Why Many Real Estate Investors Struggle

This week we were fortunate enough to participate in an amazing mastermind group that we’re part of down in Baltimore.

It’s full of like-minded action takers who are constantly re-inventing themselves and their businesses.

100% awesome.

While we were there, Nick and I got talking with a couple of them about real estate investing and the discussion centred around all the “new and shiny” ways to make money in real estate.

In fact, there are so many ways to make money in real estate that you couldn’t implement all the new real estate investing strategies out there even if you employed every man, woman and child in Canada.

The list of “real estate money making tactics” that you can dabble in is long … very, very long.

And even with all the strategies available many real estate investors still, struggle … badly.

Why?

Well, it’s been our observation that real estate investing skills and strategies aren’t what’s missing for most people.

What’s missing is the interest from the majority of investors in hearing about fundamentals, cash flow projections, project management, team building, marketing processes, saving for down payments and budgeting.

There’s some interest in these things, but it pales in comparison to the next great “million dollar” secret to buying property with “no money down”.

Next month in our own offices we have a jam-packed class on tax strategies and using Quickbooks to run your business … although it’s jam-packed, to their credit, the people attending are the unique exception, not the norm.

Being around real estate investors in one way or another for over 20 years we’ve learned that there is a huge difference between buying property with the hopes of making money and actually putting cash in your pocket.

We’ve had the advantage of seeing many investors over long periods of time, even before we seriously got started ourselves, and it’s made a big impact on us.

The great thing about real estate is that the business can be very forgiving. The large amounts of cash generated off of properties in rising markets cover up a lot of mistakes.

It allows people to get started and grow a real estate investing business of their own, small or large, without a lot of hardcore finance and cash flow management expertise. However, that doesn’t mean you shouldn’t seriously be studying these things once your real estate portfolio begins to grow.

But still, to our continued amazement, many “get rich quick” real estate experts completely mock smart business strategies and promote to real estate investors a very lazy approach to business – to their own demise.

Very recently we were told “face-to-face” by a so-called real estate investing expert that we didn’t understand the types of strategies he was talking about.

He had no idea that at some point or another we had done each of the things he was explaining ourselves, or had been involved closely with someone else who has.

He then even went on to mock us … explaining that we were traditional and “very conservative”.

As if that were a bad thing!

And what was interesting is that he was asking us for advice on business building!  He didn’t seem to even recognize the irony of the situation.

When we prodded and asked him what was holding his own business back he hesitantly shared that although he knew how to buy property with no money down he just needed some extra cash to advertise his business.

Hmmmm.

Confused?  Yeah, same here.

For years, we haven’t said anything against people selling “get-rich-quick tactics” as real businesses.  But we’ll say it now.

Silver Fever! How To Buy The Shiny Stuff

Real estate investors are a passionate bunch.  And if you’re interested in cash flow and property it also means you have a general interest in wealth and the protection of it.

Gold and silver play a role in our own personal portfolios and lately, we’re getting asked about the shiny metals almost daily … that’s what a ten-year bull run does we assume 😉

Our interest in gold and silver changed in 2008 during the financial mess.

It went from, “Uh, why would anyone in the world care up those funny rocks.” to “Wait a second, we better figure out their role in history … and let’s make this quick.”

Nothing like a financial collapse to shake things up.

Now, first thing’s first.  We’re not here to tell you that you MUST buy gold and silver.  Getting into that debate does not interest us.  Too many debates on the topic end up like messy mud wrestling matches … they start out great but get ugly – fast.  Make up your own mind.

We believe in creating cash flow and preserving our wealth and have decided for ourselves that gold and silver will play a role for us … for now.

We feel that today’s monetary system almost guarantees that gold and silver will end in a bubble just like other asset classes have – so if you dare go down this path educate yourself.  This is not like investing for cash flow … this is for the big boys and girls.

For starters, if you haven’t already, we highly recommend Mike Maloney’s book, “The Guide to Buying Gold & Silver” as mandatory reading before you make your first move.  It’s a quick read and 100% worth it.  After that, you can dig up great books on the Wiemar Republic, the events in Yugoslavia in the early 1990’s, and you can even Google George Washington and the saying around his time, “not worth a continental”, to get a taste of the history of money.

