August 2010 Archives

If you go and learn how to cook professionally in France, one of the final exams has to do with frying an egg or making a soup. The simple stuff is the good stuff.

I am reminded of this all the time when new Michigan real estate investors ask me the best possible way to get short sale leads?

Most of them think that I am going to tell them to do some complicated direct mail thing (rent a list and mail 237 letters to them for the next 237 days) or setup multiple websites wit h catchy domain name and a 32 step email marketing to back it all up or plastering signs all over their Michigan city on Friday night so the City inspectors don't catch them till Monday morning and so on.

If you are hunting for good short sale leads - focus first on the sub-division across the street wherever you live. There are houses there. Some of them are in foreclosure. I can bet you money on that and I will win. The bigger the sub-division across the street in your Michigan City, the more houses they are going to have in foreclosure.

Make a simple flyer - we buy homes, don't let bank let a default judgment on your credit, if you are ready to move on and don't want the property anymore, we can help - go to Staples and copy it or print it yourself. You are doing small numbers probably less than 200 so it is not going to kill your printer. Hire some kids for $40 to go there and drop them off.

Repeat it 3 times, 10 days apart. You will get deals out of this, either the folks across the sub-division will call you for their own homes OR they will call you for a loved one who is in trouble. Either way the phone + email are going to buzz in your favor and that is a good thing.

Two things to remember:

1. Check the weather before you drop. You want clear weather not rain.

2. Tell the kids not to put the flyer in the mailbox. It is against the law. You can rubber band it on the mailbox or if they go in the morning - they can rubber band it on the door.

Will Smith was offered the part of Neo in The Matrix, a movie that went to become an action movie classic and also spawned two lame sequels that ended up generating $1.5 Billion worldwide. He turned the role down that ended up going to no-emotion-on-my-face-ever Keanu Reeves who clocked in $65,000,000 for his three movie paycheck.

J.K.Rowling wrote the first Harry Potter book while living in London as a welfare mom. She made up the story of a young wizard living in a dorm in a school for wizards for her children and finally ended up writing it. It was rejected by a dozen publishers before finally being accepted, published, and becoming the biggest publishing phenomena of the last 50 years, spawning 7 hit books and 6 (so far) hit movies and a dedicated theme park (launched recently to rave reviews) in Orlando. She also became the richest women in England, ahead of the Queen in a matter of a decade.

Tom Clancy wrote his first book while working full time as an insurance agent. His wife one time tossed his first manuscript (The Hunt for Red October) on the floor because she was sick of him 'wasting his time' in 'writing his stupid book that nobody will ever buy.' Clancy is well worth over $100 million right now.

Colonel Sanders pitched the idea of a Southern style fried chicken to a dozens of potential investors. They all took a pass.

Howard Schultz went door to door in Seattle (read Pour Your Heart In It, a surprisingly human book about business that he wrote about the story of Starbucks) asking for private money for his 'idea' of 'bringing Italian style espresso bars to USA'. He got rejected over and over again before a doctor said YES even before seeing his presentation because he liked him personally. That doctor's initial $100,000 investment turned into a $10,000,000 payday when Starbucks went public. (Here I just give you the biggest secret about getting private investors with ease in the above lines. Did you catch it?)

My first (and the last) employer in USA tried for years to convince anybody who would listen that cell phones were the future and a national chain for dedicated high end cell phones would make sense. Almost everybody, even his close friends privately thought he was delusional and refuse to partner / invest with him. He ended up building his chain close to doing $100 million dollars, sold his stake, saw recession batter the dumb venture capitalists who could not run it as an entrepreneur can (with agility), bought it back and in the process of rebuilding the 100 stores chain (all done in less than seven years) back up. I don't know how big he will win this time but his track record so far of proving his naysayers wrong is pretty good and I will not bet against him.

But this is not about the warm and fuzziness of success. Nah, this week lets think together for a minute about the ones that got away, like the girl that was meant to be and one day she was with somebody else.

All those people who could have ended up multi-millionaires if they said YES to Howard Schultz: how do you think they feel every time they drive by a Starbucks? I wonder if Will Smith once in a while just looks at The Matrix come up late at night on TNT and just grimaces picturing him playing Neo 100 times better than Keanu?

