The answer is blurred in explanations

[Warren Nelson]

Forgive me as doodle as I just felt like writing. I read all types of comments from both side of the line of real estate agent and investors. As always there is always two sides to every story and everyone has an opinion. And as always the answer is blurred with explanations. 

I represent only five groups of investors and they all subscribed to the same training and investment theory. If they followed the program as it is suppose to work then I would be writing offers on a weekly basis. However the human aspect which is never accounted for kicks in and works against the program. As an investor you can appreciate not pulling the trigger on a deal just because the number added up and if it all works at well you can brag about it later... or not. I represent these investors and like every other hard working citizen needs to put food on the table and a roof over my family. Naturally I want to write deals every minute of the day but I take into play the human emotion aspect. I represent these investors and have to make sure that they are purchasing an investment that matches the program they are following. Even when that job is complete there is no guarantee that my investors will make an offer on it. The numbers are there so why am I not writing? The Human Element.

When an investor walks through the house they emotionalize the property and then visualize the potential. This is all wrong. This is where a very large majority of investors fall. This is why I am only writing a very small amount of contracts even though I'm representing investors with capital to invest. Even though I find the property with the formulated buy numbers the deal still goes untouched and sold to someone else. It true that there was money to be made in every deal but something scared the investor or the investor simply didn't move on it for one reason or another. The Human Element.

Now it might seem like I'm changing the subject here but I will make my point taking this route so please hang on.

Little did I know when becoming a real estate agents so many cycles ago that I wouldn't be in the real estate business. I entered the marketing arena when I stepped into the ring of what I thought was the real estate arena. I had visions of Boston Legal on my mind when I received my real estate license thinking I'm going to work for some big real estate outfit and they will supply me with the clients they want represented. However the reality became quite clear real fast that I needed to hustle the streets to find those that needed my services. So I became a marketing guru with real estate as a by product. As investors your arena is just as deceptive and you need to know that your job is “Employment Agency” with investing as a by product. Buy low sell high are two slices of bread and what's in between is what makes the sandwich. A successful sandwich is what is built between the two slices.

The most important aspect of any investor is their contractors. The investor lives and dies by the contractor. The investor can play with all the numbers in the galaxy but if that contractor isn't spot on then the house of cards comes crumbling down. That being said it's forgotten the moment the sentence ended... See what I mean?

So what needs to be done to make things work?

The simple answer is separation. Take the real estate investor out of the equation. What do I mean by that. It's simple. There is no real need for an investor to view any property they are investing in. There is a difference between purchase and investing. Now if you think this idea is far fetch let me quickly give you an example. Many states sell their tax certificates and tax sale properties to blocks of investors and these investors never get to see the properties that are packaged by the state city or municipalities. Many states no longer allow small investor to bid on tax sales or tax certificates as the big boys will buy up the whole block sight unseen. Those big investment houses then send out contractors to submit bids and plans for partial or complete rehab then decide based on those estimates if the property should be rehabbed flipped or wholesaled.

The investor is not purchasing a home but rather making an investment. The investor simply wants a positive return. The investor who has a contractor who can go out and submit a bid and plans for partial or complete rehab is what the true real estate investor needs. That investor does not need to see the property but rather crunch the number from the submitted contractors estimates. The investor then contacts the real estate agent to confirm those number for a resale flip or wholesale.

When a real estate investor wants or needs to see the property that their group is purchasing then the human element will always interfere with the number of contract the real estate agent is writing and the argument between real estate agent and investor will continue to be fought in vane.

Well my wife just told me it time to get ready for the New Years celebration so it's time to stop doodling. Will I post this or will it sit in my computer with all my other doodling?

Happy New Year. Change starts now...

[Warren Nelson]

The thing about doodling is you get to go back and read what you wrote. Sometimes it's okay and other times your glad it was just doodling. It's 2015 and I think the time has come to be criticized and chastised for my doodling as it's seems my resolution for pain and suffering will carry on for another year. But playing it safe I thought the Investor Psychology Forum would be a good place for me to begin sticking my head out of my shell.

So back to Contractors and their vital function to your investment success.

I hear lots of investors say I have my contractor or I have a crew ready to go. But the problem is as I mentioned. The investor goes out to the property and rationalizes and visualizes what changes and repairs should take place and then the contractors draws up an estimate matching the request and wham the numbers don't add up and now the investor is stressed. Now the waste of time begins as the investor tries to scramble to make changes that fit the budget yet still allow the highest return while having limited knowledge of the property and what to expect. Before you know it the investor takes a pass and the time was wasted. This system is backwards as the investor should be waiting for an estimate and plans for a partial or full rehab cost from a contractor. After receiving three sets of plans and estimates the investor will have as better understanding of this investment then by viewing the property for themselves. 

The other thing a smart real estate investor needs is uniqueness. Your rehabs can't be cookie cutter are you will soon realize that top dollar is out of whack when three or five properties look the same to the buyer. You either have to have a contractor that doesn't do the same type of work for each investment or you have to become a hiring agency and have several contractors ready to work on different projects. You'll notice that after receiving estimates and plans for several investment from the same contractors that the plans look similar for each estimate. You have to make sure that your investments do not become cookie cutter to make accounting easier as that can and will be costly.

Here is what I know. The groups that I represent purchase investment properties in Philadelphia Montgomery County and Bucks County. Through the years or as I like to call them cycles we have changed and adapted to the changes. It was clear early on as it is now that certain zip codes of Philadelphia were going to experience a wave of activity and will for still some time to come. Zip code such as 19146 and 19147 have experienced the wave as it has traveled to 19145 and 19148. In this market you are competing with foreign or global investors as well as local investors. These investors are not even seeing the property as real estate agents are now posting the properties on web sites with clock meters or simply asking for highest and best by a certain date and or time. Guess what? Investors are paying close to retail because they know that after a complete renovation the property will pull top dollar. Those investors that are still crunching numbers to try and save a thousand or two on the front end or out of the loop. 

The game has advanced and investors know that cookie cutter rehabs will have them losing money on the back end like a sinking ship taking on water.

No one is buying cheese sandwiches when there are sandwiches that have dressings as well as other choices. You investment rehab better have some wi-fi gadgets incorporated as well as the latest state of the art security and maintenance or guess what? In these zip codes your not in the loop. The days of stainless steel appliances and Formica counter tops are so last cycle.

Now remember, you as a real estate investor are in the Employment Agency arena and it is your agenda to accept bids plans and estimates from several contractors and continue nurturing and cultivating that sphere for your success as an investor. The real estate agent is better served as your marketing guru rather then a point of referral for contractors.

Good Luck and Happy and Prosperous New Year!