Time, Money, Knowledge. What Do You Bring?
All real estate transactions require some combination of time, money and knowledge. However, many successful investors are relatively lacking in one of these elements or prefer not to commit one of these elements to their investments. It is possible to invest successfully if you possess only one element but your task will be more difficult. Acquiring two elements makes investing easier. All three elements is best but even that will not guarantee success. If you have none of the required elements real estate is not for you.
Do you have time but lack money or knowledge? Many of the newbies on this site seem to be in that situation. If you are in this group, stop whining and expecting busy investors to help you before you show that you are worth helping. This is not all about you. If you are asking for guidance you are asking for someone else’s time. If they are busy time is the component they are most in need of or treasure most. If you are offering nothing in return why should they give it to you? Do you think your offer of paying for lunch is compelling to a successful investor?
Make yourself useful to investors who are time constrained. Offer to visit potential investment properties. When you do so take impeccable notes or, better yet, take detailed photos and/or videos of the properties. Offer to stuff envelopes, prepare mailings, run to the post office...anything that may be helpful. In return you will be riding along on the deals and will be gaining knowledge. Maybe you’ll collect a fee here and there. You may be surprised at how much investors will share if you respect their time and show your potential. Do this correctly and you may find yourself with a mentor or a partner who can supply all the elements you need to invest or can lead you to those elements. Of course, it would be wise to spend some of your time reading, attending REIAs and listening to podcasts in order to increase your knowledge and usefulness more quickly.
Do you have money but little time or knowledge? You may be in a precarious situation. Investing will be easy because you can write the check but investing successfully will be due more to luck than anything else if you don’t invest some time and develop some expertise.
This is where I entered real estate investing. I received a significant down payment on a land contract deal and my real estate agent, who was an investor, convinced me to lend him some of it. The early deals were successful but, frankly, I was lucky. I did very little due diligence, didn’t even know how to do the due diligence. The agent drafted the documents and I didn’t have an attorney review them. (Having an attorney review your documents can be quite inexpensive when you enroll in a pre-paid legal service.) The one thing I did correctly was that I started small, with an amount that I could afford to lose if the deal went wrong.
Having money at risk was quite motivating—it accelerated my learning curve. I made several short term loans to this investor and I asked more questions on every deal we did. It wasn’t long before I was adding clauses to the contracts to protect myself better and changing the terms to be a bit more favorable. I soon began committing more of my time to gaining as much knowledge as I could in order to further my chances of success, to learn different ways to invest, and to increase the chance that I would recognize a good deal when one presented itself.
When you acquire enough knowledge to recognize good deals and structure them well you may not need to spend a lot of time to find profitable opportunities. If you can self fund your deals you will be ahead of the game but even if you can’t you may find that it is not that difficult to attract funding for a good deal.
If you are fortunate enough to acquire significant time, money and knowledge you may find an almost limitless number of deals available to you. You will be able to control how much of the three main resources you commit to any particular deal because you will have become the kind of a partner who can add value to the deal, who can increase the possibility of success by your participation. At that time you may find that deals come to you and you may have the luxury of choosing among several good investments to participate in--on your terms.
What do you bring to your deals?