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Why It’s Important to Become Successful Slowly In Real Estate

by Ben Leybovich on July 15, 2014 · 34 comments

  
Why It's Important to Become Successful Slowly In Real Estate

This is going to be funny!

Well – that’s a hell of a way to start out.  I remember my 7th grade Language Arts teacher telling me – don’t tell them what you are going to say; just say it…

Haha – I’m feeling feisty; feeling like breaking some rules.  Besides, my 7th grade teacher had no way of knowing that I’d be writing on a real estate blog, of all things, and that my audience will be comprised entirely of real estate investors – not the sharpest knives in the drawer, if you know what I mean, and that’s putting it mildly…(if you were, you’d be buying mutual funds and forget all about RE!)

So, just to make sure that you catch on, I’m telling you – this thing is funny J

Our House

Patrisha and I built our home about 8 years ago.  Her recollection of the events is a little “different”, but I think mine is funnier, and since I am the one writing…

When building our house, I remember going to Sherwin Williams with my wife to pick out colors (like 100 times).  We finally picked out a color for our bedroom walls which had a very slight tint of beige/pink in it.  Patrisha liked it and I just wanted to be done – you know what I’m sayin’?

The construction was completed – we moved in. It was a hectic day, as you can imagine.  But, eventually we made our way into the bedroom, and to tell you the truth, the color on the walls looked just fine; not that I focused too much of my attention on the walls…first night in the new home…happy wife…no kids!

Yes – I indeed had fun moving into a freshly minted house with a happy wife.  But, then we went to sleep, and then, in the morning, we were fortunate enough to wake up.  But, that’s when it hit the fan – I looked around and had a near aneurism cause there was freaking pink EVERYWHERE…!

We installed gorgeous six-panel poplar doors stained rich, dark-cherry brown throughout the house, and baseboard trim to match.  We thought it’d be gorgeous and would help the walls “pop”.  And it certainly did; but, it made our bedroom look even more freaking pink. I mean, I opened my eyes and the whole room was pink as pink can be…

Interestingly, though (and this is where the perspective piece begins), things got better by noon-time, and by 6 PM I liked the color on the walls again…

This is when I realized for the first time that color on the walls changes drastically based on the lighting, which is a function of time of day.  I mean, I had always known this, but I had no idea!!!

It’s one thing to know something, but it is something entirely different to have PERSPECTIVE!

Let’s talk Real Estate…

Thread That Started It

I came across a very compelling and important post like week.  In fact, it was so important that I couldn’t restrain myself – I commented, and in doing so I presented myself as argumentative…

Now- those who know me best know that there’s not an argumentative bone in my body.  I mean, the only person I ever argue with is my dear friend Brandon Turner, and that’s only because he has the uncanny ability to always be wrong – it’s truly amazing, really.  But, that’s it; I never argue with anyone else!

Indeed, I couldn’t believe it, but I actually found it appropriate to come down on a guy for being – successful!  It was for his own good, and many of the more seasoned folks in the thread seemingly agreed.  In fact, this subject matter is so important that I asked Philip Williams and received permission to link to his thread in this post, and here it is:

http://www.biggerpockets.com/forums/223/topics/136046-7-buildings-20-units-18-months-thanks-to-bigger-pockets?page=2#p900927

Synopsis

If you read his thread, you’ll realize that this is a very positive post from Phil in which he announces that he was able to acquire 20 units in 7 buildings within 18 months, and credits BP with facilitating his tremendous growth.  He tells us that it was indeed the knowledge and the support that he gained from this community that made it possible for him to get these deals done.

I congratulated Phil in the thread, and I do so again here – congratulations Phil!  However, I also advised him to stop there for a while, and I stand by my advice!

Related: How Real Estate Empowered Me to Buy a Lamborghini (And What It Means for YOU!)

I think I might have hurt his feelings a bit – he’ll be OK!  Phil needs to learn that he is living in the early morning hours of his intellectual worth as it relates to his career in real estate investing, and that just like the paint on my bedroom walls, stuff that he thinks he knows will look very different at noon-time; let along in the evening hours.  Phil’s current perspective is limited by his ability to anticipate shades…

Now – Phil is talented, which is my bet is that he will figure this out.  But, in order to figure it out he needs to slow down for long enough to allow reality to settle in.

Reality of Real Estate Investing

In Real Estate, there is a very large difference between successfully getting into the game, and successfully remaining in the game long enough to win.  One out of 1,000 manage to get – one out of 10,000 manage to win!