What about those 12 book agents who rejected Harry Potter and the Sorcerer's Stone? They would be millionaires now just by a measly 10% cut of the advances J.K Rowling ended up getting for the next six books in the Harry Potter saga once the first book was a hit. Do you think once in a while they are at a book store and pass by the shelves full of Harry Potter books and think about blowing their own heads up picturing the moment they tossed that first manuscript in the trash?

Who can they blame for what they will never have now? They are the ones who said NO to the opportunity that came to them but they missed it. That this was all given to them on a sliver platter, a moment in time that all they had to say was YES and everything in their lives could have changed for better and for some reasons they just could not see it?

What have you been given in the last five years that you ignored or said NO to and then saw that wave lift somebody else?

What is in front of you right now that you are not paying attention to which will end up making somebody else's dreams come true?

Most people are so careful in watching for potholes in the road of life and business that they miss THAT TURN which could have taken them to the place they always wanted to go.

What are you watching?

Potholes or opportunities?

You are about to buy deal #4. You have a list of REO's that you are about to go and look at. You pull over in front of a 3 bedroom brick colonial. You take a look. You know how much this house will sell for once you are done with your magic on it.

You are on the right track on mastering your Michigan City. When you do comps in your head just by looking at a house, it means that you are focusing on 1 or 2 cities at most, you are looking, evaluating, fixing and selling in a small tight circle and with every flip you complete, you know EXACTLY how the finished house would go for.

Your buyer list will also grow fast this way. One of my coaching group members Doug Benson keeps a good record of every single person who has visited their OPEN HOUSES in the past. Doug and Debbie flip houses in Lansing, Mason, Holt area over and over again. If a buyer does not falls in love with house they did in June (may be needed a bigger backyard?), a good probability is that they might like the house they finished rehabbing in August. You would want to go through some of the FiredUP show episodes featuring Doug because you will learn a lot from him about selling homes.

People don't buy a house then a city to go with it in Michigan.

Look at the way you bought the house in which you live in right now. A discussion took place and you and your significant other, the choices were whittled down to 1 to 3 cities and then the search for the home started.

So what made you pick the city you live in right now?

May be it was the school district (huge checkmark) or may be it was proximity to work or family. But you choose the city first then you started looking at the houses. You did not get up and said, "I am looking for a 4 bedroom house and I don't care if it is in Macomb Township or Highland Park. As long it has four bedrooms, I will take a look at it."

I don't think so.

People who want to live in Canton / Plymouth, want to live in Canton / Plymouth. They are not looking at houses in Sterling Heights. The more deals you do in small circles, the better your chances become that your first flip will get you the buyers who will buy your next 3 homes also.

Master one Michigan City. Know the houses. Know the area. Your business of selling these houses will become easier and easier with every flip you do. Avoid the temptation of being a grasshopper with your flips.

I have couple of friends who own restaurants in Metro Detroit. Almost all of them have seen their business go down in the recent years. Sit down with them over a glass of wine and after 30 minutes you are guaranteed to hear tales of disgust with the economy, the auto industry even Obama.

On the surface, it seems obvious. Restaurants in metro Detroit are hurting because people are spending less on going out.

I don't think that tells the whole story. I think their business is down because chain restaurants (Applebee's, Olive Garden's of the world) are simply very much better at putting their restaurant in front of hungry customers. I keep seeing chain restaurants open new locations. Pick up a copy of Entrepreneur magazine and glance through the franchise section. They are growing.

So easy to blame the economy, much harder to admit that you are being beaten in your game by a better player. All of my friends don't do anything to put their restaurants in front of hungry people who are looking to go out tonight with their families, friends or dates.

The most important words in the above paragraph: hungry and looking.

No website. No online advertising. Unless you are driving and end up glancing at their front sign, you will never know that they exist. A common sentence heard all the time from people walking in: "Hey I live only 5 minutes away from here and never knew that your restaurant was here till today."

