The #1 Most Important Lesson in House Flipping

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As I’ve probably mentioned here on this blog, we are now doing a local MeetUp for real estate investors, tradespeople, Realtors and anyone who is interested in house flipping and buy-and-hold real estate investing.

Our rationale for starting our local MeetUp wasn’t to shill educational products.

The primary goal was as follows: although through REIAs investors and people get together to network, share and learn – we felt it wasn’t enough.

As many people probably know read here on BiggerPockets, I run a house flipping business as my primary business.

But one of the most frustrating things for me when I first got into the “education” business (so to speak) was the fact that so few people took action on the things that we espoused both on posts here on this awesome platform as well as on our own site.

Although not every single piece of content I’ve ever written is Pulitzer prize-winning material, the basic message is the same over and over again:

Overcome your fears and take action

Fortunately, my real estate investing and house flipping business is going extremely well right now and I’m very fortunate thankful (especially at this time of year) for all the good fortune I’ve had building my team and making money doing something I truly love.

But more importantly is the feeling I get when doing what I do instead of the actual moneymaking part of it all.

More important than the money we make on our house flips is the feeling I get when we improve local neighborhoods, provide clean safe beautiful living space for a new family and help others achieve their dreams as well as gain continued employment in the many industries and people who help us with our flips.

As much fuss as there is about “making money flipping houses”, it’s not my true motivation nor is it the true motivation of anyone on my team.

David Versus Goliath and the Lessons Learned

There’s a new book out called David versus Goliath by Malcolm Gladwell. Although I haven’t finished reading it yet, one of the first chapters is about the correlation between making money and happiness.

I found this chapter to be extremely interesting because Gladwell – who does exhaustive research on each and every topic he ever writes about – stated scientific evidence that there is a strong correlation between the level of a person’s happiness to how much money they actually make.…up to a certain point, then it drops off considerably.

This was absolutely fascinating to me.

He said that far more important than money to someone’s happiness is the feeling of “contribution” in what they do professionally. He states in the book that at roughly $75,000 per year, you’ve reached a peak in your happiness with regard to money providing happiness. Anything after that, there’s a downward slope of diminishing returns.

Although I don’t necessarily agree with the $75,000 per year in income (in my opinion it would be a few times that), the logic was fascinating.

The analogy he used in explaining this had to do with health and wine.

As many of us know, having one glass of wine each night has a positive impact on your overall health.

If that consumption goes up to 2 to 3 glasses per wine per night, the positive health effect starts to diminish and somewhat level off.

When you exceed 2 to 3 glasses per night and go into the four, five “kill the entire bottle”, the effect on your health is obviously negative and somewhat harmful.

He states that the same thing happens with wealth – citing the $75,000 mark as that point of diminishing returns.

Fascinating stuff in my opinion…

Intrinsic Motivation in House Flipping

What does this have to do with house flipping?

Getting back to the reason why we started our meet up …

We certainly didn’t do it for the money – although with coaching and educational products, we all know there’s an enormously rabid industry for this. We decided to do it because of our mission and what we want to do to help other people.

Even if I never make a cent from our MeetUp group, the rewards so far has been tremendous. The idea of surrounding yourself with like-minded individuals who all really want to be successful in the exact same industry you’re in is unlike any other feeling I’ve experienced.

The feeling I get when I speak with others to help them achieve their goals – whether it’s financial liberation from a job or just a few thousand extra dollars to help pay down credit card debt, it’s the feeling of helping and empowering others that really makes me feel tremendously good.

And my sense is that this is what Gladwell was talking about in a roundabout way in his book.

Push-ups and House Flipping

Having said all that, once I try to help someone though, it’s really up to then whether or not they take the bait, do something about it and take the first step on the road to success.

As someone wrote in my last blog post here on BiggerPockets:

“You can’t hire someone else to do your push-ups for you.”

– Jim Rohn

No matter how hard a coach, mentor or someone who just wants to help can push someone to do something, the coach can’t do their push-ups for them!

So what happens to you if you do read the mountains of helpful information here on BiggerPockets, cruise the Internet for how to flip houses or maybe buy a couple of Kindle ebooks on house flipping…only to do nothing?

Where does that actually get you?

It gets you nowhere. You now have all this knowledge in your head – all this stored energy – but you never actually put it to use.

It’s like having a Lamborghini sitting in your driveway and never taking the tarp off to take it out for a spin…

The Most Important Lesson in House Flipping

Why do people NOT take action? I’m not completely sure but I have an idea. It’s likely the result of just plain fear.

And excuses…man, I’ve heard them all.

Maybe it’s the fear of things not working out so you just decide not to even try at all…

But here’s something that was burned into my memory banks ever since I was a boy by my father. He was an old Italian who had no real formalized education but he definitely knew business and he knew human nature.

