The truth is the continued recovery of the housing market has created a new problem for my rehab business. Good inventory is becoming more and more difficult to find at profitable numbers.

I know there are still great deals out there. I am still buying. But I’ve been a little frustrated in recent months because I’m being out-bid on properties that I’d love to purchase. It’s costing me more marketing dollars to get the same number of deals every month.

I noticed this trend last fall after finding myself out-bid on multiple MLS listings. After looking more closely at my marketing campaigns, I saw that my leads-per-deal ratio was increasing each month. I seemed to be facing one of two decisions. I could either increase my marketing budget and get more leads, or do fewer deals every month. Neither of these options was very appealing.

I decided to listen to the advice I often give my coaching students: Examine your resources and move laterally.

First I examined my leads to find out what kind of properties were coming in. I found a large proportion of leads that were being ignored because they didn’t fit my rehab or rental model. More than 60% of the calls and inquiries I’d received went directly into the not interested file. Essentially, I was throwing away more than half of every marketing dollar.

Next I looked at my assets. I’m not talking about money in the bank, IRA’s or Real Estate investments. I’m talking about the resources at my disposal. From what I saw, I had a plan that began to emerge.

I have nearly 200 clients through my property management company. These are people that are already Real Estate investors. They own rental properties. Many of them would love to own more. Most of my clients have different buying criteria than I do. Based on their current properties, I even know where they like to buy.

I also have a great Rolodex. The relationships I’ve built over the years are much more valuable than any other asset. Bankers, lenders, Real Estate agents, title companies, insurance brokers and contractors are all at my disposal with a phone call.

Lastly, I have the experience and the team to coordinate all of the moving pieces.

My plan was to test the idea of a package deal. I would pursue the 60% of leads that did not fit my investment model. If I saw a deal, I’d package the contract with construction, tenant placement and property management. The buyer would only need to write a check. I could even help with the financing, if needed.

In November, I put together my first package deal. We went to settlement in December, and just recently completed construction (there were some delays in the rehab). The result of the project was a net profit of over $20,000 for my Real Estate investing company, another managed property for my property management company, and $30,000 in equity and $200 per month in positive cash flow for my client. It was a winning proposition all around.

Following the success of this test, I’ve sold 2 additional package deals. Both came from the leads I would have thrown away.

Obstacles are the things we see when we take our eyes off the goal. When you encounter setbacks, look closely at your assets. You’ll be amazed at the untapped resources that can transform your obstacles into incredible opportunity.

Since a lot of the marketing I do consists of direct mail, I thought I’d share a quick video for using one of my favorite tools.

Click2Mail.com is a great site for avoiding the boring and annoying task of licking envelopes and sticking stamps. With a few clicks of the mouse, your message can be delivered to the motivated sellers that want or need to sell.

I’m always looking for good tools. If you have a site, program or idea that’s helped you grow your Real Estate business, comment or email me. I’d love to hear what’s working for you.

You may be wondering, “Who is Tim Ferris?” The answer is hard to encapsulate in a few short sentences. He’s self described as a lifestyle entrepreneur. I was introduced to him several years ago as the New York Times Best-Selling author of The Four Hour Work Week. Reading that book was a pivotal moment in my business development. I highly recommend it.

More recently, Mr. Ferris has published 2 other great books. One of which arrived a few weeks ago at my house via Amazon.

I am an avid reader. It’s one of my favorite hobbies. So as soon as the book arrived, I dove in. The Four Hour Body did not disappoint. This text book sized encyclopedia contains case study after case study of the outliers in personal health. With chapters focused on topics from increasing muscle mass to optimizing sleep patterns, the book exceeded all of my expectations.

One of my favorite chapters focuses on injury prevention. It discusses some of the remarkable recoveries made by professional athletes after what should be career ending injuries. As I read through the text, a theme presented by a world renowned physical therapist caught my attention. Balance.

