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REAL ESTATE The Real Estate Secret Everyone Knows and Ignores

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andviv

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I received this in one of the newsletters I subscribe to. This is part of one of the RE investment groups here in the Washington DC area (http://www.RealEstateCNG.com) and I want to share it here.

So, what's the secret that everyone knows and ignores?

Focus.

I know that people out there are laughing that I would have the audacity to give a lecture on the importance of focus, but I do and I will.

I am not talking about the importance of focusing on only one thing at a time; I'm talking about the importance of market focus. Of identifying a niche, a segment - either geographic or demographic, or both - and becoming an expert in that area.

I see too many investors say, "I'm looking for motivated sellers" and be unwilling to focus on a geographic area. Why? For fear that they will choose "the wrong one" and miss out on deals outside of their area. And then they (predictably) get no results or get results that they can't work with and get frustrated.

When you fly at 30,000 feet, don't be surprised if you can't read the license plates on the ground. When you focus on "everything", don't be surprised if the customers on the ground - the motivated seller who lives in that 3BR rambler in a cul de sac in Fort Washington - somehow don't get hit by your "shotgun" approach.

I once heard it said that, if aliens were using our space exploration and investigation techniques to explore Earth, they would miss the evidence of intelligent life on our planet. Putting aside the jokes about "intelligent life on earth", there is something instructive there. Are you so scattered, so unfocused that you're missing the opportunities that you could have if you were willing to make a commitment and an investment in getting to know an area and a niche?

The riches are in the niches, not in being a generalist. Everyone knows that it's focused energy that creates power - how could you focus MORE and get better results in your business?

Not a sermon, just a thought.
 

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andviv

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hey, I didn't come up with it, I just shared it, but thanks for the rep anyway.

I do understand both sides of this coin.... what if I focus in this area but that is not the ideal one and miss the good action in other area? but the flip side is to focus in an area, become an expert and then move forward to make deals happen. To me this was the most important lesson learned from SteveO's posts back in the RD forum. When he questioned me asking what did I know about the area instead of focusing in the property first then I realized why the shotgun wouldn't work for me. No matter what a great deal the property was, if the area wasn't going to improve then my search for huge returns wouldn't happen. Pick the area first (your niche), then the right property in that area, but only after you know a lot (become an expert) in that area. Or at least that how I see it today.
 

yveskleinsky

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Totally appropriate post for me right now. I have been almost sidetracked by other potential deals, but I have kept my focus on obtaining 5+ cabins. (The other day I found myself driving around an up and coming area of town looking for SFR- like I was on autopilot! I caught myself and thought, "What am I doing here? What is the best thing that could happen?-The best thing would be if I found a great property with a ton of potential at a screamin' price. ...But it doesn't matter, because it's not a part of my plan! After realizing this, I went home and worked on getting my cabin books more organized :) ) ...Sometimes it's hard for me to maintain a focus- especially when I don't see immediate results. After hearing about the importance of focus a million times here it has finally sunk in. I gotta say it has chilled me out a bit too. I was in such a frenzy to take action that I was overwhelming myself with options- which led to enormous amounts of self-induced stress!
 

Diane Kennedy

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Totally appropriate post for me right now. I have been almost sidetracked by other potential deals, but I have kept my focus on obtaining 5+ cabins. (The other day I found myself driving around an up and coming area of town looking for SFR- like I was on autopilot! I caught myself and thought, "What am I doing here? What is the best thing that could happen?-The best thing would be if I found a great property with a ton of potential at a screamin' price. ...But it doesn't matter, because it's not a part of my plan!

I feel your pain. I have exactly the same problem. This morning I told my husband I have three long term projects and was going to limit myself to those. He then asked me about another one - and I said, "Oh, I have FOUR long term projects" They are all offshoots, kindof, of my current business - but now I'm concerned that 4 is too many for me to juggle.

I love the new deal. I love the idea of creating something bigger and that no one has done before, but I also realize that I don't want to take my eye off of TaxLoopholes and DKA (my CPA practice). I stopped doing tax strategies over 3 years and just started doing it again. I can't believe how much I'm enjoying doing them again. (BTW, Russ helped me with that one when he talked in another thread and post about how he sometimes missed working with the high end clients. I realized that it was OKAY to enjoy working in the business sometimes).

But, I know that I need to make choices - if I keep doing the hands on work, I have to limit the new growth stuff.

We have a saying in my house - for everything you add to your "to do" list, something has to go on the "don't do" list. Otherwise, you just work harder and harder and faster and faster...and nobody is happy.
 

AroundTheWorld

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Ditto here. I feel your pain.

This thread should actually be called .... HOW TO SAY NO!!! LOL

Diane,

Great idea about taking one item off the list if you are adding an item to the list.

It can be so hard to stay focused when you see exciting things happening off the path.

