What do you want?
That’s the question. I ask this question a lot, and surprisingly, most people don’t really know. We’re not talking about money, bedrooms, bathrooms, cap rates or any of that. Those are only a means to get what we truly want. What we want runs deeper than that. If you know the answer to this question, you open a world of opportunities and save a lot of time and money. Let’s look at two examples.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
New Investor Example
Most of my clients dream of being able to work part time and travel. That’s why they want to start investing. But when I ask them what they want, they tell me high cap rates, distressed properties, cheaper properties they can fix up and as much cash flow as possible.
The problem with this logic is that those properties are in areas where good tenants don’t want to live. They have higher vacancy rates, high eviction rates, and managing/fixing them will require giving up even more of the very thing these investors want to save. Their actions don’t get them to what they truly want. Why? They don’t really know what they want. When someone doesn’t know what they want, they always focus on money.
The best way to get more time and freedom in the future is to buy in areas with young professionals, areas with a high proportion of families and areas with good schools and to buy fewer, more expensive properties. These properties have lower cash flow and cap rates, but they get you to where you really want to be.
The metric (money, time, freedom, etc.) you focus on determines the direction you go and ultimately where you get to. If you want to go North, don’t start by running South really quickly.
The traditional way of talking with sellers:
You: How much do you want for your property?
You: I’ll give you $195,000.
Them: $197,000 and no repairs.
The benefits of finding what they really want:
You: Why do you want to sell?
Them: I’m moving to Nevada.
You: What are you going to do there?
Them: Well, I’m retired and have a ranch out there, so I’m going to live there.
You: Is your retirement enough?
Them: No, but I’ll make do, and I’m selling this house.
You: Do you have a loan on this house?
You: Would you consider being the bank and selling it to me? You’ll save thousands on selling fees, and I’ll pay you interest every month (less than a bank would charge) that will leave you with a lot more in the long run. We’ll both save money.
Them: That would be great.
When you know someone’s real motivation, you can find alternative ways to get what you want. If all you talk/think about is the wrong metric (money) and don’t identify what’s really important, you lose out on a lot of opportunities.
Ask yourself what you really want. Now compare that to your investing strategy. Is it going to get you there?
Let me know with a comment!