“Knowing what you know
now, what would you do differently?”
This is a question that
so many people have asked me, and it’s a tough one.
Based on my current position and the blessings I have
experienced, I really would not have done anything differently. I’m very pleased with my current situation as an investor,
and I fear that if I had done anything differently, then I wouldn’t be
where I am today. In my
opinion, a more appropriate question is:
“Based on your
experience, in which direction are you going from here and what advice
do you have for a new investor?”
While my plan for the
future is still in process, I have some advice to offer new investors.
Tip Number One : Quality Over
Quantity
In the past, I set goals
to complete a certain number of deals and as a result, found myself at
times pursuing volume over quality.
This sometimes put me into bad situations, costing me both time
and money. For example, I
might have paid too much to buy a home just so I could say I did a deal
and hit my target. While I
did experience many situations that other investors never encounter,
this is not the way to do business.
Today, I realize that I
didn’t need to do as many deals as I’ve done.
Now I pass over a ton of opportunities that I would have taken
years ago. Rather, I sit
back and cherry-pick, waiting for the “home runs” to come along.
That’s not to say that
beginning investors should wait for the big deals.
Most don’t have the resources to compete with the experienced
investors, including myself, who don’t need the smaller deals to
survive but can afford to be patient.
We can bide our time until the best deals present themselves and
still have enough resources to take advantage of them when they do.
What I am saying is that
beginning investors should do what they need to do to survive, keeping
in mind that it is better to do one quality deal than a multitude of
average deals. As a
beginner, you must get into the game, but do it carefully with good
deals. Then go from first
to second to third to home, taking it one step at a time.
Crawl before you walk and walk before you run.
Otherwise, by rushing into things, you run the risk of making
mistakes that will set you back months or even years.
Tip Number Two : Set Goals And
Put Them On Paper
I did not have concrete
goals when I began, so two years after getting started, I was in about
the same place as when I started. I
ran around in circles and covered a lot of ground, but didn’t get too
far from my starting point. Only
then did I develop a plan (smart, huh?
Only took a few dozen “seminars” and a few more whacks upside
my head).
So I teach my students
to put together a plan sooner rather than later, preferably before they
even start investing. Anyone
who drafts a realistic plan and sticks to it can achieve as much in one
year as I did in three.
Not that creating a plan
is easy, especially when you don’t know what to expect.
Accurate goal setting is actually very difficult, and not many
people teach you what you need to set REAL goals.
Most teach goals that get people excited, good in the sense that
it usually prompts people to take action, but bad in that it develops
unrealistic expectations and sets people up for disappointment.
To set realistic goals,
speak with experienced investors in your chosen field (wholesaling,
rehabbing, lease-options, “subject to”) and get their honest
opinions regarding profits per deal and the average time required to
complete a deal. Then,
based on this and your current resources of cash and credit, set your
long-term cash, cash flow and equity goals for one year, three years and
five years. Once you have these long-term goals, fill in your short-term
goals of three, six and nine months by outlining the steps you need to
take to accomplish your long-term goals.
Unless you draft a plan similar to this and truly commit to it,
you are going nowhere.
Tip Number Three : If
Possible, Keep Your Best Deals
Looking back, I have
owned a lot of homes that I wish I would have kept.
I don’t regret having sold them since every sale contributed to
my success, but I did have some gems that have more than doubled in
value since I sold them.
When I sold, I just
didn’t believe that the areas would take off like Realtors and others
were telling me. So I
cashed out and used the profits for other things.
If I had held the 50 best deals that I have sold to others and
done nothing else, my net worth would probably be three times higher
than what it is today.
Not that I’m
complaining. My net worth
used to be negative, and today it is pretty respectable.
I’m just advising you to hold onto your best deals if you can. Sometimes, though, it is necessary and understandable to sell
a property for cash profits even though it would be nice to keep it.
Use your best judgment.
Tip Number Four : Don’t
Limit Your Profits
When you purchase a
great deal, don’t feel obligated to pass all of the savings on to your
buyer. I could have
generated more profits than I did from many of the properties that I
wholesaled. Often, when I purchased a SUPER deal, I passed along the
SUPER savings to my buyer with the attitude that I should only make
$2k-$4k per transaction.
Well, this was a
mistake. My advice to you
is to take what you can get. Don’t
inflate your prices above the market and gouge people.
Give them a good value. However,
don’t think it’s necessary to limit your profits just so a buyer can
benefit. After all, this is
business. Let the market
set your price. There will
be plenty of times when your profit isn’t as large as you expected.
Take advantage of the big hits when they come.
Tip Number Five : Separate
Business And Charity
Sometimes, I used my
business as a charity when I shouldn’t have.
My recommendation for you is never to do the same. Don’t let someone live rent free or give someone else more
for a service than what it makes good business sense to give.
I’ve learned that I
need to run my business for a profit, and that I need to do all I can to
keep it profitable. I’ve
also learned that it’s OK for me to be charitable with my profits, but
that I can’t be charitable with my business.
Giving your business away before you make profits cuts your
wellspring off at its source. It’s
not prudent, and your business will suffer greatly as a result if you
choose to do so.
Tip Number Six : Hold On To
The J.O.B. As Long As You Can
I know it’s hard to
hear this, especially for those of you disgusted with your current
position, but I recommend that beginners with good jobs hold onto them
for a while. They provide a
safety net while you are learning and particularly allow you to
establish yourself with banks and credit card companies.
Convincing these organizations to work with you as a
self-employed person is tough.
Tip Number Seven : Start As
Early As You Can
I first became
interested in investing at the age of 18, and I wish I had pursued it
from that age. Instead, I
waited 10 more years to get started.
As of this writing, I’ve only been investing for 5 years and
it’s hard for me to imagine, based on my current position, where I
would be if I had started when I was 18 years old.
It’s never too late, but you need to start NOW!
Tip Number Eight : Use
Partners Wisely
Use a partner only when
you need them. In other
words, choose someone with time, money, knowledge or skills that you
don’t have. They should
bring to the table something that you need.
All too often, two people with a dream and nothing else decide to
be partners. Not good.
Partners need to complement each other, not have the same
qualities.
Today, I teach others to
use partners strictly on a deal-by-deal basis.
The form of partnership I teach most often is one where one
person puts up all of the money and the other is responsible for
everything else.
In retrospect, I would
not have taken on the one partner I had.
In time, I didn’t need a partner anymore, yet I still had one
and felt as though I was giving half of everything away.
He probably felt the same way.
Tip Number Nine : Dare To
Dream
Finally, I’d like to
stress that if you can dream it, you can do it through effort and
perseverance. Having money,
a decent job, and good credit make investing easier, but are not
necessary.
When I began my career
as a real estate investor, I had no money, no job and poor credit.
In the past five years, through the grace of God, I have come a
long way. So set your goals
and start taking the steps necessary to achieve them.
Reevaluate and adjust every so often, but don’t quit and
don’t let anything stop you.
Steve Cook is a real estate investor from Baltimore, Maryland. He is the owner of flippinghomes.com. For more information on Steve or his materials, click here