Success is in the Details: 5 Essential Business Areas Investors Neglect

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Between 1963 to 1975 basketball coach John Wooden’s teams at UCLA won 10 NCAA championships, including 7 in a row between 1967 – 1973. At one point during that streak, his team won an unprecedented 88 games in a row over the span of 4 seasons!

It would be difficult to find a coach who built a more successful sports dynasty than John Wooden did. But what is most incredible about John Wooden was not his record of wins and losses. Most impressive to me was how he taught his teams to win like that.

A friend recently bought me his great book, Wooden – A Lifetime of Reflections On and Off the Court, and I found that his lessons on winning are directly applicable to our real estate investing businesses.

I think I can share the essence of his teachings with a story about blisters and socks.

Before each basketball season began, Coach Wooden had several meetings in the locker room with his team. The players that gathered in these meetings were some of the best and most highly recruited players in country, like hall of famers Bill Walton and Kareem Abdul-Jabbar.

The players sat on a bench in anticipation of great words of wisdom from their leader. Coach Wooden then broke the silence by telling these talented young players, “Men, today we are going to learn to put on our socks and our shoes.”

Ha, Ha! Can you imagine?

For 1-2 hours these young players who were some of the most skilled basketball players in the country never touched a basketball and instead practiced putting on their socks so that they had no wrinkles! They then learned to tie their shoes correctly so that they fit snug against their feet and so that the laces would not come untied.

Why were socks and shoes important? Because legendary coach John Wooden knew that details create success.

If a player had a wrinkle in his sock, he would likely get a blister. If he got a blister, he might miss a day or more of practice. If he missed practice, he would not play 100% in his next game. If he did not play 100% in his next game, the team might lose.

Therefore, putting a sock on correctly was the difference between winning and losing!

Like in basketball and in life, consistent excellence on the little-but-important things will directly translate to success in real estate, i.e. more deals, more cash flow, and eventually financial freedom.

So, what then are the “little-but-important things” that we real estate investors should focus more on? In the rest of this article, I’ll share 5 overlooked detail tasks that are the equivalent of putting on your socks.

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5 Essential Business Details Entrepreneurs Neglect

Important Detail #1: Bookkeeping

I loved Brandon Turner’s list of the top 100 BiggerPockets.com articles of 2014, but I could not find one article about how to keep excellent, organized books. I guess it’s just not perceived as fun or sexy.

But like putting on your socks correctly in basketball, excellent books can create success or cost you big in real estate investing.

I divide bookkeeping into a two primary categories:

  1. Document Filing: Save all bank/credit card statements, receipts, invoices, HUD-1 statements, and copies of rent checks into an easy-to-access and organized filing system, either in a file cabinet or online.
  2. Computer Ledger System: I use Quickbooks Pro for desktop to enter every financial transaction for my rental and my flip business (separate companies). The documentation in #1 mirrors all of these so that we have a piece of paper to verify every transaction in the ledger.

I’ll be honest. Running these systems to the point where everything is neat, organized, and tidy can be very tedious. Before I hired a bookkeeper, the work was often done after hours and on weekends. Is it really worth the trouble? Shouldn’t I just throw receipts in a shoebox and worry about more important things?

Coach Wooden would tell you the details are worth it.

First, what happens if you are ever audited by the IRS? Ask your CPA what would happen if you could not show proof (documents) for expenses. You could lose your ability to deduct the expense, which would mean you could owe a HUGE tax bill in addition to the the stress and trouble of the audit.

Related: 3 Strategies to Fortify Your Real Estate Business Against Hard Financial Times

Second and more relevant than a rare audit, good books are your only true way of keeping score. Like in basketball, you want to be able to look up at the scoreboard at any point in time to tell if you’re winning or losing. Clean, accurate, and timely books are your business scoreboard, and they will tell you if your business finances are doing well or not.

Being objective, especially with yourself or your own business, is very difficult. Excellent books give you the mirror you need to see yourself honestly so that you can correct mistakes or accelerate successes.

Important Detail #2: Paperwork

Real estate is a paperwork heavy game. Think of all the paperwork you deal with when buying one property: deed, LLC docs, note, mortgage, title insurance, property insurance, business license, property management contract, repair contract, tenant application, lease, etc.

There are two important considerations I have learned with paperwork.

  1. Create a Good Filing System: Some people prefer digital, and others use paper. I would love to go all digital in the future, but for now I still use paper and file cabinets. I have a hanging file folder for each property, and the folders are sorted numerically. Within each hanging folder are several color-coded folders: red for insurance, blue for official property/mortgage docs, yellow for expense receipts, manilla for tenant payments, and purple for tenant documents.
  2. Hire Attorneys to Execute Documents: Do-it-yourself document creation can get you into big trouble. The problem is that you don’t know when or how the problem of your document could bite you. Simply hire a local attorney to prepare your contracts, notes, mortgages, LLC agreements, etc. On standardized documents, like Purchase and Sale Agreements and my Notes for private lenders, I will fill in the documents myself. But beyond that, let someone who knows more than you do the job.

Important Detail #3: Inspect What You Expect

Famous business thinker W. Edwards Deming once said, “You can expect what you inspect.” To me this means that I cannot just tell someone what to do. I have to:

  1. Clearly state my expectation
  2. Follow up with an inspection
  3. Re-teach expectations if not met

When I get busy in my life and business, I forget this principle or push it below other priorities. Unfortunately, painful experience has taught me that poor results build up and cause problems because of my failure to inspect and re-teach my expectations.

