If I were to start my real estate investing over again today, knowing what I know now, what I would do differently is: (in no particular order of importance)
Accept how difficult it was going to be. I’d never owned a business before. We knew this venture would be tough because it was just us – no one else to be responsible for anything. No longer could we go home at night or on the weekends and just veg-out. This was like having a baby – 24 hours a day, 7 days a week of complete responsibility. And, like having a baby, unless you’ve experienced it, you don’t understand what it means. Mental understanding is nothing like real-life-experience understanding. I expected it to be difficult – I had no idea how far from accurate my expectations were.
Know how rewarding it would become. We had goals and a business plan. We had a big “why” when we started out that we used regularly to keep ourselves from getting off track or giving up with what we were trying to accomplish. However, as big as we stretched our goals, as detailed as our business plan was, as important as our reasons to succeed truly were, I had no idea the size of the reward we would be reaping if we refused to be deterred. I cannot stress enough how large the obstacles are that get thrown in front of you over and over, and ever changing. The temptation to say, “this is too hard – I’ll try something else instead,” is HUGE. Every time you give up on your dream and start toward a new one, you are starting over. The challenges may be different, but they will still be there. To win big, you have to grow big. To grow big takes overcoming big challenges. We did, but they would have been far less daunting if I’d had any idea the enormity of the rewards waiting further down the line.
Know that true wealth was going to take longer than all the gurus said it would. “Just buy my product / follow my system and you will see big results.” I have yet to personally meet anyone who is wealthy following the process laid out by a program they purchased. Everyone I know of true wealth followed the experience of a coach/mentor as they blazed their own trail. It looks easy on TV; it sounds easy at a seminar; it is hard work and it takes longer than you think it will. Know that starting out so you’re not disappointed or distracted.
Know how hard working with my spouse would be. Who’s the boss? Yeah, right. And that’s only one problem. Who’s right? Who knows more? Who’s point of view is best? Who has the final decision? It’s one thing if you have a business partner who lives in a different house – way different. In very little time, the business is the only thing you talk about. After all, what else is there? Exactly…
Pay less for private money. Starting out, we offered too much out of fear we wouldn’t get it. Turns out, people are happy to place their money safely in an investment that is collateralized by real estate. Years later, we took profits to pay off the original “expensive” money when we gained the knowledge and expertise necessary to offer less return. Most of those lenders were so happy with the regularity of their returns that they chose to stay with us even when offered lower interest rates. Take care of your private money lenders and they will stay with you forever. (And, they encourage their friends, family, and co-workers to invest, as well.)
Sell more properties instead of holding everything (even though it did make us learn how to be lean and clean without waste). In the beginning, we had a long term picture that involved holding properties to get there. Naturally, the larger our portfolio, the sooner we could get to that end goal. Because of our tenacity, we refused to sell anything for about five years. During that time, we created quite a hefty portfolio. Looking back, holding everything was probably not necessary and having chunks of cash now and then would have allowed us to breathe better and make some different investing decisions.
If I were to start my real estate investing over again today, knowing what I know now, what I would do the same:
Pay for good coaching. From the beginning. And your coaches change over time. There are lots of investors who know more than you do, especially when you’re first starting out. You want to constantly be following someone who is successfully doing way more than you are and who is actively doing it. The economics and legalities of what we do change at lightning speed and it’s important to be mentored by someone who is actively engaged in the business you want to be learning. Far better to walk through a mine field in the footsteps of someone who’s already crossed it successfully.
Get involved in a mastermind group to share ideas of what works and what doesn’t. If two heads are better than one, how about six or seven? Not only can they help guide you and point out things you would never think of on your own, they also hold you accountable. When you meet monthly and say, “this is what I’m going to accomplish in the next thirty days,” within thirty days you’ll get it done. After all, you don’t want to go back and tell them you weren’t successful!
Enter into this business with my spouse. As difficult a this was (can you say “counseling”), it turned out to be the best partner I could ask for. For a number of reasons including the fact that no one else cares nearly so much whether or not each deal makes a profit. No one will ever look out for your business more than the person who gets 100% of the profit or loss that you get. No one will ever care as much about how every decision affects you and your family for the long term as your spouse. Yes, it’s tough, but two eyes and two brains watching out for and learning about everything that needs to be done turns out to be a big advantage. Get outside help to guide you on how to make decisions together, divide the responsibilities, and keep your marriage as well as your business in tact. One thing a lot of our students say is, “you’re so lucky your spouse is in this with you to help you and understand all that’s involved.” I have to agree.
