Why Most Real Estate Investors Fail

As you know with all of the hype in real estate and the nothing down, get-rich-quick infomercials, gurus zero in mainly on foreclosures as their primary investing technique and, even better yet, getting them for no money down. Does it really happen? Yes, once in a while, but not as often or as easily as they like to make it sound. In a nutshell, most of the time you have to take advantage of someone.

The beginning investor can have a very difficult road in front of them. It requires patience, commitment and a strong desire to learn the business in order to ultimately be successful. However, isn’t that true for anything that is worthwhile? What if I said that the key to real estate investing is simple, so simple in fact that it amazes me no one has really ever thought of it before. Of course, most anything is simple once you truly understand it. So exactly what is this key? We’re going to get to that in just a moment, but first let’s take a look at some interesting facts you may or may not already know.

First and foremost, here’s an astonishing fact: 90% of the people who purchase a real estate investing program throw in the towel and give up within the first three months. Why? They find out very quickly it’s not as easy as the gurus make it sound. Most people don’t realize all of the pieces and components of a real estate transaction. Real estate transactions are like people; each one is different and unique. Here are just a few of the things that you have to deal with in a real estate transaction.

1              Local and state laws

2              Contracts and addendums  

3              Title companies

4              Appraisers

5              Negotiations

6              Home inspectors

7              Mortgage brokers

8              Real estate agents

Believe it or not, that’s just the beginning! It’s enough to intimidate just about anyone with little or no experience. Can you see why most people throw in the towel within 90 days? Let’s be realistic. How are you going to learn everything from a book or a set of tapes? You’re not, plain and simple! Learning about real estate investing (like most anything else) is a process, not an event. You don’t expect to go to the gym and work out for a week and get great results do you? It’s the same for real estate – it’s going to take time.

But what if there were a way for you to significantly shorten your learning curve and increase your chances for becoming a successful real estate investor with simple, helpful truths? Would that be of interest to you? If you’re like most people you probably answered yes.

Some gurus will recommend that you try to find several real estate agents to work with. They’ll have you call many agents to interview and then work with the ones who want to help you. I can tell you right now from experience that it sounds great, but it only works a small percentage of the time.

Why? Because most beginning real estate investors don’t have anything to offer a real estate agent. I mean, come on! How many times can you call an agent to do a comparable evaluation or look up prices on homes or to help you for free? Look at it this way. How many times could you call a doctor for free advice under the pretense that eventually you’ll do some business with him or her? Maybe once or twice, if you’re lucky!

The gurus won’t admit there’s usually nothing in it for a real estate agent. They pretty much want you to just use them for information, especially in the beginning when you really have nothing of value to offer. And guess what? Most real estate agents can smell that on a newbie investor. Remember, real estate agents are paid on a commission basis, not hourly. They get very good very quickly at what are and are not money-producing activities for themselves.

Of all the techniques the gurus teach--no money down, lease options, sub2s, and so on--what’s in it for a real estate agent? Not a lot, I can tell you that. Maybe a promise that you might throw them a bone later on down the road? Yeah, right! Agents aren’t not going to let you burn up their time writing lowball offers on listings in their area. Can you see why this is a fatal attraction that doesn’t last very long? It’s doomed from the start. Agents are trained to qualify people and their intentions, not to be glorified tour guides.

I’ve seen a lot of new investors who are intimidated to even call a real estate agent. Most of them feel uncomfortable approaching a real estate agent because they’re afraid they’ll be discovered or looked upon as a newbie instead of as a real or seasoned investor. They’re also intimidated that an agent will find out that most of them don’t really know what they’re doing. “Fake it till you make it” definitely doesn’t work here.

You simply must have a support system in place. Having coaching or a mentor coming to see you (if you can afford it) are great things, but they both lack one critical aspect of success. Do you know what it is? On-going support from a local expert in the area!

Who do you think that expert should be? Are you ready for this? A real estate agent. STOP! I can almost hear you thinking, “What are you talking about? Didn’t you just say that investors and real estate agents don’t really mix well?” That’s exactly what I said, and it is true they don’t mix well. At least they didn’t until now!

Before I tell you how it happens, let me tell you why it should happen. Just suppose you didn’t have to worry about contracts, addendums and comparables. Wouldn’t it be nice? Wouldn’t it be nice to start zeroing in on properties to buy instead of staying busy with busy work? You bet!

Picture yourself connected with an expert real estate agent in your area. Who better to take you by the hand and plug you into their network of title companies, lenders, home inspectors and whomever else you may need? Imagine not having to worry about making mistakes on contracts because your agent is going to diligently teach you the ins and outs of all your state-approved forms.

