Strategies that will help you strengthen your savings habit and grow the pot of cash you’ve worked hard to set aside
Have you ever had a burning desire to be an entrepreneur, to be your own boss? Have you ever imagined what field that would be in? How long have you had this desire, and what makes you think your life could be better as an entrepreneur than in a nine-to-five? If any or all these questions have troubled you, then you have found the right book. Even better, if you have established that real estate investing is the field you desire to be in, then this book will give you the inner strength to start and plough on.
Do You Have the Drive?
What type of people have the drive to start a business, to be self-employed, to be their own boss? The real answer is, there is no specific description of those who are driven to start a business. I recently talked to different business owners to figure out the traits or ambitions which drove them to start their business. Some people had dreams and followed them. Some inherited their businesses. Others stumbled onto opportunities. Others were forced to think outside the box as their families expanded. Two people who you met in the previous chapters, Sebastian and Josh, belong to this latter group.
In Sebastian’s case, he sought income and time flexibility to enable him to spend time with his young and growing family. Josh watched a late-night infomercial on television on how people make money in real estate, then one day bumped into me at a worksite. We started talking, I referred him to a local branch of a national real estate association, then mentored him. He is now a thriving fulltime wholesaler, and he is enjoying it.
The truth of the matter is that investors start different types of businesses differently and at varying levels. The ones who inherited their businesses may not have had a steeper learning curve since the groundwork was already paved and they joined an existing network. They could choose to make it better or expand it. At least, for them, there was some physical and legal skeletal structure to start from. They may even have had existing repeat customers. If they were in real estate rehabbing, maybe they already had devoted customers and people may have automatically responded to their name brand. In general, I like to look at those inheriting their businesses as the lucky ones who found the train already on the track and their job is to steer the vessel along. This chapter may be a form of revision for them.
Where Are You in the Business?
If you are starting your business afresh, this chapter will provide some helpful guidance and a road map, so you know the right questions to ask, the importance of the right education and mindset, and the drive and ambition to possess to see your dreams come to reality and flourish. Irrespective of what drove you to start your business, this chapter provides a framework that guides you through a process of starting and running your real estate investment business from the ground up to an unimaginable success.
As with every start-up, you must know that the work is usually hard, the journey can be unpredictable, but with dogged effort and extreme determination, you will get what you want. Let no one lie to you that this is easy. You are best forewarned that this is hard, so if you are of faint of heart, please look for a nine-to-five. Let us get that out of the way. You might as well stop reading at this point unless you are reading for pleasure or curiosity. This is a serious endeavor for serious people. Period. Real estate is a capital-intensive investment. You will fork out a lot of money and time to be a successful investor. Therefore, you need to treat the whole process with the seriousness it deserves to succeed.
To the budding investors who continue reading beyond this point, I will assume you are serious about starting a thriving real estate investment business, and as such, let me take this opportunity to welcome you to this wonderful journey. Get some reading done so you are not a complete greenhorn when you start in your business. This book will equip you with some knowledge and key terminologies you will hear thrown around in various meetings. You do not want to be in the dark when other investors talk around you. These terminologies include cap rate, real estate owned (foreclosed properties now owned by banks), tax lien, short sale, NOI (net operating income), ARV (after repair value), cash flow, wholesaling, rehabbing, turn-keys, probate, tax-sale, fix and flip, subject to, and many others.
Some people think it is okay to go to a networking event and declare that you are the new kid on the block, and everyone will invite you to join them in singing “Kumbaya.” It does not work that way. It is important to announce that you are new, and people will be helpful, but they will start by asking you what you are interested in doing. They are willing to talk to you in the direction you point them to. Therefore, you should at least have some basic knowledge of things before you go to these meetings. You will realize, many times over, that when people go to networking events, they typically seek to meet those who may enrich their experiences. They do not necessarily set out to go teach newcomers unless teaching you is in alignment with providing some value to their goal.
For example, if they are looking for a client or someone to buy their property, then they may consider you in alignment with their desires and they may spend time with you. We will cover networking in greater detail in Chapter 9. In general, arming yourself with some knowledge in a business you are in or wish to join is a good thing. Others will realize that even though you are new, you are a serious person. That said, I will be your guide for now. Please strap your seat belt, take a deep breath, and let the knowledge and real-life experiences journey begin.
On the Road
Many people, myself included, started their journeys without any form of reading or guidance. When I started in business, I did not have any form of real estate education nor coaching or mentoring. I stumbled deeply, lost a lot of time and money. I do not want you to start that way. I want to at least equip you with some basic knowledge, if not more. Like I said in Chapter 2 of my first book, Why Do Contractors Lie?, it was a tough start, but subsequent education helped me ride the wave with faith and determination.
I encourage you to learn some basics first through the various ways outlined in these two books so you can begin your career from a point of strength and determination, knowing that you too can thrive in the business, like others have done. Perhaps you could start from a point of self-reflection by asking yourself some of the questions I instruct those seeking to start their journey in real estate investing to ask themselves:
- Have I ever dreamt of owning many income-generating properties but did not know how or where to start?
- Do I know I can master the art of real estate business and make money right from my first deal without fear?
- Do I know I can learn to successfully start and profitably manage a real estate investment business to give me the flexible lifestyle I desire?
Like with any business start-ups, people go through soul searching and self-doubt trying to convince themselves that they may not be good enough to pursue the desires of their hearts and attain the level of happiness they yearn for. I know because I went through the same predicament before starting my journey. These questions will set you on the process of clearing your mind and equipping you with the confidence that you are no different from those who started from a point of self-doubt and prospered.