This therapist shows that by balancing strength, mass and flexibility in the body, injury can effectively be eliminated. He discusses case studies and examples involving NFL teams and Olympic athletes. The idea is really fascinating.

As I meditated on the idea, it occurred to me that I’d seen similar results in my Real Estate investing career.

When I first got started, I focused my attention on wholesaling. I made good money doing this, but I also spent a lot on my business. So even though I could generate $5,000 to $30,000 on a transaction, every transaction counted.

If you have dealt with a number of wholesale deals, you probably know that there are reasons that can cause a deal to fall apart. Title issues, shaky sellers, unqualified buyers and even calculation errors can cause a deal to fall apart. When they did, it put a major crunch on my cash flow. Just like an injury, it really hurt.

It wasn’t until I began adding rental properties and flips to my Real Estate investing strategies that I saw a more consistent and predictable income flow. And as my strengths in each of those areas grew, my business became more and more balanced.

Now when deals die, it still hurts. But it’s certainly not career ending.

Balance is important in Real Estate investing and in all aspects of life. It might not prevent the pain, but it will keep you out on the field.

At the end of the last decade, a string of Ponzi Schemes were exposed throughout the world. Bernie Madoff, and the like, stole billions from unsuspecting investors big and small. The men and women who perpetrated these frauds were prominent, respected professionals.

Late last week a story broke implicating the IRS. It appears that government officials evaluated and processed tax exemption requests unevenly based on the political leanings of the applicants. While all the facts have not yet been revealed, it looks pretty bad. This isn’t some underground organization. This is the government.

Yesterday I spoke with a Real Estate investor friend. He was preparing to testify against a man accused of forging deeds that transferring ownership of a property to himself. Once the deeds were recorded, he sold the houses for 100% profit. The accused was a pastor.

It seems like everywhere we look there’s some scam, scandal or fraud coming to light. There are times when I’ve asked myself, what is this world coming to? But real question is, what can I do about it?

Real Estate investing is a field with a lot of opportunity. Like other professions where big money can be involved, sometimes the wrong people end up as poster boys for the industry. There lies the opportunity.

You may have heard the saying, “In the land of the blind, the one eyed man is king.” In an industry where there is a lot of fraud and deceit, a little bit of honesty goes a long way.

Conducting business with integrity ensures that you’ll be trusted. Get rid of the white lies and stick to the truth. While you may miss out on a quick buck in the short term, a good reputation stands out in a crowd of derelicts. It opens the door to bigger and better opportunities in the long term.

“Well how long you guys gonna’ wait to call your babies?”

If you’ve ever seen the movie Swingers, that line should ring a bell. In the dating world it refers to how long to wait before calling a girl (or guy) after getting their number? If you call too early, you’ll look desperate. Call too late, you’re not interested. Vince Vaughn’s advice: 6 days.

When you’re trying to make the right first impression with a potential mate, 6 days might be just right. But if you’re following up on a motivated seller lead or getting confirmation on an offer, 6 days is a killer.

Rule number 1: Good leads are like fish. After 3 days they start to stink.

People calling an investor to sell their house know they’re not getting top dollar. They call because some other motivation trumps price. Usually they need to sell faster than the traditional route. Every second counts.

If you can’t pick up the phone when calls come in, chances are that sellers are going to call your competition. They might anyway. But taking live calls gives you a foot in the door when the right deal comes along. If you can’t answer immediately, call back the same day.

Spending money on marketing doesn’t make much sense if there is no follow-up. That leads me to rule number 2.

Rule number 2: Make the seller come to a decision.

There are few things worse than getting strung along by a seller. Open ended offers are killers. Whenever an offer is presented (whether through an agent or directly to a private seller), put a timeline on it.

When I present my offers, the seller knows that I have limited funds. I tell them that I have money set aside to complete x amount of projects this month. I’d love there’s to be one of the projects, but I can’t wait forever. If they aren’t ready to sign on the dotted line today, then I’ll leave my contract with the understanding that I may have to withdrawal the offer if they respond after the expiration date.

