In this article, I want to get you thinking by posing some questions:
- How long do you think it takes to become a professional real estate entrepreneur?
- What does it cost to become a professional real estate entrepreneur?
- How much will you earn when you become a professional real estate entrepreneur?
One the biggest frustrations I see in the real estate industry is when people do not understand these three things properly.
How Long Does It Take?
The most common question I get relative to expectations is, “How long does it take?” I could write a whole book about managing your expectations, but let me say this. Everything you see for education in the real estate space is not a push-button, get-rich-quick plan. It’s not a “just do this online and everything will happen” kind of thing. If you’re looking for that quick fix, if you’re looking for the next deal like you need water or oxygen, then maybe real estate isn’t for you because it will take time.
I just want you to manage your expectations. I don’t want you to get too caught up in it. There are specific money-producing activities that are proven. In other words, what are you going to do every day to move you closer to your goals?
Mindset is a big piece of this. A good friend of mine, Dr. Joe Vitale, addressed this at a recent even we did together for a full hour and a half. Whether your realize it or not, all of us let the mindset get in the way, and it is a big issue. Then we have the expectation that we will earn a profit. So I invite you to honestly evaluate where you are today versus where you want to be relative to your skill set, your game plan, and the money-producing activities that you do every day. Evaluate your mindset and your expectations relative to earning a profit.
Once you start looking at where you are today versus where you want to be, you will quickly realize that no matter how much time you spend learning, it’s still going to take a lot of time. But I want to try to shorten that cycle with you. Success leaves clues. Explore BiggerPockets for folks in your niche who have had success and then find a way to learn from them, work together, etc.
Frank Williams, in his book If You Must Speculate, Learn the Rules, says, “If you are intelligent, the market will teach you caution and fortitude, sharpen your wits and reduce your pride. If you are foolish and refuse to learn a lesson, it will ridicule you, laugh you to scorn, break you and toss you to the rubbish heap.”
Why do I want to share that? In our office, our family team acts on everything. In other words, if we have a curve ball thrown at us—and that goes for our education and coaching business as well as our own deals—not only do we change whatever it was that brought about that challenge or curve ball, but we also make changes to the programs that we offer. We change any forms, checklists, or legal things that need to be changed.
Let me give you what you can expect for profits if you are in line with our averages.
As of now, payday #1 is averaging $26,503 for us. Payday #1 is not always up front, of course.
Let me tell you what that might look like. Depending on the price of the house, they might put down $10,000 with the signing of the buyer’s letter of intent with the attorney. The additional $16,500 might be next February’s tax refund plus the following year’s tax refund. Those three might total $26,503.
Payday #2 can range anywhere from $300 to $500. We have had it as high as $1,000, but payday #2 is the spread every month that you get between what you are taking in from your buyer and what you are sending out to your seller or your mortgage company. Our average right now is $313.
If I look at that over time, payday #1 has increased. Payday #3 has increased. Payday #2 has settled, if not gone down. Why is that? You run your business however you choose, but we put more weight on the total package. We put heavy weight on payday #1. I want skin in the game before they get the house. Our biggest headaches have come when we did not do that. Payday #2 is important, but it’s not critical. It’s not the crux of the deal.
Payday #3 runs $25,000 to $50,000. So if you add up all of those, depending on the term (12, 24, 48, or 60 months), we are now averaging around $73,000 for all paydays.
Now you start to see how my three opening questions are all related: How long do you think it takes to become a professional, what do you think it costs, and what will you earn? Those things have to be in alignment.
What is Your Education’s Cost Worth?
A doctor is going to spend a minimum of nine years in college. Once their practice is set up, for the first few years—depending on the specialty—they are going to earn $150,000 to $200,000. These are numbers from an old internet survey, so these could be a little conservative.
An attorney is going to spend approximately eight years in college, and once their practice is set up—depending upon their specialty—they might earn $120,000 to $170,000 at first.
A judge is going to spend eight years in college, and then they must practice for 15 years as an attorney so that they can then get a job paying $100,000 to $110,000. Go figure.
A CEO spends four to seven years in college and generally 20 years in business learning the skills required and will then earn $150,000 to $350,000. I kept that very broad because a lot of CEOs are on the road. We used to have a neighbor who was super successful—sold a $2 million sailboat, traveled the world. But when he is working, he is not seeing his family at all.
An interior designer is going to spend about four years in college, minimum, and then they are going to earn $50K a year or so.
A commercial pilot may spend eight years between college and military training so that they can get a job starting at around $60,000 and eventually earn up to about $180,000 a year.