A recent example for me was the info given to me about the SFR situation in Denver. Rather then drive my little ol Jetta off the path I decided to say no. That felt HORRIBLE!!!! So I did the next best thing. I told a few other people about it and posted it here. If I help someone else see pick up the opportunity and run then I feel so much better about leaving it.
 

randallg99

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...what if I focus in this area but that is not the ideal one and miss the good action in other area? but the flip side is to focus in an area, become an expert and then move forward to make deals happen...


I have thought about this in great detail periodically... don't worry, will not bore you with my inane inner thinkings...

The other choice to focusing on a niche is not necessarily focusing on bigger schemes, but rather if you are not focused, you are spreading yourself too thin... and spreading too thin means not capitalizing on the opportunities when they arise, or making stupid mistakes, or not fully doing proper DD...

Largest single home builder in NJ told me once: "focus on what you know and do it well"

Those words did not strike me smartly at the time, because in my 20's, I was able to run a couple of businesses, buy real estate, chase chicks, travel the world and make a single day trades that paid 6 months of expenses. The thrill was probably the driving factor but the energy level was constantly high.

In hindsight, I spread myself too thin because I lacked the focus in any single area of developing my wealth.... and in conjunction, my energy level cannot keep up the pace it did when I had many projects going on at once. (before family and more business obligations) ... the actions of taking on too much at once affected me on one of my deals: I never got all of my ducks in a row and I had to run to my bank in the middle of a settlement table to grab another cashiers check because I misunderstood the terms of my financing!!!! luckily, the deal still worked out, but that could have potentially been one of the most royal screw ups of all time...

Now, I remain focused on 4 areas of my wealth building life and I visit each aspect from my desk at least once a week.

come to think of it, I need to seek a new thrill... oh well, so much for focus....
 

andviv

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Correct. That's exactly the idea in the One Trick Pony thread that steveO created some time ago (a classic post, IMO). Now, the idea behind this one is about focusing on a geographic area. Closely related though not exactly the same.
 

AroundTheWorld

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Largest single home builder in NJ told me once: "focus on what you know and do it well"

About 50 years ago, my grandfather bought a hunting cabin. In the years following, it has become a family tradition to spend Thanksgiving there. Over the years, the number of people using the cabin has grown due to marriages, children growing up and starting families, etc.

A few years ago, a sign appeared on the wall. I'm not sure who put it there, but it says:

Know Something
Know it Well
Be Known for Knowing It​

While I theoretically understand the "wisdom" in this, something in me cringes everytime I look at it. I think it is the "say no to work" alarm I have installed in my heart.

This year I am contemplating printing up a sign that says:

Know How to Surround Yourself
With People Who Know It Well

Maybe the answer here for all us over-achievers is to delegate to experts so that we can make our pony go to new places??? This topic is timely - as we are approaching a time when many people are evaluating the year and planning for the year to come. This is certainly a hot topic in our household right now.

  • Do we need more focus?
  • Should we be doing something more?
  • Do we have time/energy to expand into a new area?
  • Will our vehicle get us to the goal as quickly as we would like?
  • What do our choices mean for our quality of life?

More specifically - the hot topic is apartment buildings and if we should go to them now. Our vehicle is developing self-storage ..... but we have - ever since meeting SteveO - been interested in apartments. So, we are asking ourselves... would that spread us too thin? Should we just stick with self-storage?
 

SteveO

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More specifically - the hot topic is apartment buildings and if we should go to them now. Our vehicle is developing self-storage ..... but we have - ever since meeting SteveO - been interested in apartments. So, we are asking ourselves... would that spread us too thin? Should we just stick with self-storage?

There is a fairly simple answer to this. Can the self-storage business take you where you want to go in the time that you want to get there. Your plan should provide this information.
 

AroundTheWorld

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There is a fairly simple answer to this. Can the self-storage business take you where you want to go in the time that you want to get there. Your plan should provide this information.

On a strictly financial answer, this approach sure does provide the simple answer.

The problem is looking for the new challange. Not feeling bored. Saying "no" to the screaming deal.
 

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andviv

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On a strictly financial answer, this approach sure does provide the simple answer.

The problem is looking for the new challange. Not feeling bored. Saying "no" to the screaming deal.

Well, there are two things mixed in here. One is that my investments are the vehicle to reach my financial freedom. That is one view. The other one is what I do that I find challenging and exciting. The 'problem' for you is that both are the same. What if you tackle some projects for the financial aspect only, and the others as your pet projects? Would that make sense?

Then the problem would be another one, how to prioritize which ones to do first, the financial-rewarding first or the interesting ones? What if you do two projects a year that occupy 75% of your time and provide 100% of your targeted income, while the other 25% of time used for projects is dedicated to your challenging ones, without having the need to make them financially successful? just a thought....
 

Russ H

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We have the same problems . . .

In fact, when we met w/Tom Wheelright for DKA's financial coaching, his first advice was "focus, focus, focus" (see, yveskleinsky, you're not the only one!).

We just passed up a screaming deal, after a LOT of due diligence.