Just like you did, other folks come to BiggerPockets to learn how to get into the game, and we deliver the appropriate hoop-la and hurray – we are good at that.  Unfortunately, we, the elders, could and should do much more to help folks realize that getting in is the easiest thing they’ll ever do in this sport.  Staying in this is much more difficult indeed…

The Key

Phil – they key to this puzzle is the front door.  You can not win if what you’ve bought is the wrong thing – period.  If you buy the wrong thing, or you buy it the wrong way, there is nothing that’ll save you…no amount of management, financing, or anything!

And – pay attention now – IT IS NOT ABOUT CASH FLOW!

All cash flow is not created equal, and knowing what to buy and how is a function of PERSPECTIVE – seeing that which can not be seen easily or at all; feeling innately that which few people do.

Related: Investing for Cash Flow or Appreciation – What’s the Difference?

Conclusion

Seasoning is the driver of perspective.  Perspective is the facilitator of success.

Slow down Philip and you’ll grow!  If not, you’ll end up like my friend Brandon Turner, who calls every so often to cry on my very large shoulder…

Do you guys agree with my advice for Philip?

Be sure to leave your comments below!

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{ 34 comments… read them below or add one }

Roberto Reyna July 15, 2014 at 7:34 am

Amen,I couldn’t have said it better myself. You my friend give some very sound advice about slowing it down. I for one appreciate what you say.

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Ben Leybovich July 15, 2014 at 2:27 pm

Thanks so much for reading Roberto!

I am glad you agree :)

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Jonna Weber July 15, 2014 at 8:13 am

I would add keep the long term perspective in mind at all times- especially when you have newly acquired properties. I smile because I’ve just had my third call urgent call about malfunctioning sprinklers in our current 100 degree heat. Getting those calls is no fun, but very small stuff when the goal is in front of you and your perspective is long term. (yes, I do self manage, and enjoy it 90% of the time)

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Ben Leybovich July 15, 2014 at 2:30 pm

I agree Jonna!

However, one has to stay afloat for long enough to have a chance at achieving the long-term goal. At times that’s more difficult than you’d think :)

Thanks indeed for reading!

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Brandon Turner July 15, 2014 at 8:29 am

Ha! Cry on your shoulder… you and I have a very different perspective on how those phone calls go! ;) That said, good post. Though – I’d love for you to share more thoughts on exactly why Phil should not buy more? Maybe that’s a post for next week, “Why Cash Flow Is Overrated?” Now… that’s a viral post! Thoughts?

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Ben Leybovich July 15, 2014 at 2:36 pm

Haha – Of course you have a different perspective – someone has to have the wrong perspective…lolol you made this too easy!

And as to the other, how much time do you think I have to spend writing? I am a big syndicator now – ask Brain Burke if you don’t believe me :)

Brandon – love you man!

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Ben H July 17, 2014 at 11:58 am

Ditto Brandon – I’d love to see an expanded explanation about why Phil should not buy more now.

Another post explaining why not all cash-flow is created equal, and what may be more important than cash-flow would also be nice.

Also, I love your website… and your first name :)

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Ben Leybovich July 17, 2014 at 12:50 pm

Well – the first name is rockin’; you got that right :)

Thanks on the website Ben. It’s funny, because this design is actually only about 2 months old. My website crashed cause WP decided they would no longer support the theme it was on, and we had to scramble and rebuild it. I also like the way it turned out.

As to the rest, it’s for me to put the stake on a plate in front of you, but it’s for you to cut it, put it in your mouth, and swallow. Makes sense? lol

Thanks so much Ben!

Philip Williams July 15, 2014 at 7:10 pm

That could be a great post for next week brandon, and I may have a few thoughts on if or should Phil buy more. Yes i’m aware i’m speaking of myself in the third person but hey that’s how it goes sometimes! Perhaps if I buy enough I’ll find myself on the podcast one day hopefully in a positive way lol!

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Ben Leybovich July 16, 2014 at 4:23 am

Hah – Phil, this was my “positive side”. You don’t want to find yourself on my not so positive side…lol Keep doing it smartly, and I’ll talk to Brandon about Phil on a podcast :)

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Phil July 16, 2014 at 7:50 am

Sounds great perhaps one of the newbie podcasts I’m not in the seasoned category yet lol but I’m getting there!

Shaun July 20, 2014 at 4:01 pm

I think this would make an interesting interview on the Podcast.

I’d say the guys should peg it around episode 130 though. That will be about a year after all these units were acquired so you can comment on if you wish you had done it slower with the growing pains or if you wish you had just kept buying as they were great and nothing was there to slow you down.
1 year is still to soon to get a full picture of how things will go but it’s long enough to be able to comment on going to fast or to slow starting out.

