To put the subject of “Progress Over Profits” into context, I recently heard another real estate investor say, “When you chase money it will run.” And I couldn’t agree more. Based on my own personal experience as a full-time real estate investor in Dallas, Texas, for more than 10 years now, that means that desperation will rarely produce results.
Whether you are a part-time, weekend, or full-time investor, when desperation overtakes you and your ability to invest, it results in what I call a “panic buy” or a “bad buy.” You’re so desperate, you are chasing profits and making hasty decisions, which can lead to buying the wrong property. You might pay too high a price, maybe you underestimate the repairs required, or whatever it is, you end up making a panic buy.
On the other hand, though, when you focus on progress and improving your real estate investing business, it will always produce results. The ways to improve your business can take on many different forms. Maybe you’re improving yourself as an investor through education, maybe you’re improving your business through enhancing your network or new sources of capital or improving your techniques as a real estate investor.
There are all sorts of ways you can advance your business through improvements. For me, what I’ve learned when I focus on progress over profits, is that it ultimately ends up driving three areas of a business: equity (wealth), cash flow and personal satisfaction.
Equity = Wealth
Let’s start on the wealth front, which comes in the form of equity for us real estate investors. You know, real estate is a great wealth creator. Probably the number one reason we get into investing in residential real estate is to create long-term wealth. Wealth comes to us in the form of equity. Equity is the difference between what we pay for properties and ultimately what they’re worth.
Our challenge as real estate investors, as we focus on progress versus profits, is how can we drive more equity in our business to drive more wealth. And this comes in a lot of different ways, shapes or forms for us. We can improve our buying skills, allowing us to buy homes smarter and create more equity. We can improve our marketing efforts, which allows us to reach more stressed sellers, buy more properties and create more equity and wealth. You can also focus on what you can you do to drive the overall longevity of your business, in order to sustain your investing for longer and ultimately leading to more property purchases, holding more properties.
So, there’s a lot of different ways to focus on progress versus profit to drive wealth in your business in the form of equity. And it’s very clear to see your measure of success when you look at your balance sheet every month or every year. Then you will see the growth in equity as you acquire properties and you compare them to what their values are over time.
When you focus on progress versus profits you also drive your income, which for a real estate investor comes in the form of cash flow. I’ll speak in the context of a buy-and-hold investor. And you know cash flow is a tremendous source of income and real estate is a tremendous way to create cash flow. And that income or cash flow is ultimately that difference every month between the rent that you receive from a property minus all of the expenses: the principal, interest, taxes, insurance and maintenance.
That difference or what ends up going into your pocket is that monthly cash flow. And that ultimately is what creates income for you and that ultimately creates the freedom that many real estate investors speak of. You know, the ability to generate income through cash flow from buy-and-holds real estate or rental real estate.
And there are so many ways you can focus on progress over profits when it comes to generating income and creating cash flow. You can increase the number of rentals you own—buy more rentals which will generate more cash flow, in turn creating more income for you monthly.
As you become more experienced as a real estate investor you can look at other forms of real estate investing that generate income, such as buying notes or seller financing. And in addition to buy-and-hold there is also the buy-and-flip strategy. That too creates monthly income in the form of the profits you get. There’s all kinds of ways you can focus on progress over profits with your business that will drive your monthly income in the form of cash flow, while at the same time generating wealth in the form of equity.
The other way to look at your business when you’re evaluating it in terms of how to drive progress as a real estate investor versus adopting a sole focus on profits is to look at the personal satisfaction you create for yourself.
As a business owner and as a real estate investor, you’re driving wealth which is one of your objectives. You’re driving income which is another one of your objectives. But there is also a satisfaction component.
You know, real estate investing and real estate ownership in America is incredibly satisfying when it is done right. Real estate is behind some of the wealthiest people in the country. Not only because it creates wealth and income but it can create great satisfaction when you invest properly and for the right reasons.
There are a lot of ways you can focus to create more satisfaction for you, the real estate investor, and in turn progress your business. As a real estate investor, some of the most satisfying moments are when you’re able to solve a problem for somebody or more importantly create value for somebody.
Never overlook that we provide a great service to a distressed seller—someone who has got to sell their property and for whatever reason the property can’t be sold on the retail market. Maybe it’s the condition the house is in, maybe it’s the circumstance of the seller. Either way, there are a lot of reasons why properties don’t get sold on the MLS.
You’re a problem solver, you’re a value provider to those sellers who are seeking to sell a property as is, quickly for cash. And it’s a great satisfaction when you can solve a problem for a seller who is in that situation. You are also a great provider of new homes for folks. The homes you buy, the homes you restore and the homes you rehab, provide wonderful homes for families looking for good, quality real estate.
You know, similarly, if you are a buy-and-hold investor you are satisfying a tangible need. One of the core needs for people is housing. You are providing, good, quality, safe, clean housing at affordable prices. And that is extremely satisfying when you do that properly.
You provide a great value to those cities and communities where you invest. You’re a great source and a great solutions provider for someone who needs a home and a loan for someone who wants to purchase a home. When you are a seller finance provider or a seller finance investor, you provide a service to someone who can’t qualify for traditional mortgages through traditional lenders. This also provides you with satisfaction as a real estate investor.
These are all great examples of how you can improve your business and drive progress through satisfaction by creating value.
And what I want to stress here is, challenge yourself to see the progress over profit as you look at your business. In a nutshell, we all know when you chase profits the money will run, but I assure you when you create progress the money will follow.
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About the Author
Kevin Guz is a Dallas, Texas-based residential real estate investor with more than 10 years of investing experience. He owns a HomeVestors (or “We Buy Ugly Houses”) franchise as well as the Clear Key companies, which focus on residential real estate wholesaling, rental property management and self-storage leasing. He also is a licensed real estate agent in the state of Texas. He enjoys sharing his ongoing personal experiences, perspectives and learnings from his start as a part-time or “weekend investor” and full-time corporate professional through his ultimate transition to a full-time real estate investor and business owner. You can listen to his podcasts at http://www.blogtalkradio.com/kevinguz.