The TurnKey Investing Philosophy - Part 1

by Matthew S. Chan

(Book excerpt from "TurnKey Investing with Lease-Options")

1. Do What You are Good at Doing

One of the dangers we’ve seen is straying too far away from what you’re good at doing. It doesn’t mean we cannot be good at more than one thing. Instead it means we have developed an awareness of the things we can do with great confidence and certainty of success, compared to those things we do with greater risk.

There are people in this world who are very good at making money in their businesses but not very good at managing or investing the money they make. These people should recognize this fact and seek out people who are good at managing and investing their money for them.

What we are good at doing is managing and cash flowing investment properties with lease-options in Columbus, Georgia and Phenix City, Alabama. At the risk of being boastful, we would be selling ourselves short if we did not acknowledge our success.

2. Know Your Market Well

We pride ourselves on the fact that we know our real estate market well. We live in a smaller city so it makes it possible for us to learn and master the marketplace compared to a large city where only a section of the market can be learned and mastered.

In the context of real estate investment, we believe some forms of investing (such as lease-options) are more conducive to certain markets than others. For example, we believe implementing lease-options as an investment strategy favors small to mid-size U.S. cities but not large or highly-appreciating cities, due to local property economics. Sometimes, it is better to invest money outside of where you live, not where you are. In my case, I chose to move to a place that was suitable for my investment strategy.

3. Invest with a Team, Never Invest Alone

Every investment inherently has some level of risk associated with it. There is no such thing as a risk-free investment just like there is no such thing as risk-free driving. If you get on the road to drive, there is always a small chance you will get into an accident. If you invest, there is always a small chance something will go wrong no matter how many precautions you take.

However, it is important to note risks can be mitigated when more than one person bears the responsibility of an investment. Wes and I have chosen to invest our money together; we have also chosen to manage our properties together. This way, there is always a fallback position.

As we have previously mentioned, it is key to have a team of professionals such as a real estate attorney, local contacts, banker, real estate agent, and others in a supporting roles to aid in the success of most investments.

4. Management Drives the Success of Every Investment

One of the reasons this book has intentionally been directed to a more affluent and sophisticated investor is because they intuitively know that good managers, not the capital itself, is what drives the success of any business and investment. Poor-minded investors tend to think having money automatically determines the success of investing. If this were true, we would not hear so many stories of rock stars, sports stars, and lottery winners going broke even after coming into millions of dollars.

Having worked in NASCAR circles over ten years ago, I learned no matter how well a race car is built, how good the engine is, or how fast the car can go, the race is only won with the right driver. It doesn’t mean the car is unimportant, but without a great driver, no races are ever won.

Likewise, in investing, having access to capital is essential, but without good managers watching and driving the capital and investments, both are doomed to fail.

5. Match the Investor to the Investment

Because we focus on our expertise within our market, we are cognizant of what we can do with a potential investor and what we cannot. We also know different people have different priorities and personal dispositions.

While we want to be exposed to many potential candidates who want to invest with us, we also know only a select few will actually be suitable. We have a very specific niche we fulfill, and only certain investors are suitable for this type of investment.

For example, we now seek cash-only investment partners. We rarely seek investors who want to qualify for mortgage loans. Although we will occasionally work with some individuals who prefer to qualify for a loan, it is not our primary focus.

Just like how we choose suitable clothes to fit our style, we look for investors who are suitable for our investments. We match the investor to the investment we have.

6. Use a System That Works

We allocate time to look for ways to improve and streamline our existing system, as well as continue to refine our implementation procedures. At the same time, we are selling lease-options to our tenants. Having said that, once we have developed a good working system for our market, we systemize it and do it over and over again.

The best example is how we market our properties through ownerfinancehomes.com where we advertise the property, our website, our firm, and our niche simultaneously. It is a very good, cost-effective marketing system that gets better with maturity.

It has worked well, continues to work well, and we continue to expand on it.

The final seven principles are covered in Part 2 of this article.