<< Continued from Part 1
Myth #6: You Want to Do It but Don't Really Have the Time
This really comes down to choices and priorities. There is always time to do the things we need to do like go to work every day, mow the lawn, feed the dog. Often there isn't time to do the things we really want to do. Learn to speak a second language, build a bookcase, or volunteer in the community. There is a difference between need and want. We'll often do what we need and put off what we want. Unfortunately our wants are what truly enrich our lives.
The investment real estate business is something you should want to do and may even need to do. It's work. To be truly successful, especially in the beginning, you will be involved in the day-to-day activities of finding and evaluating property, negotiating deals, overseeing contract repair work, possibly even managing the property once it's yours. I can honestly say, I find the business rewarding, fun, and because of that, it is profitable.
I fell victim to the myth of not having enough time myself, and I take full blame. Sharon Lechter and Robert Kiyosaki asked me to write this book two years ago. Finally I embraced the idea and actually started wanting to get it done. But wanting was not enough. What got me going was a do-it-or-else deadline. That got my attention and made me realize I needed to get disciplined and write the book. That's what got the book done.
If you don't have the time to begin your real estate investment business, maybe in your mind, you don't really need to do it. Maybe you simply want to do it, and "want" alone may not be enough to get you started. After all, if you work during the week at another job, you will have to search for and evaluate property on the weekends. You'll need to make phone calls when you can during the week or in the evenings. There's always a way to make your dreams come true . . . as long as they are truly your dreams.
Myth #7: You Have to Know Somebody to Get Going in This Business
While knowing a few key people such as a real estate agent, an attorney, or a banker may save you some time, you don't need to know anyone even remotely connected with investment real estate to get started. In this book, you'll discover the key people you need to have on your team. And you'll find that the goals you set for yourself will actually define the team. People you know today may or may not be the ideal people for your team once you determine what you want to gain from your real estate investment business.
Just get started and you'll be surprised how many people you'll get to know and how much they will teach you. You'll have "friends in the business" before you know it. Here's what I mean. We're doing a deal in Portland, Oregon. I live and work in Arizona. I hadn't been to Portland in over ten years. Anyone I had once known there was long since gone. Neither I nor anyone else in my company knew a soul in Portland. What we did know was that the city was situated on two rivers and that unemployment was high. The latter meant that the people who owned property were probably not doing so well. And to me that spelled buying opportunity. We had one big problem: We knew about the city, but we didn't know a single person in the city. We figured the market conditions were at least worth a plane trip and a few days in Portland.
Before our trip, we made our minds up to find our team, at least the start of it. So we went on the Internet and looked up property managers, city officials, brokers, and so on in preparation for our trip. We were not about to travel that far and not meet with anyone who could educate us about the market. As a result, we had ten or twelve meetings over a period of two days. It cost us a few lunches and dinners, but we had the beginnings of our team.
Myth #8: You Have to Be a Seasoned Negotiator and Businessperson
Again, this is just not true. Experience in business may make that first walk into an investor's office more comfortable, but that's all it will do. Your true power and confidence won't come from your past experience. Instead, it will come from the solid deal you assemble that is a win-win for everyone involved. This book will show you how to find and evaluate property with the ultimate goal of establishing a realistic purchase price that maximizes your monthly income and appreciates the asset. Find a deal like that and everyone will want a piece of the action.
Over the years, I've walked away from a lot of deals, and negotiation had nothing to do with it. One of those deals was a 205-unit building in Glendale, Arizona. About a year ago the listing price was $7.9 million, and the broker told me there were other offers-the highest one being $7.2 million. We did our homework on the property and by my estimation, $7.2 million was fair based on the operations of the property. The seller declined every offer and pulled the listing. Six months later, the seller relisted the building for $8.1 million. If I had still been interested in the property I would have made an offer based on operations. It would have been the same $7.2 million offer I made before. The seller would probably kick me out, along with everyone else who made him an offer based on operations. Are you surprised to learn that he still owns the building today?
With the method in this book, you'll find out that the listing price is meaningless. There is no point negotiating based on this number, and actually doing so is a recipe for disaster. That's because in most cases, the listing price is the seller's opinion of what the property is worth. It is not founded on the actual operations of the property. What most people consider negotiation meetings are for me more accurately described as presentation meetings. That's when I present the numbers, and they are pretty much take-it-or-leave- it deals. When I get kicked out, and in truth, usually it is a mutual parting of the ways, it's because the numbers don't work. Walking away is a good thing.
Myth #9: You Have to Know a Lot About Real Estate
This myth holds people back every single day. They feel they have to already be experts in a field in order to be successful, whether it is real estate or stock investing or dry cleaning! First of all, success is a journey, it's not a destination, and all successful people start at the same place. One day they wake up, they throw their legs over the side of the bed, they yawn-and they begin.
