Here are four tips for increasing your annual income over the next 12 months:
First, have a plan. If you were driving across the United States to visit a friend who lived somewhere you had never been, chances are you would look up directions on how to get to your friend’s city, specifically the home address. Without a map or GPS device in your vehicle, it may be difficult to navigate.
Unfortunately, many real estate pros enter the business with no plan. Worst yet, most experienced practitioners we know have no plan! After investing hundreds (and sometimes thousands) of dollars, valuable time, and a grueling examination, many new recruits end up with a real estate firm that has no plan for the next 30, 60, or 90 days.
A business plan is essential in real estate. Without a solid plan, you’ll probably end up spinning your wheels.
Here are a few things your business plan should address:
What is your monthly budget? How much money do you need to earn to pay your expenses each month?
Who and what is your competition, and how do you plan to differentiate yourself from your competitors in your marketplace?
Take time to perform a SWOT (strengths, weaknesses, opportunities, and threats) analysis: What are your strengths and weaknesses? What new opportunities can you capitalize on during the coming months, and more specifically, what threats might you need to plan for? This is an excellent way to help you build an essential game plan, gain vision, and accomplish your mission.
What are your goals for the next 30 days, six months, and full year from your start date or from the date of your business plan? Make sure your goals are measurable. Though your goals should be challenging, don’t make them too difficult to reach.
Do you have a vision statement for your business? Where do you see yourself in the next year as a real estate professional? If we asked you to look into the future, where do you want to be in three years in the real estate industry?
Do you have “action plans” in place for your real estate business? In other words, what programs do you have ready to implement when you begin to meet new customers, enter into contractual agreements with clients, and more? Top agents have a systematic plan of action for every facet of their business. If you have not taken the time to develop a detailed plan of action for each area of your business, then do it today.
When building your action plan, use an outline and list all the items that you plan to do for each new listing you take. One good way to build action plans is to copy or print out three or four calendar pages and determine when and how often you would like to communicate with your clients. What marketing endeavors do you need to implement over the course of the agreement? Just as you need a “business plan” for your business, each new listing and every new buyer you take on needs a separate business plan.
Work Your Sphere
According to the National Association of REALTORS® 2010 Profile of Home Buyers and Sellers, 57 percent of first-time home buyers found their real estate agent through the recommendation of a friend, family member, or coworker. Thirty-nine percent of all buyers and sellers said they found their agent through this process.
If this data does not reinforce the fact that you need friends and family members recommending your services, then please reread those statistics above. Working your sphere of influence is one of the best things a real estate pro can do regularly. Send cards and letters each month, make phone calls, and, if the opportunity arises, stop by and make a personal visit.
If we asked when you last went out and canvased a neighborhood handing out cards or providing information about your real estate services, what would your answer be? How many for-sale-by-owners have you visited or sent letters to in the last 30 days? Whatever method you prefer regarding prospecting as a real estate professional, it should be one of your most important daily tasks.
Prospecting is the lifeblood of a successful sales career: Without new business, you’ll eventually go out of business. Make it a point to set goals on what types of prospecting you’ll do for the day, week, or month. Keep track of your schedule and determine where you’re wasting time, and make any necessary changes to accomplish your prospecting goals. Also, be sure to write your prospecting goals down where you can see them and be reminded of your tasks at hand.
Finally, don’t get discouraged or have a pity party if things aren’t going as planned. Difficult days and trying times will affect everyone. Even when you have a map or printed directions, wrong turns, bad decisions, and other factors can cause you to get off course.
However, the key to increasing your income as a real estate professional is to remain diligent and do the right things. When you have a solid written business plan, set goals, prospect daily, and have a good attitude, you’re sure to succeed. Remember what author E.D. Martin said, “It is easier to believe than to doubt.” Source: Realtor.com
Your Loan in the Valley
Before house-hunting ever begins, it is good to know just how much house the borrower can afford. By planning ahead, time will be saved in the long run and applying for loans that may be turned down and bidding on properties that cannot be obtained are avoided. Know what banks are the best ones to determine individual eligibility is very helpful information needed before even looking for a home.
a. How Much House Can I Afford?
