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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.
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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.
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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.
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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:
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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.
The Attitude of the Real Estate Investor - Continued
Flexibility
A significant and important part of an investor’s attitude has to include flexibility that allows the investor to work with a variety of situations they experience. Flexibility is generally an admired trait, and perhaps better stated, a lack of flexibility is often a negative. Flexibility is not just having an open schedule in which to make appointments. It is an underlying attitude of open-mindedness that naturally welcomes a variety of scenarios and potential outcomes. This is a healthy attitude to have because few deals go exactly according to plan. Be flexible, and you’ll be both more successful and more influential with your clients.
How do you rate yourself, on a flexibility scale of 1-10? It’s OK if you are low or in the middle; the important thing is to be honest with yourself. Many strong personalities have more of a ‘my way or the highway’ approach to life and to business and, if this sounds like you, then flexibility is something you likely need to work on.
Humility
Humility, as a component of attitude, is a nice counterbalance to confidence. Humility has been an admired trait in people for a long time and I think, in moderation, it has its place. What I mean by this is, too often, investors can overdo the humility and, in doing so, be seen as either soft or weak. This can be a disadvantage when working with other investors or more assertive clients.
The proper dose of humility can actually work to your benefit. Humility is essentially an expression of ‘Hey, I’m not that different from you’ or ‘I’m no better than you are’ or “I made a mistake and I’m sorry” and can be an indirect way to establish some basic rapport with a client. It effectively offsets confidence by adding a certain human side to a display of confidence and makes the client less prone to see your confidence as arrogance.
From a basic attitude standpoint, I think it is effective to truly think of yourself as being an equal of most people you encounter. If you truly believe you are better than someone else, then maybe you are arrogant and you will just have to do the best you can with that. Too much humility can make you prone to think you aren’t worthy of the success that you do deserve and can foster self-sabotaging behavior. As is usually the case, a good attitude is somewhat about balance and the right balance of confidence and humility can take you a long way.
Commitment to a Favorable Outcome
Underlying the repertoire of every successful real estate investor I’ve met is a dedicated commitment to a mutually beneficial outcome for every deal they complete. While I’ll talk a little more about how this fits into the skill of negotiation later, I think the spirit behind this commitment is a critical part of a good investor attitude. After all, if you are in this business just for the money and do not care what outcome is achieved for your clients, sooner or later that approach will catch up with you. That is just my opinion and I have seen that greed can go so far but does have a tangible end of the road, and I’d love to see you take a more favorable path.
It is more than just a negotiation strategy. It becomes an underlying part of your attitude and could even be more effectively described as a sort of philosophy for your business. When a real estate investment business has such a philosophy, it carries over to most every aspect of how you communicate. The commitment to that ideal outcome will appear in your marketing message, it will be reflected in how you talk to clients, and will be more apparent than you think.
Before you know it, this type of philosophical commitment will actually start resulting in more deals. Why? It will be because this component of your attitude has permeated every part of your business. You will be seen as more sincere because people will enjoy talking to you and will be more responsive to your business proposals. I’ve seen this attitude-based evolution in many an investor and it is always a fun thing to watch unfold. It can happen for you too, so make the commitment to yourself and to how you will do business, and it will just be a matter of time.
It is natural that the formation of a good attitude may be something that you need to work on a little bit. I like to believe that many of us are naturally positive people, but as you’ve seen, there’s more to a good real estate investor attitude than just that. It’s what goes into a good attitude that will also contribute the most to your success and growth. Why do these things need to be built or worked on?
Well, the basic components of who you are as a person will still shine through in your attitude as a real estate investor. If you’re naturally friendly, this will reflect in your attitude. The components like empathy, confidence, and commitment to a favorable outcome may take a little time to develop as you get comfortable in your business and learn more about how things work. For example, it’s real easy for someone to say ‘Just be confident’ but, if you are just learning the business, this may be easier said than done and the confidence will come as you get more experienced and absorb more education.
The bottom line is this. Who you are does shape your overall attitude. What you learn and add to your vault of experiences will mold and refine your attitude and your business.
Continue to refine the components of a successful investor. I’m still offering the tools that will help, check it out here: www.freemakemoneygift.com/Invitation.html
The Attitude of a Real Estate Investor
How important is attitude in the world of real estate investing? It is extremely important, so important in fact, that it can make a huge difference in the overall profitability of your organization.
The typical reference to attitude that you’ll hear is heavily laden with emphasis on how it always needs to be positive. ‘Stay positive!’ or ‘Be positive!’ are the two calling cries of this approach and I can’t say that I disagree with this at all. I just happen to think there’s a little more to it than that. A good attitude has two critical components: what you feel inside and what you convey to the outside world. Today, I’d like to explore three components of a positive attitude friendliness, empathy and confidence.
Note that I’m not highlighting ‘raw exuberance’ or any reference to the classic ’smile and nod’ approach to pleasing clients, or in some cases, people very close to us. In short, a good attitude is not about exuding energy or being constantly agreeable. There’s just superficiality to that approach that I believe many clients can see right through.