O.K. I understand that a mom and pop place cannot compete with Olive Garden but they can spend $10 per day on online marketing. It cost a lot more than $10 to start a restaurant.

Heck even $1 invested to put your real estate investing business in front of people who might become your private investors (hungry) or somebody you will end up selling (looking) a home to whether wholesale or retail is better than zero.

A medium size cup of coffee at Starbucks is $1.87. Two donuts at Dunkin cost $1.50. But for a $1 per day, you can put your real estate investing business in front of 5,000 people every day. Think of it as renting a billboard which is being shown ONLY to a perfect group of people. The only difference being is that this billboard is in your computer instead on I-75 or I-696.

Just starting out and even $1 per looks tough? Look in your basement and your garage. You have stuff lying around there that you have not used for years. Sell them on eBay and Craig's List. I bet you will get more than $30.

The first time I ran an ad in Detroit News for $120 for a Sunday Classified looking for deal partners + private investors, I was pretty nervous, but I kept my mouth shut and did it anyway. I would put them on my credit card, every week, week after week, and pay them off with every wholesale deal that was going down. I never looked at it as 'spending money' but rather investing in my business. Two words but with a very different outcome.

Even in a slow month like December where everybody is thinking shopping or at the beginning of summer where everybody in Michigan is outside instead of in front of their computers, I never stopped 'investing' in my business.

I knew in my bone marrow that being 'invisible' was not the way a business can survive let alone grow. Microsoft, McDonalds, Burger King, Art Van, Best Buy, Ford... we all know what they make and sell yet they all spend billions 'reminding' us that they are here, what they make and sell and YES, THEY ARE OPEN FOR BUSINESS.

Flip on the OPEN SIGN in your business. You have no idea how many people are looking for you right now in your Michigan City. Be found. Invest the $1 and your business checking account will write you a very big check with your name on it very soon in return.

You are a week away from finishing rehab on your latest flip. The ugly house is looking gorgeous. You are in a good mood. Your plan is to get the work finished and push the button on couple of things you know will help you make the house sell fast.

STOP!

You need to start right now. You need to start on all of them at once, not line by line. Meaning you will not first order a sign, put the sign up in front of the house, wait for couple of weeks, then find a flat fee MSL service, then make a Postlets listing for Craigs List....

That is not the way this dish is cooked.

Ever watched grandmother cooked? She just put up three four pots up and started tossing things in. You may have thought that there is no way this food is coming out O.K. yet it was one of the greatest meal you ever had in your life, over and over again every time she cooked.

You got to start doing the 'selling' before the house is finished, no matter which Michigan City you are fixing this house up. Everything takes time. What looks like a minute, takes an hour. What you think will take an hour, will take a day.

A road sign will not be done and delivered to you in one hour. At best, 2-3 days. If you wait till the house is finished, then figure the payment out, and get it ordered, count the weekend days in it and you just wasted 4-5 days from idea to reality.

Somebody referred you to a great flat free MLS service? You left a message but then you had to leave town on a family wedding and they called back but you don't have a good outside picture of the house so you have to wait till you come back on Tuesday and by the time it is done the whole week is passed.

Look at the rehab that you are about to wrap up... did everything really finished EXACTLY on the hour that you planned?

Get your list moving now while the house is 7-10 day away from being perfect. Get the outside done first so you can take some pictures. Good thing about online marketing - it only takes minutes to add more pictures as other rooms in the house get wrapped up.

But start thinking 'flipping' and not rehabbing now.

It is time.

One of the big startup challenges if you are just starting out in Michigan real estate investing is: where to go and find good reliable contractors who will give you good prices (not the cheapest) and finish the job on the deadline they promised (most important).

Instead of taking chances with relatives and friends (bad idea) or finding some cheap I-know-how-to-fix-everything type character (worst idea ever), next time when you are at a real estate investor networking meeting and somebody gets up and tells their recent success story about a flip they just did, get their business card and take them out for a cup of coffee next week.

Ask them for references to good contractors they have found recently with whom they are happy with. Repeat it 3-4 times with different investors and you will end up with a very good list of contractors who have proven already that they can finish your rehab pretty fast too.

