8/31/14: The One Skill that Solves Every Problem

If there were only ONE skill you could have…the one that would help you overcome nearly every problem and get everything you want or need out of life…what would it be? Sales skill is the key which unlocks opportunity in life

That’s the topic of this edition of The Real Estate Guys™ radio show!

In the studio, to contemplate this curious question…

  • Your skillful host, Robert Helms
  • His problematic co-host, Russell Gray
  • The Godfather of Real Estate, Bob Helms

Our good friend, mentor and uber-successful real estate investor, Ken McElroy, says, “Sales solves every problem”.

At the time, he was talking about revenue being the answer to every business problem.  After all, when you have revenue, you can pay for all the rest of the help you might need.

But it got us thinking.  His statement is far bigger and more universal than simply making money.

In fact, most people only work at making money so they can use the money to do something else they’d rather be doing.  That’s a little sad, though very common.  But that’s a topic for another day.

Meanwhile, consider how sales skills translates into non-business areas of your life.

If you’ve ever tried to win the heart of the special guy or gal, or convince a headstrong child to make better choices in life, or simply want to win the debate about where to go on vacation this year…you’ve been using sales skills.

And if things aren’t going your way more often than not, it’s most likely because your sales skills need some attention.

We talk to LOTS of real estate investors.  Everyone wants to know the magic formula for picking the a great market, doing the best deal analysis, what kind of financing to use, or what returns to offer a prospective investor.

Sometimes our answer is a little rote…and irritating.  Because we always say, “It depends.”

That’s because life is a customized game.  It’s all about choices.

Better stated, it’s about applying customized solutions to very personal problems.  There is no “one-size-fits-all” answer.

The core skill of master salesmanship is asking the right questionsAnd the key to finding the unique solution to a particular problem is to master the art of asking great questions.

That is the core skill of master salesmanship.  Learn to ask great questions.

Think about it.

As real estate investors, we’re constantly negotiating with buyers and sellers, vendors and lenders, tenants and neighbors, partners and investors…and the list goes on and on.

It’s non-stop negotiating.

But isn’t negotiating simply finding out what the other party wants and is willing to do, and matching it up against what you want and what you’re willing to do?

Once you find some common ground you focus on it and build out from there.

When you get good at this (which is salesmanship), you can attract every other resource you need into your life.

And while we love the idea of educating, delegating and motivating to do more through other people, isn’t sales the core skill you use to build and lead a team?Skills take chance out of the equation and help you produce consistent, predictable results

So just like exercising,  you really can’t hire someone to do it for you.  If you want to have more in your life and business, then make it a priority to develop and practice sales skills.

Because if there is a magic formula to success, sales skills are it!

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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources that help real estate investors succeed.

8/10/14: Ask The Guys – Getting Started, Using Leverage and Strategic Default

One our favorite things to do is answer listener questions!  And as the show grows (now up 3.5 million downloads!) we get lots of them.

So we asked our email room manager Walter to send us a stack of emails and we picked some fun questions to talk about for this edition of Ask The Guys!

In the studio for another episode of powerful pontifications:

  • Your brainiac host, Robert Helms
  • His brainless co-host, Russell Gray
  • The oldest brain in the business, The Godfather of Real Estate, Bob Helms

How to get started as a real estate investor is…by FAR…the most popular question we get.  But there are always variations on the theme.

This one is about…

Finding a Mentor

In this episode, a listener wants to know how to persuade an experienced investor / developer to mentor him.  Now that’s a GREAT question!

Of course, this isn’t really an investing question.  It’s a sales question.  And that brings up the whole topic of sales as an essential skill for everyone…including real estate investors.

Sadly, many people consider sales simply as a vocation…and not a very noble one at that.

They think just as some people know how to cook, do carpentry, perform brain surgery, or program computers…that salesmanship is simply something people do to make a living.

Wrong.

Salesmanship is a LIFE skill.  Like reading, writing, arithmetic, budgeting and tying your shoes.

In other words, EVERYONE needs to know how to do it.

Think about it.  If you’ve ever tried to get a job, win a lover, negotiate a good deal on a car, ask for a raise or promotion, etc….you’ve been using salesmanship.  And the better you are at it, the more good things you can attract into your life.

Okay…off the soapbox…

So in this case, the answer to getting into a relationship where someone who doesn’t need your money (that is, you can’t pay them to mentor you even if you could afford it), is to uncover some unmet need, want or desire.  This requires asking good questions and listening carefully.

Most inexperienced people will go in talking…pitching all the features of whatever they’re offering.  Or worse, they lead with their own needs…like a beggar.  Ugh.

Don’t be that guy or gal. Look for things that you can do to help your prospective mentor, investor, lender, seller, employee, partner, vendor…and then negotiate a relationship where you exchange benefit for benefit.

We know.  It sounds so simply and obvious.  But watch the people around you.  Most do not do this consistently or effectively.  So they don’t attract as much into their lives as they could or would like to.