And for a great funny modern-day comedic overview of today’s financial policy, you won’t want to miss this video “the Ben Bernank” … it’s hilarious.

Back to reality…

If you want some current information from a decent source you’ll want to click here and read this.  The source of the article is known to have a bias against the U.S. Federal Reserve but he’s not a tin foil hat wearing gold bug either.

How Do You Buy Silver?

So, if you make the decision that you’d like to acquire some gold and silver for yourself how exactly do you buy the stuff?

I mean, it’s a physical rock after all right?

For today’s discussion, we’re going to stick with Silver but the same process applies to gold almost exactly.

The options are endless, from junk silver to your Grandma’s old silver serving trays, to certificates and collectables.  You can find silver everywhere.  I’m pretty sure my Aunt in Europe still has a silver tooth.  Nah, it must be something else.  Regardless, how funny is that?

Anyway, back on topic…

90 Minutes To Complete Domination

In last week’s post, we discussed the importance of having BIG and FAT reasons to achieve any lasting change.

We chatted about comfort being the enemy.  You can’t just “want” to achieve “financial freedom” or “the perfect family/kids” or “physical fitness”.  And you definitely won’t last if you just “want” to “start or your business” or “invest for cash flow”.

You need deep pain and frustration.  Sounds horrible, we know.

Your “want to have” must be turned into a “gotta have” or you stand very little chance of breaking out of whatever rut you’re in.

This conclusion is coming from our own self-observation and tracking.  So we can tell you with certainty that it’s important – at least, to us.

If you’re able to get emotional enough, for long enough, to take action, then the next part of the achievement equation is creating environments that force our new behaviours.

Let’s break this out into two sections.

The first, actually measuring what’s important.

And the second, structuring your day so that you don’t lose your mind.

Tracking Your Way To Anything You Want

Some people do an excellent job of getting really upset and deciding to make a change but then lose that emotional super-charge because they haven’t built-in mechanisms to remind them of their progress.  To keep them on track after the emotional charge of adrenaline wears off.

In the previous article, I mentioned that my son was taking some snowboard lessons over the holidays.  He was able to track his progress by counting how many times he fell on the bunny hill.

Next, when he mastered that he went over to the “big chairlift” and tested himself on a real beginner hill, “The Big Easy”.   And he desperately wanted to master this hill so that he could go hang out with his nieces on the Intermediate runs marked by big “blue squares” on the ski hill map.

After tackling “The Big Easy” for an entire day he was able to make it down without turning himself into a human snowball.  He went from falling every ten feet to being able to control his descent and was averaging only about one or two fairly small little falls per run.  That was enough to secure the all-important parental permission required for him to go down an intermediate run.

His speed of descent, his control and most importantly, the number of falls were his tracking tools.

He was able to clearly count his progress.

Let’s take two more examples of measuring your progress:

1. Real Estate Investing.

If you’ve been searching for a good cash flow property for any length of time and not getting anywhere you’ll quickly lose the motivation to continue.  When Nick and I began looking for good homes we turned it into a game.

a) How many properties did we have to go through in order to find a good one?  It ended up being 10 properties required to find an acceptable property.  Knowing this kept us motivated.  If we had looked at 15 properties with no luck over two days we knew that in the next five properties we were likely to find two gems … and that kept us going.  That knowledge gave us the motivation to look at over 50 properties each … a week, for months.

b) If we had a vacant rental property we turned to measuring leads, carefully.  We asked ourselves, how many phone calls from our advertising did we need to get six people to view the property?  It turned out we need about 12 leads.  After that, we figured out that to get a tenant we needed at a bare minimum, three good applications.  We then started measuring how many leads turned into appointments and how many of those turned into applications.  Knowing the numbers took the mystery out of the process and kept us focused on constantly improving our advertising and application conversion … instead of just throwing up a lawn sign and praying.  Tracking, measuring, reminding ourselves of the key numbers made us much more effective.

