There are other referral services out there. Some are good, some not so good.  The business models vary, but a typical scenario looks like this:

1. Realtors are mass emailed — email subject might read, “Business Suffering? Contact Us!!” When the Realtor visits their site, he or she is offered membership for a monthly fee or a set number of leads from their lead generation system for a lump sum payment.

2. Company advertises for leads — interested buyers and sellers who may be out shopping sites provide their information to say, a mortgage site. Their information is passed along to the Realtor.  Alternatively, a prospective homebuyer may be searching a site for listings of homes for sale. Before the homebuyer is able to access the listings, he or she is prompted to enter their name, email address, phone number, etc. This information is passed along to the Realtor as a “lead.”

There are several issues as you may have already deduced. Most importantly, the Realtor in this scenario has not been screened. He or she is more likely to NOT be a top Realtor (again using the example, not speaking of any particular service). Top Realtors are building relationships and networking with their sphere of influence. One of the activities they use to do this is meeting other top Realtors around the country for the purpose of gaining referrals to qualified clients — one of the best sources of business there is.

OK so you have decided that your investing goals are. Congratulations! You have gotten further than most just by doing that. The next thing you need to do is start building your network.

Huh? But what about the houses, the foreclosures, the deals… ? No, I said build your network. What network? The network you are going to need to be successful investing in real estate. This will eventually include other investors, realtors, attorneys, lenders,  financial partners, handymen, contractors, and lawn care providers to name a few, but let’s not get overwhelmed right away.

I would start by doing two things:

1. Find your local Real Estate Investing Association (REIA, commonly pronounced “Ree-uh”) and start going to the meetings. When you go, get there early and stay late and ask questions of the people who seem to be the most knowledgeable.

2. Find investor-friendly realtors and begin to develop relationships with them. You can find out who they are by asking around, especially at the local REIA meetings and also by searching online. The key here is to find multiple realtors who are willing to work with you, explain the local market and eventually assist you with purchases. Don’t overanalyze who the perfect realtor might be; start now by finding one who appears to be active in the local market and calling. If he or she is not friendly and/or willing to talk, go on to the next one. Remember, you are looking for a few partnerships with solid people who are willing to work with you in your quest to find good investment properties. Start by asking any questions about the local market that you can think of along with any questions you might have about any investing strategies you may want to try. Remember that many realtors are also real estate investors and have a wealth of knowledge about what may or may not work in your market.

Next Issue — OK, I am building my network. Now what?

I would say the basics are:

1. Website — you need to do that to have credibility. There are a lot of template sites out there you can use to get started or you can get someone to design your site relatively inexpensively.
2. Facebook — you are already learning why this is of value. I make a point to post on here regularly; and don’t just post real estate stuff. Post whatever you are interested in — “having fun watching the grandkids!” Over time, people get to know you and feel comfortable with you.
3. Twitter — I use Twitter to meet new people. Then once I start to talk to them, I use Facebook to get to know them better. I met someone on Twitter awhile back, then got to know her better on Facebook, and now I am sending her referrals. I met another person on Twitter who is a very successful businesswoman and mother of 6 young kids who is now coaching me on how she gets it all done.
4. Blog — www.wordpress.com. It’s free and easy to get up and running. In fact, some people have their blogs set up to be their main web presence. You could consider that. Don’t let the blogging overwhelm you. Before long you will be writing content that will make for excellent blog posts. Like I am going to take this message I am writing to you right now and post it on my blog (without your name of course).

The most important thing is to not get overwhelmed. Take baby steps. Maybe set a target to post 5 times on Facebook tomorrow and find one new person to become friends with. Then the next day, do the same thing and maybe set up a Twitter account, and so on. I think you will find that it is fun and it’s exhilarating when you are on Facebook just chatting with a friend and you get a message from someone who needs help in real estate. It feels like you are getting business just for having fun online.

Let me know what you want to try next and I will help you as much as I can.

Dear Matt,

“I’m looking into trying some real estate investing.  I thought I’d see if you had any recommendations on websites, books, etc… to take a look at. I’ve been reading some about wholesaling (just selling the contract) since it seems the lowest risk and no money down but the speed of how fast you have to move worries me. I am looking to start in N Virginia.”

My answer:

Wholesaling can be an awesome business and it is a great way to start your real estate investing career.  If you can learn how to find deals, you can apply it to everything else there is to do in real estate. You make your money when you buy — that’s deal finding.
Be ready to look at ugly houses and find rehabbers that want to rehab them!!! Your concern about how fast you have to move is valid, but there are ways around that. The best one is to find some rehabbers in your area that you plan to sell your deals to before you go find your deals. Then you have the end buyer before you go under contract. Also, you will want to write your contracts so that you have an out…. “subject to the approval of my end buyer”.
I would encourage you to start to develop relationships with other investors and realtors and to sign up for conference calls, webinars, go to investment group meetings, etc… the amount of FREE or relatively really inexpensive information there is available is staggering! Almost every real estate investment guru has a free monthly (or even more frequent) conference call you can get on just by signing up for their email mailing list.

