Your journey in real estate begins with the quest for the white whale…the most perfect deal; the one that is as great as the tales told by the wise ones who came before you. So you embark on this epic journey only to find yourself haunted by the beast that is the monster deal. You soon become frustrated as you pull up fish after fish that are too small to keep. You find yourself sheepishly sharing the stories of those that were good enough to feed you for a short while, but not so great as to live up to the legend. Soon you begin to wonder is there really a white whale?
Yes it is true these deals do exist, but they are also rarer than you might have been hoping. That doesn’t mean you can’t have a wildly successful career and enjoy the wealth that comes with it. I see people get greedy in their quest and pass over great deals because they do not hold the kind of profit that they have heard exists. This is when it really pays to step back a moment and evaluate returns. It can be the great equalizer, taking even the smallest deal and giving a fare comparison to the glamour of the big ones. Sometimes you may not have any choice, but to stick to smaller deals until the big deal comes along. After all, you have to eat.
When you are building your offer to the seller keep in mind that you are striking a delicate balance between what you’d like to make when you execute your exit strategy and what is realistic in the market place. I see investors that fail to strike this balance and teeter to far one way or the other all the time. First, there are many investors who actually sell themselves short, building in too little profit to withstand when things go wrong. Most likely this is because the MLS is too competitive and they kept losing deals to their competition or perhaps they were insecure with making a low offer and raised the price closer to the seller’s asking price. On the other side, are investors who never have an opportunity to actually do a deal because they calculate such an aggressive profit that no seller would ever say yes. In either case the investors finds themselves frustrated, broke, and rethinking their choice to invest.
It’s not uncommon to see investors building in larger profits for themselves in lower priced markets. This has a lot to do with the amount of supply that may be available in the area. In markets where the supply of property surpasses the demand, investors get to pick and choose the deals that will make them money. On the other extreme, areas of the country with high prices and appreciation tend to have a supply that is insufficient to meet the demands of potential buyers. It is because of this shortage that investors may not be able to demand the higher returns because there are few choices. Instead of trying to make the market bend to your will and bear the returns you need, be willing to either change your exit strategy or find a market that suits the one you want to use.
Expect to evaluate a lot of deals before you find just the right one. The worst thing you can do is give up after so many almost deals because chances are you are getting closer to finding the right deal. I always hate to hear that somebody became impatient and quit. You have to ask yourself, if other people are doing this business, what is it they have that you don’t. It’s likely to be vision, persistence, and confidence.
- Vision – Often it starts with an idea of what their life could be like, but long-term success lies in the something bigger; a mission to serve others and leave a person in a better place than you found them.
- Persistence – They just keep plugging away little by little, and continue to make forward progress whenever possible. No matter how many people say it can’t be done, the persistent investor will ask, “What path can I take to get the needed result?”
- Confidence – It’s not so much confidence that they know what they are doing, but they can figure out anything that comes their way. It’s the confidence to say, “It’s okay that I don’t know. I can always ask for help and that doesn’t make me a chump.”
Notice none of what was mentioned was some super-secret strategy for investing in real estate. It’s not about the techniques that make people successful. Well, it is, but not entirely. The concepts of investing in real estate are simple, but no one should be telling you they didn’t have to work at it. No one walked along one day and suddenly from the sky came an outrageously successful career and wealth beyond imagination. Occasionally, yes, deals do fall in your lap. That’s typically because you’ve spent so much time cultivating valuable relationships that finally what seems like luck is actually just a pay day for your time.
So remember, this is your journey and the only wrong way to do this business is to do nothing at all. Remember, a lot of little deals can feed you just the same as one big deal. Besides, when you are just getting started wouldn’t it be better to start smaller. Reality is that your first deal will likely cost you more than you anticipated and take longer than expected. Wouldn’t it better to practice on the small one first and limit your risk of sinking the whole ship on your maiden voyage. For more information on how to implement investing strategies successfully, check out one of our many Rich Dad Education Elite training courses.