This will be the first of many posts to the Wholesaling blog. I would like to start out by saying sometimes the less you know, the better! Wholesaling can be quite complex. Too many people start out on the wrong foot, and can never recover. To be successful, it takes education and practice. Too many people treat wholesaling just like other things in life, if at first you don't succeed, quit!
When I was with HomeVestors, we approached our advertising with what I called a shotgun approach. We wanted to cover every area available, and beat the competition. This mentality worked, because by and large, we were a group of highly trained and experienced home buyers. At the peak, we had 15+ franchisees and an advertising budget of more than $1.5MM per year. That was just in the DFW area.
Now, if you aren't going to sign a contract with HomeVestors and commit to spend $10,000 plus just to get started; below are some recommendations. If you want to hire HomeVestors to train you, support you, and get your going quicker, let me know, I'll point you in the right direction.
Baseball For Real Estate®
1. Learn the game. Too many times I win at the house because my competition is uneducated. If you don't fully understand what you are selling, it is unlikely you will be successful. I am a firm believer that people can look at you, and tell if you have any confidence about what you are telling them. If you try to use weasel clauses, or “just check the 3rd party financing box” someone like me (or someone I trained) is going to eat your lunch! Knowledge is power, and the more knowledge you can display, the more the competition will seem not to have!
2. Learn your position. Try to figure out where you fit in in the real estate game. You really need to learn which piece of the puzzle you are, to be successful. If you are going to be the acquisitions arm, you better be ready to have help on the sales. If you aren't going to get help, make sure you schedule time away from the acquisitions phase to completely devote yourself to the sales process. You will find, it does you no good to buy a house at a good price if you can't execute your exit strategy. Once you learn your position, be the best at it. Always learn, and seek out knowledge and people that can help you get better.
3. Get a coach. I can't emphasize enough the importance of having a coach. A good coach doesn't have to be someone famous. It doesn't have to be someone that has done what you are doing at a high level. A coach is merely someone that can analyze your actions, routines, and business, to help you be in the right position. A coach can also help you know where you need to improve, which I believe is one of the secrets to success.
4. Get on a team. I can’t stress enough the importance of a team. It is important to note, this team does not have to be one that is staffed full time. This team is one that you can rely on when you need them. This is a team you can trust to help you with the areas you are not necessarily the best at. Several crucial teammates are: an accountant/bookkeeper, an attorney (or several), a tax advisor, a business coach, a Realtor, a general contractor, and several long lists of tradesmen. This “Rolodex” if you will, is one of the most vital parts to your success. Without competent, reliable players on your team, success will be difficult to master. If you can't afford to hire these type of teammates, perhaps you should form a mastermind group or a partnership with the personnel you are lacking.
5. Train. How many times have you seen a baseball player show up in the playoffs, without having been through any of the regular season? Not often! It is also rare to see a player do well in the regular season without being present in the team’s preseason activities, and spring training. Training is undervalued with regards to real estate. Laws change year to year, acceptable practices are regulated in and out, and the legal forms and terminology are subject to change at the drop of a hat! You must be actively involved in your industry in order to stay at the forefront. Remember, you play how you practice!
6. Play the game. This is where I get the most frustrated with potential investors or wholesalers. I see them in all of these classes, at all of these events, and they never show up to the plate! What good does it do you to take years of batting practice and never step up to the plate? Now, don’t get me wrong. I am not a proponent of making premature decisions. Just realize, eventually, you can spend a lot more on education than one mistake will cost you, and you will NEVER learn as much about anything in a classroom, as you will doing it!
7. Know the other players. This is about two core areas of your business life. First, you have to know who your competition is, and what they are doing. Example: 1. If your business model is to buy houses at 50% of value minus repairs, you don’t want to be bidding against people that are offering 70% of value minus repairs. There are a couple of solutions to this situation. You can get a better source of properties, change where you are looking for properties, or change your model. Second, Networking is (in my opinion) the single most important factor to an investors success. Networking has been the single most helpful portion of my career. At an early age, I learn this quote, “It isn't always what you know; most of the time it is who your know.” Gunnery Sergeant Luster taught me that at the Navy Marine Corps Intelligence Training Center in Virginia. Several years later that lesson paid off while on deployment in a hostile area, but that is another story!
8. Excel at your Role. Your job is your job! If you aren’t good at your job, fire yourself! I really mean this. It may seem like a joke, but it is one of the most serious points of this philosophy. One of the best things I ever did was fire myself as the bookkeeper. I was spending countless hours trying to make the books “perfect”. You see, my problem was actually I knew too much about the books, their importance, and my future goals. Couple that with the fact that I am borderline ADD, you end up with something that is always 80% complete. What was the best part about me being fired? I was free to focus on buying, fixing, financing, leasing, and selling houses. Even then, I had to fire myself again! I had too many roles. Now, I have fired myself from every part of my business except buying and wholesaling! That is all I do. I manage the rehab, but now I hire Charles. The funny thing is, I end coming in on budget, with less work by paying a competent professional like Charles.
9. Don’t swing for the fence. Forget the late night infomercials and the flashy presentations with monstrous checks! It is not realistic. It is possible. I have made more than $50,000 on an assignment several times. I have also made $0.00 enough times to where my average is in the neighborhood of $8,000. This is when I tell you to go for base hits, try to avoid strikeouts, take a walk if you can, and every now and then, you’ll end up with a home run. It is those that don’t truly understand their exit strategy (and the numbers) that try to buy a house so low they can’t get hurt that typically end up striking out. Take the base hits. Take the walks. Eventually, you will be in position for that extra base hit, and who knows, you might end up with a home run!
10. Watch the tapes. I can’t tell you how many times I have talked to an investor that says he made $20,000 on a house, only to realize he made less than $10,000. You have to understand your performance, and your true cost. Proper accounting will help you. Separation is key in order to truly validate your results. Make sure (even if you are just starting) you keep everything separate. Here is the best example. Let’s say you go form a simple Assumed Name (DBA or doing business as). We will call it Joe buys houses. (so this mean Joe is the client). Joe takes $2,000 out of his savings, and takes his DBA down to Chase to open his business checking account. Joe need to account for all of the fees associated with the DBA, cashiers check fees, etc when beginning his accounting. Now, Joe has just invested $2,000 in Joe buys houses. After Joe pays for education, some postcards, bandit signs, paper, and his business expenses (this is where you can start deducting portions of your gasoline, cell phone, etc.) he has spent about $1,500 over two months. When Joe assigns his first house for $5,000 at the end of month two, how much has he made? In this example, he has made $3,500 in two months, or $1,750 per month net. Joe should analyze how much he is spending a month, and budget six months worth of expenses for this new business. Only once that reserve is established, and he has paid back his savings is Joe safe enough to start drawing significant amounts of money from this new venture.
11. Hit the clubhouse. If you have ever been in a clubhouse after a win (or seen it on TV) you know what I am talking about. Every victory must be celebrated. I am not saying to go buy a new car. What I like to do is take my wife to a nice dinner after every successful closing. For it to all be worth it, you have to enjoy the success, and move past the failures!
12. Play it again. In order to be successful in real estate, you must be methodical, and consistent. Consistency is what will truly set you apart from your competition!
That is all for now!
See you online!