Why Do Some Real Estate Investors Fail?

I was talking with one of our associates yesterday. We speak each week at 6:30 a.m. because that’s the time he heads into work, so he talks with me for a good hour on his commute.

While chatting, we got to talking about commitment. We talked about his initial commitment of three years.

When he started, he said, “Look, I’m into this for three years, and I’m committed no matter what it takes.”

Well, doesn’t that make sense? It’s just like any other business.

Can you imagine buying a franchise or starting any business and not being fully committed? It wouldn’t make sense.

But the fact is some people just won’t commit to doing whatever it takes—no matter how long or short of a time period that might entail—to accomplish their goals. I know that to be a fact.

These people will say, “Well, I tried it.” Or say, “I gave it 90 days,” or “I gave it 120 days.” That is a complete joke.

Quitting anything after such a short stint is a complete waste of time. At my company, it’s caused us to get super, super picky about who we work with.

It now includes an application and a call with each one of our team members, who are almost all family. We do this to hopefully choose only those that are serious and committed; they are committed to the process of getting started in the real estate industry, committed to learning, committed to themselves, committed to their family, and committed to creating something amazing.

So how do I know that some people have a problem with commitment? (By the way, if your immediate knee-jerk reaction when you read the above statement was defensive—“Well, I don’t have a problem with commitment”—you probably do. Don’t take that personally.) I know people have a problem with it because I hear just about every excuse about why people can’t do deals.

Commitment, Casualty, and Managing Expectations

I speak with many people around the country each week; it’s unfathomable to me how many excuses are out there.

It’s not rocket science. You can make excuses or you can commit to passionately pursuing something better for yourself—not both.

If you have trouble with commitment or you get a negative gut reaction when you hear the word, it most likely is not your fault. It’s the way you have been programmed and the paradigms that have been imbedded into your subconscious.

I’d be willing to bet that you are not the first generation in your family that has this reaction. Take a minute and do a self evaluation.

Consider the answers to questions such as:

Why do I have trouble committing?
Why do I react negatively to the word “commitment”?
Why is it every time I start to get momentum in my life or business, I stop trying or my energy comes to a halt?

Apply whatever you learn from this self-evaluation to every aspect of your life.

You’re Committed or You’re a Casualty

I’ll give you some examples of commitment. I’ll also give you an example of a person who didn’t stay the course—and they’re not around anymore, which is a shame.

“Person One” got his first deal, but he wasn’t getting buyers for it right away. Now, whether you’re doing wholesaling, lease/purchases, or something else in another niche, I know this: if you get all the way through the first deal and you don’t have a buyer or a viable exit plan, you’re bumming about it.

You may even react with, “Oh, no! I’m not sure this works!”

That may be you if your commitment’s not, “I’m not looking left. I’m not looking right. I’m not looking back. I’m committed to this thing no matter what. I’ll find the bottleneck, and I’ll fix it. I’ll get a mentor; I’ll do whatever it takes to get it done.”

If that’s your attitude, you’ll get through it. You’ll seek answers, and you’ll find them because success leaves clues. The answer is out there for you.

If your attitude is, “Man, I didn’t get a buyer! Maybe this doesn’t work. Maybe I can’t do it. Maybe my market doesn’t work for this particular strategy,” and on and on with the whining, then it’s probably going to kill you.

But “Person One” didn’t let it kill him; he barreled through it. The very next two deals he did, he cranked them. And if I’m not mistaken, on one of them, it was only a matter of weeks before he got a buyer.

You get through it; you find a way. You don’t care what it is that you have to do.

“Person Two” is someone who wasn’t doing any deals in his first six months. He was working his butt off.

I don’t know whether it was personal, it was the market, or it was a number of different things—it doesn’t really matter. What matters is that he persevered.

In fact, as of the writing of this article, he’s just under his first $1 million in earnings, and he’s only about 17 months into his business. How’s that for commitment?!

“Person Three” went totally against the grain with what we say to do. She didn’t show up for calls, took a four-month sabbatical in the middle of everything—just disappeared—and was generally just way off-course. She didn’t stay consistent, didn’t follow our advice, and decided to go her own path.

You cannot go at this like you’re going to bake a cake and say, “Wow, that was amazing! Give me the recipe.” Then the recipe says, “Do A, B, C, D, E,” and instead you do A, C, and half of E and are upset when you don’t get the same results. It sounds crazy, even facetious, but it’s exactly what some people do.

At my company, we create three paydays. We advise our partners to put aside the second payday in case of potential pitfalls.

She did not go out and set up lines of credit to make sure that she didn’t lay awake at night, worrying something might happen. I could go on and on.

But ultimately, she lost her buyer on a deal and became so distraught and frustrated because of the mess that she made and the steps that she missed. She was inevitably a casualty. Who knows what she’s doing now—probably back to her old lifestyle, that which made her miserable to begin with.

Now, losing a rent-to-own buyer on a home mid-term—when you have plenty of time left with the seller, who has a tiny (less than $1,000) mortgage payment—is not a big headache. You access your line of credit for two or three months, because it won’t take you longer than that to sell. Or you use the cash reserves that you put aside on the second payday, and you get it done. There are a plethora of ways to navigate all issues that can come up.

However—her words, not mine—she “forgot” to put the reserve away. She also “forgot” to set up the lines we suggested. The fact that she didn’t do all of the other things we suggested, as well, is par for the course.

The biggest downside of the whole story is she’s gone. Unlike the first two examples, she’s a casualty.

Big Picture View

The upside of this business is not that you can get tens of thousands in profit per deal (or whatever the average ends up being in your market). Your end goal should be based on a much bigger-picture view.

If you knew the big picture, understood the system, and then had unwavering commitment, you would never be a casualty. You would design a lifestyle that would amaze you and your family.

