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How Important is a Good Credit Score For Real Estate Investors?

September 25, 2019 by Team RE Mentor 1 Comment

Your credit score can have a lasting impact on your ability to invest and get a mortgage.

Not only can it change a loan from being approved to being denied, but it can affect other aspects like interest and insurance rates, among others. You’ll want to make sure your credit score is good enough to allow you to take advantage of the real estate market. So, how important is your credit score when you’re looking to buy real estate?

A low credit score will impact the cost of your loan because it represents the level of risk to a mortgage lender.

A high score indicates that you pay your bills on time and will be able to repay your mortgage; a low score, on the other hand, means that you could be a potential risk to a lender. To compensate for the extra risk, lenders will increase your interest rates to protect themselves. Therefore, the higher your credit score, the lower your interest rates. But what should your ideal score be?

The short answer is that, ideally, your credit score should be above 740 and your total debt payments, including your future mortgage payments, should not exceed 43% of your gross income. The primary benefit of a higher credit score is that you’ll pay less interest. Forbes illustrates that the difference between a 3.5% and a 4.5% interest rate on a 30-year $250,000 mortgage is over $50,000 in interest.

The importance of a good credit score is illustrated by other benefits, like better credit card terms, higher credit limits, and lower insurance premiums.

Another important factor for home buyers is homeowners insurance. The insurance premiums you pay once you purchase a home will be greatly affected by your credit score. Unlike your regular credit score, your credit-based insurance score isn’t publicly available. To evaluate your risk factor, insurers use your credit report for many of the same things as traditional lenders. FICO estimates that 85% of home insurers throughout the United States use insurance scores to determine monthly premiums in states that allow it. The reason for this is that the Federal Trade Commission determined that these scores accurately predict risk, or the likelihood of filing a claim, to underwriters. What, then, can you do to improve your credit score?

Your credit score calculation is a bit complex. Some of the factors considered are your loan repayment history, the total balances on your accounts, how long those accounts have been operating, and the number of times you’ve applied for credit in the past 12 months. The best way to keep a high credit score high is to pay your bills on time, every time. Additionally, you’ll need to pay your existing debts, like credit card balances and other loans, and avoid opening new accounts, credit cards, or loans.

Content written for RE Mentor

By C. Mendoza

Direct Mail Marketing Campaign for Your Real Estate Business

September 23, 2019 by Team RE Mentor 54 Comments

Consistency

Before anything else I must stress, the most important factor when it comes to marketing is to be consistent. To be consistent you need to design a marketing budget. Figure out what you can comfortably afford to spend every month on direct mail without fail. You don’t want to put yourself in a position where you initially spend $1,500 a month, only to find 3 months in you can no longer afford to do so. By being consistent you will “touch” each prospect a certain amount of times through the year. By doing so you are creating brand awareness and keeping your company on top of their mind if they have a trigger event.

The List

It all begins with having a quality list. Before you begin marketing you need to understand exactly what type of property you are looking for and mail to prospects that meet specific criteria. Something I like to call “laser focused marketing.” You are not just blanketing a zip code and hoping for the best, i nstead you are mailing to a large number of leads with specific criteria. Perhaps you are a land lords in a certain zip code that own 2-4 unit properties and built after 1965. With the right list, you can do that. If you are looking for motivated sellers that need to sell at a discount you need to figure out what sorts of groups you will target whether its marketing to: probate, absentee-owner, pre-foreclosure, or code violations when generating your list. Perhaps you are a realtor and want to announce your new listing to the neighborhood. It entirely depends on your goals as to what type of list you select and ultimately mail to. I pull my list in December and mail them for a whole year. Once December comes up again I pull a new list. However, if your criteria is the same or similar, you will still have overlap and many people will continue to receive mail from you, which is not a bad thing.

direct mail zip codes — via United States Zip Codes .org

The Message

The message on your marketing piece is very important whether you are utilizing letters or postcards. People need to be more willing to put their message out there and be accepting of it, don’t try to hide it, especially investors! You buy income properties. Let your prospects know it! Get that message to the right people and it has appeal, I promise you. People try to manipulate response rate using all sorts of tricks from variable data to handwritten fonts. Again, you want people to contact you for the right reason. Your marketing piece and list should do some upfront filtering for you. Some people think that you need to field 30-50 calls to get one deal. That’s ridiculous and its likely because they are not using a clear marketing message and consequently having to field more unqualified calls.

