The Business of Real Estate Investing

Hello Everyone,

I am snowed in today. There are three-foot drifts in my driveway. Some neighbors came and dug out part of my driveway and porch. After their hard work, the wind blew and the snow fell some more. Oh well, I've taken the time to do some marketing chores and to think about this entry.

I was fishing around online last night, looking at real estate investing (REI) discussion forums and blogs. I have participated in REI online discussion forums for many years. I've also attended REIA meetings (real estate investors assn) and had many talks with both newbies and veterans. One of the things I find missing from those discussions is how to treat your REI as a business.

There are countless places online to find information on every sort of investing strategy--subject-to; preforeclosures; lease options; or buy/hold with a half twist. In this mass of information, I haven't seen investors encouraged to write business plans or to do their own marketing research. These two things would be considered basic elements of any other business.

It's not difficult to find and purchase a canned system of real estate investing. I'm not discouraging anyone from seeking one out or criticizing anyone who sells one. I have purchased systems and attended workshops. I will continue doing so. I am, however, encouraging current investors and would-be investors to not rely solely on someone's system. Go further. Look at census figures and other economic development reports so you know firsthand about your local economy and population trends. Wouldn't it be good to know which age group is the fastest growing in your area? Wouldn't it be good to know what kinds of new businesses are gaining ground in your area? Don't you need to know what strategies investors in your area are using? What about the people who are going to buy or rent from you. Don't you need to know something about your customers? And most of all, don't you want to think seriously about what your strengths and weaknesses are as a business owner?

If you can't answer those questions, then you might find yourself wasting time and money on WE BUY HOUSES signs. And you might find yourself wondering why your telephone isn't ringing after placing those carefully-worded classified ads you bought with your investing system--those carefully-worded and market-tested ads from someone else's market.

Drafting a business plan forced me to stop and think. I can now make informed decisions about my business and the strategies I use, based on my specific strengths and my specific local economy. In my area, I could get the deed to a $150k house tomorrow. But that house that was so easy to acquire would soon become the bain of my existence. Because of my local economy, a $150k house is considered expensive. As a rental, it would be priced out of the market. As a property for sale, it would to sit for a long time, draining my company's cash. In another market, a $150k house might be considered a hard-to-find bargain, with buyers quickly offering more than the asking price.

The business plan also made me take a hard look at myself as an investor. There are countless people teaching others how to do short sales. I know investors who use this technique exclusively and are doing quite well. For those of you who are good at short sales, bless you. You have my admiration. I am not talented at doing short sales. I am sure if I focused on doing them, I would improve. But there are other techniques that are a more natural fit for me. In this case, it seems to be a better use of my time to focus on my strengths.

So, dear everyone, learn all you can about real estate investing. Buy that system that teaches you how to do a double sub2 with a preforeclosed short sale and a lease option on the side, hold the mayo. Just make sure you also do your own business research to make sure that system fits with your economy and fits with your talents.

Elaine