The Passion of a Real Estate Investor
What does it mean to be passionate? Passion has obvious connotations in the world of romance but also can be in reference to one’s general feeling about something. Passion is more than just heightened interest. It is a true love for something that you do or something that you follow or have interest in.
Having passion for a business pursuit may be something entirely new for you, especially if you’ve been in work environments that you didn’t really enjoy. That said, passion is not just something that you either have or don’t have. It can be developed, it should be developed, and, by doing so, you will only create more income and success as an investor.
First off, how can you tell that you are passionate about something? I think this question can be answered in several ways and the following list offers a few ‘tell-tale’ signs that passion is what you are experiencing:
- Seeing or discussing something that immediately makes you happier
- That something taps into your emotional side
- Discussion of something that gets you excited and energizes you
- Your heart rate goes up a little bit
- You look forward to (and even plan for) when you get to do or see something
- You love the idea of sharing that something with other people
Let’s first look at these ‘tell-tale’ signs in the context of something you may be more familiar with and then I’ll apply the same things to your business and you’ll immediately see the parallel.
First, let’s use the example of a sports team. Are you happy when you have the opportunity to see your favorite team play? Do you get emotional during games in which your team plays? Do you love talking about your team to other people, whether they are fans of the team or not? Does watching your team get your blood going a little bit? Do you make plans to see your team play, even if it’s just on TV? Do you want to share with the world and with anyone who’ll watch or listen that you are a fan? If you can answer yes to some or all of these questions, then it’s safe to say that you are passionate about your favorite sports team.
Note that there is a significant difference between interest and passion. Interest is a more passive and non-emotional attachment to something, while passion is much deeper. A lot of people are interested in sports teams but, comparatively, few are passionate about them. Business works in much the same way.
A lot of people are interested in business. Poll 100 people and ask them if they would like to own a small business (i.e. be their own boss). A majority would probably like the idea and would say they are interested in it. Ask the same 100 people if they are passionate enough about it to change their professional lives to do it, and you’ll likely see that interest drop off considerably. Passion is an extra gear that goes beyond simple interest and there’s just more to it. So where does it come from?
Think about it this way. If you are passionate about a sports team, how did you get to be that way? You weren’t born with it. You weren’t taught to be that way. It probably came from seeing other passionate fans and experiencing something valuable in how they approached following that team. In part, you wanted to tap into that energy by being like them and that’s how it starts. Business passion is much the same way. You are much more likely to develop a passion for what you do by seeing other investors with passion describe what they do and how they feel about their profession. In short, such energy can be infectious and can help instill that business passion in you.
Beyond where you get your inspiration, passion must be nurtured and developed, just like the business itself. Why are you passionate? What is your mission? What is it you most love about the business? What sides of us does the business bring out that you most love to see? These are the elements of business passion that you must understand and embrace for passion to be something that you truly have for real estate investing or any other business. When you can demonstrate passion, others will see it and also become motivated as a result. Much like a passionate sports fan or movie buff, others who witness true passion may not fully understand it but will admire the conviction and emotion that is behind it. In the context of business, this can be a powerful credibility booster.
Passion can be reflected by exuberant discussion and giving off that intangible ‘vibe’ that you really care about what you are doing. That is the truest form of passion for your business. When your passion is based upon the love of the process this will greatly attribute to your ongoing success. For example, when you love interacting with clients, seeing their faces when you are able to present a solution to them, watching a distressed property become something better, and love seeing everyone win in the end, that is true passion for what it means to be a real estate investor. When you love these things and it shows, you demonstrate a true passion and people will respond to that.
I can honestly say I am passionate about real estate investing. I had to learn so much, but the passion I have for buying and selling property has afforded me the endurance to stay committed to learning as much as I possibly can about the whole process. I don’t want to take for granted that what I have learned has given me so many opportunities to do all kinds of things including meeting really cool people in this business, make a decent living and have a successful, self-made business. That is why I share all I can with others who want to learn and have a true desire to invest. If this gets your heart racing a bit, then you have to take a look at my offer, here:
www.freemakemoneygift.com/Invitation.html
How to Minimize Personal Risk in Real Estate Investing
Similar to keeping one’s emotions out of the equation, minimizing personal risk also has a lot to do with how you interact with a particular client. Sure, there is an asset protection side of minimizing your personal risk but that is the subject for another day. What I’m referring to here is the tendency for many new investors to try so hard to accommodate a distressed client that they end up compromising their own business in the process. Examples of how this could happen include:
- Accepting less than ideal rents or deposits from tenants or buyers.
