Posted by Jay on May 06, 2003 at 21:32:17:
Hi Frank I loved your response . I am just curious How you invest in states other that you live in ? how do you know what’s the right price? what’s a good neighborhood ? how do you manage it until you sell it?
Thanks Jay
why so diffucult - Posted by john
Posted by john on May 06, 2003 at 19:00:59:
This question is directed to the successful “full time” investors who are making their living as real estate investors. After several years of following the various challenges and difficulties that the vast majority of investors face I have come to notice that this business while legitimate also seems to be very very difficult for most people who pursue it. I realize many quit too soon and that explains their failure. Yet I have two friends who have been applying themselves quit intensively for nearly one full year with no possitive results. Both these individuals are successfull in the business world. The first in the Vice President of one of the largest hotel/casino property in Las Vegas and the other owns a successful sports bar and pizza restaurant. These are intellingent and capable men, yet they are not able to create success in this real estate investing arena. My question is WHY NOT? Why is this business so difficult for vast majority of those who pursue it. What is the special ingredient that allows the .5%-1% of all those who enter this business to succeed. It must be more than persistence simply due to the fact that both of my friends have not let up throughout the 12-18 months that they have been working the business. SIMPLY PUT. WHY IS THIS BUSINESS SO CHALLENGING FOR NEARLY EVERYONE WHO PURSUES IT?
Re: why so diffucult - Posted by Mark (SDCA)
Posted by Mark (SDCA) on May 07, 2003 at 17:15:00:
Impossible to say without knowing what specific problems they are having. Each market has its own problems. But it sounds like they both have capital. You say that they spent a year doing it. How much actual TIME? They both sound busy already.
But if they have the time AND the capital they should not be having all these problems.
I will add one more thing… REI is very much niche based. There all kinds of approaches and types of REI to pursue. I think it is very important to choose a type that matches your personality and goals.
Cheers,
Mark
Re: why so diffucult - Posted by RichV(FL)
Posted by RichV(FL) on May 07, 2003 at 10:41:32:
Hey John,
I just got back into town so I’m a bit late on this one, and boy did you get alot of responses to this post!
But for me its an extreme drive to make it. I live Real estate it my life.
Like the others have said one must have a passion for the business. It is certianly not a “get rich quick thing” like many see on late night tv. It takes a hell of a whole work, determination and education.
Best of luck,
RichV(FL)
Re: why so diffucult - Posted by Tom
Posted by Tom on May 07, 2003 at 10:08:59:
In a word “attitude”
The best way to start a fulltime business… - Posted by Hal Roark
Posted by Hal Roark on May 07, 2003 at 10:00:50:
John,
I’ve thought about this a lot. I see lots of folks in my reia group try and fail. I see good, smart people with tons of motivation try and fail.
What separates the 1%?
I don’t know that I have the ultimate answer. I do have a method, though, that I think could give anyone a greater shot at making it (and the insight may surprise you as ironic):
The best way to make it as a fulltime investor is to start out as a part-time hobby.
The common theme that seems to doom the 99% who fail, and the 99% who jump fulltime, is they just haven’t built a successful BUSINESS. By business, I mean a system for:
Marketing for finding deals;
Screening deals for relevancy;
Signing up deals effectively in one’s time allotment;
Having the right paperwork and knowledge to do deals once you find them;
Having a team together that can execute a deal put in motion (home inspector, appriaser, closing agent, mbroker, etc);
knowing how to market to make money off the deal;
Sales and negotiating skills;
deal analysis and number crunching skills;
Deep knowledge of a niche so action in that niche is thoughtless and automatic (ie rehabbing, landlording, wholesaling, etc).
Accounting systems;
Mentoring and buddy support systems;
strategic planning, swot analyses, 80-20 biz systems analysis, etc.;
Add to this that folks are often undercapitalized so they don’t have enuf dough to last thru the learning curve, and they are doomed to never make it off the ground. It’s a very, very heavy plane to have to learn to fly – very complicated, with diverse skill sets usually done my individual professions by themselves (ie, realtors, mbrokers, appraisers, sales, landlording, etc etc etc) – it’s very, very hard to get to the point where one can make enuf money off the deals consistently to support a nice quality of life.