2. Small Business

Over the years we’ve realized that tracking tenant leads to a property is exactly the same as tracking potential customer leads into a business.

a) How many visitors does your website require to get your “desired response”.  Your website has a purpose right?  Well, measure the response.  Once you know that you need 40 visitors to get three sales or two contact forms filled out or five free quotes then you can focus your energy on increasing your lead flow.

b) How many “free quotes” or “browsing Sally’s” do you need in your business to secure a sale?   Is it five?  Three?  Fourteen?  Once you track that you can to predict how much business you’ll be able to generate from the leads you’ve been working so hard to secure.  And if you know how much that customer is worth to you then you’ll be able to measure exactly how much you can spend to acquire that customer?  It’s beautiful.

How many small businesses track leads, prospects and customers?  How many know the average value of each customer?  Worse, how many know the lifetime value of each customer … the value of the same person over three or four years?

Tracking and measuring this stuff keeps you motivated and better yet, creates a massive competitive advantage.

How?

If you know it takes one hundred visitors to your website to get three sales for a profit of $3,000 … then all your focus can be applied to generating those one hundred visitors.  You don’t waste time with frivolous details like beautiful logos and vanity phone numbers.

If you know it takes twelve tenant leads to get one solid tenant worth $30,000 in gross revenues to you … how much would you be willing to pay to generate those leads?

Measuring and tracking are what separates the boys from the men, the girls from the women.

“Whatever the majority of people is doing, under any given circumstances, if you do the exact opposite, you will probably never make another mistake as long as you live.”
– Earl Nightingale

90 Minutes A Day To Complete Domination

Let me ask you something…

What one single thing could you do, every day, that will guarantee 2011 would be drastically different than 2010?

To get different results you must have different behaviours.  To have different behaviours consistently you want to turn important actions into habits.

I’ve found that to change my behaviour I need to do something every day, no matter what, for several weeks, without exception, until it turns into a new habit.

When I start working out every morning I made a commitment to do cardio every day.

I started with 2 minutes of it.

120 seconds.

Then, the next day, 2 minutes and 30 seconds.

Then, the next day, 3 minutes.

I laughed at myself.  Others laughed with me.  The process became fun.

I did it for 67 days straight.  No exceptions.  After late nights, after Michael Buble concerts, after Bon Jovi or U2 concerts, after late men’s league hockey games … every morning, no exceptions.  I didn’t make it a choice.  I wanted to create a new habit and it worked.

Now I do 30 minutes first thing every morning, 5 days a week.  No issues, no hassle, it’s part of my routine.

I started small because I absolutely hated it but had no excuse to avoid it.  How could I admit to myself that I couldn’t do 2 minutes of cardio?  I mean … it was 2 minutes.

Tracking and measuring my progress actually encouraged me instead of discouraging me.  I saw the number increasing every day until I hit my 30-minute goal.

Now for the fun part…

Behind Canada’s Biggest PR Machine – The Bank of Canada

If you’ve been around us for very long you know that we don’t care what the rules of the money game are.

We just want to understand them so that we give ourselves the highest odds of winning.

That’s why we spend so much time studying history, monetary policy and global economics.

It’s why we get updates from relatives in Europe on what they are seeing “on the streets” over there.  Along with friends in Florida, Ohio and California.

It’s also why we pay to get the very best real estate information from across Canada and the U.S.

We’re reading the latest stats on Southern California’s real estate market to better understand our own.

Everything is connected.

And today we’re going to share with you a cool way to predict economic events before they occur.

How do you do that?

Well, we’d like to let you in on a little secret … and only if you promise not to tell anyone.  Deal?

Many moons ago we were “reactive” to the latest news headlines.

No more.

Today, we watch as it’s being created and are able to even predict what we’ll see in the headlines before the newspaper lands on the front porch.

How?

Well, if you’re reading this you’re likely interested in real estate, creating cash flow and starting or expanding your own business.

And so, it’s natural that you’re curious what’s around the corner for the Canadian economy, interest rates etc.

That leads you to the Bank of Canada and its governor, Mark Carney.