- Agreeing to a higher purchase price to accommodate a client’s needs.
- Agreeing to give a client funds to move or get back on their feet.
- Agreeing to refinance a property to get a slightly better interest rate.
- Agreeing to accept existing tenants from a motivated landlord and having to evict them yourself
I could go on and on and you might say to yourself ‘Why would I ever do these things?’ The answer is that there is no reason but yet it happens with some frequency all the same. How, you ask? It’s called emotion and it can happen in the so-called heat of battle. When a desperate seller’s situation and a strong desire to create a deal come together, sometimes that can lead you to bad decisions and these you most definitely want to avoid.
Key Point: Every time you write a check you are at risk.
My best suggestion is to approach each and every deal you do as if you have zero money or credit and therefore had to structure the deal accordingly to make it work. This forces you to think creatively and as a result, minimize personal risk.
Let me repeat myself in case you are not paying attention here because this is very important to the life, growth, and longevity of your business. APPROACH EVERY DEAL AS IF YOU HAVE ZERO MONEY OR CREDIT. Even though I gave you this great advice, I know that many of you will use your money and credit anyway. If you still don’t know how to invest in real estate without using your money or credit then go to www.freemakemoneygift.com/Invitation.html and discover how.
There’s nothing wrong with being compassionate and wanting to help someone out. Real estate investors on a regular basis exhibit compassion and most make good money in the process. Where it becomes a challenge is when your benevolence affects your business decisions. Don’t let the client’s problems become your problems. Business is business, you didn’t put a client in a bad situation, and it isn’t up to you to bail them out. There’s simply too much at stake to take on the burden of a client, especially when it impacts your business’s bottom line.
As I wrap up on investor skill sets, I hope you see a little bit of the philosophy behind how I look at this business. I don’t believe you have to do all of this yourself. I don’t believe you must have the best market knowledge to be successful. What I do believe is that the most successful investors out there are able to absorb the information presented to them, determine from it what they need to make quick decisions, and rely upon their team and resource network to help confirm the validity of every transaction they pursue.
Beyond the basic elements of making streamlined, yet informed decisions, successful real estate investing is about effective communication. How you communicate the basic merit of your business, the solutions you come up with, and the mutual benefit of the outcomes from your efforts is absolutely critical to your success. It is natural that you may not feel you possess all of the skills I’ve discussed last couple weeks. If so, then they should become a part of your educational process and goals for you to strive to achieve. Each and every one of you has the potential to be a great investor. Sometimes, all it takes is knowing where you need to focus your efforts and I hope my experience and sharing has been helpful in doing just that.
Exit Strategies and Professionalism
Ability to Understand Exit Strategies
There’s an old adage that you make your money when you purchase real estate. That said, when do you actually get paid on most transactions? Sure, it’s when you sell, and that points to mastery of exit strategies, as a fundamental skill required for all real estate investors.
The good thing is that there are only so many exit strategies you have to choose from, making your decision process easier. The down side is that this is sometimes still a tough decision you have to make and one that trips up many novice investors. I’ve often thought that the best way to determine the quality of a deal is to look at how many different exit strategies will work. The more strategies that work with your numbers, the better the deal.
While I’m not going to go into all the details of each way to exit a deal, I will say that your income does tie directly into how well you decide among them. Your profits depend on this and the best advice I have is to make your decisions expeditiously and with absolute conviction. A decision made quickly is not necessarily done in haste; rather, it is efficient and shows the confidence you have in your own decision-making power.
Having conviction in your decisions builds confidence. Sure, you may look back later and realize that an alternate choice of exit might have been better for a particular deal, but the one you did choose made money for you, right? OK then, stick by what you decided and add the results to your mental database so you can consider different options the next time around. This approach will give you confidence and be impressive to your peers and clients.
Ability to Remain Unemotional About Business
The old adage ‘its just business’ is the foundation for this valuable investor skill. In short, you must be able to separate business from your emotional side to be operating at peak efficiency.
There are several reasons why emotion can creep into the business of real estate investing, some of which include:
Real estate is a people business and people have emotions.
People often have emotional ties to their home.
Transactions involve money and people tend to get funny about money.