The Response Rate

This is a metric that is often discussed at length. My personal thoughts: who cares about response rate? I would rather get 8 calls a month, 4 of which turn out to be deals. I have enough going on and the last thing I want is to be sorting through tons of unqualified leads. An 83% response rate isn’t meaningful or impressive if they are all unqualified and unmotivated leads. What would you rather have, an 83% response rate with a bunch of tire kickers that generates no deals, or a 2% response rate and 3 properties under contract? I think you know the answer to that.

The Marketing Snowball

Direct mail marketing initially starts out rather slow. You may receive few, if any, calls your first mailing or two. The end goal is to market enough consistently on the front end that you are regularly generating leads on the back end. I like to call this the marketing snowball. Sadly after the first few mailings is when most investors quit. They don’t give the marketing snowball enough time to grow or nurture it by consistently mailing prospects every month. In the early stages of marketing things start rather slow; however, as you consistently begin to touch the same prospects through the year you will begin to build a critical mass. Once you have been mailing for a decent amount of time (6 months to a year) you will start generating leads regularly. You may find someone calling you about a house they want to sell from a post card you sent them over a year ago. Or perhaps someone that has no interest in selling you there home, but may give your post card to a friend who does (I have had this happen several times). You never know, so keep mailing.

Putting It All Together

Remember, as I noted earlier, the amount of mail you send out is completely dependent on your marketing budget and how much YOU are willing to spend for at least 6 months without getting a deal. Again, figure out how much you can COMFORTABLY spend every month. Let’s say that’s $1,000. Next choose your marketing piece. We will use post cards in this example. For printing and postage fulfillment its we will say its .40 per post card. If you’re using yellow letters it will probably be closer to $1 per a letter. Whatever marketing budget you decide upon, make sure you STICK to it. Come up with a budget for 1 year to 6 months and mail them rain, sleet or snow. Calls or no calls.

Here is how it looks in practice:

Your monthly budget / cost per marketing piece. Lets plug in our numbers. $1,000 / .40 = 2,500 post cards you can send each month as per your BUDGET. If your budget is $250, who cares, spend that consistently and persistently and you will find deals eventually. And guess what, when you do you can put that money directly into your marketing budget and scale your business accordingly.

Personally, I like to form 3 groups for mailing: Groups 1, 2 and 3. Use list source or whatever you want to generate this.

Group 1 = 2,500 unique leads (for example probate)

Group 2 = 2,500 unique leads (for example pre foreclosures)

Group 3 = 2,500 unique leads (for example code violations)

So that means you will need 7,500 unique leads sum total (Group 1 + 2 + 3) from your list generation service.

Mail each group on rotation:

Group 1 – Jan

Group 2 – Feb

Group 3 – March

Group 1 – April

Group 2 – May

…etc. through the rest of the year rotating the list based on the amount of groups you have.

If you follow the above plan each group will be “touched” by your marketing piece 4 times through the year. This is critical. You are establishing an identity and the seller may not be ready to sell the 1st, 2nd or even 3rd time you contact them. However, as you “touch” them more often you will begin to see a higher yield in the amount of deals produced. Remember circumstances change through time ,that’s why you’re mailing them throughout the year.

Other popular mailing schedules are using 4 groups total for example:

Group 1

Group 2

Group 3

Group 4

The advantage to this method is you are casting a wider net and have a large number of prospects to market to. The disadvantage is they will only hear from you 3 times a year on rotation.

Another popular mailing schedule is to mail the same list every 6-8 weeks. The advantage to this approach is you will constantly be on your prospects mind and create brand awareness since you are marketing to them so often. The down side is, since you are mailing the same group every 6-8 weeks , the total amount of leads you will be leading will be much less. You won’t be able to cast as wide of a net.

It all comes down to personal preference on selecting a mailing schedule. What’s more important is being consistent with the mailing schedule whatever you decide upon.

In Conclusion

You must be consistent with your marketing, don’t give up 3 months in, if you do you might as well not mailed anything at all. I hope you found some new ideas in this action plan that you can use to implement in your own business.

FREE DOWNLOAD Direct Mail 10-Point Review Checklist with Example

The one thing, if you add it, that will increase your response rate dramatically.

Syndication Is The Secret To Making Big Money In Real Estate

September 18, 2019 by Team RE Mentor Leave a Comment

Are you interested in syndication?