He’s the “Wizard of Oz”.  The guy behind the curtain, pulling the strings.

Well, he runs the Bank of Canada like a business … with a marketing calendar and everything.

So when he wants to get the word out about changes that are in store for Canada he pencils in a few “marketing events” to begin getting his message out.

He’s been really quiet for a few months but he’s marketing calendar is now fully engaged again.

Project “Too Much Debt” looks like it officially launched this week.

How can we be certain?

The Difference Between An Amateur and A Professional

Look, it’s 100% possible to make some real wealth, even get rich in real estate investing. Whatever your definition of “get rich” may be, you can accomplish it with real estate.

There’s opportunity to earn both monthly passive income and large chunks of cash during the life cycle of owning a property.

But, you need to know what you’re doing.

And we constantly see beginners make mistakes because they don’t follow the basics of getting some education, then finding a mentor and then following a system.

To cover all the mistakes we see would take weeks and we’ll keep adding articles to address various examples of things to watch out for.

For this article we’ll focus on one of the most important aspects of real estate investing … advertising and filling your property with a tenant.

After all, having someone pay you money every month is kind of the idea. That’s one of the important ingredients if you are going to make it in real estate investing.

Here’s something that we’ve noticed over the last couple of years…

Anyone can take a project to 90% completion. It’s a real pro that finishes the job. And it’s that same pro who gets to reap the rewards of a finished project.

Getting a tenant into a rental property is obviously worth a good sum of money to a real estate investor.

There are four important differences between an amateur real estate investor and a real professional.

And these four can mean the difference between selling a property at a loss to rid yourself of it and making very healthy returns.

Amazingly you don’t have to be a marketing genius to fill a property with a good tenant but you do need to do these things:

  1. Constant Presence.

    Let’s say you advertise your property for a week in the local paper. Towards the very end of the week you line up a tenant for your property and set a date two days later to sign the lease and pick up some cash as a deposit to hold the property.You are excited and to save a couple of hundred dollars you stop advertising in the classifieds for the next week.The meeting day rolls around and of course – it happens.One of you has a kid that is sick, or a dog that needs surgery, or a car that isn’t behaving and you need to reschedule.

    Then for no reason whatsoever when you try to meet up on the agreed upon rescheduled day the possible tenant vanishes. Calls aren’t returned, their voice mail box is full and their girlfriend, who you called because you were smart enough to get a back up contact number, has no idea who you are.

    Frustration settles in.

    You have no more tenant leads because you stopped your advertising. To save a few hundred bucks you pulled your advertising and all the momentum you were building is lost.

    The other possible tenants have vanished and you need to start all over again.

    You then resort to questioning human nature. A popular question asked at this time by beginners is “Why do these tenants lie? They said they wanted the house, why don’t people do what they say they’ll do? What’s wrong with people these days?”

    Nothing is wrong with people. People have behaved this way for hundreds of years and will continue to do so.

    The problem is you, not them.

    It’s your lack of sales experience and knowledge that is the problem (a huge topic for another time).

    You focus on the negative and it’s a downward spiral from there.

    We’ve seen this happen to amateurs over and over.

    And it ends up being so scary at this point some people just break down and decide they can’t make it in real estate investing and leave the game all together. Bad idea, but to each their own.

    Now the professional does the opposite.

    The professional investor keeps advertising until the lease is signed and there is cash in their pocket. And not just on free websites like www.Kijiji.ca or www.CraigsList.org. They’ll actually spend the money to keep a well written classified ad in the papers and on that paper’s website.

    A signed lease can represent tens of thousands in revenue.

    You can’t make any money in real estate investing without getting things like leases actually signed.

    Why would anyone jeopardize that to save a few hundred bucks on advertising?

    Small thinking produces small results and by cutting off advertising before you have a signed lease agreement you are thinking small.

    The professional investor learns about human nature and realizes that people may not follow-up on commitments.

    But the pros don’t not focus on that. Instead they focus on having 3 or more possible backup tenants in the wings.

    They continue to show the property to other possible tenants until the lease is signed. They attempt to sign the lease on the very same day that someone shows interest.