Some deals involve stressful or emotionally charged situations in a client’s life.
Recognition of where the emotion can come from is one thing. It is another to rise above it and choose not to let your emotions get in the way of good business. I know, easier said than done, right? This is likely a skill that many investors will need to work on more so than others but it is worth the effort. You don’t have to be so unemotional that people see you as a lifeless drone and please don’t confuse lack of emotion with lack of personality. Your personality should be on full display but the onus is on you to not let your emotions dictate your decisions.
If you remember anything from this section, remember this, fall in love with the numbers and not the house.
Keeping your emotions out of the picture is more in reference to not letting a client’s emotional state affect how you do business, or the proposal you make to them. It means not taking business issues personally. It means stepping back if you feel yourself getting emotionally wrapped up in a business setting and regrouping. These kinds of things will help you avoid bad situations and will also add an air of professionalism to how you conduct yourself.
If you are ready to learn more about various exit strategies and how to maintain your professionalism, then you must take a look at this incredible FREE gift. Go to:
www.freemakemoneygift.com/Invitation.html
How to Analyze Deal Potential
Real estate is a people business but will ultimately always come down to the numbers. For the new investor, and especially one who doesn’t think much of their math skills, this can be a daunting proposition. I remember thinking this way a long time ago and, for every investor, overcoming this obstacle is both essential and unique in how you get the job done. For some, simple repetition and doing numbers time and time again is what helps the process sink in. For others, use of simple formulas for different situations is a path to success in number crunching. However you see this part of the business playing out for you, make the commitment to get comfortable with running numbers because your business depends on it.
All that said, I have a few tips and suggestions that I think will help you become more comfortable with this part of the business. First, don’t over-complicate it. Too many investors crunch numbers with the perpetual fear that they are missing something important. Remember my discussion on “paralysis of analysis?” If this is holding you back, estimate costs conservatively and evaluate deals under ‘worst case scenario’ conditions. That way, you’ll feel more comfortable with what you come up with and you’ll be able to proceed more confidently. Another way to feel more confident with number crunching is to realize that you only need to run a crude set of numbers before making offers on properties. You have plenty of due diligence time after a contract is signed to check your calculations and make adjustments as necessary so don’t feel like you have to be right on the mark from Day One.
Additionally, only go after the low hanging fruit. For example, if you went to pick an apple to eat from a tree you wouldn’t climb the tree and pick the apple at the top. Rather, you would pick the apple closest to your reach. Same thing holds true for real estate deals. I would much rather you weed through a hundred non-deals to find the good deal rather than trying to stretch a non-deal into a deal. Being willing to walk away is just as important as being able to take action. Lastly, always set yourself up to make good money with bad numbers. Murphy lives everywhere, and if something bad can happen it very likely will happen. This is not a big deal, just prepare for it in the beginning.
If you attempt a deal where the numbers must align perfectly then this is a deal you should walk away from. Always have a comfortable cushion so that you can make good money with bad numbers. Don’t stress my friends, you’ll develop these skills as you continue to learn and grow, and remember that your ability to do this will produce more profitability for your operation.
If you are curious, yes I do have a standard formula I use to determine offers I make on a property. To learn more about that, you can accept my Free gift to you and gather all kinds of smart investing strategies.
Go to: www.freemakemoneygift.com/Invitation.html
Skill Sets of the Real Estate Investor: Communication and Examination
Ability to Explain Complex Processes Clearly
As a real estate investor, it is imperative that you recognize and respect that your knowledge of the business makes you fairly unique. Most of your clients and many of your peers will not have the same knowledge as you and you need to be ready to properly explain things in so-called ‘layman’s terms’ or third grade English, so that you communicate effectively with everyone. Never assume, for example, that a client understands the foreclosure process in your area or that another investor speaks the language of real estate investing as you do. This approach will generally serve you well.
Here are four tips to help you communicate more clearly:
Ask probing questions that presume the client or peer knows what you are talking about. This way, you’ll avoid unnecessarily patronizing them if they are more knowledgeable.
Welcome feedback so, if a client or peer is not up to speed with what you are talking about, they’ll feel comfortable asking you questions.
Use analogies to explain concepts to draw parallels between real estate and things a client may be more familiar with.
Avoid terms that might confuse or scare away your client.
For example, instead of saying Contract or Purchase and Sales Agreement, say, “this is the piece of paper that says you are selling the home and I am buying it.”