First let’s focus on something important: every investment entails some risk and successful investors are great at minimizing the risk not just for themselves but also for everyone else involved with them.

This means that as a real estate investor you must be quick at putting together deals using syndicates.

Syndication Is The Secret To Making Big Money In Real Estaterementor.com

Essentially, a syndicate is a group of investors representing an interest in breaking into the real estate investment market who put up a certain amount of cash and get fronted by a professional.

If you are clever about it…

And have begun to establish your credentials, built up a reputation and can talk the talk in a way that convinces people to trust you with their money you are then off to a flying start.

It means that you will bring credentials, the ability to close profitable deals and expert negotiating skills to the table.

For the investors who form the syndicate the benefits are twofold:

First they gain a foothold into the competitive real estate investment market without having to put up a whole lot of money to begin with and this means reduced exposure for them and fewer risks for their money.
Second they gain someone who will do all the legwork and close the deals and work for their profit. All they have to do is sit back and enjoy it.

Provided you are diligent in your work, capable of paying attention to every detail and good at working under pressure and, hopefully, working at more than one deal at a time then your earning potential should only be limited by your ability to put deals together.

Creating syndicates and using other people’s money to invest in real estate without risking your own allows you to create win-win scenarios which benefit everyone and that is the best way to build a career, a reputation and a personal fortune.

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7 Things You Must Know About Multi-Family Investing

September 11, 2019 by Team RE Mentor 4 Comments

1. Multi Family Properties Can Protect Your Wealth

You’ve worked hard, you’ve established yourself. Over time, real estate values have consistently proven that they will go up. We feel one of the safest investments you can make is putting your money in real estate. One of the largest benefits of Multi Family real estate is it gives you cash flow while it appreciates.

2. Your Properties Should Run on Autopilot

When you secure a property, always hire a good quality management company to run it and you can continue to invest in other properties… or enjoy your life in any way you choose. Whether you are traveling the globe or just sitting at home, your management company oversees the day-to-day operations of your investment… delegation is the key to happiness.

3. Emerging Markets Create Faster Appreciation

Institutional investors understand the power of emerging markets. In fact, MIT offers a course specifically surrounding markets that explode with appreciation. Be sure you study this critical element to success.

4. Use “Undervalued” Properties For Quick Gains

Value add properties definitely look less attractive, but that is exactly why they yield a higher return and increase cash flow.

5. Going Big Can Equal Bigger Returns

Small properties are good for beginning investors. You’ve earned the status you enjoy today. Larger properties will bring you larger returns with less risk, that’s the irony, but you already know this.

6. Start Where You Are Comfortable

If you are just beginning, get educated, take action, take calculated risks, get the confidence of having your first deal under your belt, and then watch your portfolio grow.

7. Use a Proven System

You use systems in your day-to-day life and business; it only makes sense that you should use them in your real estate investing, too. Proven systems bring you proven results and get you to your goals faster.

Emerging Real Estate Markets Are Recession Proof

September 4, 2019 by Team RE Mentor 29 Comments

The moment any one utters the dreaded ‘R’ word the real estate industry seems to shake, rattle and collapse. Mortgages, borrowing, house selling and buying and house building, all slow down. Especially during a Recession. But not emerging real estate markets.

Yet, housing never really stops being in demand. People always want somewhere to live. Real estate investors who have seen the market go through its ups and downs know what to do. When the economy temporarily stalls what is required is an emerging real estate market to allow them to make money on the same scale as when boom times are there.

This is how it works:

Emerging real estate markets are created out of a real need. Which is then coupled to generous local incentives necessary for the development of a region. As such it is totally recession proof. Perfect for the savvy real estate investor who has managed to spot it first.

The reason an emerging market is recession proof is because it is driven by its own micro-economic realities. Independent of the larger economic picture. A new industry moving to town creates an influx of new jobs. It attracts new people and brings with it its own people and all these generate a buzz.

In response, the local government provides incentives to help them with their relocation. They do this to ease the expected pressure on housing.

This attracts new supporting business to the area. Helps other start ups get going and attracts even more people and suddenly you have a boom-town in your hands.

The pressure-cooker conditions this creates are perfect for closing deals fast in emerging real estate markets…

… and making good money from them. The skill of course lies in being able to correctly identify an emerging real estate market as it emerges rather than chase the far more risky tail end of it.