Only by beginning and by continuing day after day do we ever become experts. We gain expertise through experience. By reading this book, you'll get a solid framework from which to begin. And you'll gain enough knowledge to sound really smart at cocktail parties and backyard barbecues, but more importantly you'll learn tons more from your first deal. And more still from your second and third. And even more from your fourth.
I learn something new with every venture. Some of the buildings we recently bought in Portland were built on an old wooden pier constructed in the 1930s. Who would have guessed when I embarked in this business that I would have to learn everything about the structural integrity of seventy-year-old piers? Not me, but we needed to find out everything about the condition of that pier before we went forward and purchased the property. I live in the desert. So you can imagine how foreign it was for me to hire divers and a boat and structural engineers to do the inspections. It was a real learning experience. I'm always encountering something new. That's part of what keeps it all interesting.
The only way you'll know a lot about real estate is to begin in real estate. Once you do that, you'll meet people, learn your market, see the patterns, and understand the trends. You'll encounter your own seventy-year-old wooden piers, but that will keep it fun. And before you know it, you'll be wowing people at cocktail parties and barbecues with experiences you've lived rather than just read about.
Myth #10 You Can't Be Afraid of Failing
Show me an entrepreneur who says he or she isn't afraid of failing and I'll show you a liar! A bold statement, absolutely, but a true one. Everyone is afraid of failing. The difference is that some of us let that fear of failure hold us back. Sometimes fear stops us from beginning altogether and that's unfortunate. If that's the case, make the decision now to just begin putting one foot in front of the other, making one phone call at a time, visiting one property, and then another. It's not hard, but it can seem so if we focus on the end result instead of the tiny-and very doable-steps in between.
Sometimes fear of failure occurs when it comes time to "pull the trigger" on a property. I call it analysis paralysis and people fall into it all the time. They overanalyze an opportunity and are never quite able to sign on the dotted line. This book will prove especially helpful to people with this sort of fear because it will show you exactly what you need to know to analyze an investment property. When the numbers add up, no further analysis is necessary. Frozen in fear will be a thing of the past.
Another way fear of failure presents itself is through regret. In other words, we've pulled the trigger, but then when difficulties occur-and they will occur, they always do-we regret the decision and waste energy by asking "Why did we do this?" instead of "What can we do to get past the hurdle?" This form of fear can turn an otherwise great opportunity into a bad investment. In my life, I don't regret decisions. I just consider the place where I'm at as the starting line and go for the gold every day.
I admit when I was just starting out I had an acute fear of failing. The difference is I knew that if I did nothing and remained frozen in fear, I would fail. I felt I had a better chance of success by just going forward one step at a time to make some opportunities pay off. That's the thing about fear of failure, if you don't use it to your advantage as a motivator, it becomes a self-fulfilling prophecy.
Myth #11: You Have to Know the Tricks of the Trade
There are no tricks of the trade in the purest sense of the term. But there are secrets to success in life. And as long as you know those, you'll be successful at anything. First, you have to set goals. Goals will be the foundation of the roadmap for your success. They will also tell you when you have arrived, so you can pat yourself on the back. Everyone needs that reinforcement. Not coincidentally the next chapter is all about goal setting.
Second, you have to persevere. Quitting when things get tough doesn't produce winners. In fifteen years, I could have quit a hundred times. I've had plenty of tough problems. Financing that falls through, employee problems, and downright frightening resident issues. But successful people work through difficulties and they come out on the other side stronger, more confident, and better prepared for the next challenge. And trust me, there will be more challenges. Finally, you have to understand the process. That's what this book will do. It will take you from beginning to end and every step in between. From setting goals to setting up your team, to finding property, to evaluating it, to determining a purchase price, to managing it, I'll let you in on fifteen years' worth of experience. I hope this book will become your handbook for success.
CHAPTER 1 ACTION STEPS
- Understand the myths in this chapter.
- Ask yourself if there are any others.
- Identify the ones you believe to be true.
- Determine which myths have been responsible for hindering your success.
- Make the commitment to abandon these unproductive myths.
- Make the commitment to learn techniques and preparedness so magical things happen.
Copyright © 2004 by Ken McElroy.
Excerpt Courtesy of Time Warner Book Group
Buy It Now:
The ABC's of Real Estate Investing: The Secrets of Finding Hidden Profits Most Investors Miss
by Ken McElroy
"...there are many books on real estate investing and many people claiming to be real estate experts. What makes this book different is, first, it is written from the most important aspect of real estate investment, which is property management; and second, this book is written by a real expert." - Robert T. Kiyosaki