Instead of saying this is the Deed, say, “this is the piece of paper which transfers ownership in the property from you to me.”
Instead of asking a seller if they will Owner Finance for you, say, “Will you allow me to make payments to you for the house.”?
By following these tips, you’ll be more effective as a communicator. When you can effectively communicate your business, you will be seen as more convincing because part of effective communication is making sure the other party knows and understands what you are talking about.
Ability to Eyeball Properties
What I call ‘eyeballing properties’ is something of a two-headed skill set for the real estate investor. Part one of the skill is to be able to see potential where others may not. Have you ever driven past a property and found yourself making a judgment about whether it was occupied, or had income potential? This premature judgment of a property’s potential has likely cost hundreds of investors the chance to secure a great deal, and usually without them ever realizing it. Look at everything as having potential. This may seem pretty basic but it is a skill because most investors have to train themselves to look at properties this liberally. Trust me, do what you have to do, don’t prejudge, and you’ll enjoy more opportunities.
Part two of this skill set is to be able to quickly evaluate the condition of a particular property. Many new investors will downplay their ability to assess a property’s flaws (and necessary improvements) and this is not as hard as you might think. First, you should have a contractor on your team who can back you up during your due diligence period. Second, it’s not hard to take a trip to the hardware store and price out different things that you may need to do to renovate properties. Between these two things, you can quickly develop the skill to estimate repairs (even if it’s only a crude estimate) and this skill will give tremendous confidence.
In my next article, we’ll explore more skills that aid investors in profitable decision making. Until then, you can explore the unbelievable offer I’m extending to anyone with a desire to learn more about investing and things to avoid when you start this business. I’m including tools that will jump-start your investing career.
Go to: www.freemakemoneygift.com/Invitation.html
Skills of the Real Estate Investor: Creativity and Negotiation
Creativity
Creativity in real estate is one of those unsung skills that can easily and effectively set you apart from your competition. Note that I’m not referring to creativity in the artistic or ‘left brain vs. right brain’ sense. Creativity in real estate means being willing, able, and committed to out of the box thinking, and bringing that philosophy to every aspect of your business. There are several primary areas of your business where this will benefit you.
First, you have marketing. Marketing is one of the easiest arenas in which you can express yourself creatively and it doesn’t just mean having the most unique appearance to your marketing message or media. It just means having a nice diversified approach to marketing your business and, by doing so, going the extra mile that your competition will not. Second, you have the actual approach to working with clients. Creativity here may mean nothing more than just being a good person and presenting yourself in a way your clients will not be accustomed to. Anything that sets you apart from other investors can be a form of creative expression, and such things will benefit you.
You want to have command of the fundamentals of real estate investing so you objectively are seen as competent. Beyond the basics, a creative or otherwise unique approach to your business will help to demonstrate that you aren’t afraid to march to the beat of your own drum and be comfortable doing so. Peers and clients alike will respect what makes you unique.
Ability to Negotiate
Negotiation is another one of the fundamental skills that all successful real estate investors possess. Why is it so important? The better question might be to ask why would it not be important? Negotiation is involved in establishing a professional team, interacting with clients, and getting your deals tied up and completed. It is an essential part of the business and, whether you educate yourself or get trained in it, or simply learn by getting out there and working deals, this is definitely something you need to work on because none of us are born negotiators.
My important fundamentals of negotiation that you should strive to command are:
- Educate yourself as to what all parties are trying to achieve.
- Ask good questions.
- Listen to what the other party has to say.
- Understand the needs of the other party.
- Have the courage to ask for what you want.
- Don’t always accept no for an answer.
- Be prepared to deal with opposition or objections to what you present.
- Learn to ask the same thing in different ways, multiple times.
- Be able to confidently justify your requests.
- Don’t make decisions based on desperation, impatience, or emotion.
- Be prepared to give if you receive, and vice versa.
- Have the wisdom to know when to walk away.
Focusing on these key areas does not have to be a monumental task. Just be committed to the fundamentals outlined above and remember that most anything is negotiable. Never just take things for granted and presume you have no opportunity to negotiate because few things are truly like that, either in life or in business. A mentor of mine said it best, “what comes out of your mouth goes into your bank account.” The worst thing that people can say to a request you make is no, and if that happens simply ask for something else, or ask it in a different way.
