Chasing The Almighty Dollar And Doing It Alone Can Both Be Financial Health Hazards [Landmines 1-5]
Chasing The Almighty Dollar And Doing It Alone Can Both Be Financial Health Hazards [Landmines 1-5]

When you’re getting involved in a business as serious as real estate investment, the utmost care must be taken to ensure you don’t flop – the negative result can be very expensive. Avoiding the most common mistakes sounds like the obvious thing to do, but too many folks shrug these off as “That would never happen to me” situations. I’m committed to success for every single person who reads this blog and with this first post in the series I intend to give you the tools you need to jump the most-known hurdles without skipping a beat.

With the recent release of my new book “Real Estate Joint Ventures” I’ve decided to give you a sneak peek into the book with the 20 Real Estate Joint Venture Landmines you must avoid. Stay tuned over the next four weeks as I lay out the most common problems investors face when dealing in joint ventures, and give you the critical “evasive actions” you can take to rectify each one.

Click here to purchase a copy of “Real Estate Joint Ventures” 

Click here for Part Two of the 20 Landmines series.

Landmine #1—Going it alone: You fail to build a real estate dream team

This landmine is all about the foundation you need to generate successful joint-venture deals in real estate. If you try to develop your business without a quality team behind you, you are doomed to fail.

Evasive action

Recognize that your role as the real estate expert on these deals means you must put together the team you’ll lead. The team’s success hinges on your ability to foster quality relationships with these individuals, every one of whom should have experience in real estate investing.

The Real Estate Dream Team

– Real estate agent
– Lender and mortgage broker
– Lawyer
– Accountant
– Bookkeeper
– Property inspector
– Construction and renovation tradespeople
– Property manager
– Prospective money partners

Landmine #2—Letting your team down: You forget the win-win equation

Every member of your real estate dream team should be able to expect to be involved in a win-win relationship with you. What does that win-win relationship look like?

– Your real estate agent brings you sound deals because she knows what you’re looking for. In return, she trusts that you won’t sabotage a deal and cost her a well-earned commission. So if a deal doesn’t interest you, you let her know so she can shop it to another client.
– Your bookkeeper keeps your records up to date because he knows what you expect and that you won’t burden him with last-minute requests for information unless it’s absolutely necessary.
– Your renovation expert delivers solid quotes and quality work because he wants in on your next project.
– Your property manager takes care of regular maintenance, but makes sure you know where money is being spent.
– Your money partners like the return they’re getting from their relationship with you and they tell others about it.

Evasive action

These win-win relationships can be complicated, since some roles on your team may be filled by more than one expert and there may be times when you need to draft someone new to your bench.

The key is respect. Recognize that each of the individuals on your team will expect a win-win relationship with you. In the vast majority of cases, that win-win will have a financial component: these people are helping you make money and vice versa.

To have an endless supply of JV money for your deals, you need to keep the best on your team. Take care to offer something other investors do not and never forget that you want the members of your team to make money as a direct result of their relationship with you.

JV Investor Insight: Develop a win-win mindset

Sophisticated JV investors know they can make money investing in real estate. They bring others into their deals so they can profit from deals that make money for their partners first. Look at your team members and ask yourself: how can I help them? To bring them onside, answer the question: what’s in it for them?
Under promise and over deliver by finding out how you can help them out!

Landmine #3—Staying too close to home: You choose the wrong partners

This problem is a lot more common than a lot of people realize. When you’re new to JV investing, it’s easy to talk about potential deals with other investors. But no hockey team needs more than one goalie on the ice during a game, and no real estate investment dream team needs a bench of real estate experts!

Evasive action

To avoid this landmine, take an inventory of what you have to offer and be mindful of what it tells you in terms of what you have and what you need. Are you the real estate expert? Do you also have experience with renovations? Is that experience hands on or managerial? Do you know where to find investment properties with great potential for cash flow and appreciation? How are your legal or tax accounting skills?

If you’re putting together your first real estate investment dream team, stock up on people whose skills are different from your own. What kind of investments do you want to pursue? Who can help you do that?

JV Investor Insight: What are you waiting for?

Sophisticated investors take the time to figure out who they need on their real estate investment dream team. Taking a multi-faceted approach to their deals, they look at what they need and when they need it, and then identify the individuals who can help them do that. If you won’t buy a single-family home without a property inspection, what are you waiting for? Line up that inspector before you make your first offer. Similarly, if you don’t like what your mortgage broker offers, find someone else you can work with.

 

Landmine #4—A lack of confidence: You don’t believe someone would want to invest with you

Remember the principles of JV wealth attraction? Sophisticated real estate investors attract money partners by practicing the seven principles of attraction: abundance, expectancy, imagination, giving, decisiveness, expertise and resiliency.

If these principles have you scratching your head, pick up a copy of Real Estate Joint Ventures: The Canadians Guide To Raising Money And Getting Deals Done. It walks investors through the details of wealth attraction.

Evasive action

Novice real estate investors often struggle with this landmine. They may do the work required to build a great support team, then struggle with how to bring money partners on board. More often than not, the real problem is a lack of action! No one is knocking at your door because you haven’t asked anyone over!

Change that by setting up meetings with people from your Level 1 contacts. Call relatives, friends and business colleagues and arrange a time to talk to them about your real estate investment business. Take a list of specific topics you want to cover—and link each topic to a principle of wealth attraction and tell them how your business generates win-win investments for you and your money partners.

This strategy works on three fronts:

1. It makes you narrow down your business focus.
2. It gives you important practice with face-to-face meetings with prospective JV partners. (Every time they ask a question you can’t answer, you get a new opportunity to find out information you can use to cement your reputation as a real estate “expert.”
3. It targets your message to the most important members of your Level 1 contacts. These people are the most likely to invest with you—and now you’ve told them exactly why they should do just that!
 
Meetings like this typically lead your Level 1 contacts to tell others in their own “inner circles” about what you’re doing. In other words, they will start to tell other people how your deals can help them, too.

 

Landmine #5—Chasing the money: Desperation scares potential investors

A lack of confidence must be balanced by realism. Potential investors will not be won over to your deals if you seem desperate for the money, or too confident about what you can do with it. Some real estate investors do this full time. Others balance their property portfolios with full- or part-time jobs. Regardless, never underestimate your role as the real estate expert and always conduct strict due diligence on the deal and your partner.

Because bad news travels fast, avoid getting into situations where a deal will fall through if your money partner reneges and never let JV money go to anything other than an agreed-upon deal.

Evasive action

Put a solid Plan B in place. You do not want to lose a deal because a partner reneges. Nor do you want to close a deal that doesn’t meet your basic goals (cash flow, mortgage pay down and appreciation) just because you’re afraid you might lose a particular investor.

Learn the art of negotiation that practices the win-win approach. When necessary, walk away from a deal. If you can’t come to an agreement, move on. You want to be flexible and still be able to do business on your terms. Remember your role as the real estate expert. When a prospective partner wants to elbow in on decisions that should be yours to make, think about what letting them do that will mean down the road. If you are the real estate expert, you want to own that role in your own deals.

JV Investor Insight: Seek the right partner 

Do not sell yourself short. Novice investors sometimes feel pressured to “prove” themselves and may be tempted to give away more than they should just to make a deal work with a particular money partner. Stick to your guns. If the deal is good, you will find the right money partner (or swing it on your own). Don’t give away the store to keep the front door.

Click here to purchase a copy of “Real Estate Joint Ventures”

Chasing The Almighty Dollar And Doing It Alone Can Both Be Financial Health Hazards [Landmines 1-5] was last modified: November 30th, 2011 by maddy
 

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