My 10 Immutable Laws of Real Estate Investing

1) The harder a property is to find, the better deal it'll be

I pay a virtual assistant to literally scroll Google Earth satellite imagery all day to find structures that look like RV or mobile home parks, and then cross reference them against Google My Business listings and Reonomy.

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Most investors are far too lazy when it comes to deal sourcing. Setting a Zillow alert or joining a broker's distribution list just won't cut it, unless you're cool with mediocre returns.

Real estate deals routinely net 6-8 figures, so why spend 0 figures on finding them?
 

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If my VA finds a hit then she'll cross reference against tax records and skip trace to find the owner's info.

How often do you think that owner gets called with offers to sell? Exactly.

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2) People don't sell to jerks. Kindness is profitable.

This is less obvious than it seems. These calls with owners are not to sell, it's to learn and compliment them on what they've built.

The more you talk up their asset, the more they'll like you. And the more they like you, the more they will want to sell to you, at a lower price and more creative terms.

Be warm, ask questions and compliment often. If you aren't genuine, then learn to be. This will pay dividends. The same can be said in business.

Jobs, Musk and Bezos make great headlines for being jerk leaders, but don't forget, they're outliers. The best leaders (and RE investors) are kind and patient.

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3) Cash flow is the meal, market rents are the ice cream and appreciation is the cherry on top.

And I NEVER skip dessert. 🙂 I don't buy for appreciation, I buy for cash flow. If or when appreciation happens, it comes as a nice surprise. But when you buy parks in places like Paris, Lufkin, or Colorado City, Texas, you really can't count on appreciation.

Every single park I buy has below average market rents. Bringing rents to market is the easiest lever you'll ever pull, and it's free, too.

If a park is already at market then not only is there little meat left on the bone, but it likely also means that the owner is sophisticated and the other value-add levers won't be available, either.

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4) The more you listen to ramblings, the better price you'll get.

I have ADHD and my achilles heel is talking to people that won't ever get to the point. Or talking to people that use 100 words to say 10. But hey, I need to put that character flaw aside for these convos with sellers.

With every minute you spend listening, the purchase price drops by .01%.

Is that a real statistic? No, I just made it up, but I swear there's an immeasurable correlation in there. Try it for yourself and see.

Yes, it can be disheartening when you spend hours on deals that ultimately fall through, but as you do this more and more you'll learn when to cut bait and when to keep listening.

Some people just want to talk, but their real estate is no good. Don't be afraid to politely get off the phone when it becomes apparent that it's a nice seller, but a bad deal.

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5) Profit is made on the buy, not the sell.

I know you've already heard this one before, but hear me out for a second.

Your projections don't matter. Remember that, your projections don't matter.

Your asset will either underperform or overperform, so be sure to buy at a great price and you'll either win, or win big.

This goes back to #1 above. Yes, you can find good deals listed on the market for God and the whole world to see, but they are much harder to come by.

You've gotta do some digging and put in the work. In my experience, the less value-add you're planning, the less it makes sense to look on the market.

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For example, my buddy @ZeroBasis buys raw land and converts to RV storage. He finds great deals listed on the market all the time, because he's taking raw land and applying a very specific use case to it.

If he were buying raw land in the path of progress to simply build a neighborhood or sit on, then he'd find less good deals on the market because he's competing with more eyeballs.

If you want to buy a safe MHP 6 cap to park your 1031 money inside city limits, and plan to add no value then yeah, look on the market.

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Also, if you make an offer that doesn't make you cringe as you say it, you offered too much. Don't fall in love with a deal because of your sunk cost fallacy. It's a fallacy for a reason.

The time you spent on that wasted deal will compound into your next one.

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6) More eyeballs on vacancies = higher rents.

Why don't more real estate investors understand marketing? You can literally charge more in rent for your asset if you do a better job marketing it.

Imagine a city with 5 MHPs and the market rent is $350/pad. All 5 parks are full and each have 100 units.

