The Best Advice I ever Received – Paying it Forward
Some of the best advice I’ve ever received has not come from expensive seminars or real estate guru’s trying to sell me something.Instead, it has come from experienced investors who were willing to share with me what they had learned.
I see many of the questions in the forums that I had when I first got, so in the spirit of paying it forward, let me share with anyone who is interested what some of those friendly pieces of advice were.If you have experience maybe you’ll chime in and add some of the more valuable tips or advice that you received when you first got started.
Give it time – Everyone has dollar signs in their eyes when they first get started.Fortunately for me, someone recommended I give the business 5 years before I decided if I could make it work.I shared that plan with another investor who had been in the business for 30+ years and he suggested I give it 10 years.He didn’t explain why, but after 10 years I’ve seen the difference.At five you are just beginning to understand the business.Even at ten years, you’re not an expert.However, after ten years I find that I have enough experienced contacts in the business to solve just about any problem I encounter.I also find that it the time has helped to build a network of investors who trust me.
People invest in you, not your deal – Just about everyone wants to know where the money will come from to get started in the business, unless you’re a trust fund baby.The rest of us have to save up funds or partner with other people who have the funds.You may think you have the greatest deal in the world, but no one wants to be a part of it or their terms are outrageous.It all boils down to trust.If people trust you, they will invest in and with you.If they don’t, they won’t.It’s just that simple.Unfortunately, this is momentum thing and will require that people get to know you and trust you.It’s like getting married.Most of us would not want to marry someone we just met last week.The same is true with investors.
If you find a deal, the money will be there – This follows #2.If you truly have a deal, then experienced investors will recognize the deal and want to be a part of it.If they don’t, then heed their advice if they don’t feel it’s a deal.If you’re new, you’ll probably have to share a large percentage of your profits with them as they get to know you better.After a few successful deals, you’ll find money will be easier to find and you won’t have to give up as much equity.
Stop spending money on expensive seminars and spend your money on marketing – I didn’t personally receive this advice, but I was party to a conversation with a newbie and an investor with over 200 homes.The newbie wanted to know if such and such guru was a good teacher.The experienced investor’s response was, “Stop going to seminars and take than money and instead invest in marketing.“I don’t think the Newbie took the advice to heart because they are no longer in the business.However, I listened and scaled back my education dollars significantly.Every seminar guru knows how to sell you the “secret sauce” and to make you feel like you will be missing out if you don’t go.Believe me, I’m a sucker for all of these seminars.However, I find most of them to be very careful about what they say so as to not give too much away for fear of competition. Either that, or that really are just regurgitating someone else’s stuff.
Let your income lead your expenses, not the other way around – I have to confess, I heard this from a free real estate course, not personal advice.However, I have found this to be very valuable.It’s amazing how quickly you can spend a lot of money and/or get into debt because we think “we have to spend money to make money”.We get in a hurry (remember #1) and think we’ll make all the money back in just a short time period.The gurus are great at convincing us that their course will pay for itself and we believe every bit of it.Instead of going into debt for education, pay with cash and from your previous income, not your future possible income.Remember, “results are not typical”.
Don’t worry about incorporating in some other state – This actually came from an attorney friend who said if I felt I needed a Corporation or LLC to use Nolo Press and to do it myself.Contrary to what most of the gurus say, you can look up the parties in Corporation and LLC in Nevada and other states.In addition, most states will require you to register with them if you do any kind of business in their state.So, if you're going to form an entity, just do it in the state you are going to do business in.
Don’t form an entity until you have done several deals – This seems to be one of the first things newbies want to do – and I was one of them.What the guru’s don’t tell you is that you’ll probably have to pay someone to do your taxes for your entity which will add extra costs.They also fail to tell you how difficult it is to work with banks as an entity until you have several years of tax records to prove you’re successful at the business.If you haven’t done any equity or assets, use liability insurance and a personal umbrella policy.It will be much more effective and cheaper in the short run.After you have done several deals and have assets you want to protect, then you can form your entity.
I hope this helps someone, especially if you are just starting out. There's way too much hype and bs in this business when you first start out and it's hard to determine what does and doesn't work.
Wishing you all the best,
Robert
