Matt Theriault | Forbes Real Estate Counci
After 12 years of real estate investing, more than a thousand transactions and 50 houses and notes gathered in my portfolio, I can only say one thing for sure: Experience is an excellent teacher.
Through my devastating failures and massive successes, I’ve learned six lessons that, had I incorporated them from day one, would have propelled me at least twice as far in my real estate investing business — and with greater ease, too.
As an aspiring real estate investor, you may feel lacking in knowledge about building a successful business. It might seem like the days of managing employees, having a constant flow of deals and leads or even just having enough money to invest with are too far off to see. But every successful real estate investor was once where you are.
The following lessons about maintaining effective business strategies, getting the most out of your deals, building a team, maintaining good relations with your money partners and much more that I wish I had known from day one.
1. Hire a bookkeeper first.
A bookkeeper should be the first hire for your business. Paperwork is much, much easier (and cheaper) when you keep up on it from the very beginning, and it’s quite handy come tax season. Plus, you can write off your bookkeeper as a business expense on your taxes. They literally pay for themselves.
2. Find the deal before anything else.
Many people will teach you how to do deals, but very few people will teach you how to find deals.
Finding deals should be the primary function of your business. It’s really what all of real estate investing comes down to. It’s the most profitable part of the business, and when you have a piece of discounted real estate under contract, you’ll find that all your other concerns tend to magically vanish. That’s the power of controlling a “real deal.”
If you haven’t yet, set up your team and systems for this part of your business first. I strongly suggest using an automated lead machine to generate leads round-the-clock so you’re never at a loss for deal opportunities.
3. Remember, consistency beats competition.
Consistent hard work beats everything. It beats investors who have more talent, resources or experience than you. To put it succinctly, consistent hard work beats everything when everything else doesn’t work hard consistently. In other words, running a business is just like training for a marathon. Small, daily goals are the most effective route to your ultimate success.
Track and measure your lead-generating activities. You can have more success than anyone else if you just put in the time and effort on the right tasks. If you keep up on your daily goals, the outcome will take care of itself. Anyone can do it, but most people won’t — and therein lies your opportunity.
4. Document and systemize everything.
Until you document and systemize the operations of your business, you will forever be stuck as a one-man band. Your growth and income will be limited by what you can accomplish as a self-employed individual.
To begin experiencing the financial independence that real estate promises, you must first document and systemize everything in your business. Then, you must delegate — but be careful not to abdicate. Your documentation and systems will allow you to delegate tasks to other individuals without losing your clarity and control over the business.
However, using systems doesn’t mean you can become completely uninvolved in your business and fail to manage those systems. Documentation and systems aren’t sexy, but they’re the essential building blocks of a business that will run with or without your direct participation.
5. Buy more and sell less.
Make it your intent to hold every property you can. If you’re pressed for cash, you may need to flip occasionally, and that’s OK. Cash pays the bills and keeps the business running. But the more you hold onto properties, the more money you’ll make in the long run and, perhaps counterintuitively, the faster you’ll make it.
Ask any of the old guys at your next REIA club meeting, “If you were to do it all over again, what would you have done differently?” The answer you’ll hear over and over is, “I wish I’d bought more and sold less.”
6. Underpromise and overdeliver.
When it comes to partnerships, joint ventures and working with money partners, prepare them for the worst. In fact, you should almost talk them out of doing business with you. People often initially “understand” that many variables are in play and that risk comes with the territory, but when things go south, it’s very easy to forget and feel cheated in the end. To avoid this, heavily underpromise yourself to your partners. You’ll end up on the right side of the equation more times than not, especially as you gain experience.
Don’t let this scare you away from partnerships entirely — using other people’s money is how you get truly wealthy. But no matter how experienced you are, there will always be risk. Additionally, don’t borrow more money than you can use.
Many people complain about not having enough money to work with, but you can have too much money as well. If you borrow too much and can’t find enough deals to put all that money to work, you’re in trouble, as your partner will still expect a return on that money.
Ready, Set, Go
Keep your books in order, focus on finding deals and be consistent with your efforts. If you document and systemize everything, you can delegate and build a wealth-creating business that makes money while you sleep. Attempt to hold every property you buy, and remember to underpromise and overdeliver to all your partners and lenders.
Following these six fundamentals can help you sidestep most of what ails investors today and bring you closer, faster, to the joys, triumphs and financial freedom of a successful real estate investor.
Source: Forbes