Hey, Rob Swanson here, I’ve been a real estate investor for 20 years and CEO of FreedomSoft – a true all-in-one software for real estate investors.
Let’s talk today about why to invest in real estate and what your mindset should be when becoming a real estate investor.
In my 20+ years of experience as a real estate investor, I have been constantly talking to people about this. In fact, I’ve found that most people don’t really know why they want to invest in real estate.
Today I want to break it down into a couple of key important parts.
… I’ll talk more strategically first and then bring it down to the tactics.
Too often people jump into training, YouTube videos, online courses, live events, and education that cut straight to the tactics. BUT those miss the strategy. The big picture understanding as to why you should invest in real estate.
Then at the end, I’m going to give you 4 things that you should be doing on a regular daily basis to be successful.
So before we get there, let’s talk strategy.
I’ll break it down into 5 main reasons to invest in real estate.
#1 BUILD EQUITY
It’s the long-term play that builds your wealth.
Equity is the difference between what a property is worth and how much you owe. So if you owe $0 and that property is worth $100K, you have $100K in equity.
YOU CAN TURN EQUITY INTO CASH.
You can sell the property, you can borrow against the property, you can structure creative terms to turn equity into cash at any time.
You might have heard the phrase, “you make money when you buy”. And what that means is you buy the property at a discount. Buying property at a discount creates instant equity.
If a fixed up $100K property needs $20K in repairs, it’s as-is value will be $80K, I will always end up paying $55K or less. I will buy at a discount and that will create instant equity.
The other thing to do to create instant equity is to improve the property by adding a bedroom, or bathroom, or garage. By also paying down debt on the property you create more equity.
Also by buying in the right market at the right time can create equity for you. When a specific market goes up in value, so will the property value and your equity.
#2 GET CASH
You can get cash in real estate in a variety of ways.
Sometimes you can buy, fix and flip, or sometimes you can just buy and flip immediately and you can turn that equity into cash immediately.
My favorite way of doing this is by using private lenders to pay for a property. I’ll borrow 100% of the purchase price, 100% of the repairs, and 100% of the holding costs and if I do my job well and get everything done under budget and ahead of schedule, then the remainder will be cash in my pocket.
#3 GENERATE CASH FLOW
This is my favorite reason to invest in real estate.
Real estate is a hard, tangible, physical asset that can be insured and it provides a service that everybody needs (housing). If you invest in the right type of properties, income and cash flow will come in on a regular basis.
The better I am at buying properties at a discount, the better I am at choosing the right properties, and the better I am at understanding and playing the game of real estate investing, the better cash flow will be.
Cash flow is your income minus your outgoing expenses. We look at outgoing expenses as TIMMV. Taxes, Insurance, Maintenance, Management, and Vacancy. Those are the fixed operating costs.
With a property renting at $900 per month and it having $300 in TIMMV, the net operating income will be $600. Then any debt that I have towards the property will subtract from the $600 and then that number will be the net cash flow. Net cash flow will be the money you put in your pocket.
Cash flow really gives you the ability to build wealth. When somebody else is paying for you to own a fixed asset that can go up in value, that can build equity over time, and that you could get cash out of over time, you will really be building your wealth.
This is not active income you have to work for. Real estate builds wealth for you.
#4 CAPTURE DEPRECIATION
This is one of the often overlooked reasons in real estate.
The IRS tax code is essentially a playbook for what the government is asking us to put our money into in order to spur the economy.
So, the IRS tax code says that you will get tax benefits in exchange for putting money into real estate. Through depreciation, you decrease your taxable income and this allows you to pay less in taxes.
The reason for this is with the idea that as the property deteriorates and depreciates over time, you’ll get to keep that capital that ultimately you’ll get to invest back into the property to maintain and renovate over time.
#5 USE LEVERAGE
The reason leverage works in real estate is because it is a physical, hard asset.
Through leverage, you can purchase a property using a lender and then resell that property for a profit where you have not had to personally pay for the initial investment.
SO HOW DO YOU FIND REAL ESTATE INVESTING OPPORTUNITIES?
It all comes down to one thing:
If an owner has a problem property and NEEDS to sell their property (not want), that will be the perfect opportunity for a real estate investor.
This is where real estate investors need deals and opportunities. You need motivated seller leads that need to sell their property.
Here are the 4 tactics to get deals in real estate:
1. Who are you marketing to today?
To get good deals you need MOTIVATED SELLER LEADS. But where do you find these?
You could put bandit signs around town or wait for your friend to tell you that their grandmother might be interested in selling her home.
…That’s what we did back in the day. But to be honest, it was a grind compared to what you can do online today.
Particularly with FreedomSoft, you can search for vacant houses and reach out to those owners within a matter of minutes and with just a few clicks. Get in the driver seat today, stop waiting and hoping, and learn the power of finding motivated seller leads in FreedomSoft today.
Remember that good investment starts with one key attribute – A GOOD DEAL.
2. Who are you talking to today?
After you find these leads, you have to figure out how you will get in contact with them. You could build your confidence and cold-call them one by one. This is not easy, especially if this is the first time you do it. You’ll definitely need a script to be successful.
Using your cell phone could work, but you’ll quickly learn that having a call tracking software will be a GAME CHANGER.
With FreedomSoft, you will definitely be more organized. After building your list of leads, you will be able to see their information and have the ability to text them or call them directly through FreedomSoft. Check out how it’s done here in our webinar here. Then you’ll have a proper paper trail of how you interacted with that specific person.
3. Who are you following up with today?
I’ve looked back to my last 20 years in this career and have learned something powerful that may not seem too obvious…
…66% of my deals came from people I followed up with! THE FORTUNE IS IN THE FOLLOW UP.
People get busy, people travel, people have birthday parties, and dealing with their empty house that’s across the country is something they WILL CONTINUE to put off. But if you follow up correctly and get them to finally make the decision to sell their house, you’ll be there to win!
Less often do you get a deal with people you speak with on the first time. So make sure you have the right system in place to follow up with your leads. FreedomSoft will do exactly that for you.
Whether you want to text, call, or email your leads, you can do all your follow ups through FreedomSoft. Start here to build your fortune with FreedomSoft.
4. Who are you making an offer to today?
Did you talk to a lead that is ready to receive an offer? I hope you are jumping right in.
This is THE MAIN indicator if you are being a real estate investor. Without making offers, you will not buy properties, and without properties you will not make any money.
Run the numbers and figure out what your maximum allowable offer is and then make your offer!
Through FreedomSoft you can send your offers! You’ll also be able customize your contracts, create your documents, and keep them organized.
If you’re not currently using FreedomSoft, take a deeper look at what the software can do for you. FreedomSoft is an all-in-one system for real estate investors designed to get you more, high-quality leads that turn into real estate deals.