He told me that the REAL key to success, whether it’s in house flipping or anything that you do is this:

What happens if you try something and it doesn’t work? Try again!

And if you try again and it doesn’t work. What do you do? Try again!

And if you try again and it doesn’t work. What do you do? Try again!

The common thread in this age-old wisdom, trying and DOING.

Notice that there is no “read hundreds of articles on BiggerPockets, go to lots of REIA meetings and then do nothing” – in this advice from the old man…

Instead it’s get out there, take action, learn what doesn’t work, take more action, learn what doesn’t work again and keep taking action until you successful.

Pivot, learn, pivot, learn, pivot, learn…

Simple advice? Probably. But not SIMPLISTIC by any stretch.

The Power of Taking ACTION

Something happens to you when you do something that you haven’t been able to do before. It’s this feeling of empowerment and accomplishment – a great feeling of having conquered something you otherwise thought was unachievable. This is the whole “success breeds more success” principle.

And when it happens to you for the first time, you’ll never forget it for as long as you live.

But the first step is to actually go out there and TAKE ACTION. And although I know that most people won’t, what do you have to lose if you do?

And if its true that the be-all end-all of making money in a year in fact does cap out at $75,000 per year, “making money” probably shouldn’t be your true motivation anyway.

It should be that irresistible feeling of accomplishment and having done something that you never thought you were capable of doing before. And THAT makes you feel tremendously successful and is its own true reward…

If you’ve made it this far, please leave a comment below. What you think, what is the key to success? If you have an opinion, please put it in the comments section below, I’d love to hear your thoughts.

Photo: Trey Ratcliff

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About Author

Michael LaCava is a full time real estate investor, house flipping coach and the President of Hold Em Realty located in Wareham, MA. He runs the website House Flipping School to teach new real estate investors how to flip houses and is the author of "How to Flip a House in 5 Simple Steps".

30 Comments

  1. Definitely fascinating on the $75k psychology…. Appreciate the article – I totally agree that a lot of what we do in life (and real estate) can boil down to a mental game. I’m currently starting my rehab/flipping journey, so I know what persistence means. Need to get that first one under the belt!

  2. Great points in the article. In general, the 75k mark may be accurate but will obviously be more personalized to the individual. REIs are entreprenuers at heart to some degree, most are probably trying to seek some sort of freedom, and likely has a much higher aim than the average person. For us, the number is likely skewed upwards some.
    There is indeed a therapeutic threshold. As mentioned in the article, the recommended drink for a man is 2 drinks per day & 1 for a woman. Beyond that, you will start to have diminishing returns on your investment in health which in my opinion the the best investment for anyone. The same is true of medications, beyond a certain dose, the therapeutic benefit starts to tail off and the slope becomes more flat resulting in increasing side effects & minimal if any benefit at all beyond this point. Thus, we set dosage limits on medications.
    Taking ACTION is indeed the one true key to progress. No one will benefit from the best chef on earth if he/she don’t cook us a meal. Assuming that the downside is not catastrophic, sometimes just jumping after having had some education will be enough to force you to learn & do something. When your funds are in the game, that is motivation enough, whether you like it or not, to do something. The trick is, you are actually taking action now. If you actually manage to lose a little money along the way, consider it your tuition to the school of hard knocks. Just have fun, keep learning, and earn some along the way while making a positive impart in the lives of others as well as your own. Nothing can be more rewarding.

    • Well said Leng and so true on the tuition to the school of hard knocks. I lost money on my very first flip in 2006 and chalked it up although bummed and discouraged to that same school. Learned from my mistakes and pressed onward.

  3. Great article Michael as always. I personally don’t think there is a cap on how much money equals happiness unless you put one on yourself. A lot of people have very negative attitudes towards people with money. When they get money themselves they have suddenly become what they previously and may still feel negative towards.

    Like you mentioned the more you give and help others the more fulfilled one feels. The more money you have, the more you can give and usually the more time you can give as well.

    • So true Mark. Givers Gain and it is amazing once you start experiencing it.
      My daughter was home from college this week for Thanksgiving and one of her friends who is close to our family wasn’t real motivated in going shopping with my daughter and when I privately inquired my daughter told me she didn’t have much money on her. I have her $50 and it just made her day and she thanked me. I won’t miss $50 bucks and sometime small gestures go a long way. Just keeping paying it forward as much as you can.

  4. FEAR THEE 4 letter word that is stronger than any army. I admit being new at real estate that fear is my biggest obstacle. Recognizing fear as what it is, an idea in YOUR mind is the first step to moving forward. Definitely everytime you do something out of your comfort zone you grow stronger.

    • Well said Al and some people never recognize it so maybe they don’t realize it is actually fear that paralyzes them. Once you do like you said then the next step is to figure out what that fear is and move towards ways to take it away.One exercise I used was can I accept what worse result would be? and for me it meant if I failed at this business the worst result was going back to doing what I was previously doing for a career. It kept me motivated enough not to go back.

