Over the last 23 years, I’ve known many investors and entrepreneurs.
I’ve seen every possible scenario from overnight success to plodding, sit-on-your-butt-and-do-nothing failure.
I’ve known people who would get off to a great start then fade away and some who would piddle around and never seem to get anywhere.
I’ve known those who made a very successful living and even a few who became super wealthy.
Is there a magic formula for success? I wish I could tell you there was. It could have saved me a whole lot of headaches over the years. And, having the copyright on that formula would have made me an awful lot of money.
Unfortunately, there’s no more magic in being successful than there is in anything else worthwhile in life.
However, from years of experiencing my own successes and failures as well as witnessing those of others I have identified a few mistakes that can short-circuit an entrepreneur’s rise to fortune.
I’ve compiled a list of the most common roadblocks you’ll face on the road to becoming a successful real estate entrepreneur.
1. Lack of focus.
I define focus as concentrating only on the work you must do to succeed in your business, avoiding all distractions and not getting side-tracked by every “great idea” that pops up. It’s not easy.
The world we live in today is filled with things that beg for our attention. We live in what’s called the “Information Age,” and that’s great except all this bombardment of information makes it hard for most of us to sift through the junk and come up with the good stuff.
That’s why most of us have a problem staying focused—even when we’re trying to concentrate on something we know will make us wealthy.
There are a million ways to make a million bucks and every day a new avenue for riches is presented to us. But, I’ve learned through trial and error (lots of error) that the only way to make something work is to filter out everything else and stick with what I know works.
I get frustrated when I see people with tremendous potential for this business get off track with a so-called “get-rich quick” scheme (and there are a lot of them—just watch a little late-night television).
If you dabble in one business, jump to another then try something else completely different, you’re not likely to be successful at any of it. Focus takes work, determination and discipline. Sometimes it hurts.
Like when you have to say no to your family so you can go out and make them five or ten thousand dollars when you could be watching Seinfeld re-runs at home. Believe me, when your increased income starts showing up in trips to Disney World, new clothes, cars, etc., your spouse and kids won’t have a problem with it.
2. Getting into the rental business before your cash flow needs are met.
Boy, did I ever get tangled up in this one. When I first got started with real estate, I decided to buy all the rental property I could. I figured with a lot of tenants in a lot of houses, the cash would just fall into my lap every month, right?
Wrong. It was the biggest single mistake I made for a very simple reason—I just wasn’t ready.
Like yours truly, many beginning real estate investors get into the rental business because they think it’s some kind of quick path to wealth.
But, it’s not. It’s slow and long-term. Soon after I built my “rental empire” back in 1982, I discovered that my daily cash flow needs were not being met.
I had a huge amount of capital tied up in equity and a thin stream of income. And, I had a family to feed!
Don’t get me wrong, I’ve got nothing against rental property as an investment. I’ll probably have them until the day I die.
However, if you don’t have a cash cushion built up, you’d better get really good at buying properties dirt cheap. But, even when you do, you’ll discover a million ways to spend down your cash flow.
Busted toilets, leaky roofs, paint, carpet, yada-yada-yada, it all eats great big holes in your income stream. Even if you do have enough ready cash to get into the rental game, you need to know what you’re doing.
For instance, do you know about “professional tenants” who make a living “getting over” on landlords? These creeps know the landlord tenant code and eviction laws inside out, and they can make your life a living hell before you finally get them out of your house.
If you want to become a professional landlord, you’d better understand how the game is played and get the education necessary to deal with all the potential problems.
Bottom line, my advice is this: Make some fast cash by quick-turning a few houses before you get yourself mired down with rentals. Get into some low risk, high-return deals before you start piling up equity and dealing with tenants.
Then, when you do become a “Super Landlord” your chances of retiring on your rental income will be much better.
3. Listening to poor advice.
This is something you probably already know. As you go through life, there will never be a shortage of people who want to give you advice.
Your parents, your spouse, friends, in-laws, kids, they all have opinions about what you’re doing and what they think you should be doing.
Very often the value of their advice is worth exactly what you paid for it . . . nothing!
I’m not saying these do-gooders aren’t honest, intelligent and well-intentioned. However, you must ask yourself, are these folks qualified to give you advice?
Have they had any experience in what you’re doing?
It seems to be human nature for people to offer advice on subjects they know nothing about. What baffles me is how often the recipients of this so-called wisdom will listen to it and even act upon it without ever questioning the credentials of those giving it.
Through many painful experiences, I’ve learned that when you take advice from people who don’t know any more about the subject matter than you do, the quality of that advice is, at best, suspect.
Plus, very often, listening to unqualified advice can have a negative impact on your focus (see roadblock #1)
So, who should you be listening to? I believe in taking advice only from people who are:
1. Qualified experts in their field and
2. Making a whole lot more money than I am.
And, those people are out there. Don’t be afraid to seek help—just be careful where you go to get it—even if you have to pay for it. I think you’ll find that if you pay for the opinion of a bona fide expert, the advice you receive will be more than worth the price.
4. Listening to negative thinkers and “Dead Heads.”
Nothing kills the entrepreneurial spirit like negativity. With all the challenges you face in business, you need to keep a positive, upbeat, enthusiastic attitude about what you’re doing. It’s the only way you’ll be able to perform at your best.
Negative thinkers and “Dead Heads” will only suck the energy out of you and bring you down to their own miserable level. (Usually, these are people who have failed in their own lives and get off trying to make failures out of those around them.)
They’ll make you question yourself, doubt what you’re doing and, if you listen to them, eventually give up entirely.
I’m sure when you first told friends and family you were going to be a real estate entrepreneur, you heard things like, “You really believe that stuff they sell on TV?” or “You can’t make money in real estate, the market’s too slow.”
