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Real Estate Investors: Why We Do It, What We Do, and How It’s Possible

By Ryan Johnson

In a perfect world there would be no real estate investors. The business of real estate investing stems from friction and inefficiencies in the market place of the real world where there are winners and there are losers.

Real estate investing can be seen as a quick avenue to substantial gains, but what goes overlooked is how it’s possible… have you ever bought a course or attended a workshop solely based on the sales pitch that shows you a big cashier’s check and a tried and true system? While they are valid pitches they leave out an appreciation of what being a Real Estate Investor (REI) is all about when they just focus on the system. As REI’s we are a necessary bunch for a healthy market, a healthy economy, we are the grease in the wheels. A large portion of our business comes from extenuating circumstances that are beyond our control; we can’t make a seller motivated, the circumstances that lead the seller to a scenario where they have to sell in order to prevent further damages is what makes them HAVE to sell. Our job is to convince them that they need help, that we’re a better option than slipping into bankruptcy or letting the house fall into foreclosure. Our job is to educate them, gain their trust, and make a win-win-win deal. The gains that can be made from real estate investing provide a great reason to become an investor and as things get worse for home owners in the credit crunch, the more we are needed. The overall economic environment these days makes our field a GREAT profession and a NECESSARY field, the friction that is constantly being reported on in the news provides a great backdrop for explaining how REI’ing is possible.

In real estate and business there are cycles where things go up and things go down, today things seem to be really down there, but what really matters is the mess. Today, it’s a mess, foreclosure has become a far more common term due to the fact that so much has hit the fan that the inefficiencies in the market has created this huge mess. A huge mess is good for us because that means there are more motivated sellers … the more you see it in the news, the more it’s justified by the struggling home owner. I’m sure the term short sale is more widely recognized today than it was two years because of the extra coverage of this giant housing mess. Just think of the term mess, really visualize it, and think about the players and how they see the mess.

- To investors: The mess is opportunity, if there wasn’t any mess at all we wouldn’t be able to do what we do.

- Sellers: My home, my equity, and my credit are all at stake.

- Banks: The return on investment isn’t looking so good, we must find a solution but there are so many issues that are involved and simply banks aren’t in the real estate business (just the money business). Having to have $7 in reserve for each $1 out there really puts them in a bind.

- Economy: Housing prices are plummeting to artificially low levels; market correction will sooner or later take place (naturally).

The economy at large is an unstoppable machine that behaves according to market forces and its own rules that result from the recognized rules of self-interest. So as the economy functions, all the individuals function in their own self interest, they do something because some reason pushes them in that direction.

- REI’s seek out distressed properties and motivated sellers for a discount that they can make gains on.

- Sellers are stuck in a bad spot and need to save their skins, because worst case scenario comes when they do nothing (they become a motivated buyer).

- Banks are overwhelmed, the more we can do, the less they have to do. All the bank’s options are painful, but their wounds will heal quicker if we do our job (banks want their money not a house).

- Buyers are people who have a credit rating attached to them and there is a large group out there that needs seller financing because for some reason or another they can’t get traditional financing or would be better off without it).

In a way, we are the safety net of the housing industry, at some point the prices are going to get low enough where it becomes a no brainer and if you’re buying a place because of the low, low price with profit in mind *poof* you’re an investor. You make a considerable sum of money from that deal and you look for the next one.

Warren Buffet is aptly quoted as saying ‘be greedy when others are fearful and fearful when others are greedy.’ This could not be truer for us. It is our responsibility to make ourselves professionals if we choose to work in this field through education, conduct, and action. As long as there is an economy there will be opportunity, as long as there is opportunity there will be investors, and I don’t think we have to worry about the economy disappearing.

*Beginning January 13th MnREIA will be hosting monthly Marketing Training workshops every 2nd Tuesday of the month!*

These workshops are for members only and will provide a great benefit to investors who want to focus on motivated sellers, increase the effectiveness of their marketing, and work as a group to brainstorm and interpret results.

Please RSVP by emailing ryan@mnreia.com and to help me help you. Write me a little something about your marketing efforts, what you think you need help in, and what you are interested in focusing on so I get a good idea what you guys are looking for and then I can really make the most of our time.

Go team MnREIA!

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MNREIA.COM (Minnesota Real Estate Investors Association, Inc.) does not give legal, tax, economic, or investment advice. MNREIA disclaims all liability for the action or inaction taken or not taken as a result of communications from or to its members, officers, directors, employees and contractors. Each person should consult their own counsel, accountant and other advisors as to legal, tax, economic, investment, and related matters concerning Real Estate and other investments.