Using Leverage…

In case you hadn’t noticed, equity happened to a lot of folks smart enough to acquire properties when everyone else was scattering like cockroaches.

So a question came in about what do with the equity…leave it, reposition it, or sequester it?

Another GREAT question!

So we dusted off some of our old equity optimization strategies and shared some thoughts.

First, it’s important to remember that equity is wealth on paper.  It’s based on a differential between the market value and the loan balance.

The challenge is that market values can change, and because the loan balance doesn’t change, when it comes to equity, the market giveth and the market taketh away.

Unless you beat the market to it.Cash out refinancing cen be used to reclaim equity before the a market down turn takes it away.

If you don’t like the future prospects of the particular property or local market, you may decide to sell the appreciated property and 1031 exchange the equity into a more promising market and property.

But if you still like the current property, you may decide to reposition the equity by refinancing the existing property and using the proceeds to purchase another property.

Of course, the downside of this is that you potentially negatively impact your cash flow.  Usually, a bigger loan means bigger payments (unless you replace a higher rate loan with a lower rate loan).

But if the property’s income has increased, your net cash flow may end up being the same.

And if the new property cash flows at a rate higher than the cost of the loan on the first property, you could create positive cash flow on the loan proceeds.  That is, if you take $100,000 out at a 5% rate, your cost of funds is $5,000 per year (deductible).

So if you invest the proceeds in a new property that returns 10% cash-0n-cash, you have $10,000 per year coming in.  You just created a positive spread of $5,000 a year.  Nice!

Meanwhile, you own more real estate.  And if values keep going up, then appreciation occurs over a larger base.  That is, 5 % appreciation on $1 million in property is $50,000.  While 5% appreciation on $200,000 in property is only $20,000.

Of course, there’s a dark side…

Your equity is thinner.  After all, $50,000 of equity on a $100,000 portfolio means you have 50% equity.  But $50,000 of equity on $500,000 of property means you only have 10% equity.

So if the market pulls back, you could end up underwater.  A LOT of that happened in 2008.Is strategic default the best answer when a property is underwater?

Of course, if you have good cash flow, and plan to hold long term, it really doesn’t matter.  You simply wait.

Even if the market NEVER recovers, eventually the properties are paid off.  And no matter what the pricing structure, in any economy, paid off properties are nice to have.

If there’s concern about the cash flows on real estate, you might use harvested equity to invest in some other cash flow instrument or investment.

Even though we aren’t fans of being a creditor in a falling dollar world, if you’re using loan proceeds from property A to make a higher interest loan to on a property with a lot of protective equity (i.e., a $100,000 loan on a property worth $200,000), it can still make sense.

Let’s say you borrow $100,000 at 5% and loan it back out at 10%.  You just created $5,000 positive cash flow with less exposure to falling values.

So if the market drops 20%, you have negative equity on the first property with the cheap loan, but you have positive protective equity securing your loan to the borrower on property B ($200,000 less 20% decline means the property is only worth $160,000).

Now if the borrower defaults,  you foreclose and own a positive equity property.

There are other variations, but you get the idea.

As long as there are better things you can do with your real estate equity than leave it in the property, and it only costs you a modest interest rate and some fees to extract it, it can be a very powerful tool to accelerate your cash flow and equity growth.

However, if you have negative equity AND negative cash flow, you might decide that it’s not worth writing a check each month from other resources simply to save your credit score or hold on to a property you’ve lost faith in…which brings up another question about…

Strategic Default

We had a great question come in from a guy with a nice home in the Phoenix area.  It’s underwater and he can’t rent it out for enough to cover the mortgage and expenses.  Ouch.

So he’s trying to decide if just handing the lender the keys (deed in lieu of foreclosure) might be worth it.

A deed in lieu is a form of strategic default where you simply turn over the keys and deed in lieu of a foreclosure.He’s got a non-recourse loan so the lender can’t ask for anything else besides the house.  So his personal assets are safe.  That’s good.

BUT…it means a big hit to his credit score.

However, he says he hasn’t really used his credit score for anything for nearly 9 years, and he knows that it will heal itself over time, so why not just take the hit and get out from underneath the negative cash flow?

Another great question!  Though not exactly the way he asked it…

He’s looking for reasons to walk away from the property.  Emotionally, he’s done.

We, on the other hand, see the value in a high credit score, and would like to see him keep the property if possible.

Why?

First, about the property…

It’s a very nice executive home in one of the top retirement metros in the U.S.  And last time we looked, over 11,000 baby boomers are retiring EVERY day.  AND…they’re looking for big city amenities at a more affordable price.

In fact, if only 5% of the 11,000 boomers retiring every day want warm weather, big big city amenities, and quality infrastructure (travel, shopping, health care, entertainment, open space, golf, etc…), that’s 550 people each day who may choose a place like Phoenix.

So even though there’s a glut of properties on the market in his neighborhood right now, that probably won’t last forever.