If you take away anything from this
article on negotiation let it be this,
you will never get what you don’t ask for.
Your commitment to being a good negotiator will be apparent to your clients and to your peers. Your goal is not necessarily to be seen as shrewd, but rather as someone who is always open to discussion and willing to find that ideal outcome that benefits everyone involved. This commitment becomes a part of your business philosophy.
I have experienced many success and some failures when utilizing my negotiation skills. However, I am a firm believer in learning form other’s mistakes. That’s why I put together an incredible gift for you to avoid costly real estate investing mistakes. Check it out:
www.freemakemoneygift.com/Invitation.html
The Skill Sets of a Real Estate Investor
It’s no surprise that certain skills will benefit you as an investor. That said, it does beg the question, ‘What are the skills necessary to be a successful real estate investor?’ You may have your own ideas on this and I have mine as well. Some of what I present will seem logical and some of it might also surprise you. The idea here is to both confirm some things you may already be aware of as well as enlighten you to additional skills to help you succeed.
For starters, let’s list what I see as the most common skills a real estate investor would need to have to be most successful. I’ll then elaborate on each in time so you see exactly where I’m coming from and why I think these things are important to your accomplishments. Investor skills include (in no particular order of importance):
- Ability to make decisions quickly (take action)
- Creativity
- Ability to negotiate
- Ability to explain complex processes in a clear and understandable fashion
- Ability to eyeball the physical characteristics of a property and use that to determine improvement costs
- Ability to analyze the potential for a particular real estate deal
- Ability to understand exit strategies
- Ability to keep one’s emotions out of a business decision
- Ability to minimize personal risk
- Ability to always do business with integrity (add paragraph about this)
Before I get into the details of these specific skills, I want to point out (as you may have already noticed from the list above) that I did not include things like detailed market knowledge or being handy as essential investor skills. Many investors falsely presume they need to have such skills to be successful in this business and I just don’t agree with that. The skills I just mentioned are useful but also those that can be delegated to your professional team and thus not critical for your success. With that said, let’s look more closely at the skills I do see as more important.
Ability to Make Decisions Quickly
Quick decision-making and the ability to take action is one of the hallmark skills of a successful real estate investor. Note I’m not suggesting in any way that decisions be rash or careless. What I’m referring to instead is the efficiency and timeliness in which decisions get made. The more knowledgeable you are, coupled with ever increasing levels of experience, the easier it will become to make quick decisions. There are several reasons why this is such a valuable skill.
First, quick decision making puts you in line to capitalize on those great deals that you are exposed to in the course of running your business. Slow decisions and too much analysis lead to great deals being lost and I don’t want to see this happen to you. Too many real estate investors, especially beginners get what is called “paralysis of analysis.” They get stuck analyzing the numbers over and over, and the neighborhood, and the situation, etc only to find out that they’ve analyzed themselves right out of the deal usually before they’ve even made an offer or gotten a property under contract. This is not the way successful investors do business. If this sounds like you then break this habit immediately. Get a property under contract and then do your due diligence, not the other way around.
Then after you’ve done all your due diligence ask yourself, “What’s the worst that can happen?” If you can correct the worst from happening before you close on a property then do it. If you can’t, but still want to proceed, just make sure that your decision won’t keep you awake at night. If it won’t then you should probably do the deal. If it will, then you should probably walk away. Keep in mind that the goal of this discussion is about being efficient with your decisions. It will only happen a couple of times before you really start seeing the value of this skill. Remember, I’m primarily talking about making offers here. You can make a quick decision and still have time for due diligence so don’t think of this as opening you up to greater risk because that isn’t the case.
Second, quick decisions give you valuable experience in thinking on the fly and getting into the habit of acting and responding as if your income depended on it. This will not only benefit your business, but also give you valuable confidence that you can keep up with the pros out there and that you are more than just a newbie. Most people get a feeling about something and then analyze this feeling and then act. I’ve trained my mind to do the opposite. I prefer to make a decision and then deal with the feelings and repercussions of my actions after the fact. Have I made mistakes based on this method of thinking? Absolutely. However my successes have always greatly outweighed my mistakes, and therefore I have no doubt that this learned skill has greatly attributed to the achievements of my business. Lastly, one of the greatest benefits of quick decision-making is the boost it will give to your authority. Clients and peers alike will respect your ability to think and act quickly and will establish you as a force to be reckoned with.