Here’s the truth:

An emerging real estate market always Peters out* and begins to normalize and reflect the rest of the economy. This means that the window of opportunity is small indeed and the real estate investor worth his salt knows when to get in and when to get out.

One of the things we cover in the courses we give is how to recognize an emerging real estate market and what processes you need to have put in place in order to be alerted about it and identify it correctly.

The thing you need to be aware of is that emerging real estate markets are like gold mines. You need to find them, work them and then move on, all the richer for the experience and with your bank balance better off.

*The earliest known use of peter as a verb meaning dwindle relates to the mining industry in the USA in the mid 19th century, and it is reasonable to accept that that is where it originated. Thoughts of US mining at that date bring to mind images of the California Gold Rush, which is sometimes suggested as the source of this phrase.

Recession Without A Plan Is A Fast Way To Go Broke

August 21, 2019 by Team RE Mentor Leave a Comment

The fastest way to get from point “A” to point “B” is to have a plan. The fastest way to earn one million dollars or more in real estate investing is to have a plan. The fastest way to go broke…the fastest way to lose a lot of money…the fastest way to be forced out of the investing business is not to plan. Especially during a looming RECESSION … yes, we said it.

If you don’t make a plan now, this new recession will rip you out of your investing interests during 2020.

DON’T SAY RECESSION

Just don’t say “recession” around any economists, politicians, or your creditors. We also hear you shouldn’t say the word “recession” in front of your bathroom mirror 3 times in the dark.

Many successful investors found themselves working very hard in their investing business but not really getting anywhere. Only after they started sitting down once a day to plan their activities did they start making real progress in their investing business.

Nothing substantial in life is completed without some sort of plan. When ships cross the ocean they “chart a course.” What they are doing is planning. Across all of our oceans are buoys, those red, floating devices. If you’ve ever been in a harbor or seen a harbor scene in a movie, you’ve seen a buoy. Some of them have bells attached so you don’t hit them at night.

“A highly leveraged business sector could amplify any economic downturn as companies are forced to lay off workers…” the Federal Reserve chair, Jerome Powell, said in a May speech.

“RED, RIGHT, RETURNING”

Buoys are the ocean’s traffic signals. They are all numbered. And there is a universal ocean law, followed by all captains whenever they return to a harbor. It’s the three R’s: “Red, Right, Returning”. Any captain will tell you when you are returning to a harbor, the Red buoys should be on your Right. This the way you plan your entry.

When you are going from point “A” to point “B” across the ocean, you chart out a series of buoys that you will set your “road map” for your journey. Since they are numbered, you know when you are at the right buoy. A simple journey from Falmouth, MA, to Martha’s Vineyard, though only seven miles, may require that you chart the passing of 15 buoys. It’s like playing connect-the-dots across the ocean. As you go from buoy to buoy, you successfully navigate your journey to your destination.

WITHOUT A RUDDER

Plan your real estate investing with the same philosophy. To get from where you are now to one million dollars, you have to plan to perform certain activities and meet certain milestones (buoys) to connect the dots, to get to your goal.

Without your goal constantly in mind, you will drift aimlessly and unprofitably, like a sailboat without a rudder, until you begin to plan properly.

After you start planning consistently, you will realize that any time your business starts getting chaotic, you’ll pause and realize that you’ve gotten away from your planning.

RIDING OUT THE STORM

One way to weather the storm during this type of chaos is to have multi-family rental properties that are going to provide a steady stream of income during the turbulence of the markets.

The fastest way to get order back into your business is to begin planning again. You did make rental properties part of your plan, right?

BUILDING HABITS INTO A BUSINESS PLAN

If your business or life is chaotic now, start planning. When you begin the planning process, you won’t suddenly wake up tomorrow and start planning every day for the rest of your life. Certainly, if you start shoring up for a recession today, your plan can become actions, and when this ugly beast rears its head — it is already slain.

But alas, we are all human and we begin by planning a little, reaping the rewards, getting away from it, becoming chaotic again, then going back and planning a little more. It’s just human nature.

However, each time you get away from planning and then go back again, you are taking a giant subconscious leap forward to successfully embedding planning into your business and your life.

Great plans take habitual thinking, strategy, and execution. Start your planning habit today. So, you won’t wake up to a financial nightmare. Instead, you can rest easy knowing you have prepared for eventualities.

FYI—We have a FREE videoturial that teaches the critical skill of recognizing when the market phase is changing so you change your investment strategy so you continue to do well investing (this is the number one mistake investors make)