Choosing a Real Estate Investor Mentor
Wednesday, January 09
A real estate investor mentor is the secret to investing success. Every great achiever in history has had mentors. No one is “self made”. Behind every extraordinary person are extraordinary mentors. As iron sharpens iron, so one man sharpens another. But how do you decide on which real estate investor mentor is right for you? Ask yourself these 3 questions when choosing a mentor:
# 1 – Do You Want to be a Creative or Traditional Investor?
If you don’t know the difference, please review the following article: “Creative vs Traditional Investing“. Deciding on which type of investor you want to be is critical because it will determine which type of mentor is right for you.
Traditional = Local
If you plan on being a traditional investor, a local mentor is probably your best bet. The best traditional investors are those that are very good at continually finding very inexpensive, very reliable contractors. They have the ability to move on good deals at the drop of a hat (because most traditional deals require instant action or else you lose out to someone else.) They know the local area like the back of their hand, which areas are good, which areas are bad, the direction the city is growing in, etc. Successful traditional investors spot local trends and adjust accordingly. Traditional investing is very localized so the best type of real estate investor mentor will probably be a local one.
Oftentimes, a really good “investor-friendly” real estate agent can be a great traditional mentor. He/she can introduce you to mortgage brokers, title companies, contractors and so many other team members that will be crucial to your traditional investing success.
Creative = Nationwide
If your goal is to be a creative real estate investor, you may be surprised to hear that a nationwide mentor may be your best bet. Creative investing techniques and formulas tend to work in every area because it is based on the concept of motivated sellers and motivated sellers are not location specific; they are everywhere. People who need to get rid of their house quickly are compelled to do so for reasons that typically have nothing to do with the local area, such as divorce, financial problems, death, mortgage problems, etc. So a very successful creative investor could actually relocate to a totally different area and be just as successful. Certainly there are local laws and characteristics that favor one creative technique over another, but for the most part, successful creative investing is not based on your local knowledge. Since creative investing requires significant creativity, getting outside the local box of thinking and seeing the entire nation and what different investors are doing all across the country, fosters more ideas and more ways to creatively invest. Plus, sometimes creative investing requires very specialized team members and if you are only drawing off of your local area for those people, you are limiting yourself. Some of the best mortgage brokers for no title seasoning loans and title companies for back to back closings we use provide nationwide or regional services. Whereas if I could only draw from local title companies or mortgage brokers, I couldn’t get the deal done.
Most importantly though, the number of motivated sellers willing to sell their property creatively is limited based on the size of the market. The cliche that, “there are enough deals to go around for everybody,” is hogwash when it comes to creative investing. The more legitimate creative investing competition there is in a given area, the harder it can be to find motivated sellers. Usually, the best creative investors in a local area avoid sharing their top secrets to avoid competition. Personally, although I mentor investors all across the US, Canada and the Caribbean, I don’t mentor anyone in my hometown because I don’t want to create a direct competitor.
What some local “mentors” will do is act like they are going to teach a newbie the ropes, but what they really do is simply teach them just enough to be able to find deals for themselves. Here’s why. Every creative investor is always looking for more motivated seller leads as inexpensively as possible. Certain lead generation techniques require time and energy, such as driving neighborhoods looking for vacant houses or FSBO signs. Since the mentor doesn’t have the time to do it himself, and rather than hire an employee, they get a local newbie to do all that running around for them in exchange for “showing them the ropes.” I did that when I first got started. It was a huge waste of time because that guy ended up not paying me on some of the deals I brought him, stole money from me on a deal we did “together” and stole $150,000 from a friend of mine, The guy turned out to be a total crook. He had no intention of teaching me anything with substance except how to run around and do work for him for free. Well, he did teach me something valuable, what to look for when someone is about to take advantage of me! But although my experience was a bit extreme, local “mentors” are notorious for training people to their birddogs, not successful, independent investors. The fact is motivated sellers are a limited resource and competition is not helpful to existing, successful creative investors.
Therefore, you’re best bet if you are looking to be a creative investor is a nationwide real estate investor mentor. They will open up their vault on all their hidden secrets because they don’t have to be concerned about competition and they can draw on more ideas, techniques and team members due to their much larger geographical perspective.
