This past week I was at a national youth group convention for my church and it was held in St. Paul, MN. Before we arrived at the actual convention to check-in, our group went to the Mall of America – being that it is one of the bigger attractions in the area.
As we walked through the food area of the mall, one of the youth kids brought to my attention a pretty funny scene. (Funny in the sense it really does sum up “why” America is the fattest nation in the world.) I just had to take a picture of it since I figured I could somehow incorporate this “real life” picture into a real estate lesson for my article. I took the below picture with my cell phone (note: I blocked out the food place next to it as I don’t want BiggerPockets to get any nasty legal letters in the mail).
On the right you can see “Healthy Express” which I’m assuming from the name of the place, it serves food that is good for you both long and short term. On the left is a well known fast food chain. I will simply refer to them as the “burger joint”.
Not surprisingly, there is not a single person in line for the healthy place, but immediately next store a few steps away, there are people literally waiting in line. Hmmmm…
My question for you to consider as a real estate investor is what line are you standing in?
Newbie Real Estate Investors
As someone new to the world of real estate investing, it can be very tempting to go stand in the burger joint line… and as often is the case, that is where the majority of people go. Instead of working hard and just getting their feet wet, they’d prefer to spend their money on guru courses because of the promises of sitting on the beach sipping mixed drinks while the money comes pouring in.
Like a burger, the satisfaction of biting into a guru course can be rewarding, however, longer term when you have high cholesterol and find out the guru course information doesn’t transfer too well into “reality”, you will surely regret not standing in the other line.
To all those getting started, go stand in the healthy line! This means you save your money for actual deals and use free sources such as Google and BiggerPockets to gather your education. It means you talk with other professionals, ask questions, and network as much as you can.
You may very well have to step out of your comfort zone and take a bite of that healthy food. You will need to ignore the guru burger joints as they market to you trying to get you to wait in their line. As rough as it can be in the short run, when your business is booming and you have low cholesterol, you will surely have zero regrets with the short term decisions you made.
Real Estate Landlords
The burger joint line of flying through your tenant screening and background checks can be oh so tempting! That aroma of vacancy is just so strong you can’t deny the need and desire to hurry and get your unit rented.
While the short term satisfaction of getting your unit filled can be very rewarding, before you take that path, remember to ask yourself “What is my real estate cholesterol going to look like down the road?”
Is that short vacancy really worth the massive headache and possible eviction you have just created for yourself? I would propose heading over to the healthy food line.
Sure, in this line you will need to do ALL of your screening and background checks. Sure, in this line you will need to stand firm in all your policies and screening criteria. Sure, in this line your unit may stay vacant a tad longer… BUT, when you have tenant who sticks with you year after year, paying on time (low cholesterol), I’m very confident you will be happy with your decision to go stand in the line of healthy food.
Real Estate Flippers
Where the timelines are ultra important and staying on track is the difference between profits or losses, real estate flippers are faced with the burger joint line at every turn. Opening up a wall can reveal nasty little surprises which always have the potential to alter budgets and extend timelines. They also create the desire to go stand in the burger line for short term satisfaction: namely, cutting corners or skimping out on what needs to be done in order to “make-it-right”.
There is no doubt that in the short term, this quick fix approach will save money and keep your project on time; however, what is going to happen to your personal/company brand (cholesterol) in the longer term? Are you going to end up with the reputation of someone who cuts corners and doesn’t truly care about the end product you are providing?
Eliminate this worry and go stand in the healthy line. Spend the money and time required to get things done the way you would want them done if you were going to live in the house. Yes, short term it may be like chopping through a vegetable you despise, but when you go visit the doctor down the road, you’ll have great results (brand).
Real Estate Wholesalers
Not only do investors whose strategy is wholesaling have to worry about “burgers”, they also need to worry about those hot “fudge” sundaes… as in avoiding the urge to “fudge” the numbers in their analysis. It can be very tempting and often easier if you just “fudge” the actual repair costs, after repair value, lot size, etc. in order to get a flipper to buy a property from you.
I’ll be the first to admit standing in the burger line waiting for a hot “fudge” sundae sounds amazing on the surface (I mean who doesn’t like a quick deal?), but your reputation and brand (cholesterol) can be shattered in not one, but two different ways:
- Take advantage of a newbie and they get irritated – and your name starts to spread, but not in a good way. The newbie investor who is actually putting money on the line is not going to put up with people trying to take advantage of them. They’re taking a huge step in their career so motivated people such as this will take you to the woodshed.
- Making yourself look like an absolute clown, and hence destroying your reputation. Try and fudge the numbers with an experienced flipper and they’re going to laugh you out of town. Again, you’re name will spread, but it will spread because it is the butt of the jokes in real estate circles.
Great news! There is a healthy food choice line that you can stand in. Spending time figuring out repair costs and after repair values that are honest may not always give you the numbers you want to see, but hey, honesty and accuracy go a long way in your long term success. This can also save you money by exposing a bad deal on your end. If you think your maximum purchase price is ‘x’, but after your complete due diligence you see it needs to be ‘y’, you can either renegotiate or walk from the deal. Walking from the deal may not be enjoyable in the short run, but it’ll save you from having to fudge numbers when you talk with the flippers.
The Path of Least Resistance
What is amazing to me and extremely ironic about the picture above is people are literally WAITING IN LINE in order to make themselves less healthy. The healthy food place had no resistance and is the better choice for long term success, yet… people still wanted to WAIT IN LINE. This just goes to show how powerful the short term satisfaction desire can be.
The same is true for real estate. Most people want the quick success and money so they are always picking the line that gives them quick satisfaction. If they’d just choose the line with the least resistance, it may not be quick, but in the long run, their business and brand will be so far above the others.
Bottom line, ignore the short term sanctification of the burger joint line and hop into the path of least resistance healthy food line! When you go visit your doctor later down the road, you’ll be happy you did 🙂