Don’t get me wrong: re is the real deal. You can make a ton of money. The spread on our widgets is huge, and every day there are more widgets thrown into and lying around the marketplace (due to divorce, sickness, foreclosure, inheriting property they dont’ want, yada yada yada). Once you get the systems set up and really have a real re biz: the money can be obscene. Also, if you start further up the mountain (with capital, good credit, connections, biz support, biz experience, any relevant housing skills, etc) it’s awefully easier to climb than the cat with no knowledge, skills, cash, credit, etc. That cat is fodder for the vultures and doesn’t even know it. Better he learned how to be a good employee and learn some responsibility and pay his bills than chase his latest get-rich-quick hallucination. But that’s the hard way, and who wants the hard way? Better to just run up the mountain, feverish with desire … only to be yet another carcass on the mountain that is successful re investing.
Anyway, that’s why I like going fulltime by starting parttime: gives you time to make mistakes, build biz, not have to rely on capital, etc. This is how I started. And trust me: it, too, has it’s huge downsides: never enuf time to learn fast enuf; constant time pressure with family, friends, etc; beat out of deals by pros who can move quicker with better networks, etc.
There is no easy answer. But if I had to choose, I’d choose the path that at least woulden’t put me broke.
The truth is that the other cat who can get rich (and I mean filthy, stinkin’ rich) in real estate is not just the fulltime re entrepreneur with a real biz but the guy/gal who loves their job and just does very select, niche, judicious deals on the side every year. Over the course of 30 years, that person is going to have an amazing portfolio and an amazing networth and cashflow.
Tell your buddy to focus on analyzing his activity from the standpoint of all the pieces of effective biz management. He’s definataly doing something very, very wrong. Vegas is a hot market. If he’s hitting it as hard and committed as you say, he’s missing a major piece of the pie somewhere.
I wish him, and everyone, the best of results.
Hal
Re: why so diffucult - Posted by David MacGown (Mi)
Posted by David MacGown (Mi) on May 06, 2003 at 23:11:21:
John,
I am full time but not yet successfull. I have had a lot of struggles until I found my entreprenerial niche.
Robert kiyasaki talks about this in his RDGTI book.
Many successfull B quadrant owners jump right into investing and think they will have the same success but often fail. The B and I quadrants require different skills. The reason why most people fail as investors is because the right side of the quadrant is the most difficult to reach success in, but those that do are the richest 1% in the world. Kiyasaki advises to at first start a B quadrant business before investing. The I quadrant requires much patience which most entrepreneurs lack, because of this entrepreneurs will have a difficult time with the buy and hold niche.
BTW,Kiyasaki appears to contradict himself. He says to start with the most difficult quadrant and the rest will come easier. The I quadrant IS the most difficult (this is where rich dad started his son out in) It is the play ground of the rich. This is where the rich become richer.
David
Re: why so diffucult - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on May 06, 2003 at 22:31:46:
John------------
Thanks for nice question. I wish I had a nice answer. Since I don’t, I’ll just start writing and see what comes out.
If you have not read my post for beginners, I suggest you put “beginners success” into the search function for this main board of the CREONLINE.COM website.
I think it takes a while to understand how real estate investing works. There is a lot to learn. And there are a tremendous number of variables. So every deal is pretty much unique. It takes a while to be able to see the patterns of deals, to know what to look at and, once looking at it, evaluate it. With experience come speed in studying potential deals. One learns what works and what does not.
Because there are so many different ways to invest, people need to pick an approach that “fits” them, I feel. Here is a post on picking an investment strategy:
http://www.creonline.com/wwwboard/messages/47628.html
It takes a while to look at oneself and one’s own feelings to sort out what will fit. I think that even fulltime investors could take 2 or 3 years to settle into a niche and approach that fits them, after trying several different approaches.
Many people seem to give up very easily when they meet any resistence at all. Sounds like your friends do not fit that group. However, do you know if they have tried to understand what they are doing, what different approaches might work for them? John $Cash$ Locke (NV) is in Los Vegas and reports extreme success there. You might read his posts, especially some of the ones right after he began writing here last year. Something like 600 houses in 7 years, if I recall correctly. But, his approach fit him, because of his sales background. I’m not a salesperson type so his approach would not fit me. My approach would probably suit only a very few people.
If your friends are still searching for a strategy, they may seem to lack success. However, that may be an illusion. If they are eliminating things that don’t work for them, they may be making great progress. You have to build your cash-making machine before it start spewing the $100 bills. That is what takes some time. Once you know yourself and you know your place in the scheme of real estate, it is possible to make extremely good money. My former employer went from making about $350K-$400k a year when I first started working for him to making about $1Mil a year last year, before I quit. Part of that was because I went on board and helped him, part was that he kept changing his operation little by little, even though he had been at it about 15 years. But, he tuned up and up and up.
