Starting a real estate business involves many challenges. Whether you’re new to this industry or have recently decided to fly solo, you might have discovered that what seemed simple on the surface isn’t so much after all. For that reason, at Real Estate IQ, we asked Martin Chera – the owner of Express Capital Financing, lender, and expert in real estate – what are the things that can’t be missing when running a real estate business. His answer consisted of a S.A.S. strategy: structure, analyze, strategize.
There are many opportunities for investors to make money for the next one to five years. But no deal is going to knock on your door and say, “Hey, buy me; you’re going to make 100 grand.” You need a pipeline of deals coming to you, and you have to stick to a plan.
Martin Chera, owner of Express Capital Financing
He explained at Real Estate IQ’s webinar “S.A.S. (Structure, Analysis, Strategy). The 3 effective investing strategies for maximizing your profits” that the pandemic left some consequences in the real estate industry. On the one hand, there are 376 million people in foreclosures, which will be an immense opportunity once the moratory is over. On the other hand, the market is hot: there’s a housing shortage that’s increasing the prices, and at the same time, people working from home are looking for cheaper and bigger places to live.
“The philosophy behind this approach is that the safest and best way to get the highest return on investment is using other people’s money,” explained Chera. But to do that, you need to follow this three musts.
The first S in S.A.S. belongs to structure and is related to financing and organization. In Chera’s opinion, the first thing to do is build the legal foundation of the business (i.e., creating an LLC) and put together a team. In order to do that, you should find the following members:
- Realtors: they will help you to understand values and the market, and they’ll be in charge of buying and selling properties.
- Lenders: they’ll materialize the philosophy mentioned before, plus they’ll be a second pair of eyes to make sure you’re profitable.
- Wholesalers: these are the guys who help you locate deals, and if you can’t work full time on your real estate business, this is the best way to find a property.
- Contractors: they’ll get the work done for you.
- Permit expediters: they have significant expertise if you find yourself in need of specific permits.
- Attorneys: they’ll offer legal guidance and contracts. Try to have a few with different specializations and pick the ones that have a flat fee.
- Title companies: they’ll ensure a clear and equitable title and search for liens and encumbrances.
- Insurance agents: they’re in charge of ensuring your properties with low risk.
- Other types of investors: be sure to surround yourself with them. They have the experience to guide you.
There are many ways to find your team: open houses, referrals, online sources like Zillow, courts and auctions, social media, and above all, networking events and webinars. “Don’t be afraid of networking because it’s an opportunity to grow your business. And that’s what’s all about,” assured the speaker.
The A in S.A.S. is for analysis. Besides having a structure, you need to know your industry. This means analyzing not only market trends (to know, for instance, if you are working in a seller’s, renter’s, or flip market) but also your deals. In addition, it’s essential to learn about details that could affect the property value, like industries nearby, the population, and if the area was struggling before or was affected by the Covid crisis.
“You should look out for places with strong population and economic growth mixed with affordable housing, and avoid areas that were struggling before or have been affected by the pandemic. Look for opportunities in resilient markets where home values are stable,” summarized the lender. In addition, he detailed the top markets for real estate right now: Austin, Houston, San Antonio, and Dallas-FWT – all these in Texas –, Orlando, Tampa, and Fort Lauderdale – in Florida –, and Atlanta, Georgia. Did you know that Real Estate IQ’s products are available in all the top areas?
And it’s the turn to explain the last word of the S.A.S. strategy. Chera warned that it’s critical to decide what your investment plan is going to be. If you have neither experience nor liquidity, wholesaling might be the right one because you only need a small amount of money to start. If you have 10 to 20% down to do a deal, then you can do a fix and flip. And if you have a nice amount of money, you choose among the strategies we mentioned, plus buy and hold or BRRRR.
“Bottom line, you need to make sure your deal works. Remember: numbers don’t lie; only emotions do. So stick to a plan, don’t rush into any deals, and have products like the ones offered by Real Estate IQ to receive information daily. After all, you got to spend money to make money”, concluded Chera.