When you say N. Virginia, do you mean DC area or where specifically? I would like to find you an investment specialist realtor in the area I can refer you to.

Here are some investment gurus:

Than Merrill — star of TV show “Flip This House” http://www.fortunebuilders.com/ Than will actually be in Charlotte this month at the investment group meeting http://www.metrolinareia.org/ClubPortal/ClubStatic.cfm?clubID=1396&pubmenuoptID=14398 which is an awesome opportunity ($15 admission for nonmembers, but if you join a REIA even where you are now you can get in free). He is a rehabber/wholesaler which means he is an expert at finding deals.

Robyn Thompson — http://www.robynthompson.com/ “The Queen of Rehab” her info is excellent. She is also a rehabber and works with many wholesalers who find deals for her.

Well, that’s a start… let me know your questions and what specific part of VA you are talking about. Real estate markets are very localized so you will want to work with realtors who know your area. I will help you with that.

Interest rates, while rising at the time of this writing, are still at historical lows. The economy is struggling and the government is offering an $8000 incentive for first time homebuyers (defined as anyone who has not owned a home in the last 3 years). They know what we know — revitalizing the housing market is the key to jump starting the economy. The market is flooded with homes that sellers need to sell.

In a lot of ways we paralyze ourselves into inaction in times like these.. your mind goes crazy with all these “what if’s.” The thing is that’s the same mind that will ask you 20 years from now why you didn’t buy…if only I’da bought a couple of homes back in the crash of 2007-20xx!!!

What are you waiting for? Turn off the TV, stop listening to the gloom and doom from the media, find a realtor and get out there and BUY. In my humble opinion, the media does a tremendous disservice during times like these by reporting the gloom and doom. If all you hear is about how all these people are losing their jobs, you start fearing losing your job. You think you need this fear so that you can stay safe, but nothing could be further from the truth. The Law of Attraction says basically that you will attract into your life what you think about. Today, it’s more commonly stated that ”you get what you focus on.” So, if you sit around worrying about losing your job, guess what? Conversely, if you learn to think prosperity thoughts, you will attract prosperity into your life. So, I recommend my approach — don’t listen to the gloom and doom. Turn the TV off. If something happens that you really need to know, don’t worry; someone will tell you.

The truth is that opportunity is always EVERYWHERE. There are ALWAYS two sides to the coin. A job loss in one location creates an opportunity somewhere else. A person that loses job X is freed up for opportunity Y. For there to be bad there HAS to be good. Otherwise there would be no such thing… You think that people get wealthy when times are good during the “booms”. The truth is the wealth builders are joyously working OVERTIME right now. While the general public is watching the news, lamenting the decline of the stock market and fearing job loss, the wealth builders are out shopping. That’s because the WHOLE COUNTRY is on sale — it’s not just real estate. And, you make your money when you buy, not when you sell.

You can too. If the concept of building wealth is a bit much for you right now, start small — simply go out and buy a home that will appreciate in value and provide a great place to live and a sizeable chunk of cash when you sell in the future. Take part in fixing the economy by putting money into circulation and attracting the abundance that you are entitled to IF you take action…

OK, so let yourself fast forward to 21 years from now:

So you are on your way to work talking to the guy next to you about what coulda been…. “if I’d just bought a few rental houses back in 2009 when the market tanked.”

He responds with, “yeah I even had a realtor friend of mine tell me this was going to happen and offer to help me buy some properties.” You could buy a nice house for under $100,000 then. There were deals everywhere!”

Your conversation progresses to how there used to be something called social security that would at least pay for food but that’s now gone.

“I saw that coming too. You know, come to think of it, I was too busy complaining about how my 401K had lost all it’s value. What I should have been doing is realizing that the WHOLE COUNTRY was on sale and used the resources I did have to secure my future. Buying houses in a growing area like Charlotte would have been the perfect strategy.”

“If we’d just bought a few houses we wouldn’t have to work anymore!” You chime in unison. Ah well, “if only ida”… and then you continue on to work…

For the purposes of this discussion, we will assume that the person has good credit but little or no funds available for a down payment.  If the person has no money and bad credit, there is no other option except to allow them to rent (maybe).

In my mind there are several options:

1. Allow the person to owner finance without a down payment or with very little down payment at the time of purchase, but with a higher interest rate until a down payment is made. Currently, there is an $8000 tax credit that the buyer will collect when they file their taxes, so that is one possible source of revenue to help. There are also currently rumblings of the tax credit being able to be used as a down payment, but the mechanics of that are still uncertain.

2. Lease with an option to buy with a low option fee. This assumes that the buyer can come up with SOME funds; I would say at least 1% of the purchase price. So, if the property is to be sold for $140,000 then the option fee would be $1400.  This allows the buyer to begin a relationship with you as the seller and opens up more possibilities for the future.

3. Rent the property to the potential buyer while leaving open the option of converting to a lease with option or an owner finance in the future when the buyer has funds available to do so.

In the current market, sellers need to be flexible but as always, due diligence and risk management are key. There are numerous opportunities to create win-win situations with great people and families who will make great buyers but simply cannot secure bank financing in the current market.