Focus on the long term rather than short term results. Disappointments in the short term happen often and the results can trip up your enthusiasm and stamina. Always have those long term reasons and goals in front of you to keep you putting one foot in front of the other, especially when overcoming the big obstacles. We use lots of projection calculators to see where we’ll be in 5, 10, 20, 30 years. Today may be lean but, boy, retirement looks amazing!!
Refuse to be stopped – no matter what the media says, the banks do, the legislators change, tenants throw your way, private money lenders require, attorneys ask for, on and on and on and on and on and on. Tackle bite sized pieces – one day at a time – one project at a time – one document at a time. Keep overcoming. That’s what this business requires.
Hold as many properties as we could. It made life in the short term tough, but the long term rewards are worth it.
Continue to do business plans as often as possible. These keep you on track. Business plans make you aware of where you’ve been and where you are. They’re the only way to plot progress or distractions and for years they’ve kept us on the One True North toward our goals.
Build a team and staff. Real estate investing is not a solo business. Our first hire was a bookkeeper. Bookkeeping is essential but not something we wanted to spend our time on; it’s not something that generates income. Find out your pain points and hire others to do what you don’t want to do or can’t do. Your job is to generate income. One of the best ways to do that is sitting in front of sellers negotiating deals. Work that can be hired out and handled by others, hire out and let others handle.
Surround ourselves with like-minded people. We all need peer groups. A group of other investors doing what you’re doing will help you make decisions, point out alternative solutions, keep you motivated, offer support when you struggle, and hold you accountable to your own goals and timeline.
Keep both a real estate and business coach. For years we had real estate coaches. Once we had real estate investing somewhat mastered, our next struggle became owning and operating a business – another new frontier. So we found someone who was successful at doing exactly what we wanted to do. Our holding company was operating in the red at that time. We were confident it would turn around as the economy recovered and property values began to rise. Our business coach looked over our companies, made some tweaks to our operations, and within a matter of months that same company was six figures in the black. I can’t stress strongly enough that you don’t know what you don’t know. You can’t ask the right questions when you don’t know what they are. Find someone in every area of your business who has been there/done that and will point out what you don’t know today.
Always stretch beyond what we believe possible. This business requires a lot of stretching. There are so many moving parts and a lot of them are frightening – dealing with mortgage companies, private lenders, hard money lenders, attorneys, title companies, insurance companies, local/state legislation and the IRS, just to name a few. You must be willing to function outside your comfort zone and go where you’ve never gone before. Those who constantly retreat back into the safety of what they already know are never truly successful.
Have a clear vision of where we are headed and stick to it. That vision allowed us to sacrifice for the business even when it was painful. We always had our big picture plan emblazoned in front of us.
Create goals. It’s so true that if you don’t know where you’re going, you don’t know how to get there or even if you arrive. But, it’s actually much more than that. The first time we wrote down goals, we wrote our one, three, five, ten, and fifteen year goals. Who knows what in the world will happen in fifteen years? I wrote “retired”. What was fascinating was that we accomplished our one, three, and five year goals all in the first six months! A couple of things about that: (1) we’d never written or tracked goals before so we had no idea how much we could accomplish in a specific time period (2) we were moving way too fast! The next year, we hit our one year goals in 8 months. The third year, we hit our one year goals in 10 months. We can now predict, with a fair amount of accuracy, just what we can accomplish in 12 months. Every year, our goals are much larger for the year ahead than they were the year before. And, every year our businesses have grown exponentially. Coincidence? I believe the amazing growth is because we pay attention to the details. The fun part is when you review those goals to see if/when you hit them, and the next fun part is being able to stretch them. Without goals, you have no frame of reference and no scorecard. Without a scorecard, you have no idea how you’re playing the game so you can’t correct and improve. And, by the way, you can’t celebrate unknown victories!
ALWAYS have contracts with contractors including pay schedules and deadlines. There are not enough pages to write out the importance of this.
Never depend on banks. Ever. We started our business in January 2005 and didn’t want to depend on banks. In 2008, we were glad we hadn’t. We have a neighbor who had all of his commercial loans with one lender. Unfortunately, his private residence was tied to them. Without warning, this lender decided to no longer offer commercial loans so they stopped renewing the ones on their books. Our neighbor was caught in this trap and unable to find alternate commercial financing quickly enough. He lost not only his commercial properties, but his personal residence, also. Banks can change/create the rules without your approval. And they do.
Build good solid honest relationships. This takes time.
Keep your word no matter what – even if you don’t eat.