The old formula that was used to determine how much a borrower could afford was about three times the gross annual income. However, this formula has proven to not always be reliable. It is safer and more realistic to look at the individual budget and figure out how much money there is to spare and what the monthly payments on a new house will be. When figuring out what kind of mortgage payment one can afford, other factors such as taxes maintenance, insurance, and other expenses should be factored. Usually, lenders want borrowers having monthly payments exceeding more than 28% to 44% of the borrower’s monthly income. For those who have excellent credit, the lender may allow the payments to exceed 44%. To aid in this determination, banks have mortgage calculators on their websites to assist in determining the mortgage payment that one can afford.
b. Check Your Credit History Thoroughly
Lenders like to look at credit histories through a request to credit bureaus to make the borrower’s credit file available. This allows the lender to make a more informed decision regarding loan prequalification. Through the credit report, lenders acquire the borrower’s credit score, also called the FICO score and this information can be acquired from the major credit bureaus TransUnion, Experiean, and Equifax. The FICO score represents the statistical summary of data contained within the credit report. It includes bill payment history and the number of outstanding debts in comparison to the borrower’s income.
The higher the borrower’s credit score, the easier it is to obtain a loan or to pre-qualify for a mortgage. If the borrower routinely pays bills late, then a lower credit score is expected. A lower score may persuade the lender to reject the application, require a large down payment, or assess a high interest rate in order to reduce the risk they are taking on the borrower.
c. Mortgage Loan Preapproval and Loan Prequalification
After basic calculations have been done and a financial statement has been completed, the borrower can ask the lender for a prequalification letter. What the prequalification letter states is that loan approval is likely based on credit history and income. Prequalifying lets the borrower know exactly how much can be borrowed and how much will be needed for a down payment.
However, prequalification may not be sufficient in some situations. The borrower wants to be preapproved because it means that a specific loan amount is guaranteed. It is more binding and it means the lender has already performed a credit check and evaluated the financial situation, rather than rely on the borrowers own statements like what is done in prequalification. Preapproval means the lender will actually loan the money after an appraisal of the property and a purchase contract and title report has been drawn up.
d. How Lenders Determine How Much Mortgage You Qualify For
There are two simple ratios that lenders use to determine how much to pre-approve a borrower for. Here’s how these ratios are calculated:
Ratio #1: Total monthly housing costs compared to total monthly income
- The borrower should write down, before deductions, the total gross amount received per month.
- The number in step 1 should be multiplied by .28. This is what most lenders will use as a guide to what the total housing costs are for the borrower. Depending on the percentage, a higher percentage may be used.
Ratio #2: Debt to income
- The borrower writes down all monthly payments that extend beyond 11 months into the future. These can be installment loans, car loans, credit card payments, etc.
- The resulting number in the first step should be multiplied by .35. Total monthly debt should not exceed the resulting number.
e. Credit and Mortgage Loan Qualification
When qualifying for a mortgage, credit plays a very important role. Here are questions a lender will more than likely ask:
- Is the credit score of the borrower considered to be good?
- Does the borrower have bankruptcy, late payments, or collections? If so, is there an explanation?
- Are there excessive monthly payments?
- Are credit cards maxed out?
The answers to these questions can make a determination as far as the eligibility of a mortgage loan goes.
f. Collateral and Mortgage Loan Qualification
If the loan would exceed the amount the property is worth, the lender will not loan the money. If the appraisal shows the property is worth less than the offer, the terms can sometimes be negotiated with the seller and the real estate agent representing the seller.
Sometimes a borrower may even pay the difference between the loan and the sales price if they agree to purchase the home at the price that was originally offered to them. To do such a thing, the borrower needs to have disposable cash and should ask the question of whether or not the property is likely to hold its value. The borrower must also consider the type of loan they qualify for. If the borrower would need to move suddenly and the loan is larger than the value of the property, the loan can be a very difficult thing to pay off.
Your Loan in the Valley