Property Method Report

How to Avoid Becoming a Pig-headed Real Estate Investor

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The Pig-headed Investors

An engineer bought a commercial unit and hoped to let it out for good rental yield. After the building completion two years later, only 10% of the building is occupied, mostly by the unit owners themselves. Failing to get any tenant for a full year, he sold the property 50% off the original price and lost more than a hundred thousand ringgits.

There is another investor who had made a lot of money by flipping properties. He buys landed residential houses from new housing projects and later sells for handsome profit. He had successfully flipped three times. Every time he sells off the previous property, he will get a bigger and more expensive unit on the next purchase. Finally, he was stuck with a bungalow house, which is never

completely built. The developer just disappeared.

If you think it is easy to make money on real estate investment, think again!

Are you one of those “pig-headed” investors?

Real estate investment is perhaps one of the most lucrative forms of investment today. But it is also equally risk bound especially when one is not well versed with the trends and nuances of the real

estate market.

So if you are contemplating on investing in real estate, it is best to avoid costly mistakes in real estate investment especially when you invest your hard earned money into it. Knowing why most real estate investors fail, helps one steer away from making the same mistakes and ensures good return

on investment.

Here are the top nine mistakes made by real estate investors collected after speaking to established, full-time real estate investors and other professionals involved in real estate investment such as bankers. Read on to know them and avoid from becoming the “pig-headed” investor called by other

investors and professionals.

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Lack of a proper plan is the biggest mistake made by novice investors.

Lack of a proper plan is the biggest mistake made by novice investors.

Finding a house after forming a proper investment strategy is the right way instead of looking for a house to fit the plan. Many make the mistake of buying a house because it

seems to be a good deal and then trying to see how they can fit it into their plan.

Instead of buying a house and thinking one can plan in due course, investors should rather concentrate on the numbers and try to make offers on multiple properties. This will ensure a good property that not only matches their investment model but also works out

well with the numbers they had planned for.

"I want to make a lot of money" is not a sustainable business plan.

"I want to specialise in foreclosures, lease options, and subject to" is not a sustainable

business plan.

"I buy property for cash or terms" is not a sustainable business plan.

Enough said. If you don’t know how to develop a workable plan for real estate investing

buy a book on business plans, or better yet take a small business administration course.

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This may sound contradicting to the mistake number one.

However, most “relatively-diligent” investors new to real estate get fascinated quickly by a technique for acquiring control of real property or a technique for turning a quick profit.

These "techniques", often taught by "gurus" at $500 - $1,000 for training, workshops and tapes, emphasise no need for extended time and financial commitment or emphasise

quick turn profitability (foreclosures, flips, over financing).

These are analogous to the technical or chart reading aspect of stock market investing; it

doesn’t matter what property you find, just apply the technique.

The truth is that any of these techniques can be successfully utilised given the right set of circumstances. However, they are applicable in only a very small percentage of cases, and usually after an extended negotiation or as an afterthought to the property acquisition process.

Successful real estate investors concentrate on the property itself rather than on a specific technique. This not only allows the investor to concentrate directly on where most profitability resides, but also opens a much wider array of potential "deals" for the

investor to consider.

Further, the investor can concentrate on the much more reliable profitability formula of "adding value", rather than on the more suspect and ethically questionable formula of finding a naïve individual to work the other side of the real property transaction.

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This is worth emphasising again and again here. One of the major mistakes that real estate investors make is to think it is very easy to get rich in real estate.

This is only a myth and the reality is that investing in real estate is a long term project. Yes it’s possible to purchase real estate with no money. Yes it’s possible to flip properties for large profit with no investment. Yes it’s possible to option property for $100.

However, it’s infinitely much easier to successfully participate in real estate transactions when you as a real estate investor have an equity contribution in the deal.

When you put some money in a deal, three great things begin to happen. Bankers become interested in financing your transaction and 20% hard money or 30% equity share

becomes 6% financing.

Sellers take you seriously and are willing to sell their property to you. And outside

investors become attracted to your deals. Life becomes easier and much more profitable.

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Investors have to exercise a certain degree of caution and take earnest efforts while making a deal.

New investors often fail in this regard and sign a deal without doing adequate research on

the property.

One needs to build a team of professionals who would assist you in your deals. This would

ideally include real estate agents, lawyers, bankers, contractors, etc.

