So you want to become a real estate investor?! One of the most common questions
I get from those who are just starting to invest is, "Where do I start?" or,
"How do I know where to begin?" I want to share some secret principles with
anyone who has ever struggled with how or where to start in the world of real
estate investing; just start at the end.
When I say start at the end, I mean that you have to figure out where you want
to end up or it is awfully hard to develop a plan for how to get there. It would
be like the family that says they want to go on vacation but they never take the
time to figure out where they want to go! If they never take the time sit down
and decide where to go, then they forfeit the right to complain about never
arriving anywhere.
Your real estate investment choice should begin with drilling down to what
amounts to 2 very basic baskets of choices:
Would I prefer a bigger chuck of cash now?
Would I prefer the passive income each and every month?
Either answer is fine. Let's face it: in real life we will want both, but we
also know that we need to have a primary and a secondary goal when it comes to
these two categories. If you already have a good chunk of cash, then you would
most likely lean towards the passive income category. If you lack the cash and
need to build up some money, to solve some other issues or areas of your
financial life, you would most likely lean towards getting a bigger chunk of
cash sooner.
Consequently, when we come across deals, we tend to try and push them towards
the primary objective that WE need; either cash flow or cash now. I have seen
many beginners get frustrated when they just can't seem to get their first deal
under their belts. One of the reasons they might be struggling is because they
have tried to fit a square peg into a round hole. Maybe the deal they have found
would be great for cash flow but not so great for cash now. Or maybe they found
a decent wholesale deal that would have some cash if they flipped it; but it
spits off no income if they were to keep it.
Instead of trying to force our own will and what we need into every deal, we
need to learn to stand back and start at the end and see what the deal allows us
to do. When I look at any prospective deal, I ask myself 3 questions regarding
any potential profit:
Can I make money living with it?
Can I make money renting it out?
Can I make money selling or refinancing it?
First of all, if the answer is no to all three of these questions, then it
probably is not a deal I am going to do. What if there was money renting it out,
but I don't want to have rentals or I need the quick cash? Or what if I could
buy it right, but the rents just won't cover the debt service? Should I throw
the deal away? Definitely not!
This is why it becomes so important to build our team. Just like Robert Allen
and Mark Victor Hansen (two prominent real estate investors and personal
development specialists) talk about in their book "The One Minute Millionaire",
you need to develop your own Mastermind Team. A Mastermind Team is essentially a
group of like-minded people with similar objectives. They can be your guide and
support system at the best of times. Find and Surround yourself with other
investors who might be looking for things that you are not. For instance, if you
are looking for cash flow, and you find a deal where there is profit on a flip
but not from a passive income perspective, you could flip the deal over to one
of your Mastermind team members who is looking for a rehab. If you are looking
for fixers to rehab and sell, but you find a duplex in good shape that has some
cash flow, you could still turn the deal over to one of your team members who
seeks that. You can also form joint ventures in a deal if you need to spread the
risk.
Simply said, rather than getting frustrated when we find deals that don't give
us what WE want, see if there is profit in another category and make a bit of
money by flipping the deal to another investor who may be seeking something
different. The other advantage of a MM team is that you can share strategies and
ideas on a regular basis to maximize your portfolios.
Another way to say it is, "start at the end". See what the deal allows you to do
and go with it instead of fighting it! For example many investors try and sell a
property if it does not perform whereas they could refinance and save on tax,
estate agent commissions and other duties.
*Scott Lamm is a hugely successful American Real Estate Investor. Investing in
real estate anywhere in the world is based on sound investment principles first.
It is irrelevant in what country you are buying property, what entity you are
buying in, what tax laws apply, etc. It is important first to have a strategy
which works for you the investor. Lamm is a 1989 graduate of Robert Allen's
Wealth Training. Fifteen short years later, he has bought and sold over $36
million in real estate and currently owns nearly 100 rental properties. Lamm
owns nearly $5 million in real estate including single family homes, commercial
properties and apartment units. He recently completed The Hampton's -- a
72-acre, 387-lot residential subdivision. Lamm began speaking and training
nationally in 1992, upon leaving his management job at upscale retailer
Nordstrom. Lamm is a featured speaker and trainer for The Robert Allen
Institute. He is also a distinguished member of Robert Allen's Millionaire Panel
and regularly appears and speaks at Robert Allen and Mark Victor Hansen's Wealth
Retreats and other National Events. Lamm is a multi-disciplined professional,
well versed in all aspects of real estate, sales, management, mass audience
communication, financial markets and both internal and external training
programs. He brings a vast wealth of knowledge and experience to bear in
relationship and rapport building, overcoming fears, marketing, teaching,
training and all aspects of Real Estate investments and financial and securities
markets. His dynamic and unique style of teaching and training, filled with
real-life learning curves and experiences, is respected and enjoyed by all;
beginners appreciate his simplicity and more experienced investors value his
sophistication.