Friendliness
This first component of a good attitude is also perhaps one of the most obvious. Naturally, an investor who comes across as being a bit of a jerk (and unfortunately I’ve met some like this) is not going to be seen as favorably but those that fit this category probably have their reasons. For example, the jerk might say ‘Hey, this is a business and I just treat it and everyone I’m around as if it is a business.’ Sure, treating a business like a business is important but I think a comment like that is just a euphemism for ‘I’m a jerk; deal with it.’ The bottom line is that some people just aren’t nice and probably never will be.
You can look at this and shake your head or you can look at it as a golden opportunity. The jerks of the world are going to bring their bad attitudes to the clients and colleagues they meet and that will only make those of us who are friendly look that much better. Just being professional, cordial, polite, and courteous are elements of the friendly investor’s approach. The integrity comes not from investment expertise in this case, but rather from just being a decent human being and the value of that alone should never be underestimated. You are in a people business and being likable can go a long way towards your ultimate success.
Empathy
Empathy is simply defined as seeking to understand a situation or the needs of another person. It is sometimes confused with the similar term sympathy and there is a significant difference between the two. Sympathy is to actually feel bad for someone and, in doing so, absorb the emotional impact of someone’s situation. Empathy is no less sensitive but involves less of the emotional side of a situation, making it much more objective which is a good thing for us as real estate investors.
The way that empathy manifests itself is to simply be interested in someone’s situation, ask questions, and legitimately want to understand what is going on. When you can convey this to your clients, it can give you a tremendous amount of respect because you actually are interested in what is going on with the client. Empathy is not just asking questions, though. It is a part of your attitude and will show in both your tonality of how you speak and body language so your empathy must be sincere in order for it to show to a client.
In the world of real estate investing, it is common to work with clients who are in distressed situations. Empathy is an extremely valuable tool to have in your attitude arsenal because clients want to be understood more than they want someone to feel bad for them. Your empathetic attitude keeps a level of business professionalism around your approach but also shows that you care, which can be a very potent and effective combination.
Confidence
What exactly is confidence? This state of mind is often misconstrued and I think unfairly so. Often times, the confident individual who gets a bad rap is seen as arrogant or, in the case of more laid back demeanors, smug. Is this fair? In many cases, no, but that is how it is and I would like to offer my opinion here on how to convey confidence without overdoing it.
To best illustrate this, let me offer my definitions for arrogance. Smugness, or at least the perception of it, is just quiet arrogance so the same definition will apply to both. Arrogance is a display of confidence that (a) cannot be backed up by real knowledge or experience, (b) is used to demean or patronize another, or (c) both. Arrogance is of course a little more flamboyant and is more noticeable but smugness can be equally detrimental. Many people who themselves are not confident will see any display of confidence, quiet or exuberant, as smugness or arrogance, even if the label is unwarranted. As you develop more confidence in your business, you must work to make it an effective part of your attitude but also be aware that it can be seen the wrong way. Confidence mixed with the right infusion of humility and simple expression of knowledge may well serve you in avoiding being unfairly tagged as arrogant or smug.
The bottom line here is that confidence can be effectively demonstrated through having good knowledge in a particular area without coming across as a know-it-all. In short, when you educate yourself as an investor, that knowledge will show up at some point in the form of confidence. That first meeting you have with a client where you feel sure of yourself and are able to convey that to the client can be a breakthrough confidence builder. When you can consistently convey knowledge-based confidence, the impact on your local reputation will be significant and can mean great things for your business.
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Story Time – “My First Mentor in the Business”
When my retail coffee shop business failed, I knew that I needed to pick a direction to go from there. My choices were, (1) pursue the passion that I had acquired for real estate from my books, or (2) go find a 9 to 5. Well, since I wasn’t married, didn’t have children, didn’t have money, I decided that I didn’t have much to lose, so you guessed it, I went after my passion for real estate investing.
Upon doing some networking in my area, it turned out that one of my business relationship friends knew someone who was active in real estate investing. The problem was, he lived in Louisville, KY and I lived in Lexington, KY. I asked my friend to introduce me to this guy. Little did the investor guy know at the time, that I was a man on a mission and I was going to work for him whether he liked it or not.
With time, I professionally pursued the new relationship and became an “apprentice” if you will, to this investor. It really was a win-win relationship. I would drive an hour to Louisville every day to work for this guy, willing to do whatever it took to give me more knowledge about the business. Overall it was about a six month period where I wasn’t making a penny, but I was getting an invaluable education about how to make money as a real estate investor.
Eventually, the time came where I was either going to move to Louisville and work for this guy full time, or stay in Lexington and start my own real estate investing business based on the knowledge that I had acquired. At the time, it was the scariest thing that I ever did, but I decided to make a go of it on my own. I was extremely fortunate to have been able to experience the business from someone already in it. This mentor, mentee relationship was invaluable to helping me gain confidence and get started as a real estate investor. I wouldn’t wish for it any other way.
