As you hear so often—and you’ve heard it from me, too—in order to be successful in real estate investing, you have to treat it as a business. But what exactly does that mean?
From my experience as a real estate investor and a HomeVestors franchisee in Dallas, I’ll share some insights with you that I think will help clarify what it means to have a real estate business versus just a real estate hobby.
Let me start by saying, I have personally witnessed a lot of my peer investors succeed—and succeed tremendously. The common factor is that they did approach their real estate investing as a business, and they treated it like a business. On the flip side, I have personally known, and witnessed, many colleagues in the real estate investing arena fail miserably because they did NOT treat it like a business.
There are three key points, or pillars, to this concept that real estate investing is a business. So let’s explore each of them, and as you reflect on your own business—whether it is as a part-time real estate investor, or weekend investor, or maybe even a full time investor—perhaps it will help you see whether or not you are treating your real estate investing like a business.
Success Factor No. 1: Consistency
The first factor is consistency. This means, you have to do what it takes to succeed every year, every month, every week, every day and every hour. Your real estate investing is not something that you can just pick up occasionally and sink a little time, money or effort into when it’s convenient for you, and then put it back down and walk away from it with the hopes of coming back to it intermittently throughout time. That lacks the consistency that you need to be successful.
Likewise, you can’t turn around with your real estate investing business and quit when things are going well, because, “Wow, I just got a great deal. I made a nice big profit. I am going to back off for the next month or two”—or however long. You also can’t stop or walk away when you have a bad deal. “Wow, that deal really hurt, that one set me back. I am going to step away for a while.” You lack the consistency in each of those scenarios.
Here is a real-life example of my own business and my own experience. The most evident, and probably the most critical element of my business where consistency plays the largest role, is in my advertising for leads. I advertise constantly—consistently and strategically—to multiple forums to get leads for motivated sellers. I do it every year, every month, every week and every day. I have advertising in place to keep my lead flow constant, and to keep my business constant, and to keep my business growing. I see a lot of investors who will throttle their advertising back and forth. They have a great month: “Oh, I’m going to advertise a little more next month.” They have a bad month: “Oh, I’m going to advertise a little less next month because I don’t have the funds to support the advertising.”
There is a Henry Ford quote, and I am not going to quote it directly, but I will summarize it, or at least get you the key point. Henry Ford once said words to the effect that, “The individual who attempts to stop the clock in order to save time, is erroneous as the business that attempts to stop advertising in order to save money.” That’s a loaded quote because it applies to so many things we are talking about, and it just happens to also apply to advertising, as in my example. But more importantly, it also applies to the fact that you can’t throttle your efforts or your business or elements of your business. You can’t throttle them back and forth erratically and expect to have a good, stable, growing business with good, stable, growing business results.
So reflect on your own situation: Are you consistently doing what it takes to drive and grow your business? Or are you erratically reacting to the past or anticipating the future, and moving your business back and forth versus having at least some degree of stability and consistency?
All great businesses are deliberate in what they do. You don’t see those businesses having a bad month and locking up some doors this month to save some money. “Oh, we will open up those doors or those retail locations next month after we accumulate some cash.” Good month or bad month, the doors are still opening each morning. Those businesses are continuing to thrive and be successful.
You do see some businesses that do literally lock the doors overnight erratically, but if you peel that back you will also discover that they are not successful businesses. So consistency is the key, and your investing business should be consistent also in order to be successful.
Success Factor No. 2: Clarity
Point number two is clarity. You have to have a clear vision, a clear goal. As I have said before, you have to begin with the end in mind. You have to have that unwavering clarity of what you are trying to achieve with your real estate investing business. Then you can embark upon a path to reach that goal almost unknowingly, and you do the things consistently that will lead you closer to that goal or vision.
That clarity is critical. It’s just like when you set out in that car on a family vacation or a road trip, I guarantee you know exactly where you’re going. You know exactly how to get there. You know exactly how long it’s going to take, and you probably even know the places where you’re going to stop along the way. You have unwavering clarity of your ultimate mission or goal, and you are on your way to get there, and chances are you are probably going to get there exactly when you planned. That’s a result of that clarity.
Think about it. You have never seen a successful CEO—and I stress successful—who cannot clearly articulate the vision, mission or goals of the company. Your successful investing business is no different. The successful investors are going to know exactly how many houses they want to buy this year, that they need to buy this year, and that they are going to buy this year. Every week, they know whether or not they are on track to achieve that total number of houses by December 31st of that year.
When you don’t have that simple number in mind, probabilities are that when December 31st arrives, you won’t be at the number you thought, or you wanted, or you needed or you liked. If you don’t define that now—if you don’t begin with the end in mind— and have unwavering clarity, you have only a very small chance of ending up where you want to be. That clarity is a key component of your real estate investing success and of your business success as a real estate investor.
Success Factor No. 3: Commitment
The third point is commitment. You have to commit to consistent action. This is almost a blend, or a hybrid, of the previous two points of consistency and clarity. You have to be committed to the action that’s required in order to be consistent in your actions and in order to achieve that vision that you so clearly already defined.
If you defined the number of homes that you are going to buy in 2016, you have to commit to it, and that comes in a lot of different forms. You have to commit your time. You have to be prepared to commit your energy. You have to be prepared to commit the financial resources or the money. Commitment is broad, and it’s overarching, and it’s critical. Without commitment, it doesn’t matter what your end goal is or your end vision. If you are not committed to it, I guarantee you won’t achieve it.
As we tie this back to my own personal experience in real estate investing, I can tell you that failure is not an option for me. I have defined a mission, a vision and a set of goals that will ultimately build and allow me to maintain and sustain a lifestyle that I desire. There are going to be challenges, there will be obstacles, there will be unplanned outcomes. All are inevitable along the way. But I am committed to achieving my goals, and it’s that commitment that has historically brought me success, and I’m confident it will bring me success going forward.
It’s key that you have the personal commitment to overcome all of those obstacles and unplanned outcomes that are going to come at you. If you are uncommitted, you will fall to those challenges, you will fall to those obstacles, and you will run from those unplanned outcomes that are ultimately lurking ahead. Your ability to deal with them and overcome them is all rooted in the level of commitment that you have to your investing and to your business.
The key point—and I can’t stress it enough—is to be prepared. If this is a business, be prepared to commit your time, your energy, your money and your willingness to make sacrifices to succeed at this business.
This is a big challenge for part-time investors, especially. You have a whole other life—a whole other career, most likely—and it can be very difficult to treat your real estate investing like a business. So ask yourself: “Am I consistent in my actions? Do I have clarity in my mission? Am I committed to doing whatever it takes?”
If the answer to those questions is “Yes,” then I guarantee you will succeed as a real estate investor and business owner.
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