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| “Knowing
what you know now, what would you do differently?” |
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| This is a
question that so many people have asked me, and it’s a tough one. Based
on my current position and the blessings I have experienced, I really would
not have done anything differently. I’m very pleased with my current situation
as an investor, and I fear that if I had done anything differently, then
I wouldn’t be where I am today. In my opinion, a more appropriate
question is: |
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| Based on
your experience, in which direction are you going from here and what advice
do you have for a new investor? |
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| While my plan
for the future is still in process, I have some advice to offer new investors. |
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| Tip
Number One: Quality Over Quantity |
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| In the past,
I set goals to complete a certain number of deals and as a result, found
myself at times pursuing volume over quality. This sometimes put me into
bad situations, costing me both time and money. For example, I might have
paid too much to buy a home just so I could say I did a deal and hit my
target. While I did experience many situations that other investors never
encounter, this is not the way to do business. |
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| Today, I realize
that I didn’t need to do as many deals as I’ve done. Now I pass over a
ton of opportunities that I would have taken years ago. Rather, I sit back
and cherry-pick, waiting for the “home runs” to come along. |
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| That’s not
to say that beginning investors should wait for the big deals. Most don’t
have the resources to compete with the experienced investors, including
myself, who don’t need the smaller deals to survive but can afford to be
patient. We can bide our time until the best deals present themselves and
still have enough resources to take advantage of them when they do. |
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| What I am
saying is that beginning investors should do what they need to do to survive,
keeping in mind that it is better to do one quality deal than a multitude
of average deals. |
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| As a beginner,
you must get into the game, but do it carefully with good deals. Then go
from first to second to third to home, taking it one step at a time. Crawl
before you walk and walk before you run. Otherwise, by rushing into things,
you run the risk of making mistakes that will set you back months or even
years. |
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| Tip Number
Two: Set Goals And Put Them On Paper |
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| I did not
have concrete goals when I began, so two years after getting started, I
was in about the same place as when I started. I ran around in circles
and covered a lot of ground, but didn’t get too far from my starting point.
Only then did I develop a plan (smart, huh? Only took a few dozen “seminars”
and a few more whacks upside my head). |
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| So I teach
my students to put together a plan sooner rather than later, preferably
before they even start investing. Anyone who drafts a realistic plan and
sticks to it can achieve as much in one year as I did in three. |
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| Not that creating
a plan is easy, especially when you don’t know what to expect. Accurate
goal setting is actually very difficult, and not many people teach you
what you need to set REAL goals. Most teach goals that get people excited,
good in the sense that it usually prompts people to take action, but bad
in that it develops unrealistic expectations and sets people up for disappointment. |
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| To set realistic
goals, speak with experienced investors in your chosen field (wholesaling,
rehabbing, lease-options, “subject to”) and get their honest opinions
regarding profits per deal and the average time required to complete a
deal. Then, based on this and your current resources of cash and credit,
set your long-term cash, cash flow and equity goals for one year, three
years and five years. |
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| Once you have
these long-term goals, fill in your short-term goals of three, six and
nine months by outlining the steps you need to take to accomplish your
long-term goals. Unless you draft a plan similar to this and truly commit
to it, you are going nowhere. |
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| Tip Number
Three: If Possible, Keep Your Best Deals |
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| Looking back,
I have owned a lot of homes that I wish I would have kept. I don’t regret
having sold them since every sale contributed to my success, but I did
have some gems that have more than doubled in value since I sold them. |
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| When I sold,
I just didn’t believe that the areas would take off like Realtors and others
were telling me. So I cashed out and used the profits for other things.
If I had held the 50 best deals that I have sold to others and done nothing
else, my net worth would probably be three times higher than what it is
today. |
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| Not that I’m
complaining. My net worth used to be negative, and today it is pretty respectable.
I’m just advising you to hold onto your best deals if you can. Sometimes,
though, it is necessary and understandable to sell a property for cash
profits even though it would be nice to keep it. Use your best judgment. |
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| Tip Number
Four: Don’t Limit Your Profits |
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| When you purchase
a great deal, don’t feel obligated to pass all of the savings on to your
buyer. I could have generated more profits than I did from many of the
properties that I wholesaled. Often, when I purchased a SUPER deal, I passed
along the SUPER savings to my buyer with the attitude that I should only
make $2k-$4k per transaction. |
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| Well, this
was a mistake. My advice to you is to take what you can get. Don’t inflate
your prices above the market and gouge people. Give them a good value.
However, don’t think it’s necessary to limit your profits just so a buyer
can benefit. After all, this is business. Let the market set your price.
There will be plenty of times when your profit isn’t as large as you expected.
Take advantage of the big hits when they come. |
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| Tip Number
Five: Separate Business And Charity |
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| Sometimes,
I used my business as a charity when I shouldn’t have. My recommendation
for you is never to do the same. Don’t let someone live rent free or give
someone else more for a service than what it makes good business sense
to give. |
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| I’ve learned
that I need to run my business for a profit, and that I need to do all
I can to keep it profitable. I’ve also learned that it’s OK for me to be
charitable with my profits, but that I can’t be charitable with my business.
Giving your business away before you make profits cuts your wellspring
off at its source. It’s not prudent, and your business will suffer greatly
as a result if you choose to do so. |
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| Tip Number
Six: Hold On To The J.O.B. As Long As You Can |
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| I know it’s
hard to hear this, especially for those of you disgusted with your current
position, but I recommend that beginners with good jobs hold onto them
for a while. They provide a safety net while you are learning and particularly
allow you to establish yourself with banks and credit card companies. Convincing
these organizations to work with you as a self-employed person is tough. |
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| Tip Number
Seven: Start As Early As You Can |
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| I first became
interested in investing at the age of 18, and I wish I had pursued it from
that age. Instead, I waited 10 more years to get started. As of this writing,
I’ve only been investing for 5 years and it’s hard for me to imagine, based
on my current position, where I would be if I had started when I was 18
years old. It’s never too late, but you need to start NOW! |
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| Tip Number
Eight: Use Partners Wisely |
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| Use a partner
only when you need them. In other words, choose someone with time, money,
knowledge or skills that you don’t have. They should bring to the table
something that you need. All too often, two people with a dream and nothing
else decide to be partners. Not good. Partners need to complement each
other, not have the same qualities. |
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| Today, I teach
others to use partners strictly on a deal-by-deal basis. The form of partnership
I teach most often is one where one person puts up all of the money and
the other is responsible for everything else. |
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| In retrospect,
I would not have taken on the one partner I had. In time, I didn’t need
a partner anymore, yet I still had one and felt as though I was giving
half of everything away. He probably felt the same way. |
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| Tip Number
Nine: Dare To Dream |
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| Finally, I’d
like to stress that if you can dream it, you can do it through effort and
perseverance. Having money, a decent job, and good credit make investing
easier, but are not necessary. |
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| When I began
my career as a real estate investor, I had no money, no job and poor credit.
In the past five years, through the grace of God, I have come a long way.
So set your goals and start taking the steps necessary to achieve them.
Reevaluate and adjust every so often, but don’t quit and don’t let anything
stop you. |
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