# 2 – Is the Real estate investor mentor Passionate About Teaching AND Successful at Investing?
Being a successful investor and being a good mentor are two very different things. Some people are fantastic performers but lack the drive and patience to teach others. I have a friend who is a very successful investor and agent who refuses to mentor people anymore because she got so frustrated by students not following her instructions. She didn’t have the patience to deal with the fact that no matter what you say, sometimes students have to learn their lessons the hard way. Plus, she wasn’t passionate about teaching. She saw it as a good sideline business to make some extra money in between deal closings.
If you want to be a creative investor, you need to also make sure the mentor is successful nationwide, not just locally but wanting to become a national mentor. You want someone with a track record for mentoring students to success on a nationwide basis. A tall tell sign that they are a good local mentor but a wanna bee nationwide mentor is that the deal examples, case studies and success stories they give are all from the same geographic area.
On the other hand, you have people who are extremely passionate about teaching but they are not successful investors. That’s where the old saying, “Those who can’t do, teach,” comes from. They are very zealous real estate investing teachers who aren’t successful investors themselves. They are perhaps more dangerous because they teach well, but what they teach is wrong. Unfortunately, the less competent mentors are also usually the least expensive and since many budding real estate entrepreneurs are on a tight budget, sometimes they go with the lowest priced option. This is one thing you don’t want to go cheap on because you can’t learn to be rich from a broke person. If you picked the right person, the cost of the mentor will be a drop in the bucket anyway. So avoid going with the least expensive option and make sure that the real estate investor mentor you choose is far more successful at investing than you are.
For those traditional investors looking for a local real estate investor mentor, be aware that you will have a much more limited pool of prospects than the creative investors going for a nationwide mentor. Try to avoid lowering your standards just to get a local one. Be patient and persistent. You may have to go outside your specific area but perhaps you can find someone that is regionally close to you. Or maybe you can reach out to a nationwide mentor and they may have some mentors they know that are closer to you geographically. But keep in mind that you need someone who is passionate about teaching AND is successful at investing.
# 3 – What’s the Mentor’s Motivation to Help You?
This is a HUGE mistake many, many people make when choosing a mentor, They do not think through the REAL motivation of why the mentor would help you. The consequences can be significant. You need to have a clear and realistic understanding as to why the mentor wants to help you. Some beginners unrealistically assume they are going to find an extremely successful mentor who, out of the goodness of his/her heart, is going to lead them to the promise land. But mentoring someone to real estate investing success is a long term, ongoing, patient and persistent process. The mentor must have substantial motivation to work with you; and the thought that they want to help you because they like you is downright naive. It doesn’t work that way in the real world.
Here are some examples of the REAL motivation of some mentors:
1. If you are traditional investing and you have an investor friendly real estate agent mentoring you, that agent’s REAL motivation is for you to buy real estate. That’s how they get their commission, when you buy. But sometimes the best decision of all is to not buy the property. If you don’t buy the property though, your agent doesn’t get paid. When in doubt, that agent is going to tell you to buy because that is how they feed themselves.
2. If you are traditional investing and you find a local real estate investor mentor that says he/she will teach you by doing a deal together and all you have to do is bring the money, beware! That’s what got me and my friend in trouble when I first got started. Well, my friend brought money, but I was broke so I was bringing my good credit credit, which is basically the same thing. If a local mentor is truly successful, he/she doesn’t need your money or your credit to sign on a loan.
3. Whether creative or traditional, sometimes a real estate investor mentor will charge you an upfront fee to be your mentor. Although this arrange can work well, be aware that ultimately, the motivation they have to help you was provided in full at the beginning of the relationship. What motivation do they have down the road to help you when you get stuck? They have already been paid all of their money and given all of their motivation. It would be like paying a painter their entire bill before they took one stroke of the paint brush. Most people would never agree to those terms with a paint contractor. Instead, they may pay the painter some money upfront for materials and to get the work started, then they may pay some progress checks as work is completed, and then, they would hold off to pay the final bill until the paint job was complete.
The best way to ensure your mentor’s motivation is aligned with yours, is to align your incentives with the mentor. Such as doing a profit sharing arrangement whereby when you make money, the mentor makes money. That way, when the mentor wins, you win and perhaps just as important, if a deal is falling apart, the mentor stands to miss out on those profits just like you.
In addition, if you have already paid for real estate coaching services or are trying to make a decision right now on a mentor, consider how you found that person or company. For example, did you find them by researching online, reading articles or a book they wrote or by a referral from a trusted advisor? Or did they find you, as in coming to a local hotel in your area? In most cases, the best people to work with are the ones that you found, as opposed to the people that found you.
Hopefully now, you can make much more informed decision when choosing a real estate investor mentor.