Out of theory and into practice

The last couple years I have spent finishing my bachelors degree, I also have spent on developing myself into an entrepreneur. I have been reading everything I could get my hands on about everything from real estate investing, to business start-up guides. In a very school-like manner, I would spend entire nights engulfed in material and developing a couple of plans to use to support myself after school is done.

That time is here. With mere days until I am finished with college, I now understand that school is not simply a time to learn about a subject so I can find a career in that field. College is a time to learn about life, love, loss and purpose. Having figured out my purpose on this earth is to help people, I have developed a real estate investment company, as well as a promotions company as my vehicles to assist people.

Now the time has come, where I am retiring from formal education, and the massive brain dump I have been engaged in over the last few years. I now shift my efforts to the practical application of that which I have been studying. I have been waiting for this moment for quite some time, and now I seek to accomplish greater goals.

My school days are numbered!

My college career has spanned six years, four colleges, and two states. At this point, being 25 years of age, I am grateful to have had the opportunity to take the time necessary to get me to this point. I am paving a road for generations to come while developing the life I truly desire. I am aware of, excited about, and grateful for my life's purpose, which is to help others.

With mere weeks to go before graduation, I have been aching to focus my time on real estate, but have been developing my skills as a photographer, graphic artist, and entrepreneur. Upon graduation I am not going to enter the workforce, but I will simply be an investor and entrepreneur. Real estate investing will support my lifestyle and retirement, and allow time to work on my other entrepreneurial endeavors.

This blog is one portion of my entrepreneurial life, which I have been neglecting. It is difficult for me to set aside the required time to explain my trials and tribulations, but I am compelled to offer my experiences to assist others in their entrepreneurial endeavors.

Asset Protection

Not a subject that I have contemplated too much, as I have been focusing on the nuts and bolts of Real Estate. Now that I have completed my first two deals, I have been taking a small break to work on other ventures and prepare myself for this life of entrepreneurship I will embark upon after school ends in three months.

I am seeking to obtain a layer of protection between myself and my companies. This is going to be another entity which essentially is me. The question I am stuck on is what type of entity it is that would best protect me.

First, there is the LLC. The LLC does not allow liability to flow either way from company to owner or from owner to company. This can prove beneficial when working with millions of dollars of real estate. My overall real estate investing company is an LLC, and serves great for buy and hold properties. We are going to hold only 3 houses in each LLC, and create a new entity every fourth property we obtain. This protects us, because liability does not flow from entity to entity.

Since my real estate investment company is an LLC, we do not really have a way to flip or wholesale multiple houses without facing a serious tax consequence, personally. Here is where I am thinking about starting a C-Corporation for myself personally that can be set up as a brokerage, and handle the taxes as its own entity, and have an exit strategy for quick flip properties.

Now, my problem with this idea is that if I am personally sued, stock of any company which I own can be given as an award. This would mean that I could be sued and lose my company and whatever it is my company owns. This makes me a bit uneasy, as I would like to limit my liability affecting my companies.

What I am seeking out now is whether or not I can develop an LLC which is able to have all of the tax benefits I am seeking from the C-Corp. This is going to offer me a buffer between my personal actions and the actions of my company, and hopefully offer a tax benefit to my real estate company, without creating an unwanted personal burden.

As I am going to do early next week, I suggest that anyone who is starting a business should consult with a lawyer and a CPA. All of our needs are different, and there are a variety of solutions, be sure to consult a professional!

Keys to Real Estate Investing

Upon deciding to leave California, my home state, behind and embark on my own life in a new land, I decided I would focus my efforts on becoming self sufficient. I had an associates degree, and figured that if I focus my free time for the two years while I finish up my bachelors on developing an entrepreneurial plan, I would be able to live my life without ever having to work for another person again. Growing up in California showed me what living outside your means is like, what focused passion can do, and how powerful real estate can be, although my family did not profit greatly from this last boom. I knew that real estate was to play a major role in my path to success, and began researching real estate investing immediately upon my move.

I am going to explain some of the major keys I feel have played an integral role in helping me get to where I am now, with two deals under my belt and my sights set on 20 deals in 2007.

1. Network with local real estate investors. This has single handedly been the most helpful piece of advice that I have followed. I am a part of two real estate investment companies, partnering with multiple other investors who share the same goals as I do. To find real estate meetings near you, check out http://www.reiclub.com/real-estate-clubs.php

2. Developing a team. Just as linking multiple batteries together generates more power, linking brains toward a common goal creates more brain power. Also, if you are the smartest person on your team, your team is in trouble, and that your team is only as strong as your weakest link. Teams should be united from their common goals, values and different knowledge backgrounds.

3. Understand your local market. From the median house price, to the differences in neighborhoods; what someone can expect to pay for a newly developed home on a monthly basis, as well as the larger real estate cycle between strong and weak times for your particular market. All great sales people must intimately know their product, we are no different.

4. Develop and follow your particular strategy: Different market timings and fluctuations can call for slightly different procedures, but you must have an overall focus or strategy. This allows you to have something to reflect upon and measure your success towards that strategy. My strategy focuses on long term wealth, cash flow and short term income. This meets both my specific needs and the current local market conditions, you need to figure out what is best for you.

5. It is a numbers game. Once you have focused in on your segment of the market you are targeting, one must stir up as much traffic as possible. The more "No's" you hear, the closer you are to a "Yes." Many suggest one can expect to contact 100 owners, to find 10 interested and generally land 1 deal. I aim to land 1 deal per 25 contacts.

