There is something really cool about real estate investing: how many routes you can go and succeed. I think something so many new folks don’t understand as they get into the industry is how many variations of real estate investments there are. Even if someone does understand how many options are out there, they often don’t realize how to capitalize on having those options.
The 20 Best Books for Aspiring Real Estate Investors!
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Strengths vs. Weaknesses
We all have strengths and we all have weaknesses.
Growing up we were taught that we need to build on our weaknesses. I’ve come to the realization however that building on your weaknesses is not the way to become an over-the-top rockstar. Why? You can only increase a weakness so far. It will be a great learning experience to explore things you aren’t as good at, and it never hurts to get some experience in whatever that skill may be, but you will only get so good at it. Whereas if you focus on improving your strengths, the sky is the limit for how good you get with those strengths!
The point of this article is not to argue whether you should build on your strengths or weaknesses, or even to discuss in detail any logic behind any of it, but I give you that little blurb to get you thinking about your strengths and weaknesses. Think of what your strengths and weaknesses are, in general not in real estate. Go ahead and do that now.
Using Your Strengths as an Investor
As I mentioned, there are so many routes you can go as a real estate investor. To name a few, and this list is far from inclusive: landlording/rental properties, flipping (flip to hold or flip to sell), wholesaling (even though this isn’t technically an investing route), tax liens, notes, residential, commercial, real estate investment trusts (REITs), land development, mobile homes… and the list goes on. Each of those avenues involves different types of skills required to succeed.
For example- flipping. If you are flipping a house, rehabbing is required. Rehabbing involves the physical condition of a property. You will need to understand at least the basics about the physical structure of a property (electrical, plumbing, flooring, etc.). Even if you aren’t the primary person doing the work, you still need to have a rote understanding of those components so if a contractor tells you something, you know if he is on par or off in left field. If you don’t have a functional understanding of this type of thing, you can get taken for all day long. You will have a hard time assessing potential properties to take on because you will be at the sole mercy of someone else telling you things, having no idea if they are legit.
It’s like me taking my car to a mechanic. I hate doing that because I know so little about cars that a mechanic can usually tell me whatever they want to about what is supposedly wrong with my car and I just have to believe it because I don’t have enough knowledge to make an educated decision otherwise about what should be done to the car (and for how much money!). Not knowing the basics puts me at risk for spending a lot of money on my car when I don’t need to. While it is frustrating, it’s not going to kill me if I get snowed.
If I were to flip properties, however, I think it is critical I know the basics. If a “mechanic” is able to pull a fast one on me, I could be in a huge heap of trouble. Way more than if I get taken for a few hundred dollars on a car fix. So for flipping, the more skill you have in repairing, building, or developing properties, the better.
Another example- wholesaling. I know one aspect of wholesaling involves making horrendous low-ball offers to sellers trying to convince them to sell their property to you as cheap as ever-living possible. This takes a certain skill (and pair of you know what) in people skills, maybe even in bluffing skills, and insane negotiating skills.
I don’t flip or wholesale. Why? Because I have absolutely no interest in repairing things or understanding the inside guts of a property. I’m certain I could be really good at working the guts of a property if I learned how to, but since I have no interest in it I will never be able to learn that much (I’ll drift off mid-lecture). I also have dreadful negotiating skills and I can’t bluff to save my life. When I’m bartering, I’m only good if I’m certain I’m right about what price it should be. When I’m playing poker, I only get rowdy with my bets when I know for sure I have a killer hand.
I do, however, have amazing problem solving skills. I love figuring out how to fix something from a big picture point of view. Not from the trenches, but from high up. I own rental properties. This is perfect for that level of problem solving! Because I use property managers, I don’t have to get in the trenches and get my hands dirty. Instead, I can sit back and assess how the properties are going and if anything isn’t right I can figure out the best solution to the problem and then pass that solution on through my people working on the property. That’s how I like to roll. From a distance. I have no interest in fixing a leaky roof or yelling at a problem tenant, nor would I be good at either of those. I have no interest in roofs, and therefore no strength in fixing one, and I’m way too shy to get in a bad tenant’s face (surprising for those of you who know me, I know).
What if I tried to flip or wholesale? Could I do it? Absolutely. I’m incredibly smart, I learn things quickly, and I’ve always been known to make what I want to happen, happen. I could do either of those, no question. But I would be swimming upstream the whole way. I could do it, I could be very successful at it, but it would take me double (or more) the effort than it would a lot of people. Why? Because I’d be fighting against my natural weaknesses and even more devastating than that, my interests. Whereas with rental properties, I have succeeded extremely quickly because I was working in the same direction as my strengths and my interests.
Note: It should be fairly obvious by now that typically strengths and interests tend to be directly proportional.
I know a fellow real estate investor who recently branched into the Atlanta market as a flipper. When I first heard he wanted to do that, I thought he had lost his mind because the Atlanta market is tough even for the pros these days and he is way closer to being a newbie than a pro. Even if he was a pro though, I still would have thought he was a nut for trying to break into the Atlanta market. Oh, and to make it insanely harder on himself, he lives in San Francisco so this is a long-distance thing for him! I caught up with him recently and was shocked to hear how well he is doing. Not because I thought he wasn’t smart enough but because even the smart guys can get defeated in Atlanta right now. Contrary to what happens to most there today, he is rocking and rolling and it’s like someone handed him Easy Street on a silver platter. Turns out he is an absolute natural in this arena.
When you are that naturally skilled at something, you are bound to succeed if you try. I can’t imagine 99% of people pulling off what he has in Atlanta, but if you have that naturally talent like he does and you choose to work it, you can do anything, no matter how crazy-sounding, with no question.
Remember too, your natural talent doesn’t necessarily have to be exactly real estate related to succeed as a real estate investor. Real estate investing covers such a broad range of methods that there is literally something for everyone, even if your best skill is to be completely silent and hands-off!
Don’t Swim Upstream
I promise you I wish my skills were those that would help be succeed in flipping. I love how much money can be made as a flipper and I think the various projects would be a blast. It would be so much easier for me as a newer investor too because it would give me awesome capital to invest with. But flipping doesn’t align with my strengths and therefore not with my interests either. So if I were to do it I would be constantly battling the currents. I could do it but I would be so much slower at it and more stressed than someone who has more of a natural inclination towards that sort of work. Because of that, I know my talents will get my further faster if I focus them on the things I’m good at, and therefore the things I enjoy. Even if at first glance it seems to be the slower route to financial freedom.
You can choose any real estate investing route you want. You can study all day long, you can find mentors, you can learn by jumping in, and you can eventually succeed. But why force something unnatural? If you have no handy skills, don’t flip. If you can’t convince a cat to climb down out of a tree, don’t wholesale (or if you do, plan to get properties at way worse deals than you could get them otherwise). If you are someone who naturally has a smile on their face at all times, don’t landlord properties in the ghetto (at least if you don’t want to have your life threatened daily and constantly get jipped for payments).
Figure out your strengths and then find a real estate investing method that compliments that strength. You will soar to the top and rock it out, I promise! You will have less headaches, you will only gain self-confidence rather than have it challenged every day, and you will become “successful” astronomically faster. Even if you wish you were good at a different method than what you are, stick with your strong one first. Then once you are successful there, you can go play with other methods and see what happens. Build your confidence first, put some money in the bank, then go play with what you may not be as good at.
Current investors, what strengths do you have that help with the method of investing you are involved in?