Most people don’t make that much money because they don’t work as hard and long hours as he does. But, then again, some people make much more than that if they get into big deals. Buy a $25Mil property for $21Mil because the owner is in some distress. Resell for $24Mil to make a quick sale. $3Mil profit in one deal? I’ve never done anything like that, but I don’t see why it couldn’t be done. The Enron Building in Houston recently sold for about 1/3 of the construction cost, $ 210 Mill if I recall correctly, cost $600 Mill to build. Now, I don’t know if the market value is $600 Mill, but I could be readly convinved that it is worth 10s of millions of dollars more than the purchase price.
Good InvestingRon Starr*
We’re Marketers Full Time & REI’s PT… - Posted by Chris S.
Posted by Chris S. on May 06, 2003 at 22:19:27:
That’s what 99.95% of the population fails to realize. Without business coming in you’ll never have the money to pay for the bills that need to go out. If we focus Full Time on marketing, getting out name out there and networking we could realize a steady stream of your most qualified prospects calling you. This way when the one that grabs your attention calls the Part Time Real Estate Investing thing starts to pay off.
My .02 Cents.
Chris S.
Re: why so diffucult - Posted by Marc NJ
Posted by Marc NJ on May 06, 2003 at 21:22:57:
Difficulty comes from ignorance and not having start up capitol to either educate or experience. RE investing is a difficult challange, b/c you need guts to purchase properties and you dont have a dime. These challanges can be overcome through perservence and motivation, knowlege and experience, and education.
Some will never reach the point of no return b/c they gave up before they ever got started, some will succeed b/c of having one or more of these listed traits or others that havenot been listed.
You have to betotally consumed by this business or you wont make it. I gave up my hobbies , and evry other waking hour I had and committed myself to make it happen, cash would have made it easier ,but it was not an option.
I have been in this business less than 2 years and now own 13 properties and have fliped 7 more.I’ve done short sales and any other creative purchases you can think of. I have 17 rental units and I started with 6K, which I got from selling my truck.
Im not saying that Im making a killing, cause Im just getting by, but I am looking at cashing out some 200-300K worth of equity in the next year.That will leave me with a couple of nice properties with high cash flows, and I’ll start buying again.
So, why is REI so difficult? I dont know for sure but it takes a big set a balls, to do what most sucessful investors do. You just have to want it bad, real bad, in that statement I want to point out that you must want to succeed worst than any thing else in your life.
Re: why so diffucult - Posted by Anne_ND
Posted by Anne_ND on May 06, 2003 at 20:54:37:
John,
You told Rocky that you are not an investor, nor do you wish to be, yet your email address is webuyhouses@yahoo.com. I’m wondering what that’s about.
To find an answer to your question I suggest you play Cashflow 101 a few times and read ‘The Millionaire Next Door’. You’ll see that having a good income from a JOB and being a successful real estate entrepreneur do not necessarily have anything in common.
And yes, I’ll be a full-time REI in 9 days.
good luck,
ANne
Re: why so diffucult - Posted by frank
Posted by frank on May 06, 2003 at 20:28:02:
John;
Both Rocky and Steve gave you excellent answers. Motivation was definitely the key to my success. I was so sick of my job that I’d have done about ANYTHING (legal) to become a re investor; and I was making a decent living. I looked at 714 foreclosure files in one week - that was the extent of my desperation (determination?), and found the first deal. The second, third, and fourth were immensely easier. Thant was 8 years ago.
I think you were probably right when you said that your friends were unable to “create” a success in this field - and that’s okay; not everyone can get far enough out of the box to succeed in “creative real estate”. My best suggestion is to do a very simple thing: take a real estate millionaire to lunch, and ask him/her how they did it; how they started, and why, thier successes, greatest failures, and so on. (I’m betting)You’ll be shocked at how willing they are to talk to you - and it’ll be the greatest education you’ll ever get. Then, you’ll be in a position to look at your friends’ “efforts” with open eyes. Good luck, God bless.
Passion and Focus - Posted by phil fernandez
Posted by phil fernandez on May 06, 2003 at 20:07:54:
I think you need both alot of passion for this business and with the passion comes the focus that is necessary for success. Now I have eaten, drank and slept real estate investing for 25 years. In other words, I love it and wouldn’t want to be doing anything else.
Through my passion for real estate comes my focus. If you think real estate 24/ 7, you’re bound to have the focus.