This method of learning was so beneficial to me in my early days that I have made it a personal commitment of mine to reciprocate and give back to other aspiring real estate investors looking to achieve great success in this business.
You must constantly invest in your education as a real estate investor if you want to achieve great success and longevity.
That said, businesses also don’t succeed on pure drive and determination, although it could be argued that these things are ultimately what helps keep businesses afloat through growing pains and other challenges. In short, your vision and courage are most admirable but they aren’t a substitute for properly educating yourself on the nuances of your business. In this case, you still need to be able to understand the numbers, prepare paperwork, evaluate market conditions, interact with people, negotiate effectively, and ultimately determine the profitability of the real estate deals you pursue.
The adage ‘Do your homework’ has multiple applications in the world of real estate investing. Sure, it can refer to proper evaluation of deals, adequate due diligence, or even timely reliance upon your professional team. I’ll discuss these things in future articles. In the here and the now, the idea of doing your homework also means getting yourself properly educated in the business and, if you haven’t done enough to this point, there’s never been a better time than now. Now, make a commitment to education and treat this part of the process just like you would any other aspect of your business and success will soon be at your doorstep.
I will suggest a great first step - I am willing to provide you with a Free gift to really explore your potential in real estate investing. If you are serious about educating yourself and learning all you can about this business, you must take a look and decide for yourself how far you want to go.
Check it out here: www.freemakemoneygift.com/Invitation.html
The Education of the Real Estate Investor - Final Comments
Personal Coaching/Mentoring
One of the single most valuable pieces of education you can get as an investor is to work one-on-one with someone who is more experienced than you. Someone who has been there, done that. This can often be arranged for a fee. However, do not expect this to be inexpensive, remember, you are paying for someone’s time and years of experience. Either way, you can get the following benefits:
- Education from someone who has had both successes and failures
- Education in a one on one environment
- A chance to voice your own goals and interests
- A way to get all of your questions answered
- A way to learn at your own pace
Naturally, a coach or a mentor needs to be qualified to give you the most benefit so you need to choose carefully. The confidence that a coach or mentor gives you can be tremendous, because as you grow your business, you have a sort of partner (at least in mind or spirit) who can guide you through your early development. Some seminar programs offer these types of mentors and others can be found through networking locally. I highly recommend this tool and have met many successful investors who have benefited from it so please take my advice to heart, because this one piece of advice could potentially shorten your learning curve and enhance your initial chances for success as a real estate investor better than any other training tool available.
Experience (aka the School of Hard Knocks)
Some investors adamantly argue that this form of education is second to none but I don’t think it’s a prerequisite to quickly becoming your local real estate investing guru. I’ll be the first to admit that experience is a necessary part of an investor’s so-called curriculum. After all, what good is the rest of an educational package if it is not put to use in the real world? Experience based education is certainly valuable in its own right and can be a mixture of both good and bad experiences such as the following:
- Facing litigation
- Having to go to court to evict a tenant
- Having tenants trash a property before they move out
- Losing an escrow deposit
- Taking a loss on a property that ended up being a money pit
I could go on and on and I think you get the idea here. Experience can make us wise to what happens down the road and, in the absence of some background education, can also be quite painful and expensive. Experience can and should be considered a beneficial supplement to some other forms of training, the type of training that can help you avoid certain key pitfalls in the first place. Using a well-rounded mix of education is perhaps the most valuable thing you can do and it perhaps will keep you from blindly accepting what comes your way as ‘just a part of the learning process.’
Experience is something that all investors gain over time and I’ve always found it helpful to gain from the experiences of others before embarking on something new myself. Teachers who are willing to share both their knowledge and their past experiences (good and bad) are abundant in the world of real estate so why not take advantage of this before having to experience all the ups and downs yourself like you were the first person who ever tried it. Take my word for it; there is no substitute for experience in this business. You just don’t have to experience all the possible mistakes and poor decisions yourself to learn from them. We’ve all made mistakes and we’ve all made bad decisions, and anyone who has been in this business for a while, as I have will certainly attest to that. Learn from this, learn from the experiences of others, and your own educational journey will be a smoother path to success in real estate investing.
The bottom line is this. Education is not just a hot topic for the news media and for politicians. It is an essential part of being successful in any kind of business. Just to remind you, you don’t need a traditional education (be it a business degree, MBA, etc.) to be a success in this business. Numerous studies have shown that traditional education, despite what benefits it offers and value it may have, is anything but a solid indicator of future financial success.
I am dedicated to helping others learn real estate investing. You just can’t beat working one on one with someone who can take you through a deal step by step, guiding and assisting you the whole way. That type of learning is invaluable and will be an investment for ALL your future deals. If you would like to learn more about my mentoring groups, please go to:
http://www.ultimaterealestateinvestors.com/membershipsignup/membership-levels/
Huge opportunities await you!
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