(This article is Part 2 of 2, although Part 1 is titled,
“5 Prominent Examples Of Inaccurately Calling Yourself A ‘Real Estate Investor‘“)
Creative And Smart Leverage Is Good For Your (Business) Health.
Previously, in Part 1 of this article, “5 Prominent Examples Of Inaccurately Calling Yourself A ‘Real Estate Investor,” we discussed the different types of income generation:
- (E) Employee
- (S) Self-employed
- (B) Business Owner (entrepreneur)
- (I) Investor
… and how they apply to the 5 most common types of players in the “real estate investing” game:
- Bird Dogs
- Private Lenders
To be fair, the ability to be in the top 1% of income-earners and wealth-creators is not really about knowing something everyone else doesn’t, but it’s in the execution of that knowledge. Sure, there will be plenty of people who read this post and are made aware of the some concepts for the first time.
And, of course, most of the general population doesn’t know 1% of what most of us know about marketing, sales, negotiation, real estate, and finance. We’re not really including those people, but only those who have made the decision to be in the real estate business, desire to produce a high level of success, and are willing to constantly learn, try, fail, and adjust.
It seems the reason most of us are not yet multi-millionaires is because we haven’t applied what I’m about to share — or just haven’t yet done it long enough for our results to catch up with our actions.
(For the sake of consistency in this article, we may use the general term “real estate investors” or “real estate investing” to describe the model of acquiring properties at a discount, possibly adding some type value to the property, then either reselling it to a retail buyer or other investor, or renting it to a retail tenant)
Have you ever wondered how and why some people (especially real estate investors) make $10 per hour, others $100 per hour, and even others literally making $10,000 per hour?
By the way, given a 40-hour work week, that’s:
$20,000 per year for Person A
$200,000 per year for Person B
$20,000,000 (MEEEELION) per year for Person C
At first, the hourly rate sounds ludicrous. Impossible, even. But we all know there are plenty of people at each of those levels.
In the world of real estate “investing,” and even brokerage, we often hear the term LEVERAGE.
But, do we really understand the full extend of how many ways a real estate entrepreneur can exert and benefit from it?
According to the Merriam-Webster Dictionary
a) influence or power used to achieve a desired result
b) the increase in force gained by using a lever
A rigid piece that transmits and modifies force or motion when forces are applied at two points and it turns about a third; specifically : a rigid bar used to exert a pressure or sustain a weight at one point of its length by the application of a force at a second and turning at a third on a fulcrum
Simply put, and from a business standpoint, it means getting the highest and best performance out of the least effort or risk.
They understand and apply LEVERAGE in ways most don’t.
They are not only INVESTORS, but real estate ENTREPRENEURS.
Are you an entrepreneur, or just self-employed? (an entrepreneur is more focused working ON their business than IN their business)
(We recommend you read the book, E-Myth, which is all about this topic)
Most real estate investors only think of leverage in terms of controlling a property with Other People’s Money (OPM), and spend lots of time seeking funding and partners for that purpose.
However, millionaire real estate entrepreneurs figure out ways to leverage both OPM and OPT (other people’s TIME and efforts), and also leverage OPM in new ways.
Below are 4 powerful examples of ways to generate an ROI of 1,000%+ through different forms of leverage. (in order of importance, according to my humble opinion)
Although two of these are tangible, and two are intangible, let’s call them ASSETS that true real estate entrepreneurs leverage.
>> 1. EDUCATION (OPM/OPT)
This includes things like skill development (marketing, sales, negotiation, leadership, finance, etc.), joining millionaire mastermind groups, private coaching relationships (with people who are in life and/or business where you want to be), online courses (for the DIY-inclined), and a variety of high-value seminars on marketing, sales, leadership, real estate investing, networking, etc.
This is the ultimate application of leverage because you are investing in yourself, the one person/thing you have the most control of. Even if you decide to outsource or otherwise delegate your marketing and operations to other people, it’s vitally important that you have a high level of understanding in any area of your business that you entrust to another person. You don’t necessarily need to be MORE knowledgeable than the staff or vendors you have doing the work for you, but you must not be ignorant. Empower yourself to be a project manager, and monitor the process. The key here is in saving yourself the time of tactical implementation. But you need to be the visionary and strategist.
