By Stefan Aarnio
Freedomway.ca

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Speed is a virtue that has been coveted throughout the ages.

In the jungle, animals with speed would dominate the terrain over bigger slower animals. In evolution, animals that developed to be large with heavy armour always died out to animals that were lighter, faster and with sharp teeth and claws.

In warfare, throughout the ages, the faster more mobile armies were always able to wipe out  slower, heavily armoured forces. Whether we are referring to Atilla the Hun with his mounted archers vs the slow, heavily armoured  Roman Legion; or Hitler in WW2 with his Blitzkrieg forces that dominated the sedentary french and polish troops. 

Speed is a virtue in all arenas and is a key to victory.

Today in technology, companies that can embrace change and implement with great speed are the ones that survive. In the past, a company like Apple was able to innovate with products like the iPod, take the market by surprise and implement new ideas before any competitors could react. Apple would take over and dominate a market long before a competitor could think of stepping in.

Think of iPods... Small children call all music players iPods. A little girl will point to an analogue record player and say "look daddy, that's a big iPod!" - that is the power of speed.

In real estate investing, or investing in general, speed (in my opinion) is the difference between a novice, intermediate and advanced investor.

I was having dinner with a friend of mine tonight and we were talking about our goals for the upcoming year 2013. Every real estate investor, regardless of skill level, always wants to add more transactions and doors to their portfolio.

I mentioned to my friend that I was setting the goal of doing 100 transactions this year. This was way out of my friend's context and he couldn't comprehend that kind of volume or speed. He asked me how many transactions I have completed in 2012: "12-16 by the end of the year" was my estimate. He was impressed with my ambition and wanted to know how I was going to have an 800% increase in my business.

The answer is speed, some experts would say "velocity of money".

The general classifications for Real estate investors can be defined as follows:

1. Novice investors do less than 5-6 transactions per year
2. Intermediate investors do 1 transaction per month or 12+ transactions per year.
3. Advanced investors do 100+ transactions per year

The only difference between these three investors is speed. 

NOTE: There is likely little difference in the quality of transactions between skill levels. There are many astute and careful, slow, novice investors who can earn the same or better returns then an experienced advanced investor. However, the difference between the novice and advanced is that the advanced investor does more deals, executes them faster and utilizes opportunities to compound results. 

The advanced investor is a cheetah in the jungle and the novice is the turtle.

There is nothing wrong with being the turtle, however, the cheetah will be dominant in the market and will have access to the best opportunities and more capital due to visibility.

A problem I have had in my past businesses has been velocity. In the past, I gravitated towards slow "residual" type businesses.

1. One of my first businesses was a self-employed guitar practice where I traded my time for money. This was extremely slow because, although I had lots of clients and low over head, it was very difficult to compound or grow this business. The residual "cash-flow only business model" made it very hard to grow because there was never an injection of cash or credit. Every month I would take 22-25 little cheques into the bank and cash them. There was never a big cheque that could instigate growth.
2. Another business I started in my early twenties was my Debt buying business. Debt buying is a very simple concept. Debt buyers buy charged off, non performing credit cards (or other debt products) for pennies on the dollar and outsource them to collection agencies for residual income. However, this business is also a residual, cash flow business and it was very hard to grow this business without taking on large debt and long term risk as well.
3. My third business was my buy-and-hold Joint Venture real estate portfolio. This business was great because I could Joint Venture with many money partners and have growth every month, but the growth and speed was linear, and again, I was seduced by the cash flow of the business and was not looking at the speed of the business. A deal would take me 1 whole month to find, get under contract, find a JV partner, deal with the financing, deal with the legal, take over the property, fix the problems on acquisition, show the suite to tenants, lease up and then repeat. I became trapped in my own labour and the velocity of this strategy kept me small. I was a turtle.

All of these businesses are functional: However, the businesses above are slow, cannot grow on their own cash, cannot expand easily, cannot gain any market share and have a disproportionate amount of risk and liability when compared to the upside.

The debt buying business and the buy-and-hold JV's also are big and clunky because they rely on debt financing and bureaucratic approval from banks etc. to grow.

These models are the slow and heavily armoured roman legions that were destroyed by the fast moving mounted cavalry of Atilla the Hun. The Huns were fast, mobile, light, hit the battle field by surprise and cherry picked the best opportunities on the field.

My new strategy does not focus on buy and hold, instead it focuses on three FAST strategies:
 

1. Wholesaling
2. Lease options
3. Buy-fix-sell

Because my goal is to have 100 TRANSACTIONS and not hold 100 DOORS at the end of the year, I must focus on fast strategies. Speed is key and I don't want to get weighed down in a slow, long renovation or a long term buy and hold (although these are good models).

Three of the fastest Real Estate strategies (in my opinion) are wholesaling, lease options and buy-fix-sell.

However, to see the effects of choosing fast strategies, lets see the following strategies in terms of TIME so that we can compare them to the slower strategies I used to use.

1. Wholesaling has a time frame of less than 30 days, usually 7-14. It is a fast, no debt, "no buy" strategy that creates fast cash and fast transactions.
2. Lease options have a time frame of less than 30 days to fill or set up. They are fast, can have no debt, are a "no buy" strategy that creates fast cash and fast transactions.
3. Buy-fix-sell has a time frame of less than 90 days (I have completed some buy-fix-sells in 30 days, but that isn't every deal). These deals are fast, carry debt (sometimes hard money), require capital for acquisition but create more profits with slightly more work.