In addition to the above questions, you need to master various techniques that will give you a clear path for success. You will learn many of these skills in this book. You will be equipped with the techniques that shorten your learning curve and set you on a path for success from the get-go. You will acquire the best business procedures for utmost success. A checklist, along the lines listed below, will be developed and they could help you form the framework for successfully starting and profitably managing your real estate investment business, so you get to the point where you own many income generating properties according to your goals:
- How to, efficiently and effectively, own many investment properties
- How to avoid rookie mistakes other investors make
- Great habits successful investors employ
- What constitutes the right investment for your individual needs
- Strategies for managing your unavoidable losses, should they occur
Answers to these procedures are fully covered in this book. Your meticulous reading should lead you to develop a deeper understanding that will get you started on a path to a fulfilling and rewarding real estate career and give you the flexible family lifestyle many people, including Sebastian, dream of. The importance of the above checklist is to make sure nothing is overlooked in the process of starting and managing your business. You should start your business path from the point of enlightenment through education, mentorship, or coaching. With relevant instruction and mentorship, you could capitalize on great strategies and develop a winning mindset that leads you to infinite success. People have different desires and what separates those whose ideas end with their dreams and those who see their dreams blossom and achieve unprecedented success is their drive and belief in themselves. They also have the conviction that the capacity for their success lies within them.
Sometimes what keeps people down is their mindset. As such, what matters is that you know and believe you can start a successful business and make yourself and your family a lot of money. As I have mentioned and you will realize throughout the book, a properly grounded business journey should start with some form of education. Chapter 4 will guide you on the right education to have before you start in real estate investing. You will be exposed to how relevant education will boost your confidence, eliminate fear, and provide you with the necessary knowledge for decision-making. Appropriate education will shorten your learning curve, enlighten you on the type of mentor you need, and help you craft a road map for success before you invest your hard-earned money. Relevant education and exposure create awareness, and awareness is typically a catalyst for change. Also, great education in your field equips you with the right knowledge. A knowledgeable person is a confident person. A confident person develops a confident mindset, which will help you approach the business world around you in a confident manner.
In Chapter 5, you will learn the importance of the right mindset. The right mindset is a key driver for positive and progressive change. Your mindset is a huge factor in how you act and react to circumstances. As such, you should know that the biggest opportunity and the biggest threat to your success is yourself. Your mindset – in this case, your winner’s mindset – can be the difference between your success and failure in any endeavor.
Every great business starts from a business plan. Chapter 6 highlights the importance of drawing out a good business plan. Such a plan is not only a good management tool, but also provides a roadmap for setting targets, reference points, and operational benchmarks. That roadmap could guide users if they fall behind in timeliness or profitability. A great plan incorporates great business strategies that enable the various departments to work in unison and even provide for smooth continuation in the absence of the business owner.
Chapter 7 outlines how such a business could be set up so the whole system operates like a well-oiled business machine. Your system should be easy to learn and readily transferable so others can step in on a moment’s notice. Setting up your operation as a business, even if you run a one-person outfit, saves you time due to the repeatability of functions that follow an established and defined process. When all is said and done, all the efforts of having a great set up in any residential real estate business should, first and foremost, lead to a streamlined and repeatable process for purchasing properties that meet your defined goals.
The procedure for buying a property is an important step since investors generally make their money at the purchasing stage and not necessarily at the selling point. Chapter 8 deals with the important quantitative aspects of property evaluations through facts and figures. This section will highlight why you could gloss over some pertinent facts when looking for a property to live in, but you do not have the same luxury when evaluating the viability of an investment property. You should be on point and follow some established mathematical ratios involving cash flow and return on equity, combined with learned qualitative analysis when evaluating an investment property. From my experience, investors who master the right property evaluation techniques and keep abreast of the ever-changing business environment typically increase their chances of success in the industry. You should look at your business environment as consisting of the marketplace, people, and processes.
Chapter 10 outlines the importance of understanding why others have failed so you do not repeat the same mistakes. The concept follows the principle that those who do not learn from history are bound to repeat some common and avoidable mistakes. Time is one of the greatest assets you need to learn to control in your daily operations. Therefore, you do not want to waste your time repeating actions that will most likely lead you to failure. That way, you will concentrate your energies on those strategies that work.
Relevant and continuous education will not only help you with determining the right areas to concentrate your energies on but also equip you with strategies for managing failure. Learning to manage failure, and its aftermath, is a cornerstone of many successful investors. They typically figure out how to turn shortcomings into success. Due to the capital-intensive nature of owning a property, it is important to purchase only those investments that meet your business goals and desired income. In the same fashion, you should mainly hold onto those properties that continually meet your goals and let go of those that are problematic and make you lose your income.
Chapter 11 describes what constitutes the right time to let go of a property. One of the key concepts in the business is to learn not to fall in love with your properties so you can systematically let go of any whenever you determine that there is no longer much discernible need to have them in your portfolio. The reasons may range from changes in the neighborhood, negative cash flow, increased stress, or a desire to relocate or retire.
Summary and the Results You Will Get
The above framework highlights the problems and solutions you are likely to encounter as you master the intricacies of starting and successfully managing your real estate business to greater profitability beyond your current expectations. This book offers you the opportunity to learn and put into practice the best business procedures right as you start your career.
The information you gather in here will give you the necessary knowledge and a clear understanding on how you will commence and manage your business in the most effective, efficient, and profitable way. The book also provides a reference point for those wishing to start their career in the business, so they have appropriate knowledge to approach their business with ease and confidence. You will possess the necessary understanding to put in place the right mechanisms and procedures to hit the ground running in a manner commensurate with your desired goals for success.
When you start with the right procedures from the beginning of your career, you are likely to internalize the best business practices from the get-go, as opposed to doing some things wrong at first and later re-learning. Learning from mistakes can be costly, and Chapter 12 lays out the potential landmines you could face when you implement the techniques outlined in the book by yourself. Your confidence and success level will be much higher if you work with a professional rather than going it alone.
