5 Things new investors should never do.
5 Things new investors should never do.
1. Ask for an unreciprocated mentorship.
Everyone has to start somewhere. Usually that place is the bottom. It would make sense that one of the best ways to get where you want to go is to learn from someone who is already there.
Every day I receive emails from new investors looking to be mentored. Unfortunately, as much as I would love to help everyone of them, there just is not enough hours in the day to do so. I do have to spend my limited time running my own business. This will be true for most, if not all successful investors.
So how does a new investor go about getting themselves a mentor? Provide VALUE. Instead of asking for experienced investors to help you, you should focus your energy on figuring out what you can offer them to make them want to help you.
- Great with computers? Offer I.T. support.
- Handyman? Offer maintenance work.
- Well connected? Provide leads.
- Own a subway? Bring sandwiches. (Everybody loves sandwiches)
2. Fly Blind
New investors should never go into a career in real estate without a basic understanding of real estate laws and practices.
Aspiring buy and hold investors should brush up on Landlord-Tenant laws pertinent to the areas they are looking to invest in.
Aspiring wholesalers should look into real estate licensing courses. There is a lot of incorrect information out there that if can lead them into hot water with their local division of real estate for illegal unlicensed brokerage activities.
3. Be difficult to work with.
The real estate business is not about houses, apartments, or strip malls. It is about people and relationships.
You have to cultivate relationships.
It's not what you know, it's who you know.
You don't create relationships by always second guessing whether or not you squeezed every single penny out of every single deal. You make them through doing business with people in the industry. In the beginning the deals and terms are always going to be the worst. With a quality relationship they will just continue to get better and better.
Example: I met this local lady. She had some properties she wanted to sell via owner financing. She's getting out of the rental game and she did not want to pay capital gains taxes. To avoid capital gains taxes she wanted to sell her houses on 10 year terms.
She owns around 20 houses. Mostly all of them in the heart of my investing area. At this time she wanted to sell me two of them. She told me what she wanted for them and I bought them.
I could have countered her and got a better deal but I didn't.
Why? THE RELATIONSHIP.
She owns 20 of these things and does not want all the cash at once. I wanted to be the first guy she called because I was the easiest guy to work with.
Fast forward a few months later. Guess who calls me and wants to sell two more houses? Yep, same lady. One house was great. The other I really didn't want. Bad neighborhood. She just wanted it off her hands.
So guess what I did? I bought the darn thing anyway. I never even went inside. Actually I never even went to the street it's on. My partner John did do a drive by and was not impressed. This house was a dog, but we are cultivating a relationship here.
Fast forward again. Guess who called me with another great house to sell in my prime area? Same lady? Nope. Her daughter this time. Guess what, her daughter owns 40 homes in the area and wanted to start unloading some as well.
So who was the first person she called? Why of course the easiest guys to work with.
We bought that house on owner financed terms with a Joint Venture partner and it was a pretty great deal. It was cheaper than anything on the MLS and it was owner financed.
Guess what my reason was for taking this great deal to this particular Joint Venture partner? Our Relationship. I have about 30 people who would have done that JV with the terms I got. I could have even offered it to all of them and worked out even better joint venture terms for myself.
I did not do this. Instead I ran it past his desk first. Why? Our relationship.
Continuing to show this investor whom I have a great relationship with the value that I can bring to him is much more important than trying to save a couple bucks shopping the deal around to everyone and anyone.
I Have done many deals in the past with this investor and he's always been the easiest guy to work with, has treated me fairly and understands that our relationship is more important than any one deal.
4. Want it now.
In real estate it takes time for your efforts to pay off. You can make a fortune in this industry, but it will not be easy.
The relationships I spoke about in example # 3 took time to develop into what they are today. It won't happen overnight but eventually the long hours of relationship building and networking with will start to pay off.
Building relationships and Networking is like starting a garden. You have to plant seeds that will eventually turn into flowers.
5. Take short cuts.
There are no short cuts in this industry. Cutting corners, get rich quick schemes, and the like are not going to be the path to that will take you to success.
If it sounds to good to be true, it probably is.
About the author:
James Wise is the Broker and Owner of The Holton Wise Property Group, a real estate brokerage and property management company operating one of the largest scattered site rental property portfolios in the greater Cleveland, Ohio area. He has been a guest speaker on several real estate internet radio shows and podcasts. He regularly writes blogs and articles for multiple real estate related websites. He is an active member of the National Association of Realtors® and the Akron Cleveland Association of Realtors®.