The timeline is important for a few reasons. First, it limits the seller’s ability to shop your offer around. Second, it brings the seller to a decision point. Third, it allows you to move on to the next deal instead of crossing your fingers for a phone call.

If you have not heard from the seller as the expiration date approaches, call the seller. Find out what’s going on from their end. Then remind them that you may have to move on.

Mastering the art of the waiting game pays dividends. Whether you’re waiting for a call from a Real Estate investing lead or from that special someone, timing is everything. Make sure you don’t wait too long to call your babies.

Over the last week I’ve been on the losing and winning end of the clock.

Last Thursday I got a call from one of the REO agents I work with. She told me about a property within one of my farm areas that perfectly fit my criteria. It “just came on the market” and the asking price was within throwing distance of my likely offer. As soon as we hung up the phone, I headed out to see the house.

The property was exactly what I look for. Right area. Right resale range. Just the right amount of construction. It took me 10 minutes to know I wanted to make an offer. Next I went to the agent’s office and wrote up the contract. I gave her my check and started making calls to plan out the construction. It was a done deal…in my head.

This week I got a phone call from the agent. “We lost the house,” she said. Apparently there was another offer submitted a few days before. The bank accepted. The deal was gone. Damn!

But then there’s also the deal I saw 3 weeks ago.

This place is the perfect rental. The neighborhood is primarily tenant occupied, but the quality of the tenants is strong. I manage 2 properties on the same street and both residents have 2 years of strong payment history. I know I can rent a decent house in this area within a week.

The property I looked at was not in good condition. It was in great condition. The current owner completely renovated the house within the last 3 years. The roof, windows, electrical system and heating system were all new. The kitchen, bathrooms and flooring had also been updated and upgraded. The property owner even added a half bathroom on the first floor because he thought his tenants would appreciate the amenity.

Most rental properties in this area do not look like this house. The investor over improved. And of course, the property had an over improved price tag.

At the end of the day, business is business. My offer was $20,000 less than his asking price, and it was $10,000 less than one of my competitors. But he still accepted my offer.

How can this be? It’s because I offered more than cash. I offered him time.

The seller was moving to Arizona. In fact, his relocation had already begun. His wife and children were living half way across the country. He couldn’t move on with his life until this investment was dealt with. And last Friday, when we signed the agreement of sale, I helped him do that.

Real estate investing is a fun and exciting business. It’s full of ups and downs. There are times to proceed with caution and times to rush in. The key is knowing when to brake and when to step on the gas.

Its days like today when I wonder why every day isn’t so perfect. When this happened today, everything clicked.

Two weeks ago I had a meeting with my business coach. This guy has a strange knack for taking complex situations, concepts, problems, etc. and making simple sense out of them. So when he heard me complaining I received a pretty simple response.

“Stop complaining and start being unreasonable.”

Sounds simple, but I was a little confused. What does being unreasonable have to do with my employee frustration, difficulty with title issues or lack of motivation to get to a workout? Directly, there’s no connection. But indirectly, the connection couldn’t be more important.

We can “be” anything we want to. We can be happy, excited and optimistic. Or we can be frightened, reserved and skeptical. The key is making the choice.

In the past, I’ve allowed who I am to be influenced by the circumstances of a given moment. I’ve allowed myself to be the product of my experience. By choosing to be unreasonable, I’m freed from this trap. My experience becomes a product of who I am.

So for the last two weeks, I’ve been happy for no reason. I’ve been excited about nothing in particular. And I’ve been optimistic when moments look darn right bleak. I’ve been unreasonable – choosing to be who I am and want to be, with no specific reason or influence.

I know this is a Real Estate investing blog, and this article doesn’t really fit that description. But the real goal for any income stream is to be able to live the life that we want and choose. Everything just seemed to click today.