Incidentally, if any gurus give you their generic contracts or tell you to go down to the local stationary store and buy those generic contracts, don’t do it. Some gurus even profess to have contracts for which they have paid attorneys thousands of dollars to write that are already slanted in your favor. I don’t know about you, but if you’ve ever read a contract slanted in the other person’s favor, it makes you mad. Plus, it’s also pretty obvious you’re trying to get one over on them, and then you lose the trust and confidence of those involved.

Any attorney will tell you the absolutely best contracts to use are your state-approved forms. Why? Because they protect both parties involved and every state has different laws. This is the reason each state has a real estate division, to help protect the buyer and the seller.

Another great reason to have this relationship with a real estate agent is for comparables, known in the business as comps. Simply put, a comp is comparable sales from a specified area to give you an accurate indicator (price) of what the property in question is worth.

I know frustrated investors who have spent an entire day trying to comp a property, doing everything from looking on Realtor.com for similar properties in the area to calling for sale by owner properties (FSBOs) and everything in between. This can be a huge challenge for someone starting out until they have a lot more experience.

I’ll give you an example. Let’s say you’re new to the used car business. How long do you think it would take until you became familiar with all the different makes and models and what they’re worth based on mileage, wear and condition? Answer: it’s going to take time!

So right now you’re probably thinking this makes a lot of sense, but how do you do it? How do you get a real estate agent to give you that kind of loyalty, especially in the beginning when a new investor needs help the most and may not be able to give an agent any business right away?

Here’s the answer you’ve been waiting for. You think in terms of building the real estate agent’s business and yours will naturally grow because of that. Did you get that? Build the agent’s business and yours will naturally grow. I know that may not make a lot of sense, but I’m going to explain everything in detail and make it perfectly clear to you in just a moment.

First, let’s take an exclusive look at the inside of the real estate business as only a licensed agent could tell you. Let’s break down the real estate industry and help you understand what it is and how it works. It is crucial that you know exactly how this industry works because realtors control up to 90% of the inventory in a given market. With this knowledge and understanding you’ll be able to see how you’re going to get a real estate agent to help you as an investor.

The first thing that you need to understand about the real estate business is that it's extremely competitive. It may not seem that way from the outside looking in but, trust me, it is. If you're currently working inside the real estate industry or have been in the business or know of anybody in the business, you'll know this statement to be true.

The Pareto Principle, or 80/20 rule, is a prevalent concept in the real estate industry. What this simply means is that 20% of the agents are doing 80% of the business while the other 80% of the agents are doing only 20% of the business. You’ll see the truth in this statement even in your own hometown. How? You tend to see these agents’ signs up all over the place.

These are the agents who are the movers and the shakers, the ones making things happen in your area. They are definitely the minority. Often they are so busy they don’t know which direction they are going. These are the ones you don’t want to work with. Why? Because they are so busy and really don’t need any more business. So what about the other 80%?

What is all too common with real estate agents in the industry today is turnover. Why? A lot of people have misconceptions regarding working as an agent in real estate, the most common being that you get to drive around all day and show people homes, they buy, and you make lots of money. Those who come into the industry with this in mind are what we call “glorified tour guides,” and these agents make little or no money. You will soon find out this can become an asset to you as a real estate investor.

The people who think this is all there is to it have apparently focused their attention on the top-producing agents who make up the top 20% of any given marketplace. I am sure you know which agents we are speaking of, the ones who really do drive clients around in nice cars and make lots of money. Gee, what a fun job, right? It depends.

It actually can be a very fun, very exciting and extremely rewarding job that can pay handsomely if you can somehow manage to get started on the right foot. We can’t forget these top-producing agents started in the lower range at one time. It was through a lot of time and effort on their part that they were able to develop a name for themselves and build a residual client database of sellers as well as attract new buyers.

As for it being a fun job for the other 80% of the agents out there, sometimes nothing could be further from the truth. These agents continually strive to build a name for themselves, yet some of them literally struggle just to earn a living. Trust me; it can be a difficult struggle for them. You have to understand that these agents don’t make a dime until they put a buyer or a seller together and close a deal.

Some people will gravitate towards real estate once they’ve been successful in another industry. Once a success, always a success, right? Not necessarily. Let’s take a quick look at how a typical agent comes into the real estate industry and what knowledge and instruction they are given to build their business.

This new agent might have been successful in sales previously or maybe they owned their own business prior to coming into real estate. Some may have even taken early retirement on a job they had for 20 or 25 years. All of a sudden they’re bored and the thought pops into their head, “Hey, I’ve been in sales before and I love houses. I’ll get into real estate.” All of this experience doesn’t give them any sort of guarantee or edge over anybody else in real estate.

There is an inherent problem with building a real estate business based on this thought. The problem is that once real estate agents get out of real estate school, they’ve learned nothing about marketing and advertising.