You are not looking for soul mates. So no profile on eHarmony required or a needless search for years to find the perfect electrician or plumber. The other investors who are just one deal ahead of you have already done it for you so why waste time in speed dating contractors? Get the list and get your house finished quickly.

Here is a simple technique to get private money or deal partnerships for buying foreclosures in Michigan.

When you are in front of people who have the potential of partnering up with you, just tell them about your business and then ask them if they are interested in partnering up with you.

That is it.

All the fancy stuff: the PowerPoint, the MLS listings, the ROI spreadsheet can come later. But if you don't ask, you don't get.

I am almost 100% guaranteed that every time I am teaching a seminar, 2-3 people will come to me during a break and tell me a tale of woe on how hard it has been for them line up deal partners.

I would ask them if there is anybody in their lives who has the potential of being their partner based on what they know about that person's financial situation. 10 out of 10 times, they would say YES. Yes, my dad just retired and he is always complaining about his stock market losses.

Hey, I would say, have you ever asked him if he might be interested in financing just one deal for you and see where it goes from there and 10 out of 10 times they would say NO, I have not asked him.

Why not?

Asking is magical. In everything in business. But when it comes to money, ASKING for money is the best business strategy for all.

Everybody who gets money gets it because they asked for it.

How do you think companies get venture capital or bank loans? How did you acquire the loan that able you to buy the home you live in? Did the mortgage fairy left the deed underneath your pillow because you have been such a good boy lately?

I don't think so. You got the money from the bank because you called them up and asked for it. They asked for some documentation from you to prove you income, pulled your credit and that is how it all happened. But it all started from you asking for the money to buy the home you live in.

So what is so different about private money?

How am I supposed to know that you need somebody to finance a deal with you unless you ask me?

Whole lot of people in your email list and your cell phone memory. You have no idea what 90% of them are doing with their money or NOT doing with their money. Unless you put it out there that you are open to partnerships and buying and selling bank foreclosures in Michigan with them - they cannot help them and you cannot help your LLC.

Ask and ask a lot. Especially when money is involved. Are there certain ways of making a convincing case? Sure. Are there things that you should not be talking about during your first meeting? Sure. Are there certain safeguards to protect both your and their interest that need to be written up in a deal partnership contract? Absolutely.

But before all that can happen, you have to mentally make a decision that you are going to ask. Before it could happen in the real world, it has to happen first inside your head.

So make the decision today and you will never have to worry about where your next deal is going to be financed from.

(Fast Company, September 2010)

10 years ago, when I was telling friends and family about my desire to quit my job and go full time as a real estate investor in Metro Detroit, almost everybody warned me that 'this was not a good time' to be starting a business in Michigan.

I don't remember what the reasons they gave me at that time were. There was some bad news that was reported in Detroit News and Free Press that day. But is it not true for them everyday to begin with?

Every time somebody brings up the topic of starting a business or investing in Michigan real estate, everybody has some suggestions:

"Wait till the kids grow a little older.'

"Wait till you retire."

"Wait till this recession ends."

"Wait till the unemployment numbers come down."

"Wait till business credit / easy mortgages / hard money comes back."

"Wait till the auto industry / housing marketing / my 401K recovers."

The list goes on and on. I am not for recklessness in life. But there is no perfect date for starting anything. The world is not perfect. Business is not perfect. 

The richest guy in the world is in Mexico. Ahead of Bill Gates. How is the economy in Mexico for the last 50 years? Terrible huh? So how come he got rich in a 'bad economy'?

Buy the new issue of Inc. Magazine. It is their annual issue of Inc 5000 - the fastest growing companies in America. If nothing else read the profiles of companies in the world of real estate and the ones that came from Michigan on that list. They all started when their founders decided that they wanted to be in business.

No matter what the date is today - somebody is getting married today in Michigan. Bunch of babies will be born today. Somebody will leave this world. Somebody is arriving at Metro Detroit airport with their family to start a new job. Somebody got divorced on Friday. Somebody got engaged on Friday.

Even on the worse day in Michigan where there is 4 feet of snow on ground and the blizzard is coming down, somebody is driving to a title company to close on a house.

