakes that wont make you crash, then you will begin to build a base of knowledge. You will begin to see how it all fits together and you will start to make money.

It is a process.
About the Author

Alex Anderson Helps Regular-People To Successfully Invest In Real Estate. Enroll In Her FREE - “Investment Property Program” Today!

Real estate investing has a number of key terms used by insiders to categorize various kinds of real estate investment properties according to the different goals a property might serve, depending on the method of acquisition and holding period.

As a real estate investor, the investment property you currently own undoubtedly falls into at least one of the following four categories and chances are you might not even know it. If you are not acquainted with these terms and are prone to learn, then this one is for you.

Downside Risk

Simply put, the downside risk of an investment is when the investment does not reach the potential the investor expects. If you are about to purchase an income-producing property based on raising the rents in six months, the downside risk is that in six months the rents and monthly cash flow do not reach the level you are projecting. Obviously, each investor must decide what is acceptable to balance the upside potential.

Pattern of Growth

This is the trend of growth in any given area. It is important for investors to ensure that the property acquired fits into the current and pending pattern. Purchasing an apartment complex 10 miles from the nearest shopping should not expect to increase much in value unless you see a clear and present trend of growth toward that property.

Single-Purpose Use

Single-purpose use refers to one likely (or reasonable) use of the property due to zoning or building design. Land zoned for “single-family homes” or a building clearly designed for a fast food operation generally fall into this category because the amount of money and time it would take to alter the property to accommodate another use would not be reasonable.

Multipurpose Use

In this case, zoning and building design add flexibility to the use of the property. For example, with the right zoning, an investor might purchase a house as a residential rental and then eventually demand higher rents by converting it into a medical or professional office.

Alligator

Income-producing property that costs more to hold than it benefits is an alligator; it simply lays there and eats. Often tolerated in situations where the property value expects to increase, the investor agrees to accept a negative cash flow and thus “feed the alligator” until it does.

If you are an active real estate agent, you undoubtedly will have at least one opportunity a year to sell real estate investment property.

Whether by a walk-in, up-call, previous customer, or some aggressive cold calling, it is not a question of whether you have the opportunity to meet a real estate investor; the question is “Are you ready?”

Making the Right First Impression

All salespeople understand the value of the first impression, and that winning or losing a sale often rests solely on the perception a customer develops within seconds during the first encounter.

Certainly, real estate agents understand the value of the first impression.

Customers they service make buying decisions based on curb appeal (the first impression) of properties all the time. Moreover, real estate agents always wash their socks, hair, and cars in anticipation of a customer, not afterward.

Ironically, however, it is in the first encounter—where agents otherwise excel—that so many lose excellent opportunities to sway real estate investors and gain rental property sales. Why, because most agents fail to recognize what generates a good first impression to investors.

Real estate investment is not about style and panache; winning over an investor is more than Armani and Mercedes. Real estate investors generally require one thing of agents—enough knowledge about investment property to feel confident that the agent can assist the investor in making a sound buying decision.

Okay, put it to the test and consider your last encounter with a real estate investor. How did you respond when asked about the value, profitability, and rates of return? What reaction did you give when the investor requested an APOD or proforma? Were you clueless?

If you stood there like a deer staring into the headlights of a car, experience dictates one of several outcomes. One, you got lucky, won the investor over, and made a sale, regardless. Two, you referred the business away and took a 75% cut on potential commissions. Three, you scrambled around for a week or two trying to learn about cap rates and APODs and finally referred it away, only to discover that the investor went to your competitor.

Okay, now grade yourself. You had a perfectly good opportunity to turn a real estate investor into a commission, yet either had to rely on pure luck, gave away money, or simply received nothing, why? You were unprepared to meet with that real estate investor during that first encounter because you failed to recognize the weight of it.

Understand what the first encounter signifies to a real estate investor—he or she is interviewing you. Unless you are a relative, the investor does not know you from Adam, and therefore has no incentive to work with you or anyone else for that matter that the investor cannot trust to possess some degree of competence about investment property.

Once you come to terms with that logic, you are ready to proceed to the next step and prepare yourself to meet with a real estate investor. You will be shocked to discover that it is not as difficult as you assume.

How to Prepare Yourself to Meet an Investor

Here is the good news: you can prepare for an investor without needing to become a real estate investment expert. Hundreds of deals close every year by real estate agents that specialize in residential property and know very little about rental income property. How do they do it?

At the very least, they understand the difference between capitalization rate and gross rent multiplier, and when required are able to discuss and create an APOD. In other words, they get it. They understand the importance of numbers to a real estate investor and make the conscious effort to create those numbers and reports for the investor.

During that all-important first encounter with the investor, rather than staring at the headlights and losing the opportunity to capture the confidence of the investment customer, they presented numbers and reports about the property that made the right impression and won the customer over.

Here is more good news: You can do it too.

There are thousands of online resources where you can learn the formulas. Moreover, if you have a spreadsheet program like Excel you can design reports that integrate the calculations. It will require some effort on your part but if it means closing just one additional deal a year, it is time well spent.

On the other hand, you can purchase real estate investment software already developed with the formulas and reports. Of course, this will require a monetary investment on your part, but again, if it means closing just one additional deal a year, it is money well spent.

The important thing is that you prepare yourself to meet an investor before you actually meet the investor.

Remember, when you do not make that all-important good first impression, you run the risk of not capitalizing on that opportunity and losing money. Putting your best foot forward in preparation for a customer is simply a truism of successful selling.

Considering what little is required, and the financial reward real estate investment property offers, why not prepare to meet a real estate investor in advance and take advantage of every opportunity you have to build your business. You will not regret it.