If you’ve had difficulty being who or what you aspire to, don’t forget to be unreasonable. It’s the simplest way to be you.

If you’ve ever purchased anything from a sales person worth their salt, you’ve heard about their limited time offer. From the infomercial to the car dealer, every offer includes a catch.  It’s that one little line that puts you in the perfect place, at the perfect moment, to get the deal of a lifetime. But you have to act now!

I am a sucker for a good sales pitch. I love watching the craft of selling when it’s expertly delivered. I will be the first one in line to hand over my $19.95 for not just one, but two pairs of the kitchen knives that never need sharpening.

Impulsive buying is not a problem if it is limited to the occasional $20.00 purchase. But it is a huge problem if the purchase involves large ticket items like a Real Estate investments.

As I rode along in my new car this morning I thought back to the third investment property I ever bought. It was a 2 story row house in the Francisville section of Philadelphia. The house had no roof, floors and only 3 walls. Calling it a shell is generous, and I should have known better.

At the time, Francisville was a developing neighborhood. Blocks of boarded up properties ran parallel to newly remodeled, high-end buildings selling for more than $500,000. The area seemed ripe with opportunity for an aspiring Real Estate investor.

When the wholesaler told me that he had 2 other offers coming on the house, all good sense went out the window. At full asking price and with limited knowledge of the market, I ran as fast as I could to buy a property I had no business being involved with.

The experience taught me an expensive lesson.

Whenever I start working with a new student, we begin by defining their ideal investment. The next step is defining their personal Real Estate investment rules. Only then do we discuss marketing, screening leads, analyzing deals and making offers. The structure is the key to successful investment.

To define the ideal investment, you’ll need to answer a few questions. These answers focus attention on investments that have the highest probability for success.

1. How large of a return do you want and how quickly do you want it? The investor who wants to make $50,000 on a flip within 90 days will have a different ideal investment than the investor looking for a rental property that cash flows $200 per month.
2. What is your experience or comfort level with construction and repairs? If you’ve never done a large project, your ideal investment should not be a house with no roof, floors or rear wall. Believe me.
3. What areas near my home or work have properties that meet the needs defined in the previous 2 questions? Time is valuable. Spending 2 hours every day traveling back and forth to your project is a waste of time. That time could be better spent looking for the next deal. So stay close to home.

Once you’ve defined the ideal investment, next define your Real Estate investment rules. While no one likes a lot of rules, defining the do’s and don’ts for your investments will give you freedom. Buying decisions will no longer be based on emotion. They’ll be based on what matters most in any investment – the numbers.

I’ve made a list of some Real Estate investment rules below as an example:

1. All properties bought for fix and flip investments will have a resale value between $250,000 and $400,000.
2. No purchased property will require more than $35,000 in work.
3. No rental property will be purchased without a lead based paint inspection.
4. All rehab properties must be within 10 miles of my house.
5. All projects must have at least 35% equity based on an after repair value for the 30 day sales price on the property.

Your rules will probably look different from these. And they will almost certainly change over time as your objectives mature and your experience grows.

Instituting my own rules has allowed me to evaluate properties more easily. It has also helped me to focus my marketing and refine my processes. Best of all, these rules have kept me from buying another mistake like the project in Francisville.

Making an emotional decision on a limited time offer is not always the end of the world. It might just result in another exercise machine that takes up space in the basement. But when dealing with a Real Estate investment, be wary of deals that are only available for the next 30 minutes. Follow your buying rules. You’ll find that there’s always another deal and another opportunity.

Nick enjoyed gambling. He especially loved the ponies. I can remember walking down the hall to his bedroom. The small TV in his room would be running live broadcasts of the local horse races. When I poked my head in to say hello, he’d update me on how much he’d won or lost during the day. And he rarely lost.

After a series of these similar encounters I started asking questions. This guy kept a running tally of all the horses, the betting lines, his predictions and the results of each bet. He’d been keeping these records for some time, and was ahead on his bets to the tune of nearly 6 figures.