*It’s been said that SELLING is the million dollar skill, and I would agree. If it wasn’t for the funding we raised, I wouldn’t have been able to hire a personal coach/mentor to take my sales skills to the next level, and be 10X more effective when talking with sellers, especially compared to other investors and acquisition managers who are just winging it.
>> 2. MARKETING (OPM)
Direct response marketing and advertising is the only form of promotion that matters for most small and medium business, which includes virtually all real estate investors. This is marketing with accountability — it can be tracked, measured and optimized. The best direct response marketers know that for every $1 they invest in a particular marketing campaign, they will get back $5, or $10, or even $2 in some cases. They understand the lifetime value of each customer/client/member, and therefore how much they can invest to acquire a new one. It’s a predictable equation/formula, which is repeatable and scalable a high degree. The delivery medium can vary (internet, email, social media, direct mail, SEO, pay-per-click, billboards, radio, TV, etc.), but the formula is the same. Where else could you potentially get a 2,000%+ return on your investment ($20 return for every $1 spent)? It happens all the time with top marketers. If it’s not happening to you, you need to go back to #1 (Education).
*Marketing is actually my favorite form of leverage because it seems to involve the highest level of creativity and variety. In my opinion, if selling is the million dollar skill, effective marketing is the BILLION dollar skill.
It basically allows you to GENERATE CASH ON-DEMAND… like your own ATM machine with an unlimited checking account.
>> 3. ACQUISITION (OPM)
The typical form of leverage with real estate investors is the acquisition of a discounted (often distressed) property, adding some type of value to it, and then reselling it in the marketplace. Where and how these deals are found is more of a marketing (#2) strategy. Suffice to say that this is a great form of leverage because you can essentially acquire a property as low as zero down, and have the opportunity to resell it without any improvements, in another marketplace (arbitrage) at a premium, and collect the profit spread. In this case, your ROI is infinite, because all of your “return” (profit/proceeds) came from zero “investment.” However, in most cases, SOME cash is needed to be put into the deal, whether it is earnest money, a down payment on a hard money loan, marketing costs, property repairs, etc. Nonetheless, it’s not uncommon for a rehab/flip investor to earn a 3X to 5X return on their investment.
Alas, this is the ONLY form of leverage most investors even think about.
>> 4. OUTSOURCING / DELEGATION (OPT/OPE)
What is your time worth? If your goal is to make $100,000 per year, you’re worth about $50 per hour (assuming a typical 40-hour workweek). if your goal is to earn $1 million per year ($83,333.33 per month), your hourly rate/worth is $500 per hour. If your goal, as a real estate entrepreneur is to make anything less than $100,000, this post (and almost everything on our blog) doesn’t really apply to you.
So, at either of those levels, why would you spend time doing anything that you could outsource to someone else for less than half that amount? The big money in this world goes to the people with vision, strategic and creative thinking, and the ability to lead and motivate people, sell their ideas and solutions, and execute their plans. Everything else can be delegated to virtual assistants, acquisition managers, administrative assistants, marketing manager, research analysts, and interns. But all that delegation costs money.
But WHY don’t most real estate investors apply those types of leverage?
They’re not (yet) entrepreneurs… and/or they don’t have the cash to invest in those things.
Remember, entrepreneurs focus working ON their business vs. IN it.
They become masters of marketing, leadership, sales and strategy.
They create implement systems that run the business like a well-oiled machine.
Unless you have $100,000+ of discretionary CASH in your bank account, you need some type of loan or a partner to do most deals.
Yes, of course you can acquire and control properties with seller financing, but at some point real cash needs to be invested in the deal.
- Hard money, private investor capital, and bank loans
- FREE (almost) methods of marketing (cold calling FSBOs, Craigslist Ads, etc.)
But, let’s just be honest. You really do get what you pay for. Plus, although they are financially free, they cost a lot of TIME (away from your family or other interests, hobbies and endeavors)
There is also plenty of good FREE training information out there, but do you really have the time to sort through the information overload to figure out exactly what you need?
