Treating Real Estate Investing as a Business
business advice for real estate investors NAREIA winter cruise 2013 Rehab Queen Robyn Thompson treating your real estate investment as a business
One of my favorite educational presentations on the 2013 NAREIA cruise was by Robyn Thompson, known as the "Queen of Rehab" for her amazing productivity and profitability in rehabbing and flipping houses. Her focus at this session was on treating your real estate investing as a business, and she offered some very practical advice. "Face what is," she advised. "Set aside a minimum of three hours every week to decide what is working and what isn't." Robyn actually sets aside 4 hours per week to plan for business; 1 of those hours is devoted to marketing. During that time, she closes her office door, and does not allow any interruptions. She defines the serious business owner as one who: has a detailed marketing plan for buying properties (1 hour per week to plan); Has saved up some start up capital; Has a full-time commitment; Has a support team of family and friends; and that the business owner demands alone time to plan Robyn focuses her marketing efforts on desperate sellers who live out of state and owned property for a long time. She gets a 12.7% response rate on her infamous "horsey" letter, with a hand addressed envelope, pretty stamp, and signed with a PS. (e.g. PS. If you would rather email me personally, my email address is 1wendywonder@gmail. If you would like to send me any photos or information of the house, please do so). She pays a disabled worker 37 cents an envelope to hand-address. Responses go to patlive.com. Go to patlive.com/robynthompson for free scripts from Robyn. You do not want responses to go to your personal phone. Robyn will usually offer three different buying scenarios to motivated sellers: Offer #1 $42500 cash (worth $80K) Offer #2 Split funding $10K now, $45K in ten years Offer #3 $800/mo for 100 months Her philosophy is that a "Quick nickel is better than a slow dime." She looks for property in a good school district on buy and holds; property taxes and insurance must be reasonable. For fast cash deals, she recommends that wholesalers ask fellow investors what they are looking for, where do they want to buy, how many deals per month, how much cash do they have to buy? Her secretary pulls her list from List Source. Her assistant also pays all bills; answers phones; checks emails; and gets contractor quotes. She advertised for her assistant on monster.com - using criteria such as 5 years of admin experience, good w Microsoft Word, Excel and Quick Books, lives close by, education. Patlive prescreens all responses from letters. Her secretary pulls comps; and Robyn buys one out of every ten motivated seller respondents. She has 9 types of houses to avoid, which include: busy street, mixed use/commercial property, war zone, junky neighbors, luxury homes, tiny bedrooms, and small houses. She buys houses that 80% of the buying population can afford. She strives to create "a drop-dead gorgeous house," with nicer kitchens, bathrooms,etc. than the competition. Her independent contractor agreement requires her contractor to pay all permits, pick up materials, and respond to a detailed scope of work listing every SKU # for materials. She warns investors to be sure that the contractor is not your employee; he who buys the material is your employee; have a good independent contractor agreement; never buy materials; make sure there is workmen's comp, and add yourself to their insurance policy. Never make payments equal to materials or to labor (so it does not look like you are hiring them as employees). Find the money, find the deals and let the contractor handle everything else. Robyn uses gonannies.com to take care of household chores. She likes to pull LPDU approval on her buyers, with 2 pay stubs, last year taxes, and a bank statement. LPDU-Loan processor, desktop underwriter - full-blown approval, contingent on insurance and appraisal. Until she has LPDU approval, she does not take a house off the market. Robyn believes that any serious business owner must be a leader and must focus on generating revenue every day. A serious business owner never wastes money on unnecessary frills - but asks, will it make me 3X what it costs me? Robyn also adheres to a strict detailed personal and business budget. Her mantra of "Reserves, reserves, reserves" served her well during the economic downturn. Robyn's best book recommendation is Failing Forward by John Maxwell. (This is available as a free eBook download at Seattle Public Library). According to Robyn, the serious business owner lives by these beliefs: Strong work ethic; No excuses allowed; Feed on opportunities and possibilities; Focus on strengths and hire people to cover the weaknesses; Failures are the ultimate learning lessons; accept 100% responsibility; Resilience.