One of the Most Important Skills in Real Estate Investing
Thursday, January 31
At a recent Real Estate investor speaking engagement, I was asked, “What’s one of the most important Real Estate investing skills I need to know to be successful?” It was a bit presumptuous to assume I know all the answers (no matter how much I like to think I do) but I did my best at giving my thoughts on the subject, thinking at first that there are a lot of great skills that help you do the business; whether it’s knowledge of construction/repairs, finance and economics, or even sales. But the more I thought about it, the more I felt that discipline has been the most important skill for me throughout my career and life.
A disciplined investor takes action, is extremely focused, consistent, invests in him or herself, networks constantly and maintains a network, and is organized. Along with patience and sheer dedication, these traits lead to a good reputation. Many times this reputation leads to deals that the undisciplined investor might not get, word of mouth recommendations are the best form of marketing. But none of this stuff happens overnight. You can’t tell people about a creative investment strategy because if you know they’re not disciplined they stand the risk of losing what could be a lot of money. For example, say I tell you to utilize your HELOC on your primary mortgage to invest in a SFR rehab, but if you don’t have reserves or invest in something that isn’t necessarily liquid you could lose the house you live in. So let’s go over a few of these traits below and I can share my experiences doing my best at adhering to these qualities:
Action – This is a big one. I didn’t take action for the first 25 years of my life when it came to investing, and let me tell you, that didn’t pay off. That’s why I constantly try to do my best to take action now. One of my goals that I’ve managed to keep on track has been to buy one note for myself every month. It’s a process I’ve done for years and I hope to do for years to come. I usually use a line of credit because I find the notes to be more liquid than houses, more diversified, less risky, and of course less work. It’s certainly the most efficient way for me to take action.
Focus – If I buy a house and rehab it today, I’ll use private money and NOT my line of credit because private money is short term and if I didn’t use it I would lose focus on my rehab. When using a HELOC, I’m using money at a lower rate so I tend to let myself become more distracted and getting to the rehab whenever I get to it. You’re private money lender wants a draw schedule, he’s going to inspect the house, and he’s going to charge me penalties if I don’t get it done on time so I have a lot more incentive. It’s also a lot less risky using private money because the worst thing they can do is just take the property that you’re rehabbing. I once had a friend who almost lost his million dollar family home because he utilized his line of credit to buy a dump of a rehab. In the middle of the rehab repairs he had a heart attack and was out of work for 9 months. He couldn’t access his HELOC and he was almost without a home.
Consistency – When I buy a house to rehab I always buy the same exact type of house - I don’t buy the high end and I don’t buy in the ghetto…I buy in the middle. I’m not saying it’s the best system but it’s what I know and it’s worked for 25 years, so if it ain’t broke I don’t fix it! I’m also consistent with repairs; I use the same paint, same carpets, and generally the same contractors for every one of my places. It keeps them happy and everyone knows what to do. I could get a print on the kitchen without a guy ever coming to the house and without me going to the showroom of the cabinet company. That’s consistency.
Invest in yourself – I belong to a mastermind group of CEOs of different industries (I’m the only real estate guy there, which trust me can be beneficial) and one of the things that came up is “what is the one thing you’re doing to improve yourself and your company this year?” When it came to my company, I speak all around the country and although I think I’m good at it, I could always be better so I decided I would join a group like Toast Masters. When it came to myself personally, I hired a property manager for all of my houses. I used to always do my repairs and now I just don’t have the time or patience to worry about it. I’d rather pay someone else 6% to do that for me. I don’t stand in line at Home Depot anymore or find tenants; in fact I’ve removed myself from all of these types of $15/dollar jobs so I can focus on my note company.
Networking- I usually go to 8 networking meetings a month, I’ve been slowing down a bit but I’m doing more internet based networking (webinars, forums, etc.). Why do I do this? Because this is where I found the hard money guy who lends to me! Not to mention all of my connections with title companies, note investors, and other entrepreneurs who are willing to give advice. Years ago, I started a networking group with other key team players and that built my network incredibly quickly. Now today that has evolved into me being the speaker at the majority of these meetings and that expands my network even MORE exponentially. So go out and start a group or become an active member in somebody else’s. Once you get to the point of speaking at these groups, you’ll know you’ve made it and the network generally comes to you.
Organization – So I mentioned a property manager for my properties, but what about all the notes I buy? Well, I have a servicer for those and even though they’re less time than managing houses they still involve tasks that I’d rather not spend my time on. This is also why I have a bookkeeper and three different accountants, because would I rather spend every day on my accounting and taxes or would I rather think of new ways to make money? I think we both know the answer to that.
So if you’re not disciplined, that’s okay. You’ll get there. Remember, it took me 25 years to start to figure it out; and another 5-10 years to really start to get the hang of it. But maybe this article will help get you there sooner, or at least get you thinking. So what are you waiting for?! Get disciplined, take action, focus, be consistent, invest in yourself, network, and get organized because without all that you could be wasting a lot of time and money.