Nothing beats private, or even group coaching, where a truly successful entrepreneur is giving you all their best stuff. (and that ain’t free)
You may very well outsource all of your marketing, but you better first empower yourself with innovative knowledge and BE the marketing master who directs your marketing vendors and/or staff.
Lastly, hard money and private investor funding are great, and can grant you access to Leverage Form #3 (property acquisition), BUT, you cannot use any of their cash for #1 (education), #2 (marketing), or #4 (outsourcing)
And, if you’re considering asking your local bank for a loan or line of credit for flipping houses, marketing to flip houses, or anything of the sort, they might actually laugh at you.
Feel free to put your home and family at risk by tapping into a home equity loan, since it’s cheap, but you may not even have enough equity.
As you can see, MOST investors are only operating at 25% of their full potential, and missing at least 75% of opportunities for massive profitability and leverage, not to mention wasting a lot of time.
This is a shame, not only because of the lack of efficiency, but one of the best benefits of leverage forms #1 (education), #2 (marketing) and #4 (outsourcing) is that they can create TIME FREEDOM!
And, what’s more important, time or money? Why not have an abundance of both?
If you want to have an unfair advantage over nearly every other investor in your local market, and increase your learning and success curve by at least 12 months, you flat out need to invest in high quality:
So, what’s the solution to this problem?
Well, there may not be only ONE solution, but here is a solution.
… for the things that matter. Things that can provide a high ROI and leverage.
Whether it’s $50,000… $100,000… $150,000… or more.
But, how, and from where, if hard money, private investor and bank loans won’t work?
As you may have read or heard in the past, my brother Joe and I got access to $120,000 within a pretty short period of time, and that capital has literally saved our business and allowed us to stay afloat while we try, fail and adjust on many areas of our marketing and real estate businesses.
Yes, it would have been better to have saved up $120,000 in previous years while working a job, and used that cash to fund our business launch, but that wasn’t possible for us.
In case you missed it, here’s what I’ve said about this experience:
“Hard money loans just weren’t an option for us. But we weren’t going to let one
funding challenge keep us from pursuing our massive real estate investing goals!”
“Getting that $120,000 in funding was a real game-changer for us and our real estate business.”
“We’ve invested in several things hard money doesn’t allow, like strategic marketing,
high-end coaching and operations, and have generated a really impressive ROI so far.”
“Frankly, the best part was that we got access to all this cash without any collateral and on a stated income basis, and of course it doesn’t hurt that it’s way cheaper than hard money and came in about 16 days!”
Naturally, as entrepreneurs and marketers, and happy clients of this program, we made arrangements to share this program with other real estate investors and entrepreneurs, and were offered an exclusive referral fee arrangement. That’s the full disclosure. We’re informing the world about this program first and foremost because it works, and we want to help our fellow real estate entrepreneurs succeed. Secondarily, as a nice bonus, we’ll be compensated modestly for it.
Of course, there are other ways to raise capital other than traditional bank loans, in general, and hard money for real estate deals.
Perhaps in the future we’ll provide some research and interviews with experts about this topic.
From government agencies, private foundations, etc.
• Personal loans from family/friends
This method probably has more cons than pros, but it is certainly an option.
• Home equity line of credit
Cheapest money out there, but only applies IF you have enough equity. And, do you really want to put your family’s home at risk?
So, here’s the deal. We don’t want this to be a sale pitch, but we do want to make this resource available to you if you want it.
You have 3 options:
1. If you think you could benefit from getting $50,000 to $150,000 for your business (marketing, operational expenses, staffing/outsourcing, or going towards property acquisitions and construction), then request a no-obligation phone consultation with the Funding For Flipping team, and possibly even get pre-approved by phone. By the way, the company guarantees $50,000 or they waive all their fees. Pretty cool.
You can click here to request the consultation.
2. If you’re not ready for that, no problem. Maybe you should just opt-in to their email list so that you you have information on file, and will stay top-of-mind over the next few months. No one will call you, and you can upgrade to a consultation request at any time you’re ready.
You can click here to request just info via email.
3. Do nothing right now (well, you could at least join our Flipping Awesome! email list to get awesome stuff direct to your inbox)
Regardless of what you do, just remember that leverage comes in many forms and degrees. Approach each of them with thoughtful care and strategy.
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