I know that sounds like utopia—even far-fetched—but that’s what reality is for us right now. It’s that predictable; it’s that simple.

Struggles Exist—Find a Path Through Them

I ended the examples above with the woman who we counted as a casualty because she was thrown curveballs. Are you going to encounter the same in the business? Yep!

You might go to a lot of seminars, attend a lot of boot camps, listen to a lot of podcasts, and so on—all the fun and fluffy stuff.

But I don’t like the fluff. I prefer to tell it like it is.

One of our core values is that we’re blunt and to the point. There’s no gray area.

Another is that we empower individuals and families. And you can’t do that by not looking at the whole picture!

I have an entire chapter in my first book about what can go wrong. I’ve been criticized by one or two or more mentors for including it.

They said, “You’re going to scare people away!”

To that I said, “If they’re scared away by that, they should not be in the business, because it’s a business—there will be curveballs and headaches.”

I don’t know any business that is absent of that. If you find one, let me know.

Are you going to have bottlenecks? Are you going to have challenges that you can’t predict? Of course you are.

Last year our keynote speaker was Shiloh Harris. (Google his amazing story.) He went through more challenges than anyone I’ve met or read about (and that includes my son Nick, who had a head injury and was in a coma for a month).

Here’s what I hear sometimes: “It’s a slow market” or “a hard market,” or “My buyer left.”

I can list thousands of them. Remember what I said above: you cannot make excuses and still experience success.

What can you do if you find yourself thinking or saying these things? Well, for starters don’t stop. Figure out how to fix it, get around it. Find out where the bottleneck is.

Regardless of what niche in real estate you decide to pursue, call a coach. Call your mentor. If you don’t have a mentor, find somebody whose shirttails you can grab onto. Then when you are faced with the struggles and the curveballs, you can do something about it.

Skills come from struggles. When I read that line for the first time, it hit me like a Mack truck.

Everything that I have learned and internalized did, in fact, come from struggle. Struggle is part of the learning process. It’s the breaking down and building up of new muscle—the new muscle you need to accomplish the goals you have set.

Embrace the struggle, and know that you are getting stronger and acquiring the skills you need to become the person you want to be by doing so.

Don’t Start Until You’re Ready to Commit

As much as I love seeing people get started in real estate, please don’t just go out and try. And if you do anyway, stay at your job until you’re ready to absolutely commit.

Think about it! If you were going to bring a company public, or buy a franchise and dump two, three, four hundred thousand or half a million dollars into it, would you seriously say to your family, to your partners, to your kids, or to yourself, “I’m going to give this a shot for six months or so”? Of course you wouldn’t. That’s silly.

We all need vision. We all need that unwavering commitment. And then there’s absolutely nothing that can hit you that you can’t handle or find someone to help you handle.

Again, I’m not talking about just our niche. Find someone that can help you in whatever your niche may be.

Discouragement Brings Growth

I don’t care what niche you’re in, or even what types of deals you’re doing, you will have some type of roadblocks. So, what if you’re caught with a surprise on one of your properties?

I’ll give you another of our examples. Once we had a lead paint job that cost $32,000. Would you be discouraged if that happened? Would you be discouraged if you had a vacant home or two because a buyer defaulted, as in the earlier example?

Would you be discouraged if you couldn’t sell a home right away and you couldn’t figure out why? The pricing could be good, depending whether you’re flipping it or, in our case, putting a rent-to-own buyer in there.

You just refreshed it, and you couldn’t figure out why it wasn’t selling. We’ve been there, too.

There are all kinds of options though! Get creative. You can Airbnb it. You can rent it. You can work around the roadblock and lower the numbers.

You can renegotiate with the seller. There are all kinds of workouts. You don’t just throw your arms up. You dig in and find the answers. They’re out there.

Would you be discouraged if you had so many properties that it started to get hard to manage? It can certainly become hard to account for things as you scale your business.

It’s even hard to handle the incoming funds. (This is a good problem to have.) We hit that block, so we went out and recently located a fantastic software company. It solved almost all of our growth headaches at this next level.

All it took was my daughter digging in, seeking out a solution, getting us on the phone with the appropriate people, and addressing the challenge.

Would you be discouraged if you didn’t get a deal for 60 days and you had just started? We’ve been there. We’ve done all of these things. You work around it and find a way.

Maybe you’ve never run a business, so all of this is new to you. Maybe you’re not 100 percent sure of what you want yet. You should get clear on that first.

Maybe you lack confidence. This is not something most people like to admit. But maybe that’s an issue.

Regardless, all of these things can be overcome in time.

My son Nick and son-in-law Zach and the whole team here are under 30 years old as of this writing. They’ve never run a business.

So what’s the difference between them and you? If you’re in your 50s like me, or you’re older, or you’re under 30 like them and you’re doubting yourself, I can tell you what’s different.

They constantly educate themselves. They constantly seek mentorship inside and outside of our office. They constantly ask me and others for advice—and they don’t take things personally.

Get out of your own way! Don’t look left, don’t look right, don’t look back, and find a mentor. Let your guard down, and let that mentor bring you to the next level.

It’s easy to say and harder to do, but you can do it.

Expectations Must Be Managed

You won’t fail because of the market. You won’t fail because of your family. You won’t fail because of your friends. You won’t even fail because of your bank account.

You’ll fail if you don’t properly manage your commitment, your struggles, and your expectations.

You’re managing your expectations and your commitment properly when you say, “I’m sticking with this—no matter what—for three years.”

And when you say that—not if—but when you say that, you’ll have success in your first 12 months—but be mentally ready for 36 months.

Are you committed? Have you encountered roadblocks? How have you overcome them?

Comment below!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.