7

Every field of business needs sufficient amount of homework to be done, and real estate investment is no exception.

Not doing your homework could be a costly mistake if you were a real estate investor.

Learn the fundamentals and market before venturing into any deal. Pig-headed investors are easy to identify from here. They demand that their property to be listed for a price

that far exceeds market value in the hope of making a huge and unwarranted profit.

Or they have agents write and present an offer far below market value hoping to steal

and make a once-in-the-lifetime deal on the rental property.

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In certain area, landed property like residential house may be a crowded market, in other area commercial real estate may be reaching its saturation point.

Rather than competing in the crowded and overly competitive market, real estate investors would have increased chances for success if they spent the same time and energy learning about the various areas of other real estate markets.

In certain area, landed property like residential house may be a crowded market, in other area commercial real estate may be reaching its saturation point. That is why understanding the market is the very fundamental that every real estate investor must

learn as stated in mistake no. 5.

A successful real estate investor will educate himself with a good overview and then decide on an area of concentration. Rather than wasting time fighting for the left over scraps in a saturated market, the investor can be breathing the rarefied of high demand real estate market.

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Investors whose strategy is to buy, hold and rent out properties need to ensure sufficient cash flow for maintenance.

Property managers could be expensive and the owner has to incur more expenses such as

mortgage, taxes, insurance, advertising costs, etc.

Investors have to allocate their budget such that all these expenses are taken care of, or

end up having their asset turn into a liability.

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A larger volume of deals or transactions helps in increasing the profits by reducing the impacts of marginal deals.

However, one should avoid doing many deals each with a small amount of profit.

Many investors both experienced as well as new are thrilled with a small profit/return on each deal. Since unexpected expenses always seem to creep up when least expected in real estate investing, the actual profitability of these transactions range from half the expected profit to no profit.

In order for you to earn enough income to warrant the time commitment, monetary commitment and risk involved, you would have to participate in a large number of deals

annually.

Since it always takes many negotiations to produce a single deal, and many property inspections to find a single property worth negotiating on, real estate investment can

become a full time real estate business.

There are people who successfully play the low profit high numbers game. But if working 70 plus hour weeks and buying, rehabbing and selling 50 plus properties per year sounds like a worse life than the corporate world you’re trying to leave, you probably want to

find a different approach.

Participating in a smaller number of highly profitable transactions not only produces more monetary success but also leads to a much more leisurely, less stressful and more

satisfying experience.

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Having more number of options at hand for the property you buy is a wise strategy. This helps one to be prepared for fluctuations in the real estate market.

Plans to rent out the house could go awry when the rental market slumps. Having

alternative plans helps you cut down losses and tackle unexpected situations.

There are so many possible mistakes and troubles you can get into when you are starting

out to make money from real estate investment. So how do you make your first move?

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Where should you start?

We recommend novice investors to start their first real estate investment in apartment.

Apartment investments provide the following advantages to investors, which significantly

reduce the risk of making fatal mistake in real estate investment.

1. There will always be a demand for residential housing whether the market is going up or down. Apartments have become a much-needed form of housing because of their

convenience, easy-maintenance, security and amenities.

2. Rental housing is cheap – cheap to rent and cheap to buy. Leverage makes investing in

real estate, especially apartment, extremely affordable.

3. Apartment investments are one of the only sector of real estate investment that aren’t affected by business cycles traditionally viewed as negative like rising interest rates and recession. As interest rates rise, homes become less affordable. It makes demand for rental housing even higher because it becomes the affordable option. The same thing happens when there is an economy downturn or recession. When people are holding back their expenses, especially the largest purchase in their life - buying a house, renting a

house becomes an affordable option.

What Now? Taking the first step is always the hardest. Well, we are working on a course to get you started. We will help you to get your feet wet in properties investment and make money safely with a very high success rate. And if by some chance you’ve received this report without signing up for free updates from www.PropertyMethod.com… well, that’s great because there is someone connected to you who cares. But if you want more help building a high profit real estate portfolio, come on board and let us contact you here: Sign Up for Free Updates from www.PropertyMethod.com And please... if you enjoyed this report, feel free to share it. Link to it from your site, and/or click here to Tweet it, Stumble it, or share it on Facebook. Thanks for your time and attention. The very first online interactive properties investment course is coming soon… Best Regards, OngKL& KCLau Real Estate Investor Founder and Publisher Bestselling Author

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