Or maybe “There’s not enough appreciation to make a profit, and didn’t they change the tax laws or something?”
Yes, the “Larry Losers” of this world have all the answers, don’t they? Meanwhile, they’re working three jobs and won’t answer the phone at night for fear it will be a bill collector. I don’t think your true friends or your family would intentionally hurt you or bring you down.
Usually they think they have your best interests at heart. However, in the process of “trying to make you see all sides” or “just giving you a few facts about the real world,” they’re pouring buckets of ice water on the fire you need to keep burning in order to keep on succeeding.
It may be nearly impossible to completely cut yourself off from these people. I suggest you simply tell them in firm, no-nonsense terms that you appreciate their interest but have no use for their negative, sarcastic or skeptical comments.
Sure, it can be a rough thing to do and some of them may be offended, but if they really care about you, they’ll get the message.
One of the best ways to avoid negativity is to seek out positive and supportive people. Find successful people or a group with common interests where you can share ideas and discuss successes and failures with people who are genuinely in tune with what you’re doing.
This is where clubs and associations can play a big role. If you’re not a member of a real estate association, I strongly suggest you consider joining one. Having said that, let me caution you, not all club members are doers.
There are people in every group who are going nowhere and are never going to achieve anything in their lives. Pick out the winners and connect with them. When you become a successful real estate entrepreneur (and you will), one of your greatest rewards will be to share your blueprint for success with others, “What goes around, comes around.”
Before you know it, that sharing will attract people to you like a magnet. I can’t tell you the many profitable deals that have come my way through people who wanted to hang around me because I was willing to share my knowledge.
5. Lack of action.
There’s an old saying that goes “Even a turtle won’t get anywhere until he sticks his neck out.” Another old saying (that I made up) is “You’re never going to get rich sitting on your behind and waiting for it to come to you.”
You have to make it happen. You have to get things started. You have to put the wheels in motion. And if they get stopped, guess who has to get them started again. You guessed right.
Movement, action, activity, progress . . . they’re essential in any successful business. Without activity on your part, nothing positive will happen for you.
It starts with that first call, that first conversation with a seller, even the first visit to a Realtor. But, your ship can’t come in if it never gets launched.
By action, I don’t mean running in place. Sure, you can go to the seminars and listen to the tapes so often you memorize everything I’ve ever said.
You can acquire all the tools you need to do this business. But, then the time comes to fish or cut bait and you find yourself standing by creek bank watching the water flow by. My friend, all the education in world is worthless until you put it into practice.
The best time to start is now. And, I mean right now. I want you to get up after you’ve finished reading this newsletter and do something that will get you going on your first deal. Call a couple of sellers in the classifieds.
Drive around looking for FSBO signs or place your own “I Buy Houses” ad. Just do it. You’ll be surprised how taking a tiny step will propel you forward towards your goals. You see, any one action on your part can produce a result.
Of course the more actions you take, the more results you’ll get.
6. Wasting time with unmotivated sellers.
They may be interesting. They may be wonderful people. They may have heartbreaking stories to tell. But if they’re not motivated to accept your offers, they’re wasting your precious time and sucking dollars out of your pocket.
If you waste enough of your time waltzing around with people who aren’t serious about doing business, then you’re not going to be in business for very long.
It’s just that simple. Trying to deal with unmotivated sellers is like trying to pick fleas off a dog.
Neither you nor the dog is going to benefit.
Unmotivated sellers will think up so many reasons “why not” and give you so much crap, you’ll soon become convinced this business doesn’t work for you, only for other people. I can’t stress enough that these are people that you must avoid like the plague.
But, to avoid them you have to learn to recognize them, figure out their game and move on. If you have listened carefully to my courses, it shouldn’t take you more than five minutes to pre-qualify a seller.
7. Chasing dead-end leads.
Chasing dead-end leads is very similar to dealing with unmotivated sellers and can be a tremendous waste of time and energy. Unfortunately, many people never really learn how to avoid it.
Well, I can solve this problem very simply. Pre-qualify every prospect that comes your way.
I’ve found if you spend as little as five minutes getting pre-qualifying information out of a prospect, you may avoid spending hours and hours gathering details about a property you never have a chance of buying.
And any time you can spend minutes to save hours, it’s like putting money in the bank. Some students of mine have a tendency to take a phone call from a prospect and rush right out to look at the house hoping something will develop—especially if business has been slow.
They’ll be out there measuring for carpet and gathering useless facts before they even know if they have a chance to put the house under contract. What a crazy waste of time, especially when you know you should never leave your desk without a solid reason to do so.
Properly pre-qualifying a prospect will help you to determine if further action is warranted. When making the initial contact with a prospect, you should ask yourself two questions to determine whether you can make a deal:
1. Can I buy the house wholesale?
2. Can I create a subject-to, seller financing, or lease-option (Terms) deal?
Your VA asks the right questions before you even get the lead sheet.
If the situation doesn’t fit one of these models, you don’t have a deal. It’s that simple. There is no reason for you to waste any further time on the conversation, much less traveling across town to look at a house you’ll never own.
Five minutes is all it should take to determine if you can create a deal with the prospective seller. Of course, you’ll have to take the seller’s word on things like the condition of the house, mortgage balances, etc.
However, if the information seems reliable and you feel the seller is motivated to pursue one of the money-producing models we discussed above, you should arrange a meeting and verify your assumptions about the viability of a deal.
When I leave my desk, my chances of putting a house under contact are about 80%. By the time I ease the old Mercedes out of the driveway, I’ve fully qualified my prospect, and I know I won’t be just collecting a lot of useless facts.
So instead of being professional fact finders, we should get into the business of being professional offer makers. If you follow this pre-qualifying procedure on every lead, you’ll save yourself a lot of wasted, unproductive hours and start to find this business really coming together for you.