I agree that real estate does not come easy for some. And not all will succeed. We all have our strengths and weaknesses. I could not run a sports bar and pizza place well or be a good VP for some company as your friends do. We’re all different.
Re: why so diffucult - Posted by rocky
Posted by rocky on May 06, 2003 at 19:50:52:
John,
Do you know the definition of Neurotic? Someone who consistantly uses the same means while attempting a different end. If your friends are applying themselves for 12 to 18 months without altering their approach, then your question is answered without having to ask it. They need to try an alternate approach.
This business is not for conventional thinkers. To achieve success, a degree of creativity must be employed. Even the conventional investors in this industry are creative and realize that every opportunity has several possible strategies available. This business is only difficult to those who choose to perceive it as such.
Also, what do your friends know of real estate investing? Being a VP of a casino is not the same as creating profit out of a piece of property. This business is challenging because it requires a different kind of thinker. It requires someone who can see money where others cannot. It requires someone who can see money before others can see it. And it requires someone who does not ask what am I doing wrong, or else he’ll get the wrong answer. Instead you should be asking, “what can I do right?”
Good investing,
Rocky
In a word… - Posted by Steve (Atl)
Posted by Steve (Atl) on May 06, 2003 at 19:44:24:
Motivation. This ingredient is the single most important thing in any business. It could also be described as passion. While knowledge is very important, it is not the most important. You could be a very smart individual, but if you do not know the required, core knowledge, you will not succeed. You say that your friend(s) are successful at what they do. Well, you have to be successful at something. My grandfather was a very successful builder in my area. He read on a 1st grade level. However, he could build a house without a set of blueprints. I would (and still) take him tomy rehabs and he can tell me in about an hour what repair estimate should be. He is usually right within about 1,500 everytime. We are talking 20k to 60k rehabs. Now I doubt that he could go into the Mirage and tell your friend what the ROI on Craps Table #3 is. His motivation is being on the job site. Seing a total dump and realize that with the required labor adn material, it could be an imaculate place to live. Nothing wrong with not succeeding in real estate. And who is to say that your friends won’t succeed? But, you are right. can be very hard work. But to me, it is not work. Work is the place that I used to go to every day to collect a paycheck. For myself, my motivation is the freedom that this gives me and my family. I love what I do and I have a very deep passion. I imagine that the second this stops being fun, I will find something else.
This is just my take…
Re: The best way to start a fulltime business… - Posted by Houserookie
Posted by Houserookie on May 10, 2003 at 13:14:08:
Hal,
How about relationship building with buyers and sellers? I think this is the most important aspect in any business ESPECIALLY IN REAL ESTATE.
Too often, I see newbies waste time on testing magical phone scripts and what to say. It’s almost like they expect people to become their best friend and become motivated on the first call.
Great Post!
Austin
Re: The best way to start a fulltime business… - Posted by Dick Chelten
Posted by Dick Chelten on May 07, 2003 at 21:24:26:
Thanks for the great post. Recently, I sold my insurance agency biz and started with CRE. I prepared my niche, my biz plan, and recruited my 24 yr old stockbroker son to join me. I pay him out of our LLC and we are working our 3 yr biz plan every day. Sure, it continues to evolve, and we do get distracted at times by the many different “niches” we could pursue. However, we always come back to our 3 year biz plan. It’s what keeps me sane and fearless about our future. I have written up my plan for success and am beginning already to design our exit strategy for those funds we make starting the 3rd year.
I lived by my monthly projection/actual results reports in my old business. I see no reason to do differently here.
All your sugestions are valuable. I copied your posting and emailed it to my son to review and discuss tomorrow at our AM get-together meeting. Thanks for your re-enforcing sound business principles to this website.
Thanks.This ones a"printer"post to keep - Posted by Ronald * Starr
Posted by Ronald * Starr on May 07, 2003 at 12:50:37:
Hal Roark–(LA)----------------
Thanks.
Good InvestingRon Starr*
Speak for yourself - Posted by Potash
Posted by Potash on May 07, 2003 at 07:56:43:
I do very little marketing, and no networking.
Re: We’re Marketers Full Time & REI’s PT… - Posted by Stacy (AZ)
Posted by Stacy (AZ) on May 07, 2003 at 24:09:40:
That’s the first time I’ve heard that take. I like it. I’d put it at 75% marketing and 25% investing, but your point is insightful and true. And I’d venture to say the vast majority of beginners who want to get into RE investing full time don’t realize it. Some never get it, and those are quick to lose interest and bail out. Fine with me.
Hey. Let’s keep it between you and me…