Next, we know the Fed and the government are doing everything they can to prop up the value of homes.  There’s an old saying in investing – Don’t fight the Fed.  You might disagree with their policies, but they’re inflating real estate anyway.

Also, remember that prices fell because of de-leveraging when the mortgage industry imploded.  But recent headlines tell us lending is loosening up…especially at the higher end of the market.

So we think there’s a good chance more purchasing power is headed into his property niche.  That’s positive for long term values.

Also, he’s got a good loan on the property.  Good loans are nice to have.  Especially in an inflationary environment.  Every dollar in debt gets to be paid back with a dollar of lesser value.  Borrowers win when inflation is present.

Second, about his credit score…

Banks are loosening guidelines right now because they want to make loans.  They’re trying to attract borrowers.  But not on the low end.  They want good credit scores, solid balance sheets and documentable income.

This guy has all three.

So, his credit score is valuable asset because he can get his hands on cheap capital. And he can make money with cheap capital.

In fact, he can probably very easily make enough money with just his credit score that he could more than make up the negative cash flow on the underwater property.

But, you say, doesn’t that put his credit score at risk?

Yes.  But he’s already decided he’s willing to throw it away.  So why not go for it?  As long as the future deals are all set up non-recourse, the only thing at risk is the credit score.

And the only thing missing is knowledge about how to do it.

The point here is that before you get emotional and simply throw in the towel, it’s important to explore ALL the options.  And when your focus is on how to make profit versus simply cut losses, a whole new world of opportunities open up to your imagination.

So listen in to yet another imaginative episode of Ask The Guys!

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10/6/13: Tom Hopkins – A Legend Shares Wisdom on Investing, Sales and Life

Tom Hopkins of Tom Hopkins International - Master Sales Training and Author of How to Master the Art of SellingWe all have people who’ve made a big difference in our lives.  Sometimes they’re people around you.  Other times, it’s a someone “out there” – an author, speaker, talk show host (hey, we can dream), or even a politician (okay, that’s REALLY pushing it).  But you get the idea.

For us, Tom Hopkins is a guy we really didn’t know personally, but whose ideas made a HUGE impact in our lives.  And that was WAY before we became The Real Estate Guys™.

So you can imagine how excited we were when Tom agreed to be our in-studio guest for a full hour (and then some) of face to face conversation.   And when it was all over, Tom agreed to join the faculty for The Real Estate Guys™ 2014 Investor Summit at Sea™. WOW!  Double prizes!

From the Rich Dad Radio studios in Scottsdale, Arizona for this star-struck episode of The Real Estate Guys™ radio show:

  • Your happy host, Robert Helms
  • His giddy sidekick, Russell Gray
  • A living legend in real estate and sales training, Tom Hopkins

We kick off this episode gushing about the role Tom Hopkins has played in each of our lives.  We’ve been recommending Tom’s signature work, How to Master the Art of Selling, in the Sales and Business section of our Recommended Reading area since we first set up our website.

Now before you tune out because you’re not a salesperson, think again.  EVERYONE is a salesperson.  And everyone is better off for being more skilled in the art of persuasion.

Think about it.  Whether you’re looking for a job, asking for a date, recruiting a team member or negotiating the family budget, if you want to be successful, you’d better be able to persuade the other person.

And in addition to being a legendary sales guru and prolific author, Tom Hopkins is also an avid, lifelong real estate investor.  His perspectives have been shaped over decades of selling real estate, investing in real estate, training real estate professionals and being connected to people at all levels of the real estate industry.

With that kind of resume, it’s a shame we only had Tom for an hour.  But did we mention, he’s agreed to join us for an ENTIRE WEEK on the 2014 Investor Summit at Sea™?  We can’t wait!

Tom reminds us that for sales pros (or anyone wishing to persuade another), the tools of the trade are words.  And the good news is that unlike heavy equipment, computers and power tools, words are FREE.  But that doesn’t mean you don’t need to be diligently trained and practices in their safe and proper use.

Sadly, because the barrier to entry is so low, many people end up in sales who are unskilled with their words.  The result is misunderstandings, ruffled feathers and awkward moments.  Or worse.

On the other hand, because so many people are unskilled with their words, when YOU take the time to master your craft, it’s easier to excel.  And while persuasion is an art, it’s also a skill.  So even people lacking “natural talent” (whatever that is), can become proficient persuaders.

Consider how handy it would be to be skilled when negotiating your next deal, partnership, vendor contract or loan.  The applications for sale skills are endless.

So before you label yourself as “just not a salesperson” or “a natural salesperson”, think long and hard about what it means to be a professional in getting teams built and deals done.  Can you really afford not to be a proficient persuader?  How much more profitable might you be with better skills?

If you’re not already the type of person who invests early and often in your own education and skills, we hope you’ll begin to do so right away.  As Ben Franklin said, “An investment in knowledge pays the best interest.”  Wise words.  No wonder he’s on the hundred dollar bill!

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