5. Don’t have dreams, have goals.
The difference between dreams and goals is everyone, without qualifications, can have dreams. Dreams have no quantification, no thought out process of how to get there from here. When I was starting out in real estate, I had several goals, two of which were making at least 30 calls every weekend, finishing a book a week on real estate and later, buying 4 rental units a month. These were written down on my whiteboard at home (which everyone should have a whiteboard) and also written on a piece of paper in my wallet. Keep these goals in sight and in mind. Now, with experience comes knowledge and with knowledge, you should be prepared and expect to change these goals.
4. Concentrate your networking
It is NOT critical to network as a real estate investor; you can succeed on your own without anyone’s seeds of wisdom, advice, or input. You can also mow your grass with a steak knife, but I prefer a smarter way. You want to talk to people in the industry to boost your own knowledge about your local happenings and real estate as a business. You may not learn the greatest thing to do from each person you talk to, but, you may get lucky and learn the things NOT to do. Learning from your own and others mistake will skyrocket your success. Nowhere, is the networking more concentrated than at your local real estate investor club. Join already!
3. Leverage your money
Investor A takes $100,000 and buys a duplex outright and rents out each side for $500 and to make our numbers simple, after other costs, brings in $10,000 in profits in the first year. This is a 10% return on cash invested. Investor B takes his $100,000 and puts $10,000 down on 10 duplexes that make him a conservative $100 a unit, after other costs, let’s says he makes $1,000 profit per unit, $2,000 a duplex, $20,000 for the year. That is a 20% return on cash invested. Also, if you think about vacancy rates, if you have one vacant unit as Investor A, that is 50% of your profits. Investor B could cover the costs of a couple vacancies with the cash flow from the other units.
2. Educate yourself
I came from the IT Industry in that I worked as a database administrator for an insurance company (terribly exciting isn’t it?) In the computer industry, knowledge is your second most important asset (work ethic being the first in almost all industries). And you would have guys that had been in the industry for ten years, but gave up learning 5 years ago. These people would be replaced by younger, hungrier individuals that would work, go home and read about computers, work on them at home, then go back to work and apply that knowledge gained outside of work for the company’s benefit. Real estate is not that different. You have to be smarter than your competition and take the time to constantly feed your brain with material. Whether you are an investor, mortgage broker or realtor, being educated will help you build rapport with new clients and help to educate your current clients when you learn something new.
1. Build your team
You have to have a team around you that wants you to succeed. In real estate, this is not that hard to do as most of your real estate related people don’t get paid until the deal is done. Should you use realtors? Absolutely! Anyone that can help you find more properties faster is critical to your team. Who else can help you find properties? Family members, mail carriers, pizza delivery guys, divorce attorneys, etc. It is a good idea to drive for dollars and cruise your local targeted neighborhoods but you should not be the only one looking for you. People make money when you buy something, make sure they know that! Also, if you are following the third principle you should have yourself a good mortgage broker. Banks are fine for A credit and when you don’t acquire too many properties but when you get outside the mold, mortgage brokers have access to more programs than a bank does. Make sure you have a good CPA as well. Your time is best spent looking for deals, not pushing paper or doing your own taxes. And even if you are a handyman, think about the job you are going to do and if your time is worth more than what you would pay someone to do it for. Time management is critical to anyone that is commissioned or non-salaried. Like Scrooge McDuck said, “Work smarter, not Harder!