I can’t really say how often I have been asked (Q) “How do you do it? What’s the best–I guess I mean fastest–way to get rich in real estate?”
Ans. That’s what I like–a simple question! The short answer is that real estate is first of all a business opportunity, not merely an easy path to riches. There are urban legends out there of fast and easy money to be made ‘doing foreclosures,’ ‘flipping’ and such but, frankly, I’ve failed to turn up any get rich quick schemes that have staying power or that offer real prospects of building and sustaining wealth.
That said, I’ve developed a short list of ten Secrets of Success for New Real Estate investors that I believe may be relied upon to build wealth in real estate (or any other business for that matter).
The first of these is (Secret #1): There are no secrets! Real estate fortunes are built on a foundation of “existing art”, standard practices that have proven valuable to real estate investors and entrepreneurs for generations. Techniques such as ‘flipping,’ the lease-option, or dealing in foreclosures, touted as new or unique or even ‘trade secrets,’ are simply well established approaches to the business repackaged for the purpose of hyping book or seminar sales.
Secret #2. Know why you’re in (or going into) the business. To be successful, your business life should be only one dimension of your personal life, an extension of your personal values.
You will need a clear understanding of what benefits you are offering or bringing to others (the Marketplace).
Finally, it is important that you truly enjoy the melieu, the tangible and intangible aspects of the product (real property) and the people with whom you will be dealing. Every business, every industry, has its unique culture. It will be important to your success that you relate to that culture and identify with it in affirmative ways.
Secret #3. Have a plan. As with any initiative it is important to prepare a written Business Plan that is grounded in reality not fantasy.
Your plan will require research and analysis: that done, you will be on your way to becoming expert in your chosen field. The necessary financial projections and cash flows will provide the Goals and Objectives that will get you underway and give you a “view of the horizon” to help you stay the course. Successful entrepreneurs prepare.
Secret #4. Build a network. This is how you will recruit your Team (the best and brightest). Cast a wide net. You will need professionals related to the business: lawyers, brokers, contractors and tradesmen and, importantly, other investors who share your interest in real estate.
You should seek out a Mentor, someone who combines experience with genuine interest in you as a person.
Secret #5. Know how and how much to spend. Learn the fundamentals of unit pricing and line item budgeting. Learn ‘street pricing;’ don’t expect contractors and vendors to voluntarily offer up the best prices.
Don’t go into any project without a carefully prepared Budget, and pay out only on a percentage completed basis.
Avoid novelty: standardize your product.
Secret #6. Fast track the job. Don’t become captive of your contractors. Experienced ‘production’ investor rehabbers practice tight Project Management, often completing a single family rehab. within 2-3 weeks.
The benefits of fast tracking are many: Everyone involved is more focused on the work and morale is enhanced. Carrying costs and security issues are minimized. This is how professional rehabbers will complete a project a month with a single crew.
Secret #7. Have a Marketing Plan. Generally a part of your business plan, a written marketing plan will spell out a coordinated ongoing and sustainable program of advertising and public relations designed to keep your Message (and your “brand”) before your public.
It is important that marketing be understood as an investment, not pursued randomly or on a case by case basis. Keep in mind: You haven’t made any money until you’ve sold something.
Secret #8. Pay yourself first! From day one set aside, invest or save, at least 10% of what you earn. Practice thrift; conspicuous consumption is for those who care more about ‘looking good’ than achieving wealth and true independence.
Your goal should be to create Passive Income, that which arrives in your bank account month after month regardless of your involvement or employment. As passive income builds, the day will come you get up for work because you love it, not because you must.
Secret #9. Always study, learn. The business is multifaceted, requiring many sometimes unrelated skills. There’s much to learn about construction technology. Legal and tax aspects are always evolving. Keep up with market trends and be aware of the Next New Thing (but take care).
Finally, Secret #10. Trust in the goodwill of others. Don’t be too quick to judge. What appears to be thievery may be simple ineptitude or sometimes negligence–know the difference. Work to understand the other person’s issues (whether employee or customer).
By and large, we are all guided by the same aspirations and concerns. If you are to be in the driver’s seat, it is up to you to exercise both good judgment and humane consideration of others. In the end, ‘most everyone wants to do the right thing.
To learn more about how to implement these 10 Secrets, go to www.urbanrehabber.com.
To your success,