  5. The wealthy understand that there is no correlation, at any level, between wealth and happiness. From the beginning, happiness has nothing to do with why they build wealth.
    If you want a truly accurate, well-researched reference on the subject, read “How Rich People Think” by Steve Siebold.

  6. With regard to your point about people buying educational products and not doing anything you can see this in every single market on the planet. The biggest example of this would be the fitness niche.

    People are buying the outcome (big muscles for example), but whenever anyone buys a product that requires work from them it’s much easier to just buy the product and then do nothing with it.

    The more work it takes for the desired outcome the more likely it is for the buyer to simply stop using the product or not even start.

    So if you are in the education business you just have to be comfortable knowing the majority of your buyers will do nothing. You then have to just decide that’s ok and focus on the people that do take action – or just focusing on doing instead of teaching.

    Because teaching is so scalable that’s why again you see gurus in every niche largely teaching instead of doing.

    • Great point Chris and I have to admit that is not an easy one for me but I am getting use to it and my marketing partners have been patient with me because I don’t want to be labeled as just another Guru. This is why I continue to build my investing business and offer education as I build it out. I can lead and teach by example because I am actually doing it and not just teaching it. Like you said I do have to accept the reality of not everyone is going to take action. Thank for your comments and I look forward to more of them from you!

    • Chris – you’re not one to teach and no do. Big fan of your stuff as well. Anyone who makes $41,370.67 in profit for October 2013 on their blog is not sitting on the sidelines for sure – but taking massive action, which is what its all about.

  7. I think the Key that you mentioned was that sense of accomplishment. I have a “day” job as a maintenance mechanic and run my real estate business on the side. I buy home that need updates and repair and then rent out. Even at my day job I love being able to say I put in long hours ( I am currently on the 2nd to last day of a 5 day stretch that consisted of 12 hr nights, 16 hr nights, and 3 final days of 12 hr nights) and after getting home tuesday morning I will meet a contractor and be up all day helping on an interior drain tile job. I get a thrill out of putting an ambitious plan together and then going out and executing it. If I didn’t love it there is no way I would work 16-18 hours a day, day in and day out to get it done. I do plan on continue to scaling this back with time but I am able now and will use my resources to the best of their ability.
    In the end though that accomplishment is meaningless without a goal. To put in the work brings about finacial rewards but money alone is useless as well unless that can buy more time enriching not only your life but those around you including family, friends, teammembers and clients. I love knowing that I help each neighborhood that I have a property in. Gret article Michael.

    • Thanks Kyle and I just love to hear story’s from people like yourself that are taking action and making it work. That’s right you are putting in those long hours now for a purpose to get the freedoms you desire. I have had many days like that and now in the scalability stage. I just would like to caution you a little. Depending your long term goals of the hours you are working to be successful just make sure you carve out time for your wife and kids if you happen to be married or have a partner. One thing I always said I will become successful and gain financial independence but not at the expense of not knowing my kids growing up. I know some rich people that told me if they could change anything in their life and they said to spend more time with their family and kids. This may not apply to you but whomever reads this I hope it will.
      Where are your rehabs?

  8. Great article, Michael, and one to which I could definitely relate. Taking action truly is the key to this or any other business, and we (my husband and business partner and I) have experienced this first hand, and we see it every day with our students as well. (I think I will have to borrow that line from Jim Rohn with some of our students and say, “look, we can’t do your push-ups for you.”)
    When we first began working with OUR mentor, one of the things he kept saying was “5 calls a day makes a business.” What?!? It couldn’t possibly be that simple. We needed to build a website first (and we do have some pretty good sites), get our business cards, set up our LLC’s…but then we finally took his advice and just started DOING, taking action, and our business took off. Then our mentor encouraged us to start mentoring other students and…wow! What an eye opener! Yes, we can guide them around pitfalls and through new and scary situations, but those things can only happen when the student takes ACTION! Otherwise, the “coaching” session often times ends up being more like a “counseling” session, as we work through their head games and dissect what is holding them back (and by the way, “what” is usually some form of fear.). So while I can instruct my students on the various types of lease options and when and how to use them, and I can teach them some really great unconventional and orthodox techniques of selling, none of this will do any good if the student fails to take action. So I find myself repeating my mentor’s words to them: “five calls a day makes a business.” The ones who heed this advice are usually successful; those who do not, never are.

    • I like that Marishka. It forces them to take action. It may not go perfectly in the beginning but isn’t the point of the whole exercise. I remember I went to a 3 day boot camp on how to raise money and the teacher told us we had to call 5 people and tell them about our business and the opportunity they could have investing with us. I have to admit I didn’t thing I was ready for this my 2nd day at the bootcamp. It wasn’t an option, I did it and actually got some interested prospects and one of them is still a lender today. Fast forward today and money is not even a problem now. The challenge is finding enough deals to keep all our investors money in play. Powerful stuff.