Every single strategy I am using can be executed within a 30 day time frame. Time is the real currency in the market, not money. Money can be manipulated and recreated after it is lost... Time is lost forever when wasted and it is the REAL limiting factor in any business.

Since I have chosen 3 fast, "light on debt and cash" strategies, I am confident that with the right team and systems, I can achieve my goal of 100 transactions and earn the rights to the title of "advanced investor".

If you are interested in working together on a deal for a share of the profits, please contact me on the freedomway.ca contact page and we will see if we have a fit.

In the meantime,

Thanks for reading,
Stefan Aarnio
Freedomway.ca

P.S. Please share this article if you found it educational.

By: Stefan Aarnio
Freedomway.ca

Photo Left: Stefan Aarnio and Award Winning Investor Nik Fast with his trophy earned at the West Coast Top Investor Awards.

One of my favourite things about being a real estate investor is the opportunities to meet extraordinary and interesting people. I had the pleasure of meeting Nik Fast of 2nd Story Investments this week. Nik is a local Winnipeg investor with an accomplished track record. He was recently the winner of the West Coast Top Investor award for "Best Deal of the Year" and he is a local celebrity in the investor community.

I have known of Nik for some time in the Winnipeg market, but had not had the chance to sit down with him to get to know him better. Upon meeting Nik, I found him to be a very humble guy, he speaks well and has a very pleasing personality. All traits of a shrewd real estate investor.

Nik has earned himself some local press for doing absolutely beautiful renovations, but the deal that he won the West Coast Top Investor award for was not a cutting edge, high design renovation that would earn a spot in the newspaper. The deal that won Nik a national award was actually a very simple deal based on seeing what others had missed.

Nik's award winning deal was a small house in the Weston neighbourhood of Winnipeg (a low to mid income blue collar neighbourhood.) Weston is notorious for having a very mixed base of inventory and it is very difficult to price out comparables in the area because the houses drastically range in builds and values.

Nik's "deal of the year" was a very simple concept. It was a "missed opportunity" and a house that had scared off too many buyers. It was sitting, getting old and racking up "days on market".

The small starter house that Nik is known nationally for was originally marketed at $109,000. No one bought it, and it sat... 

Next it was reduced to $99,000. No one bought it, and it sat... 

Next the house dropped to $89,000 and after 2 large price cuts, Nik sensed a motivated seller and an opportunity: it was time to take a look.

PRO TECHNIQUE: Nik was very smart in that he kept his eye on mis-marketed "problem houses". These are often houses with fatal flaws (like badly damaged foundations, or severe mechanical deficiencies), however, they can sometimes have problems that irrationally scare off retail buyers and are relatively easy to fix: These types of houses are money makers.

Upon seeing the house, Nik was very impressed with the cosmetics, the kitchen, the bathroom etc. It was a pristine house on the surface. However, after venturing into the basement, he found a basement absolutely FULL of mould.

PRO TECHNIQUE: Mould scares of many retail buyers and for smart investors, it can be one of the easiest ways to buy equity because it can be cleaned up for a couple hundred dollars and irrational buyers and irrational sellers are both terrified of it. Mould houses can be purchased for huge discounts and fixed quite easily. This is a profit generating technique to keep in your mind at all times.

THE PERCEIVED PROBLEM: When Nik inspected the basement, his agent told him that the foundation was "cracked" and that water had run into the basement creating mould. 

THE ACTUAL PROBLEM: Upon further inspection, Nik found that the dryer vent was not hooked up and had been blowing hot and moist air into the basement for years creating mould! Also, the house had no eavestroughs, which made all of the rainwater run into the basement to create moisture and mould. In addition, the plumbing for the garden hose was leaking down the foundation and into the basement creating moisture and even more mould!

Nik was able to inspect the foundation walls and sure enough, there were no cracks!

PRO TECHNIQUE: Find a problem house and find a way to solve the problem creatively and on a boot strap budget. The more creative you are, the more you will earn.

After the house had sat for 90+ days on market (which is unheard of in Winnipeg), Nik wrote an offer for $81.5 and it was accepted. Nik had the mould quickly cleaned up and had the house immediately appraised for $120,000. All of this was done WITHOUT RENOVATIONS - Instant margin, instant equity and instant profits! Some people would call this "money for nothing".

With nearly $40,000 of instant equity created, Nik was able to pull his funds immediately out of the house and purchase another house immediately.

PRO TECHNIQUE: Velocity - when evaluating an opportunity consider the velocity of your investment. If you can get your money out of the deal fast, it's high velocity. If a deal takes years to return your principal, it's low velocity. Stick to high velocity deals if you are an active investor and keep your money moving. In Nik's case, his money moved at lightning speed.

The biggest lesson I learned from Nik is to be consistent and persistent in your local market. Keep tabs on houses that have "problems" and when they get to a high number of "days on market" go in and take a look. I don't like to buy off of MLS and prefer private deals, but I have used this technique in past and it works. Find the "deal killing problems" and find a way to fix them quickly, but take a steep discount for your problem solving abilities. Missed opportunities and mis-marketed houses have the potential to be the highest velocity deals and the highest profit earners.

Amateurs cannot spot the gold hidden in most opportunities, but professionals like Nik can! Congratulations on the deal of the year Nik!

Thanks for reading,
Stefan Aarnio
Freedomway.ca

P.S. Thanks for reading! Please share this article if you found it helpful.