4 of the MHPs don't feel a need to advertise since they're full, but MHP #5 wants to push the envelope. First of all, $350 isn't market rent if all 5 parks are full, it's actually much higher.

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MHP #5 spends $20k boosting Facebook listings and on a few billboards. He also installs better, bigger signage.

His inquiries go from 10 per week to 30. He bumps rent to $400/month, stays full, and adds $60k/year to his bottom line.

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At an 8 cap that's half a million dollars in value added to the park, all because he spent $20k on marketing, once.

This of course assumes that tenants are month to month and you're allowed to increase market rents. But you get the point.

In my experience, every $1 spent on marketing a real estate vacancy returns $10 - $40.

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7) Turning down a stupid high offer = choosing to pay a stupid high price.

My grandfather used to say "If someone offers you $1,000 for your shirt and you say no, you just chose to pay $1,000 for that shirt."

Every now and then you'll get a really good offer on a piece of real estate that you own. If it's not a price you would ever pay, and you have a better use for that cash, take it. Especially if your'e adept at finding other off-market assets, 1031 your money into something with more upside and trade up.

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8) Good marketing can't compensate for a bad location.

When I was in college I opened an iPhone repair store. I found a prime piece of retail real estate in the center of town right next to a McDonalds. The rent was steep, but I thought I could make up for it by not having to market.

An advisor at the University told me it was a terrible decision and that the rent would eat me alive. He told me to open in a rough part of town to save $1,500/month on rent.

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$1,500 = 20 iPhone repairs, or one per business day per month. I thought a superior location would equate to at least 3-5 extra repairs per day, so I ignored his advice, and I was luckily right.

Not only was that store a massive success, but it's still there today under a different name at 505-D 15th St E, Tuscaloosa, AL 35401

Not bad for a 13 year old business!

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This same law applies to any piece of real estate. Sure, you pay less for poor locations, and sometimes it makes sense to do so. But don't do it expecting to compensate with marketing. It's not apples to apples.

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9) My price your terms or your price & my terms.

You've likely heard this one as well. It is SHOCKING how many creative ways there are to structure deals.

I'm working on a MHP consulting project for a guy in Tennessee right now. He found a beautiful park on a lake but the seller wouldn't budge off her $1m purchase price. It's worth about 75% of that. So what did I advise him to do?

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Well, there's a single family home on the property that he is breaking off and giving back to her for free. She'll also be seller financing the park at 6% and will receive passive income from that. This enables her to accept $1m, because the value of her house is about $300k.

So a $1m purchase price minus a $300k house (that the buyer doesn't want anyway) equals a $700k park. In addition, the seller gets residual income from seller financing, pays $50k down, and the buyer doesn't need to raise money or go through a bank.

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If you build a relationship with the seller then they will be more likely to work with you. Almost every deal is workable if both sides are willing to get creative.

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10) Brokers are your best friend. Overpay for them & they'll go to you first.

@fortworthchris is the king of this, so I can't take credit for the idea, but it's so obvious on the surface, yet so underutilized.

Would a broker rather make 6% and spend hours and hours marketing a property, or 8% and send one text to you?

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Overpaying for brokers is the perfect plan because incentives are perfectly aligned. You'll pay an extra 2% on the deal, but will have access to the very best deals and will compete with fewer investors.

And if 2% breaks your deal, it's too thin of a deal anyway. The broker is happy because he doesn't have to break his back marketing the deal.

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This plan takes months to put into place, because it takes time to build trust and relationships with multiple brokers.

A mass text or email won't do it, which always bums me out. But sending gift cards or setting up coffee and lunches with the best brokers in your area will go a long way in earning their trust and attention for life.

Be sure to follow up with them every month or two. Use something like Hubspot to automate this so you don't forget.

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This was originally going to be 33 different real estate "laws" like this, but I ran out of time, so I'll save the rest for another post.

Thanks for reading. Would love a follow @mhp_guy if you found this helpful.