Life goes on. Are there some things that are not as profitable as they were 15 years ago in Michigan? Sure. Gas stations and car dealerships used to be great businesses in Michigan and now they are not. 

But there are 3,000 new type of businesses that exist now which were not there 10 years ago (cupcake stores, internet marketing companies), things you can buy now that was not possible five years ago (houses in every Michigan suburb with good school districts on heavy discounts, apartment buildings and strip malls on land contracts). 

Than there are businesses and needs which will never go away - you will always need a dentist. You will always need a place to call home. There were millions of renters 10 years ago and that number will still be around 10 years from today.

Look at your own life. Did you get married, got divorced, got engaged, had a child, had a child go to college, got a new job, got fired, got a better job.... Did you pause your life because there was a recession going on or the auto industry shrunk? I don't think so. You made some adjustments. But you lived your life. So do others.

There is no perfect date for starting a business. Only today. Only now.

While the doubters and pundits on TV were screaming at each other (at the same time getting rich on selling books and speaking gigs on the impending doom) the entrepreneurs in your zip codes, started businesses, bought houses, deposited checks. They did not wait for a date to arrive in their lives. They made a day good by their actions. 

I have heard this "Are you really sure this is a good time to do _______?" so many times in the last 10 years in Michigan that my ears are exhausted. Spending time wondering if this is good day or not to do something about your business in Michigan is not going to bring any new money to your business checking account. Doing a deal. Making new connections. Filling in the gaps in your knowledge are all three good alternatives. Leave the hands wrangling to others. They need something to do with their time. You got houses to flip & checks to collect. 

The only time is now time in a business. Look around you... it is a perfect day (because you are going to make it perfect) to do something in your business. 

Let's go...

Robb Report, one of the most expensive magazines to advertise for the last 30 years started as an 8 page newsletter for people who own, buy and sell classic cars.

Dominos did so poorly in its first 10 months that Tom Monahan's partner, his own brother, sold him his share of the business in exchange of Tom's old car.

Subway sandwiches started in Brooklyn and did extremely poorly. All of the owner's family and friends suggested shutting down the business. He believed in his sandwiches and instead opened up another location in Brooklyn which took off from Day 1.

Google started in a rented garage. Made no money for three years because they had no idea how to make money out of this search engine they have built. They went to AOL, Microsoft and Yahoo trying to sell their company and they all rejected them. Both founders Sergi and Brian wrote later about sitting in their offices late at night depressed at 'wasting' two years of their lives building this search engine that nobody wanted. In a fit of desperation, they decided to start selling advertising.

Oprah started in as a local TV anchor in Chicago. By her own admission, 'not very good in front of the camera."

Rachel Ray did demo's of making 30 minute meal, standing up on her feet, in NY supermarket aisles.

Weight Watchers was started by a housewife, holding small group meetings in her living room.

Tony Robbins used to go door to door, selling tickets to goal-setting seminars for another speaker in California.

Zig Ziglar sold pots and pans door to door.

My friend Dean Killingbeck who runs a widely successful business in Howell used to sell roses to nurseries. Before that he was a second generation farmer for 10 years.

My first job at age 14 was an in neighborhood store, 9,000 miles away. Pay was around $1 per month. I put myself through school by loading chemicals, surgical equipment and olive oil in trucks in 100 degree heat, went back to the office, took my soaked shirt off, poured cold water on my head, put the spare shirt on, and went to night school. Took a bus for 2 years in Ypsilanti to work. Learned how to drive at 28, because I never had a car before. I started my first business in my apartment in Novi. I bought my first house on Nora's credit card. Got my first private investor with a $40 classified ad in Detroit News. Lived in a one bedroom $400 apartments for six years straight before building a house in West Bloomfield. It was strange walking into a house. I had never lived in one.

Everybody starts at pretty much the same way. With nothing. The big list of resources: money, assistants, offices... typically comes much later. Everybody stands one time or another at the STARTING LINE.

If you are there and feeling just a little down... DON'T. Just look at the list above. You are in good company.

Instead....

START Somewhere (now)