When the majority of new agents show up to an office, they spend much of their day sitting around wishing, hoping, waiting and eventually praying for the phone to ring in hopes of landing a buyer or seller. They are instructed by the office broker to prospect, or in other words, work with what is known as their personal sphere of influence.

This sphere of influence can include anybody they have met at some point in their lives, including family members, friends, neighbors, doctors, dentists, even people from past jobs. The agents are told to get into contact with them and see if they may need a real estate agent currently or if they can think of someone they know who does.

Generally most new agents are instructed to go out and cultivate what is known as a farming area. A farming area is simply a geographical area or subdivision that an agent prospects in hopes of generating business. This business is generated in a number of ways. Agents might go out and knock on doors to introduce themselves, or they might send repeated mailings in hopes of finding somebody who needs assistance in a real estate transaction, either now or in the not-too-distant future.

Regardless of how they do it, they are out creating awareness by having potential clients receive mailers and/or meet the agent in person. I'm sure at one time or another you have received mail like this from a real estate agent, be it a calendar or some other form of advertisement with the agent’s name and number on it.

Why am I telling you all this? Knowing this gives you insight into how many new or newer agents work, and that’s a huge advantage. The majority of real estate agents are aching to get more business and put additional commission checks in their pocket. Most of these agents are very competent, knowledgeable and caring people. Their problem is that they just don't have enough clients or know how to get them. Eventually they wind up slowly starving or simply leaving the business. This happens both because expectations and ambitions are so high and because of the competitive nature of the business. A large percentage of new agents simply will not last in the business if not given the proper training first.

So how do we bridge that gap between the new real estate investor and a real estate agent? By using a system that helps develop the skills of a real estate agent and a beginning investor. This is something that has never been done before in any real estate investing program… until now! Just imagine the possibilities for a moment.

When you use the “Cash In On Real Estate” system, you will not only benefit yourself, you will also be helping these agents. This proposition is totally win-win for both you and the real estate agent. Why is it win-win? Because when you go out and seek one of the 80% of agents that don’t have as much business, it’s going to help these agents immensely. You are going to help them while helping yourself as you both get pointed in the right direction.

Most of these agents are fully qualified and competent to help you find, comp and price properties. Some simply don’t have enough business to have a consistent income. They are living from commission check to commission check.

This is where you can now come in. You’re really not at a point where you can give them much, if any, business of your own right now. You’re going to do something much better than that anyway. Remember how I said earlier to think in terms of building the agent’s business and yours will naturally grow? That’s the key! By giving them something that will really help their business grow. Now, how powerful is that?

Think about that for a moment. If you give them proven tools that will help them get more commission checks and prospects. They’ll want to work with you… plain and simple! Imagine giving them marketing that automatically delivers to them expired listings. (An expired listing is simply a home that failed to sell during the time it was listed by another real estate agent.) Or how about giving them buyers that want to buy now? And that’s just the beginning. Talk about a real estate agent’s dream! And it can all come from you.

So when they take their kids to Disneyland this year or buy a new car or whatever, it was because of you. Do you think they’re going to want to help you at this point? The natural law of reciprocity answers that question with a resounding, “Absolutely yes!” What do you think this is going to do for both of your businesses?

This is how you lock a real estate agent into you for life. This is how you get them to reveal their most precious contacts and be available to help you whenever you need it. By giving them what they want, you get what you want. This is the golden thread that has been missing from real estate investing for over 30 years. There are several key elements that make it all work in unison.

Now imagine what it would be like as you learn and grow with your real estate agent. You both start to make money together and build an unstoppable network. I can even show a real estate agent how to start a local real estate investment club in his or her area. Listen, this stuff just hasn’t been done before. Real estate agents will all tell you, “You can’t do that,” or “That won’t work.” I’m here to tell you, yes, it can and, yes, it does work. How do I know that? Because I’ve done it!

You’ll actually become close personal friends with your chosen real estate agent. It’s a powerful combination of teamwork and networking. What real estate agent wouldn’t want to grow their business and have it handed to them on a silver platter? Not very many! Can you see now why now this is the direction you want to go? Instead of running around wasting a lot of time making busy work, you make a plan and alliances. Then you go to work.

Remember, many of the gurus find most of their own deals through a qualified real estate agent. This is why they might mention working with one but never really stress it. They know that nine times out of ten it just doesn’t work out. Although deep down in their gut they may know this is the golden key to success, they just don’t have an answer for how to bridge that gap. They’ve never been able to think of anything to tell their students to offer to an agent that had any real value. The majority of them have never walked in my shoes as a real estate agent. It’s having this inside knowledge that has allowed me the opportunity to discover this knowledge and put it together for you.

I always like to say that it’s easy to do and easy not to do. Of course, the choice is yours. With the right tools almost anyone can make it in real estate. Real estate is real and very rewarding! You’ll find that out to be even more true as you read further into this book.