I love our CPA, but how do they do it? I don’t know. They are going to spend four years in college and an additional two years studying to take the CPA exam so that they can then go out and average a crushing $60 to $80K to start out.
A schoolteacher, sadly enough, spends a minimum of five years in college, and in many cases, six to seven and sometimes eight, so they can start at an average of $45K a year! Even if it was $100K a year, look back at our numbers. If right now our team is running $73K for all paydays, would you do the math?
In each case, I think you will agree that these people are prepared to do two things. Number one, they are prepared to invest a tremendous amount of personal time so that they can have a career. Number two, they are ready to spend a tremendous amount of money preparing to earn whatever their income will be.
So for those of you not fully immersed in real estate yet, I don’t know what’s stopping you from just doing six deals a year and getting out of your J-O-B. It’s got to be driving you nuts. Some people I speak with are making that transition very pointedly and some aren’t sure how to. Again, success leaves clues so the path has already been laid for you.
Related: 4 Toxic Habits That Sabotage Even the Most Promising New Investors
How Much Time and Money Are You Prepared to Spend?
How much time and money are you prepared to spend to create the income flow that you’d like to have for the rest of your life? Now, go ahead and answer that. How many months are you going to spend? Jot that down in a journal. Then, how much money are you willing to spend?
Let me give you a facetious example. Let’s take a conservative approach and say you should expect a learning curve of 90 to 180 days. What if you had the wherewithal to sit through it and manage your expectations, but then you cranked out 12 deals after six months? It took you 18 months to crank out 12 deals, but then let’s say that your market happened to be like ours, and you happened to hire us to help you and you happen to do about the same average of $73K, or maybe only $70K. So what is 70 times 12? How many months and how much money would you spend if that effort produced you $840,000?
Now because it comes in three paydays, it won’t be $840K all in the same year. But you created that much income. You received all or most of your payday #1s. You receive all of your payday #2s and you are waiting for your payday #3s. That is a pretty cool little business.
After 27 years or so in the business—and our team has 50 years combined experience—we look back and can say that we have determined for sure what the biggest obstacles are that real estate professionals face in building a successful business. We have concluded that any one of the following could get in the way, and these are the things we are going to help you with. I will go into more detail on some of them below:
- Inability to set specific goals
- Difficulty of maintaining a positive attitude in a sometimes-negative environment
- Inefficient use of time
- Soft skills
- Lack of commitment to the business or expectations not in line
- Bad mentors or coaches
Inefficient Use of Time
For time blocking, go check out Dan Kennedy. He is one of my mentors and friends. Go to his No BS book series, and find the one on time management. He has updated it several times. I suggest you read it at least three times a year for the next three years. That is how much I think you are going to enjoy it.
I think you will agree that this one is overwhelming because if you knew exactly what to say and when to say it, you would be chomping at the bit to get on the phone with a seller or a buyer and let them ask you questions. It pays handsomely to study and learn the proper scripts. It is exactly the same way my son-in-law Zach and my son Nick built their niche roles in our company—by studying scripts. They are very well scripted, and that gets the results that we get on a daily basis. Even so, we are constantly trying to improve.
Lack of Commitment to the Business or Expectations Not in Line
It is extremely important to balance your commitment with managing your expectations. If you have never done any deals, and you need to get one done in the next 30 days, is it reasonable to expect that with 100 percent certainty? I don’t think so. Can you do it? Sure. Sean comes to mind. He is a police officer in Pennsylvania. In his first 30 days he did a deal. He then got busy with life and did not do many after that. Does that mean you will do a deal in 30 days? I don’t know. I don’t know you well enough, but you could. They point of this article is getting you to think and believe—I can do this!
Bad Mentors or Coaches
If you can’t find a coach or even a person to mastermind with on BiggerPockets, then you’re not looking hard enough. There are some phenomenal real estate professionals here. Put the blinders on for three years. You are starting a business and it takes time but clearly is well worth it. If you think you are going to have a challenge doing that, I would tell you, “Don’t do it,” as much as I would love to see you in the business.
- Manage your expectations for how much time and money it will take to start earning a real income from this business.
- Understand that if initial costs seem high, they are not so high relative to your eventual income. Ask yourself if it is worth the investment.
- You could average $50,000 to $70,000 per deal, and can reasonably expect to put together one deal per month or at least one every other month—that’s up to you.
- Find a mentor who is still in the trenches and model what they do.
- Follow a simple and proven system.
What are YOUR expectations from real estate investing?
Let us know with a comment!