It didn’t take me too long to find out that Nick had a trick. He never put a bet on any race. That was it. His interest on gambling on horse racing was simply recreational.

There are a lot of people in the Real Estate world with a similar story. They are interested in Real Estate. They’ll attend every seminar, educational talk and networking event. These are the guys that can explain every aspect of the business, and give a detailed description of 100 ways to structure a deal. They’ll often regale you with stories of the deal that got away.

What they can’t tell you is when they made their last dollar in the business or did their last deal. If you attend a local REIA, you can probably name a dozen people who fit this description.

Learning about Real Estate investing and surrounding yourself with like-minded people is important. For anyone who is just getting started in the business, it is a vital part of a successful career. It can also be a lot of fun. If recreation is the goal, then any time spent is time well spent.

My goal, and the goal of most investors, is to use Real Estate as a vehicle for lifestyle design. In short, we want to make money. It’s a great industry where people can make an incredible income with only a few transactions per year. This leads to freedom of time and money. But the only way to achieve that success is to get in the game.

Nick was a great guy. He survived his first fight with cancer, but passed away following a second diagnosis. He survives today through the memories of his family as a loving father and grandfather. I’ll never forget his friendly manner or his lessons on the track.

My wife’s grandfather was not a professional gambler. His hobby was studying and betting on the ponies. My hobbies include training Jiu Jitsu, watching college wrestling and reading science fiction novels. But I am a professional Real Estate investor.

Real Estate is a great business. For those of us willing to get in the game, the rewards are significant. But if you’re looking for a hobby, I suggest the race track.

Henry George gained fame in the late 1800’s with his book Progress and Poverty. His most famous, and surviving, economic policy was the idea that the only tax governments should collect is a land tax.

I am a fan of fewer taxes and less complex tax assessment, but at a Real Estate investor, I’m not sure I’m a fan of this proposal.

Right now, governments across the country are struggling. From the local and state level all the way to the national government in Washington, revenues are not keeping pace with expenses. The problem has triggered heated debate on the Sunday shows and talk radio. It has also led local politicians in the hunt to find new revenue. A common hunting ground has been property taxes.

In January and February of this year I received several letters from the City of Philadelphia. I have a handful of rental properties there, and the city wrote to inform me that their new Actual Value Initiative would be taking effect in 2014.

Under the new initiative the tax rate will be reduced. How nice. The catch is that property values are being re-assessed. The result is a higher property tax.

It’s been nearly impossible to determine how the city arrived at their property values. My phone calls have been met with double speak and marble-mouthed jargon from City Hall. But the research I did seemed to show an unfair application of the law.

In some neighborhoods, property tax rates have double or even tripled. In others, the increases are simply passed to Real Estate investors through a Homestead Exemption which applies only to owner occupants.

It’s the way of the world, I guess. Times change. Taxes go up. Life moves on. My real concern is the impact that similar legislation will surely have on urban areas across the country.

Pockets of properties in some metropolitan markets are owned by investors and occupied by tenants. These areas are attractive investments because of the low entry costs and relatively low overhead of taxes and insurance. Properties in such areas are great cash flow investments. They also play an important role in their communities.

As we learned from the mortgage debacle of the early 21^st century, not everyone is qualified to own a home. That’s not a judgment on my part. It’s a fact. But these people need a place to live.

When governments increase property taxes it affects cash flow. Without cash flow there is no incentive for Real Estate investors to get into these traditionally attractive rental markets. Investors leave and neighborhoods decay.

What local political officials seem to overlook is the unintended consequences of their legislation.

Henry George was a smart man. He knew a lot more about Economics than I certainly do. But from where I sit, an increase in property and land taxes is not good for communities or for the country.

New taxes are coming to a city near you. Remember to consider these additional costs when evaluating your next investment opportunity. Make sure your local politicians consider you before moving forward with their newest revenue stream.