Month: January 2012

Real Estate

Create Value In Your Real Estate Partnerships

I have built my business buying foreclosures and invested millions of dollars in real estate transactions through forming partnerships. Partnerships can be extremely useful tools to enhance your real estate investing portfolio, providing you the means and opportunity to buy foreclosures or other properties you may not have been able to attain by yourself. Follow these simple but important steps to avoid extensive and expensive legal battles and in the end, become the ruin of your real estate business.

Your partnership is going to work best if you and your partners have complimentary skill sets that you each can contribute to the organization.  It’s vital that you bring in a partner who can complete the missing piece of the puzzle, while enhancing the pieces that are already present. For example, you may have the know-how to find and analyze the deal, the ability to finance the purchase but you may lack the construction funding and experience to finish the project. You partner search should fill in those gaps, handling the responsibilities needed to see the deal to a successful completion.  This enables each partner to have clearly defined roles, with little to no overlap. Too often, when too many people are “experts” in the same field, you can get paralysis by analysis, when each side tries to prove their superiority. This can lead to significant and costly delays for you and your project. It’s not about egos here, it’s about money.  If you want to stroke your ego, do it on the golf course.

RealEstate tip

Just like a marriage, real estate partnerships require the right pairing of personalities. While you should marry for love, partnerships should be formed with the goal of profitability. You don’t necessary have to like your real estate partner, although that helps, but you do have to have a mutual respect. If the respect is not there, RUN. Unlike a marriage, where not everyone has a prenuptial agreement, a dissolution agreement in a partnership is an absolute must. You may never need it, but like a good insurance policy, it’s there to save you money. If there comes a time when the partnership goes awry, not having it can potentially cost you thousands of dollars, not to mention the aggravation and stress associated with the breakup of the relationship.

Keep accurate records, no matter what structure you use. Have formal meetings set up with your partners on a monthly basis, and send out formal invitations to attend those meetings. They may think it’s silly, but keep doing it, and keep a record of your attempts and the meetings. This might sound strange, especially if your partner is a friend or close acquaintance, but by treating your real estate business as a business you will earn their appreciation over time and become to be known as a true professional.  More importantly, if something should ever arise that could fracture the partnership, you will have your bases covered because you kept your partners up to date on developments, good or bad.

The key to any real estate system is putting yourself in the position where you can choose your partner. When I am buying foreclosures or investing in distressed, mismanaged properties, I am choosing my partners. You should never be so desperate to do a deal that you decide to work with just anyone, or the first person who could come to the table with money.  A perfect example of this in my career was working with this investor named “Mike.” Just so you could understand how much money Mike had available, if you had Mike’s money you would burn all yours. He worked with some other real estate investors I knew and had always asked me to work with him on a deal. I choose to work with him on a project and we all made money, but during the process I got to see firsthand what is was like to deal with him. He would not follow through on payment arrangements, make double or triple the work and got involved in areas that he was not supposed to. I was happy to give him his check at the closing and even happier that I never used his money for any transaction I was involved in again.

Finally, this isn’t just about the “other guy (or gal)”.  Make sure you are a great partner and you will have people lining up and knocking on your door to work with you.  Always respect the other persons time; always follow through on your word; always try to make your partners the most amount of money you can.

Hyman Roth was loved because he always made money for his partners

The skill and knowledge of finding and structuring the right deals, whether I’m buying foreclosures or short sales, mismanaged investment property or estates, has enabled me to be in the position to pick my partners and not the other way around. Pick the right partners, and you will be able to achieve greater profits in real estate than you ever could alone. Most importantly, make sure you are they type of partner that helps your partners achieve the same thing.

Donald Trump

How To Buy Real Estate Like Donald Trump

You Can Learn Tips On Buying Foreclosures From Donald Trump

Love him or hate him, Donald Trump is one of the most recognizable faces in real estate investing. His real estate portfolio that started in New York has grown to a multinational conglomerate that is the envy of most real estate investors across the globe. While you may not be ready to put your name across a skyscraper adjoining the NYC skyline just yet, there are tips and techniques from “The Donald” that you can integrate into your real estate business that will prove beneficial as you start buying foreclosures.

The Most Important Part When Buying Foreclosures

The first thing you should be doing when you are buying foreclosures is drafting a business plan for the property. As George Ross, one of The Donald’s legal advisers, stated in his book, Trump Strategies for Real Estate, this was the first thing Trump would have his staff do as they looked at investment merits of a particular piece of property. What should you focus on when writing out your business plan? Anticipated costs, available financing options, estimates of income, and projected timelines are all good places to start.  After that, design the most important part of your plan when buying foreclosures- your exit strategy.

Trump house

A famous saying that you may have heard is: “People never plan to fail, they only fail to plan.” The truth is, you always have a plan whether you know it or not.  You either design a plan beforehand, or you plan by default, i.e. make one up as you go along.  This is akin to a chicken running around after its head is cut off.  If you treat buying foreclosures as a business and design a plan, you will be able to see the deal from all possible angles, and therefore have a much greater chance of making it work and most importantly, maximizing your profits. Be prepared, and write that business plan before you start any negotiations.

Create Win-Win Situations When Buying Foreclosures

We all know Donald Trump likes to talk about the great deals he makes, but what makes them such great deals? Ask yourself this: would Trump keep getting great deals if people were thinking they were being taken advantage of? Of course not. Trump realizes that to keep getting that “great deal,” you need the other side to think they are getting a “great deal,” too. By creating win-win situations, both sides can think they are involved in a great deal and that gives you the opportunity to make huge profits buying foreclosures.

When you are buying foreclosures, negotiating with homeowners who are in distress, what they may need and what you want may not be aligned. They may just need some extra time to get their affairs in order; maybe they need some help in relocating. We’ve had tremendous success in buying distressed notes, and property owners have been happy to deal with us in selling their deeds for little money as we forgave their debt and gave them a chance to start fresh. When you are buying foreclosures, sometimes your creativity in getting them what they need, will give you what you want.

Keep Expenses In Line When Buying Foreclosures

Now that you’ve negotiated your property, and bought your foreclosure, what’s next?  Let’s look again to the man with the famous hair. Donald Trump shot to fame in the 1980’s when he took over Wolman’s ice skating rink in Central Park. New York City had closed the rink for renovations in 1980 that were supposed to be completed in 2 ½ years. By 1986 the job was not complete.  Trump took over the project and completed the major work in 4 months, under budget and opened 1 year ahead of schedule.  How? By keeping his contractors on a timeline and holding them accountable. You need to stay in constant contact with the professionals you brought in at the beginning and make them hold the line on costs and their timeline. Managing your property and project is vital to your business, otherwise, it runs the risk of ruin.

Extra costs in construction or costly delays could mean the difference between huge profits in your foreclosure business or losses that can absolutely be avoided. If you want to be like Donald Trump when you are buying foreclosures, may sure contractors keep to their timeline and stay on budget.

You Don’t Need To Be Born Into The Business Of Buying Foreclosures

We might not all have been born to a father who was a successful builder, with a large network of industry wide contacts, but there are tips and techniques that you can take from Donald Trump that will work whether we are buying a large commercial building in Manhattan or  buying foreclosures in a market like Phoenix, Arizona. Start with an effective plan, negotiate a great deal and keep a close eye on your project’s progress, and you will on your way to running a successful and lucrative business buying foreclosures.

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