Real estate investors are salespeople, and we must acknowledge that. We are selling a service which includes our intimate knowledge of the market, and our ability to create win/win situations through alternative means. The more seriously we take our positions as investors offering a valuable service, the more valuable our service becomes.

My current real estate investing set-back

Upon return from my vacation a week and a half ago, my vehicle was pronounced dead upon my arrival home. The battery had died, set off an alarm I was unaware existed, which activated an ignition kill system I could not bypass. Well, I ended up bypassing the alarm when I arc'd the battery with the fender, and shorted out the electrical system. Awesome, vehicle would start now! Welllllll, not quite. The arc welding experiment also took out my alternator which I have now replaced twice, and the vehicle is still not charging. Finally, I took the vehicle to a shop this morning. I am going to let them deal with it as my time is more valuable focusing on real estate.

I illustrate this frustrating episode of my life to illustrate one of the many problems one runs into when embarking on their own. Desire, as I briefly touched on two posts ago serves to aid one in enduring these types of problems. Any self made individual has endured countless hurdles, heart aches, and losses. It is inevitable. Successful people are the ones who never give up. Perseverance leads us to those breakthroughs that make us into stronger and more educated people.

I have been very frustrated recently due to my lack of transportation, but simply see this as the necessary step back before I move forward towards my goals. Just as an up trending stock has its ups and downs, our paths to success will similarly have theirs as well. We just have to keep ourselves focused in the right direction and ride out all of the struggles we endure... Pretty sure we can all get rich someday.

My current real estate investing strategy

Here it goes... a little bit of the bean spillage for my non-existent readership. While the interest rate has yet to make any significant moves, the housing industry as a whole is slowing. The bubble may or may not be bursting, but we have reached a plateau, or shift in the real estate cycle. Prices are being reduced, inventory is not moving as quickly, and real estate investing itself has become significantly more trendy creating more competition in the marketplace.

First, I would like to make sure everyone is excited about this! One of my investment partners said he has been waiting for 5 years for the market to make its way back to this point. This is a great time for investors as long as you have a solid investing strategy, and I feel that my current strategy is pretty damn good.

That being said, lets look at the strategy. There are two specific sides to this strategy, one to build capital and the other to build wealth. One fear of mine is to become real estate rich, but cash poor, so we developed a two channel system. Accompanying a buy and hold strategy with a wholesaling strategy has offered us the diversity to overcome this fear. The buy and hold deals will offer us long term (3-5+ years) cash flow and equity while the wholesale deals will offer short term cash gain (2-6 months).

This particular buy and hold strategy focuses on situations where the seller offers us financing and keeps the current mortgage in tact. We, in essence, assume the loan by negotiating a cash out price for the seller, and pay their mortgage through escrow monthly. Our exit strategy is to offer these properties as lease to own opportunities to families who may not have the credit necessary to obtain conventional financing. Being able to avoid the banks due on sale clause allows my company to purchase houses with minimal cash out of pocket and without the use of our own credit, allowing us to repeat the process indefinitely without problems. Our minimum requirements for these types of deals are less than $10,000 out of pocket and a minimum of 100$ cash flow per month. Wash, rinse, repeat.

Simultaneously, with the deals that don't particularly match up with our strategy, we have the option of wholesaling these properties. This essentially means that when I find a fixer-upper, or other distressed property that I am not interested in investing in myself, I am able to take this property under contract and sell or assign that contract to another investor who is interested in the deal. We have also been known to purchase these types of properties outright and reselling them to investors in certain situations. I am not a contractor, don't like to physically work on houses, so I use wholesaling to help other investors who may not like the business side of things.

As this stream of consciousness runs through my fingertips and onto my journal, I cannot help but feel I am being too vague. For this, I would like to apologize and reassure you that I will continue to explain, in greater detail, these systems as I personally work through them. Also, you must realize that investing in real estate is similar to playing a musical instrument. The more chords, riffs, or chops you know, the better a musician you will be, and similarly, the more strategies you know in investing, the more opportunity you have.

The entrepreneurial mindset

Looking back over the title, I may have bitten off a bit more than I can chew, but considering this is my journal, I am going to break it down how I have come to know it. All of my businesses will be extensions of myself in one way shape or form, therefore it is my mindset that truly decides the outcome. In what I sought out as a shortcut to retirement, it seems that I have embarked on a long journey through my socio-economic life.

As opposed to trading my time to another entity in exchange of money, I am choosing to directly apply my time to generating and investing money. In every community, large or small there is a sea of money. In metropolitan areas, there are oceans of money just waiting to be tapped into in some new creative or unique fashion. I have friends who are very talented artists, musicians, and action sport athletes. I am building a promotions company to assist them in this process while developing a brand for a clothing line. I am an avid snowboarder and have dreams of snowboarding internationally in countries such as Japan, New Zealand, South Africa, etc. I recently purchased the domain name snowboardbums.com, and leave tomorrow for a 2 day business trip in Colorado. Write off a mid-week boarding trip? Ummmmm.... shure. I will be developing a self moderating community for snowboarders on that website, and continue to take business trips to powder filled destinations. Another example is this blog, and getrichsomeday.com. These are all simple ideas that I have developed through my free time and hobbies which will be turned into large, prosperous companies over time. I will personally see to the creation and success of these ideas.

This is an example of how I have experienced the entrepreneurial mindset. It seems to revolve around offering value with your time. By offering a valuable item or service to someone, they will gladly pay. Within an entrepreneurial mindset one is constantly refining the processes in which they currently use to bring value to the market place as well as developing new ones. Fuel this mindset with a burning desire to succeed, and you are only limited by your own imagination.