Sharon Tzib July 15, 2014 at 8:37 am

I don’t think your comment was argumentative; it was more obtuse or mysterious imho. But having read you for a while now, I know you like us to use our gray matter to dig deep and find the perspective ourselves, instead of offering it up on a platter. But it can get a little annoying at times :) Sometimes we just wanna know why….

Having been a landlord for 14 years now, and starting and stopping my investing career several times, I totally “get” what you’re saying. Anytime you do something over the long-term, you will gain lessons and perspectives that the short-term simply cannot offer. It’s knowing what to do with that perspective that will set you apart from others, however. Good stuff, Ben!

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Ben Leybovich July 15, 2014 at 2:39 pm

I want, I want, I want – damn Real Estate investors…You give them a finger, they wanna bite your whole arm off…

The minute I have to put it on a platter, that’s the time I stop writing – but you knew that, Sharon :)

Thanks so much indeed for your comment!

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steve July 15, 2014 at 11:08 am

For one I’m glad to hear someone saying slow is okay. The gurus, investors and especially the ones who failed at the games put so much urgency in doing it all at once and hopefully you survive. I on the other hand take things slow because that’s how I feel comfortable. Perhaps its not as efficient and I’m sure I’ll look back and say why didn’t I do more but I’m also dealing with stress in a more manageable way.

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Ben Leybovich July 17, 2014 at 6:36 am

Indeed Steve!

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Mike McKinzie July 15, 2014 at 11:22 am

Ben
Great blog, BUT, you need to put a little more MEAT in it, LOL. As I posted in that thread, on January 1, 2010, I had 3 rentals and today I have 26. While that may seem FAST, it is actually just a quirk in my long line of investing. I purchased my first rental in 1980, at the age of 19 and by 1990 I had 10, a mixture of small plexes and SFR. After a divorce in the late 1990s, that was cut in half to five (I stopped investing in the 1990s due to the tumultuous marriage). In 2004, I got remarried, and sold 2 of my rentals to build our custom home in Colorado (which we still own). Thus my 3 rentals on 1/1/2010. Thirty years of investing and three rentals, I call that pretty SLOW. But, in that time, I had owned 20 different rentals, thus gaining a lot of knowledge and experience. Not only that, from 1986-1988, I ran a Property Management company and was managing 100+ units by myself. By 2010, one of my rentals had over $200,000 in equity so we refinanced it and bought another rental. We sold my wife’s house, and bought 3 more rentals. Both of my parents passed away, we inherited 7 rentals in 2012 (my sister got the other half). Therefore, using my 30 years of experience, of losing and winning, of living in my car for a short period of time, we were able to amass the portfolio we have now. How did I lose? During my first marriage, we bought a rental in Riverside, CA for $110,000. During our divorce, we sold that house for $80,000. Also, during my first marriage, we sold a house, carried a second trust deed and the buyers let the first go into foreclosure (bye bye $37,000 Second Trust Deed) I thought I knew what I was doing when I bought and then sold those two properties!
Could I lose again, even after 35 years of investing? Absolutely!! But I hope that I have learned enough to LOWER the risk of losing, but the risk is still there. Could I have given up during those dark days? Yes, but I still saw the potential and kept trucking. Three rentals with no equity and a negative cash flow would discourage a lot of investors. But I hung in there, and got to where I am today. SLOW and STEADY!

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Ben Leybovich July 15, 2014 at 2:46 pm

Mike – there is a Rusian saying which is too vulgar to appear in a classy online publication such as BP. But, it applies! It’s not about how quickly the number of doors increases, but whether perspective is given the opportunity to shape through reflection…you make my point for me sir!

Thanks indeed!

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ericka July 15, 2014 at 3:39 pm

So true. Know many college friends we jumped out into high amounts of terrible easy credit rentals and when countrywide maybe misspelling went down in NC so did they. No in better position in texasto slowly acquire properties. BP is great for networking and knowledge thats for the go slow reminder.

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Ben Leybovich July 15, 2014 at 4:52 pm

Exactly Erica!

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Orion Walker July 15, 2014 at 6:15 pm

Man, I just got done listening to Podcast episode 61. You and Brandon just don’t stop do you? I thought you guys were going to have to settle that Waldo debate outside. :)
My two cents on the slow down versus speed up would be that I tend to go slow and kick myself for it, especially when I keep hearing about all these folks who’ve been all super successful going big fast. But then again I think we tend to hear about the successes a lot more than the failures. So I try to keep that in mind.