Imagine a beach house with panoramic white water views of the Pacific ocean for about half the price of others in the same area. With owner financing:

http://www.bodegabayhomes.com/properties/lucille3060/lucille3060.htm

The house across the street just sold a few months ago for $710K, and its view is somewhat obstructed by the house we were looking at.

They accepted our offer of $440K with only $85K down, owner financing, and a 90 day contingency period, since we needed to figure out if we could fix the place up for less than $300K.

The long and the short of it was, due to some very strange local building requirements (and something called a "waiver prohibition area"), the county would rather see this house crumble into sawdust from dry rot and termites than allow a new one to be built-- OR allow the old one to be completely repaired (the county only allows a small percentage to be repaired every 2 years in this area-- if you're living there, this is no problem at all. But if you have deferred maintenance, it literally means that you fix up a bit, wait 2 years, fix up a bit more, wait *another* 2 years, then finish the repairs.

And in the meantime, you're carrying the loans and the house is not certified as livable.

Oy.

You all know what we do: Rehabs and vacation rentals/B&Bs. We were planning on fixing this place up and renting it to our B&B guests who wanted to spend a day or two at the ocean (there is an absolutely incredible 2 mile long sand beach within 10 min walk of the house).

But when we looked at the numbers, it just didn't pencil out. Not even if we were able to get the WHOLE thing fixed up in the first go 'round.

And that didn't even factor in the fact that pulling permits would be an all-day affair: The county permits dept is about an hour away from where we live, and the jobsite is about 80 min away from where we live.

Contrast that with our current situation: Fixing up the house next door, and having the building dept 3 blocks away.

So we canceled our escrow.

We will probably get a beach house to use as a vacation rental sometime in the future, but not until we're done with the other big projects we have right now.

It really came down to: Which is better- having a really cool beach house where we can escape, or fixing up another house on the block and making hundreds of thousands of dollars?

We picked option #2, and decided to spend some of those thousands renting beach houses in the meantime. :)

-Russ H.
 

liv42dy

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... but I also realize that I don't want to take my eye off of TaxLoopholes and DKA (my CPA practice).

Diane,

I thought DKA turned into ProVision Wealth. Can you elaborate?

----------------------

My situation is a little off-topic as it does not directly pertain to real estate, but I completely understand this on-topic discussion of "Focus". When I started my business of helping filmmakers find funding for their projects, I naively thought the filmmaker was going to have all of their documentation prepared so I could hit the ground running. But the more filmmakers I spoke with, the more blank stares and dropped jaws I encountered as I described to them exactly what I needed, i.e. a comprehensive Business Plan with market and industry research, income projections based on the kind of distributor they were using, and Letters of Intent from key cast members, personnel, and distributors; a Private Placement Memorandum with Subscription Agreement, which meant they had to hire an attorney to help them draft the document and decide on the number of Units and Price Per Unit in their company; and the list goes on.....

Being anxious to get my business off the ground, I decided to help some of these filmmakers put their research and projections together and connect them with an attorney that could help them with a PPM. But I now find myself so stressed about having to constantly breathe down the filmmaker's neck to get their documentation done, that I haven't been able to do what I enjoy most (and what I get paid for)....find investors to fund their film.

On the other hand, I have found a niche in the market. These small filmmakers need help communicating with investors. So now, I have to decide what to focus on: only work with filmmakers who have their documentation in order so that I can immediately find investors, or help to bridge the communication gap between filmmakers and investors.

Fortunately, I have a meeting in a couple of weeks that, I think, will help me decide. A possible three-way joint venture idea....don't want to give away too many details. But, in the meantime, a few of the things on my to-do list will have to wait. And, it's nice to know I'm not the only one with this problem.:smxB:
 

Diane Kennedy

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Diane,

I thought DKA turned into ProVision Wealth. Can you elaborate?

DKA is my CPA firm - stands for D Kennedy & Assoc. I used to have a joint venture agreement with Wheelwright-Mathis, which became DKAdvisors, which became Pro-vision. That agreement ended 12/31/06.

A lot of people that come to my CPA firm for help are just getting started in business and investing. And at the same time, some people are looking for help with very sophisticated business and real estate transactions. It's hard to find just one firm to be great at all the different needs that my diverse community would have. So, we expanded in 2007 to include more firms and set up a training program for all CPAs who would work with our referrals. This new group of CPAs then "graduate" as DKAffiliated CPAs. Wheelwright-Mathis/DKAdvisor/Pro-vision did not want to participate in the training program, and so we no longer work with them.

Boy- is that a long answer to a simple question.

And, there is a lesson in this as well. For me, it's about how to leverage my knowledge and tax strategies so that more people get the benefit (hey, the average savings of someone who works with me is $30K/year) but still are able to maintain high levels of quality control so that prices don't get crazy and service levels stay high.
 

liv42dy

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How can I switch my accounts from Pro-Vision to D Kennedy & Associates? Or rather, is it possible for me to switch my accounts?
 

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