This shows itself most often with repair contractors. We hire contractors to do a multitude of details on our rental and fix-flip properties. Even the best contractors, however, require inspection and coaching in order to ensure that the result we want is performed.

I cannot afford to be on the job site all day micromanaging, but I do know the value of regular boots on the ground to inspect and coach contractors and other people who have been delegated business tasks.

Important Detail #4: Tenant Screening

The people in our real estate business will make or break us. In the rental business where monthly cash flow is king, nothing could be more important than recruiting and picking a tenant who will pay on time and care for your property.

Brandon Turner at BiggerPockets wrote “Tenant Screening: The Ultimate Guide,” which is the most comprehensive and well-written guide to the process I have ever found.

When you need cash flow on a vacant rental property, it can be very tempting to just put in the next warm body that comes along. This is one of those details that can cost you a lot of money and heartache over the long run. A bad tenant can cause you thousands of dollars in damage to your property, thousands of dollars in lost rent, and countless moments of unneeded stress and frustration.

Study this process in detail and learn to be excellent at recruiting and screening for the best tenants.

Important Detail #5: Deal Analysis

Most real estate problems can be traced back to purchasing a bad deal. This means you either bought the wrong property, paid the wrong price, or borrowed on the wrong terms.

Related: Overcoming Mediocrity: How to Break Through a Plateau in Your Business

Because this is true, becoming excellent at the details of deal analysis can help you increase your likelihood of real estate success many times.

I have written 3 BiggerPockets articles about deal analysis based upon the best in the business, Warren Buffett. If you need help in this area, you might find them helpful:

I also think another article by fellow BiggerPockets contributor, J Scott, is an excellent overview of the subject of deal analysis:

Which Details Are Preventing Your Success?

I hope that the example of ultra-successful coach John Wooden has convinced you that excellence with details is the recipe for success. As I always do, this is the time that I bring the focus back to you.

Which details are you overlooking that could be sabotaging your success? Are you weak in one of the 5 areas I have outlined above? Are there other details that you know are not getting done but should?

Please share your own story in the comments section below. I’d love for us to help each other grow and start winning more real estate championships this year.

About Author

Chad Carson

Chad Carson invests in Clemson, South Carolina. He also writes at coachcarson.com about using real estate investing to retire early & do what matters. For practical advice each week — join his free newsletter at coachcarson.com/newsletter.

12 Comments

  1. Great article I will be saving it in my gems folder to go back to. Can you recommend a really good rental management software besides quick books, that would really hep me out.

    For my flips I have all my payments to contractors on a spread sheet for each property and along with that I will have a folder of dozens of receipts for materials. I keep all my other pertinent documents in a online folder for each property in case my computer crashes or I need immediate access I can pull them up from my phone, tablet etc. however I’m always in search of a better mouse trap.

    Thanks for the article!

    • Chad Carson

      Hi Ang! thanks for reading and the comment.

      I actually use Quickbooks for property management, too. It’s not perfect, but the accounts receivable/invoicing system is pretty flexible and allows me to handle most of what I need. I’ve considered other management software but the pain hasn’t been big enough to make the switch.

      I like your flip system. A good spreadsheet, folders, and online back-up is what I do too. Organization systems are so personal, so as long as that works for you I say run with it.

    • Chad Carson

      Thank you Lashelle. Yes, you made the best point. This attitude of watching the details is even more important in other parts of life. I can think of just a few: exercise, nutrition, good sleep/rest, time with friends and family, etc. Not glorified, sexy things. But they’re the fundamentals that make all the difference.

  2. GLORIA DULAN-WILSON on

    Thank you for your comments – definitely have an issue in the bookkeeping department – not so much in keeping receipts, but in keeping them in an orderly manner. I generally am guilty of putting them in an envelope, to later to put them in a shoe box, to later sort them out later – you get the picture. However, it was not so much your quote of Coach Wooden that was compelling, it was the fact that you actually read and understood W. Edwards Deming, and quoted him, that got my attention. He is the guru of quality control, something that almost does not exist in the US. It’s one of my pet peeves, and also sometimes something that causes me to throw my hands up in the air and just grin an bear it, because it’s so lacking in so many ways, and can sometimes be difficult to teach – of course Japan has him to thank for their gigantic lead in technical and inventive development – everyone else is still trying to catch up with them.
    That said, I am making a list of your recommendations and will try to apply them as I go forward. I am looking at making my first offer on a property – I will definitely read your other articles and include your methodologies. Thank you again –

    • Chad Carson

      Thank you, Gloria. Yes, Demming is such a giant in the philosophy of good business processes. Japan took his advice to heart and the U.S. is still learning it:)

      Best of luck on your first offer. Are you buying a rental? A flip?

  3. David Semer

    @Chad Carson Awesome article about the importance of the tedious tasks but how they affect the health of your business. Without these you will not be able to see how the business is running or if your over budget. How best to spend the capital. I especially enjoy reading articles like this because it does not matter how new or experienced you are the fundamentals are the most important for our business to succeed. This what allows us to grow and take on the projects we want. If your not prepared or like doing any of those tasks you better be prepared to partner or find somebody who can; but make sure you have systems in place to monitor it.

  4. I would add that if you buy most of your own materials for rentals and flip renovations that it simplifies record keeping to open accounts at places that will place a a p.o. for each purchase then bill you at the end of the month. I use the property address then enter splits on quicken for one payment each month. It really helps when you have a husband who subscribes to the shoebox method:)

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