My 2014 Success Plan - 7 Questions and Answers
I recently spoke to a group at the Metrolina Real Estate Investor Association in Charlotte,NC about goal setting. The core message of my talk was this:
“Goals aren’t helpful unless they are transformed into actionable plans.”
For me, the best plans are broken all the way down into tiny, mundane, day-to-day steps that you can actually do. This planning step is important because I can’t DO goals, no matter how wonderful or motivating they are.
At the end of my talk, I shared a real estate business plan worksheet that helps to break real estate goals into these tiny steps. It basically asked the audience members to answer the questions I am going to share in this article. I’ll also provide a summary of my own answers so that you can use it as a template to create your own 2014 Real Estate Success Plan.
Here we go …
1. Why do you do this? What motivates you?
This business isn’t easy. Executing your plan won’t be easy. Reaching your goals won’t be easy.
I know, that’s a shock if you really believe get-rich quick messages of gurus and late night infomercials.
Deep, strong motivation and enthusiasm have helped me get through many obstacles in my business. And I know there are many more to come.
So what motivates me?
Autonomy. Freedom. Controlling my own destiny. Flexibility. Free time. Traveling. Making a positive impact on the lives of others through my business. Not having a real job. Not having a boss. Not having to sit at required, time-sucking meetings. Being able to give to my wife, my kids, my family, my friends, and my community. Sharing what I’ve learned with others. Helping others become entrepreneurs. Helping others own real estate.
So what motivates you? Is it real or superficial? Big houses, cars, and vacations are nice, but I doubt that kind of motivation will sustain you over the long haul. Dig deep.
2. What’s your real estate niche?
I talk and write about this subject a lot (How to Find Your Real Estate Investing Niche) because I think it is critical to figure out before all of the other steps.
What’s your financial situation? Sinking? Steady? Great shape?
Do you have capital already saved? Or are you currently cash poor?
Does that mean you should be a wholesaler? A fix-flipper? Landlord?
In order to take confident action within your real estate business, you must be clear about your niche. You can always change later, but clarity = confidence in the short run.
While it’s best to start with one, this year I have several simultaneous niches. I’m looking for affordable multi-unit and mobile home rentals, median-priced single family rentals, single family fix-flips, wholesale deals, and coaching/joint venture deals to help others doing these niches.
I am full-time, so it almost requires multiple niches. But if you’re part-time, how can you focus more and establish your own niche?
3. Where will you get the money?
Real estate is an expensive sport. Even cheap houses cost more than luxury cars. So if you want to buy good deals this year, you MUST have a plan for the money.
When my business partner and I first started, conquering this step was the catalyst that accelerated everything else. Our own strategy for our first fix-flip deals was to find an experienced investor with available cash and offer him as much of the profit from our good deals as was necessary in order to entice him to fund our deals.
We began splitting profits with our first “angel” investor, and while the splits have gotten smaller over time, we still happily do business with him today.
Other sources for deal money we have used include:
- Private lenders (including family and friends)
- Self-directed IRA funds
- Local bank commercial loans
- Lines of credit
- Credit partners
- Lease options
- Seller-carry-back financing
- Subject-to existing mortgage
The main message here is that you need to find the source of funds most readily available to you. Early on, don’t be afraid to give away more profit than you like. Less of a deal you actually do is better than all of deal you never do!
4. What is Your Target Geographic Market?
Many people debate whether to invest in your backyard or to travel and invest in other, better markets. I won’t get into that here, but I will say you should focus on specific farm areas that you get to know intimately.
One of the biggest beginner mistakes I see people make is to spread out too much, too soon. In the beginning, a farm of one or two neighborhoods would be better than farming all of city, for example.
Part of establishing a farm market is to also study the real estate and demographic statistics. Not all markets will be good for your chosen niche. For example, some locations work well for fix-flips, others don’t. Some areas have high cash-flow rentals, others don’t. So I highly recommend studying your prospective farm market in detail.
My own farm markets this year include certain areas in South Carolina within the cities of Clemson, Central, Pendleton, Liberty, Easley, and Seneca. I also branch out from time to time to Greenville and Anderson.
What is your farm market (or markets)?
5. What is your Acquisition Strategy? How will you find deals?
Once you have motivation, a niche, money, and a farm market, you can now figure out how to find good deals.
To start, what types of motivated sellers will you search for? Absentee or burned-out landlords? Bank-owned properties? Pre-foreclosures and shortsales? Foreclosure auctions? Estates? Life situations (divorce, job transfer, etc)? Fixer-upper properties?
How will you reach these target customers to let them know you are a buyer? Ads? Direct mail? Signs? MLS searches? Driving for dollars? Networking?
How much activity will you need to do on a daily and weekly basis in order to attract enough prospects to meet your acquisition goals?
In the past I have rotated between many of the different types of motivated seller niches, but currently I am able to help a lot of burned out landlords, estates, and bank-owned (REO) sellers.
I use direct mail, MLS searches, driving for dollars, and LOTS of networking for referrals.
And my primary metric that tells me whether I am on track or not is simply this:
the number of offers I make per week.
To meet my 2014 fix-flip goals, for example, I will want to make 1 offer per week. Based on my historic track record of number of deals purchased per number of offers made, this will be sufficient to meet my 2014 deal goals.
What is your acquisition plan?
6. What’s a good deal? What is your profit plan?
I like to build a profile of ideal real estate investments within each of my particular niches and farm markets.
This profile includes the type of property (ex: single family house, duplex, mobile home park, multi-unit apartments, etc), the age, the property characteristics (size, bedrooms, baths, lot, construction type), and price range.
The profile also includes a profit plan. In other words, I want a model that helps me identify in strict, quantifiable terms what a good deal actually is.
As I wrote above, I have several niches and locations. But to explain the concept, here is one profile for my Clemson area fix-flip deals:
Single family houses; built 1960s - 1990s; 3+ bedrooms; 2+ baths; large, level lot, garage and/or storage space; retail price $150 - $220,000.
My minimum profit would vary depending upon the level of rehab, but a minimum would be 15% or at least $20,000.
So what is your deal profile? What is your profit plan?
7. What obstacles will stop you? What are your solutions?
These are two questions I started asking myself a couple of years ago. They have been VERY helpful to me.
It’s called mental contrasting or negative preparation, and it’s the anecdote for people who often begin with “positive thinking” and ambitious goals but fizzle out too soon.
I challenge you to think of at least THREE obstacles. Make them personal, and not some outside force that is out of your control. And then use your creativity and your network of mentors and friends to figure out possible solutions to your obstacles.
To give you an example, for me, I know managing my time on a day-to-day and week-to-week basis will be my biggest challenge. Dozens of projects and urgent “fires” to put out often overwhelm me and make me less effective.
I don’t have just one solution. I have a lot.
My own solutions include simplifying and cutting out extraneous activities and commitments that fall outside of my top priorities. They also include getting more help from a team around me, both in business and in personal-family arenas. And they include being more disciplined with my personal priorities, like exercise, sleep, meditation, and good nutrition because these will give me the energy and focus to handle the waves of activity life brings me.
What are your top 3 obstacles? What is your plan to overcome these obstacles?
Now it’s about you! Don’t worry about perfection.
I have done my part and given you the blueprint. Now it’s up to you to do the work.
If you feel this process is valuable, what will keep you from doing it? Time?
What if you decided that doing it imperfectly and fast was better than not doing it all? Lock yourself in a room for 30 minutes and just answer these questions for yourself with whatever comes to mind.
Don’t worry. You can improve it later.
The result will be the first step of your 2014 real estate success plan. Let me know how the process goes.