I am not a big “quotes” kind of guy. You rarely ever read articles where I am throwing around quotes from other people as validation for my point, but I am about to make an exception. Warren Buffet…before you decide to stop reading, this quote and article has nothing to do with his recent comments on CNBC that have been totally twisted by every real estate company and guru on the planet. No this is much simpler and much more straight forward and easy to understand.
What Is The Risk In Real Estate
Warren Buffet is quoted as saying:
“Risk comes from not knowing what you’re doing”.
I am not going to try to twist that quote into some justification that he thinks you should get coaching. But I am going to take it for face value and point out the fact that even people like Warren Buffet have coaches. Do they always have the name “coach”? Probably not. But really good business men and women are known to surround themselves with highly qualified and competent people, some are even paid, to help them make really good decisions. These same people are in position to help guide and teach about topics, which they are uniquely qualified or experienced in to be able to share.
I am going to set the argument of having a coach to the side for a minute and really explore the risks in real estate. As an experienced real estate investor, I am probably uniquely qualified to talk about risks in real estate. First, what does it mean to be experienced in real estate. It could mean many different things. For me, it means that I bought my first piece of investment property over 10 years ago at the un-ripe, young age of 30. That also happened to be the year that I purchased and proceeded to read and watch the entire Carlton Sheets program. I don’t give a lot of credit to the program, but I do give credit to his ideas about getting outside of my comfort zone and ability and the philosophy of being open to where I can find deals. Within two months of reviewing that program, I made my first deal and it would have never happened if I had not purchased Carlton Sheets program. So, I guess I have to give it more credit than I thought!
I also say that I am experienced because I have done a wide variety of deals. I have wholesaled properties to other investors. I have done joint-venture deals for a profit split. I have purchased project houses where we completely transformed the property and then sold it on the retail market. I have been involved in thousands of rental conversions for other investors from around the world. I have built my own portfolio, lost part of my portfolio and then rebuilt my portfolio even stronger. I was one of those investors who thought he knew more than the “experienced” guys and gals who came before him and continued to buy more and more properties right through the boom and right into the middle of the bust. I have had to learn how to negotiate foreclosures…on some of my very own properties. Luckily, I had some good “life coaches” around me who helped me handle my personal business correctly and with my head still held high. That helped me to keep my local banking relationships in place and take care of debts and losses that were incurred from losing some of my properties. Yeah, I would say that pretty much sums up why I consider myself an experienced investor.
So the risks for real estate investors can come from so many different places. Some of the real risks are located right between our ears. We are very capable of convincing ourselves of almost anything. A good example – the bank said you can buy these 10 properties in one day with no money down and that an interest only loan at 6% across them all is a good deal. That is a risky deal if I have ever seen one! Some other risks are information overload. The internet is an extremely risky place because of the instant access to what is usually one-sided information. In some cases, you need to refer back to your geometry courses in school to keep track of all the different sides to a deal.
There is also the risk of succumbing to “shiny-object syndrome”. This is a symdrome that effects many real estate investors who can not seem to stay focused on one thing. They are constantly searching for the next big thing. Their conversations almost always center around figuring out the “secret” to real estate investing success. This is a very real danger. It is not paralysis by analysis. It is literally not knowing when to get started because you never keep at anything long enough to get good.
One final major risk in real estate is not knowing when to stop. I have met several investors who were just like me. They became addicted to the fact that they could buy real estate. We all forgot to reflect on what we doing and find out if we should be buying real estate. Not being able to tell the difference between a good deal and a deal we could take down with our eyes closed was a problem that led many real estate investors right into the toilet from 2004 – 2007. Those are the tough lessons that came from that time period and if you were lucky enough to survive them, then you definitely came out on the back side of the real estate bubble with a healthy dose of humility (I did anyway) and a new found appreciation for getting some coaching on the skills I needed to deploy if I was going to remain in the real estate game.
World Class Athletes Could Teach Real Estate Investors A Lesson
I have to give credit for this point where credit is due. The original idea for it did not come from inside my head. I was listening on Saturday to an excellent speaker and Catholic author, Matthew Kelly. He was speaking at a men’s gathering in Memphis. I was sitting there with close to a thousand other men at a local church and Matthew began to talk about world class athletes. He pointed out that at the last Summer olympics there was a strange anomaly. There was only one athlete there who did not have a coach present at the Games. A distance runner from Kenya attended the games without his coach. Not because he did not have one, but because he could not afford to bring him. Most of the athletes, and certainly the high profile athletes had multiple coaches in attendance with them. It was a very entertaining talk especially when he began to count the number of coaches some of the world’s top sprinters had. One for the left leg, one for the right leg, one for the right arm, one for the left arm, one for the inside of the body and one for the brain and then one more just to coordinate all the other coaches.
He was being sarcastic of course, but the point really hit home to me. We often look up to professional athletes for their determination, single-minded focus, incredible ability and ultimately for their focus. But we forget about the people they have surrounded themselves with from the day they decided to go pro. Every top notch athlete has a coach and many have multiple coaches. From swing coaches in baseball and golf, to pitching coaches, goal keeping coaches, running coaches, nutritional coaches and head coaches (as in the brain!). Sure, many have vast resources to pull from, but would you not be willing to put forth a fraction of your wealth and resources if it meant being the best of the best?
Is Coaching Right For You?
Consider that for a moment as you read this and think I am off my rocker for suggesting that coaching is a good and needed element to our success as real estate investors. I have heard all of the arguments about doing it yourself and finding free resources and I am not discounting those arguments at all. But what about being the best? What part of being the best at your craft is found in taking the long journey of self exploration and learning? I totally get that there are lessons to be learned by diving into the pool head first. Unfortunately the lessons I can think of both end up badly – hitting your head on the bottom and not learning to tread water fast enough before you drown. How much easier would it be to take lessons from a swimming coach who can guide your success and help you avoid some of the painful headaches?
This is a topic that evokes some powerful reactions and sometimes those reactions miss the real point. I don’t want to be mediocre at anything I do. I earned a national coaches license for soccer 15 years ago and have had the pleasure to coach for two premier clubs in the U.S. I was able to work with some incredibly talented kids who committed themselves mind, body and spirit to be top soccer players and athletes. Several went on to play at very high levels. They had the same drive I did and did not want to learn at a slow pace. They wanted someone to teach them at a fast pace to help shorten their learning curve and to start achieving above their current level. I look back on the lessons I taught as a coach and wished I had followed those lessons as I got into real estate investing. I would have made some mistakes, but I would have had a coach there to help me dissect my mistakes, learn from those mistakes and ultimately avoid them and the necessary losses that usually come with them.
I would love to read your thoughts and maybe even exchange ideas on this topic with you. Whether you think I know what I am talking about or not, whether you agree with letting coaching help you to improve your “game” or not, I want to hear your thoughts and read your comments. If you are just passing through on your way to the next article, then I hope you at least have a new appreciation for the fact that the best of the best always had help from coaching.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.