White Fox Group's "Fundamental Rules for Real Estate Investing"
Over the years, having had careers in several major industries besides real estate, such as Financial Investments, Accounting and Tax Preparation, Advertising and Marketing, Sales, and in Technologies, the members of White Fox Group have developed the following “Rules” to aid our clients.
1. Clearly define your motives for acquiring property:
This is a very important, and a very simple concept but it can’t be over-emphasized. The old saw of “If you don’t know where you are going, then you will probably get there” really applies in real estate and investing.
2. Know your Financial Limits:
Do this before you get very far into the searching process. Some exploration will be necessary in order to come up to speed on what is available, and the associated costs of those properties. However, without a solid understanding of your financial capabilities, you may find that you have a “Champaign taste on a beer budget”, thereby wasting everyone’s time, and running the risk of being embarrassed. Or conversely, you may pass up an opportunity, thinking that you could not afford it.
3. Learn to be a strong negotiator, or retain one to work on your behalf:
The business world, and especially the real estate industry, is made up of cleaver, accomplished negotiators. You wouldn’t go into any other situation unprepared. Never assume that the other side will automatically treat you fairly and with respect. You must earn it first.
And always, always... Be willing to Walk Away From the Deal!
4. Do “Due Diligence”:
I repeat “Do Due Diligence”. In other words, know what you are buying, or say “No” and look elsewhere!
Due Diligence is a buzz word that has gained popularity in recent years. What it reduces down to is; take the time and make the effort to consider all factors known or anticipated which could impact this property. Again; "Know What You Are Buying", or walk away.
5. "He (or She) Who Cares Most, Loses":
"What?" you might be saying. Whichever party feels they absolutely must have this deal, is going to over-pay...or if selling, they will give in too soon and not reap their full benefits. Whenever possible, always be willing to walk away from the deal, or you will not maximize your profit.
If you want to sit back and enjoy a flash-back with Queen, here is "Under Pressure": https://youtu.be/a01QQZyl-_I?t=35
6.Make your money going INTO the deal:
The key here is; DO NOT OVER-PAY WHEN BUYING THE PROPERTY! Review and apply Rules 2, 3 and 4. You cannot make up for over-paying after you have bought the property.
Side-Tip: While looking through prospective properties, look for "Functional Issues" which you may be able to solve. Read a bit more here.
And be sure to over-estimate your expenses before getting into the deal.
7. Know when to Sell:
Just because a property was the right one to buy at the time, the only thing that stays consistent in life is Change. Be aware of your location’s environment, and be willing to “Pull up stakes” and sell if changes in the market indicate such a shift. You don’t want to be the lone hold-out if the area’s economy collapses. There are countless examples of this throughout the country, and throughout history – they are commonly known as “Ghost Towns”. We actually have some here in Ohio. They are towns where the owners, for one reason or another, had to move and no one was interested in buying the property. If you are curious about Ghost Towns in Ohio, here is a site to visit: OhioGhostTowns.org.
8. Understand a major Positive and Negative of Commercial versus Residential properties for investment purposes:
Positive: Commercial properties tend to offer longer, more stable rental income.
Negative: Commercial properties tend to suffer longer vacancies than residential properties.
Of course there are many other facets to commercial real estate and real estate ownership, but we believe these are solid axioms to help our clients navigate safely and pragmatically through the waters of the Real Estate industry.
Unfortunately, here in the U.S., we do not teach our children to be good negotiators. Why not? Largely due to how our business models are structured; when you walk into the local grocery, or WalMart, or to buy your gas, everything has a price sticker. You pay that price, or walk out empty-handed.
One generation after another, we have lost the skills to negotiate.
Steve learned the basics of negotiating by accompanying his father to local pawn shops…the same places where his father learned from his grandfather many years prior.
Yep…if you want to learn about negotiating, visit a pawn shop and show a little interest in an item, then shake your head and walk towards the door. They will almost chase you down the street to close the deal as they cut their price. Nothing wrong with this. This is business, and business has to be flexible.