Anyone who is thinking to venture into the world of real estate investing should understand that it is not a game. You have probably seen all of the informercials and links to blogs and landing pages with promises of riches in real estate investing. These gurus will tell you that it is easy, no risk, no money down, no nothing, you make money while you sleep, blah, blah, blah. Obviously, many individuals who dream of riches fall for these luring ads and purchase these programs that promise them wealth beyond their dreams in 30 days.
So why we have so many people fail in the business?
I have concluded that the main reason someone fails in real estate investing, and in businesses in general for that matter, is due to their view or lack of vision of their real estate enterprise. Is real estate investing a business or a hobby for you? I think that depending on how you answer this question, it will determine the probabilities of your success. There are many other factors that will contribute to your success, but the answer to this question is key and will influence in other aspects of your real estate investing future.
Real estate investing, as I have mentioned before, is not easy. However it is simple. Do some marketing, find some buyers, then wholesale some houses and watch the cash roll in. However, most of the people that venture into this profession don’t make money and end up quitting within the first 12 months. The reason is the lack of vision. Most of them treat their new venture as a hobby and after the excitement wears off from their last real estate seminar they loose interest and frustration sinks in.
Persistence, faith, and vision must be with you at all times, specially when things get tough. Believe me they will. It’s easy to give up when after couple of deals do not seem to close, the sellers have rejected your offers, I know because I’ve been there. When I started right out of college I was looking for the “magic pill”, the easy fix that many real estate courses sell. Not everything went well at the beginning. Then I realized that real estate investing is no hobby, it is a real business. To be successful you must treat it as such. It has legal and tax consequences, just like any other businesses.
After 20 years in this business, as a real estate investor and consultant, I have concluded that there are no "secret magic pill" to success in real estate investing. What I suggest to those of you that are getting started in real estate investing is the following:
1. Before you start, determine if you are going to treat this venture as a business or hobby. The answer to this question, will determine the amount of resources (time and money) you must invest in it.
2. Find out why you want to become a real estate investor. Make sure that your reasons are not based on unrealistic expectations.
3. Like any business, you must create a plan. Yes a business plan. It does not have to be complicated. It will help you set goals and vision. In this section you will identify you strenghts and weaknesses (prepare a SWOT analysis), some of us are better working on wholesaling transactions than fix-n-flip.
4. Determine your method of real estate investing (wholesaling, fix-n-flip, etc). This will be determine as part of developing your plan and it will help you determine the resources you need.
5. Invest in your education. Yes, invest in real estate courses that will help you better understand your industry and niche.
6. Professional advice. This is a must. You must have as a minimum in your professional team a real estate attorney and tax advisor. Many times you will see a real estate investor bragging about how much they made in their last closing, you know the ones I am talking about with their checks posted in their websites, the questions is how much of that they get to keep. How much money they had to invest to generate that closing. As far as I know, financial wealth is measured by what you keep and not by what you make.
In 2010, I invite you to review your vision and goals regarding your real estate business.
It does seem like there is a lot of hype around real estate investing as though it is easy to get rich.
ReplyDeleteWhen I began to sit down and decided to go into real estate, it began with a lecture be Tom Siebel of Siebel Systems and Founder of first virtual group. When I listened to that lecture the ideas around real estate began to incubate in my mind. He was talking about the convergence of energy technology and real estate. I began to form a vision of where real estate was going and the future potential in real estate. I began to develop a vision to strive for.
However, my first order of business when I sat down to begin my business and made the decision to go into real estate, I decided to define exactly what my primary aim for my personal life was going to be. I defined it and downloaded pictures of it off the Internet and put it into words. I basically saw exactly what vision I had for my life.
Once I knew what vision I had for my life then I needed to find out what could get me their. What vehicle could I use. I decide that real estate was a great alternative given my deep interest in investing. However, real estate is only the beginning. My vision for my business had to line up with my vision for my life. I decided on the amount of passive income I would need to make each year from my business in order to realize my dreams. I began laying out exactly what my real estate business would look like operationally. I decided on the pre-tax profits, after-tax profits, and revenuess. I studied the competition. I decided that my business would eventually end being REIT and differtiate itself by catching the trend in Green Technology applied to housing over the next 10 to 15 years as all the players in the industry begin to embrace the technology and apply it to new forms of construction.
I have also decided on what I wanted to do after I build my real estate business fully.
Overall I have set step by step goals that lead to where I want to go.
After reading this blog, I believe I will go back over my strategic objective for my real estate business and begin refining it even more so I have an even clearer vision of where I am going, so that I can focus my energy toward an end objective. I think the greater the clarity of vision, the greater you focus and stay on track, and the more motivation you have to stick through the tough times to see your vision out. Without a destination, you are lost and ultimately confused. When you are confused you get stuck in doom loop of lost motivation going from one opportunity to the next without creating anything of any real value for your life. Its important I think to make a decision to go after your dreams and find out exactly what you need. As I heard one person say "Goals are dreams with a deadline."