      Thanks for sharing this and I think I will borrow this technique.

  9. Hii Michael,

    I had the pleasure of attending a lecture recently by Dr John Helliwell http://www.publicaffairs.ubc.ca/2012/02/01/six-things-science-tells-us-about-happiness/. His research looks at income worldwide and documents the rise of happiness related to increasing income – and at the number at which happiness starts to decline. For Vancouver where I Iive, the number was a lot higher than 75K per year so it’s all relative to the cost of living.

    Good article!

    • Thanks Penny for the article. I particular like #4 Generosity pays off. It is so true the satisfaction of giving is rewarding and like the study shows more satisfaction for the donor than the recipient.

  10. Great article Michael. I have fallen victim to monster we all know as Fear. I was talking with my dad recently and expressed my feelings to him and he reminded me of something. He migrated to this country over thirty years ago and he told me the story of the struggles he faced just to reach this country. He told the story like it just happened the day before. It was amazing. He closed by saying that if he would of turned away every time he faced fear he would never have had what he values most, his family!

    The amount of money is not important. It is the freedom you provide yourself along with what you give back that matters.

    Thank you for sharing.

    • Thats a great story Felix and you must be proud of your dad for that as I am sure it was no easy accomplishment. I hope this is motivation for you to stop at nothing to achieve your dreams. You are right that it is not the money but the freedom it brings.
      Where are you looking to invest in real estate?

  11. Great article, very motivating. The $75k figure has a lot of research behind it – not to say that more money wouldn’t be great – I’d love to win the current ~$250m mega millions. However, there are very steeply diminishing returns in happiness after you have met your basic needs. I try to keep this in mind when thinking about what I want my work/life balance to be. Do I want to work another 8 hours, or go spend that time on a mountain bike trail or hanging with my wife an kids?

    • So true Adrian. Isn’t it always about balance and time management to achieve fulfillment in all the different aspects of our business and personal lives. I do this exercise once in a while where I draw a circle that represents a bicycle wheel and divide it into pie like sections to represent different segments of my life like business, health, family……. and then shade in from the middle outward to where if I feel I am satisfying that segment completely then it will be fully shaded to where if I am doing nothing then it won’t be shaded at all. The point it to recognize what you are lacking so you can’t get the balance back. So if this was a real bicycle wheel then it wouldn’t turn very well like your life it would be out of balance.

  12. I wish I could find a good coach or mentor. I really want to get into this business but finding it hard to get started. Where I live there are so many run down homes just sitting and nothing being done with them and I think it is because in the areas I am speaking of the people who live there just don’t care how they live. I have learned a lot on here but I guess I just need to learn more. Maybe I also have the fear factor in me like so many new ones out there and if that is the case how do I get passed it?

    • Hello Sandy – Small steps and taking a little action everyday is a great way to get started. start setting goals and take action. Remember goals with no action are just dreams.
      Educate yourself as best as you can and BP is a great place to get probably every possible question have and get multiple answers from members just by going to their forum page and posting questions there. If you have some money to pay for a coach then that may be a good investment because you will buying time to help you navigate and get started more quickly but be VERY careful here because I would hate to see you pay money for a bad coach. Create an affirmation and say it 3 times a day to start to change your mind set to believing you can. All the best.

  13. I would just like to recognize Michael for more than just the article. To make it a point to respond and add commentary to each comment is a wonderful example of how you do care for your craft and do take action. Thank you for the inspiration to be better!

  14. Hello Michael, your article was a great uplift. I’m sure for many, fear is one of many reasons, if not main reason why people do not take there first step, my age is what typically holds me back from starting, i am a 20 yr old with some start up money but don’t know where to start due to the fact that i am in the nyc area and everything around me is so expensive & there aren’t many rehabs around. I have been on BP for quite a while now reading most forums, articles, & acknowledging my self with all i am taking in, but still have not took that first step yet. I’m assuming in due time with studying and having myself attend as many seminars as possible ill be sure to take that first step soon enough. My question to you is, do you suggest to go out of state to start looking for rehabs, if the nyc area is to expensive to start off at?

    • Hello Juan – First let me tell you your age is your asset being so young and understanding the potential in real estate already. I almost started when I was your age and it took me until I was 40+ years but no regrets. I would try to start local if you can but if there truly are no deals then you will have to work your way out from there. You just have to be very careful when you first start out not to do something where you can’t react to it by driving to the property. Don’t let expensive be in the way of calling that no deals. When you learn how to work with OPM (other peoples money) and leverage that you will find a way to MAKE deals. All the best!

  15. Hello Juan,

    I would recommend talking to BP member Marc Ramsey if you’re interested in knowing more about investing out of state.

    All best! Penny

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