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Ben Leybovich July 15, 2014 at 6:46 pm

Orion – my mentor told me:

Just make sure that the deal you do today is bigger and better than the one you did yesterday and you’ll ensure growth.

This means 2 things:

1. You do have to do something.
2. You don’t have to do a lot of something as long as the something that you do is better each time!

Hah – but how do you know what’s better? That is the point I tried to address here – time and reflection is the way to know…

Thanks so much for reading. And as to Brandon – now one is perfect, some are more imperfect than others…but I still love him and appreciate his friendship :)

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Brian Burke July 15, 2014 at 6:20 pm

To build a house, you must first pour the foundation. If you immediately begin building the structure, it will never be sound. You must first allow the foundation to cure. Then you build.

Such is life. Everything you do is laying the foundation for your future endeavors. You might not even know how. But in time, the reasons will reveal themselves, even if only subconsciously. Allow the process to happen, force it at your own risk.

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Ben Leybovich July 15, 2014 at 6:54 pm

I write a freaking article, and this man puts it down in 5 lines. You are right – I should have been a writer!

Pay attention people; I certainly am!

Thank you Brian :)

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Philip Williams July 15, 2014 at 7:12 pm

Hey Ben thanks for the thread! I never thought you were being argumentative or anything but I do enjoy playing devils advocate occasionally. My initial plan after acquiring these was to slow down for a while, now we may have very different ideas oh what a while is haha. Seriously thought greatly enjoyed the thread hope we can discuss real estate more in the future.

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Ben Leybovich July 16, 2014 at 4:28 am

I am glad you liked it Phil. You got talent and pizzazz. Focus on the things that you don’t see, look for them. Assume you are wrong about everything and make yourself prove in your own mind that you are not wrong – do this often, and you’ll be just fine!

Congratulations to you on all of your success Phil. Feel free to reach out!

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Shevaughn July 16, 2014 at 6:19 am

Hey Ben- thanks for the great article!!! I totally agree with you. We always here the advice, “keep your emotions out” when doing the deal and I think we should follow that cardinal rule when managing our real estate business. I think sometimes the excitement of landing a successful deal clouds our thought and we want to race out and find that next great deal instead of refocusing!!! Great advice and I will definitely remember your advice when I start acquiring properties! Thanks again:)

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Ben July 17, 2014 at 6:39 am

Steve – this is a difficult conversation to have. There are such principals as diversification vs. focus that enter the conversation when we frame things in terms of comfort zone. Indeed, doing the wise thing may or may not be a function of “comfort”…

My basic point is that time has to be allotted for reflection, as this is how we learn! Go slow enough to be able to internalize the effects and side-effects caused by your preceding actions, and no slower than that…

Thanks so much Steve!

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Sara Cunningham July 16, 2014 at 6:26 am

Oh Ben,

There you go making us all think think think. Sometimes all you need are a couple of disasters to make you slow down and rethink your strategy. After 9 years of investing I had started to think I wasn’t going to make so many mistakes. My latest is far worse than Waldo haha. However I will continue slowly but surely.

Sara

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Ben Leybovich July 16, 2014 at 6:28 am

Hahaha – I didn’t mean to make anyone think; jsut wanted to write about the GREAT first night in a new house…lol

Thanks so much Sara!

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Jordan July 16, 2014 at 2:15 pm

Honestly, I think this can go both ways for Phil, as an investor it can go left and then it go right, knowledge is very informative in this kind of scenario and this will probably eventually help you along the way but in life sometimes it takes just guts, sometimes in life you have to take the bull by it’s horn, so I disagree with him slowing down. Sometimes you may miss an opportunity slowing down. Have to get it while its hot, he may mistakes but who has not made any mistakes doing real estate and he can probably decrease his risks, but you have to take risk in life. Look at some of these major corporations many were startups and the CEO went on a whim and started a company with against them and some and most are doing quite well. We cant avoid mistakes we can reduce them, we live in a non perfect world.

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Ben Leybovich July 17, 2014 at 6:49 am

Thanks so much Jordan!

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Shevaughn July 17, 2014 at 5:20 pm

Hey Ben- thanks for the great article!!! I totally agree with you. We always here the advice, “keep your emotions out” when doing the deal and I think we should follow that cardinal rule when managing our real estate business. I think sometimes the excitement of landing a successful deal clouds our thought and we want to race out and find that next great deal instead of refocusing!!! Great advice and I will definitely remember your advice when I start acquiring properties! Thanks again:)

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Ben Leybovich July 19, 2014 at 11:55 am

Thanks so much Shevaughn!

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