The same thing happens with lease options, the investors don’t think about cash flow. They just think about that positive monthly cash flow. What happens if there is a vacancy? What happens if there is an unexpected repair required? They are under funded and undercapitalized. It means they won’t have enough money to sustain them for the long haul. Or they will look at a deal in the luxury home market and see a large profit margin. It might be a million dollar home with $150,000 in profit. What many investors don’t think about is the monthly mortgage payment that goes along with a million dollar home. You have to have enough cash to hold on to that house and make the monthly payments. The luxury home market has a smaller pool of buyers. It means less chance to be able to sell it. You will make that $150-200,000 if you can stay in the game. Cash flow is critical in this business.

5. The #5 mistake is not having a clear understanding of the customer and the customer’s needs and wants in the property.

• Who is your customer?

• Is it an investor?

• Is it a renter?

• What are they looking for in a property?

• Are they looking for profit?

• Are they looking for amenities?

• Are they looking for price or location

If you are rehabbing the house for an owner occupant you need to understand what they are looking for based on the area that they are in. Otherwise you have done too much or too little rehab which is bad either way because you have either spent too much money in the project or you have made a house that nobody is going to want because there aren’t enough amenities in it.

If you are trying to sell to an investor buyer what are they looking for? Don’t try to sell the house the same way to an investor buyer as you would to an owner occupant. The owner occupant is looking at the lifestyle of the house. The investor buyer is simply looking at the profitability of the property. In looking at the profitability obviously people look at the resale potential of the property. Investors are looking at the profit. Recently I saw somebody advertise a property that was a wholesale deal to investor buyers talking about this beautiful swing in the backyard. What does an investor buyer care about a swing in the backyard? They are not going to sit in that swing and look and contemplate nature. They’re looking at whether there is going to be profit in this deal or not. And that’s what you want to be focusing on. If you are talking about renters then you want to talk about the amount of money that they have to put into a security deposit. How much money they have to have up front and whether they can have pets or not and the schools in the area and anything else that you are offering as an amenity to that piece of property. You must really understand your customer before you get into the deal. Don’t get into the deal and then try to create the customer. The customer is already there. Find the right deal for the customer.

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