As we hit the midyear point, it’s a good time for an investor to ask himself or herself some key questions: How do I find the road to real estate investing success? And, once I find it, what am I supposed to do?
Before you can even find which road to take, you need to know where you’re going. So here at the six-month mark, take time to sit back and look at your investing business. First of all, get re-anchored in your year-end goal—or set that goal if you haven’t already—so that you know where you are going.
Obviously, with six months of real estate investing behind you, you are on some road. But is it the right road to get you to your destination—that goal you plan to meet by the end of this year?
I love to do this at midyear because it is simple, and it’s easy. By this point in the year, I have a good sense of what my market is like and where I am in terms of progressing toward my year-end goal. I have seen some good results thus far. I know and have a good idea of the obstacles that are facing me as an investor. I understand, through prior experience and knowledge, the challenges that are in my market this year. I know what has—or has not—produced results the past six months, so that gives me a sense of how things are going and what is working.
It is very easy to tell whether I am likely to reach my destination, or goal, by year-end, if I keep doing what I have been doing. Perhaps it’s a goal of buying a certain number of houses, whether it is one or 100. Or maybe it is a goal of earning a certain amount of income or profit. Whatever your goal may be, the important thing is that you have that goal, and now you can assess how are you doing thus far, and what you need to do in the second half of 2016.
The good news: you still have time to change course
If, as a result of that exercise, you find that you need to make a change, the good news is that you still have time for a course correction to put you back on the road to success. We have six more months left in this year, and there’s still enough roadway left to change your course, correct your path and still reach your destination by the end of the year.
Since I like to keep things simple in my business, at this point of the year, I really focus on two key levers that I can pull, push or adjust to achieve my goals, based on how I feel my business is looking at the midyear point.
When I say “goals,” I am talking in terms of volume (the number of houses bought) and profit (the earnings made from those houses). Those are the two levers that I focus on, and I encourage you to do likewise as you step back at this midyear point and assess your real estate investing business thus far.
First, look at the front end of your business—where it all begins, with lead generation. Second, I encourage you to look at the back end of your business—where it all finishes and the profits are ultimately realized—and that is in your exit strategies. I guarantee you, if you look at those two areas and make the necessary corrections, you are going to be where you want to be when the end of December rolls around, and you are going to feel pretty good about your success in 2016.
Let’s talk about each of these areas.
Lead generation—where it all begins
As you recall, I mentioned I am focusing on my volume goals—the number of houses bought—and my profit goals—the amount of earnings generated from those purchased houses. Lead generation, the front end of my business, ties directly into that first goal: the volume component, the number of houses I intend to buy. I step back at this point in the year and I evaluate whether I am doing all the right things and whether those things are generating all the right results, or good-quality house-buying leads.
I have said in the past that my biggest business expense—and by the way, it’s a six figure annual budget—is advertising. That is the single most critical element of any real estate investing business. What are you doing, and what are you spending to generate good-quality leads that generate good-quality buys that will ultimately generate good-quality profit for you as an investor?
Whether you are wholesaling, renting or fixing-and-flipping houses, the need for good-quality lead generation at the front end of your business is the same.
So at this point in the year, you first need to seriously look at your advertising. Are you advertising enough? Are you advertising the right ways? Do you need more mail? Do you need to place more bandit signs? Do you need to run more print ads in green sheets, newspapers or senior living magazines? Do you need to get out on the street and hang more door hangers? Or if you are a larger scale investor, do you have enough billboards? Are running enough radio ads?
In our case, because I am a HomeVestors franchisee, we even do television advertising, and we analyze and look at that activity. Do we have right commercials at the right time on the right networks at the right frequency?
Finally, take a look at your Internet activity, too. Are you doing the right things on the Internet to attract sellers to your website and to capture their leads so that you can contact them and follow up and provide a solution for them?
Also, take a look at your own personal networking. Are you attending enough real estate investment club meetings, and are you active or are you sitting at the back of the room? Are you seeking out Realtor partners who will send you referrals for distressed properties that are not suitable for listing? Are you meeting one-on-one at least once a week at lunch or over coffee with another investor, another Realtor or someone who can help you improve your business and to whom you also can provide some value? Are you leveraging all the appropriate sources for leads—whether it’s other wholesalers, other wholesale websites, or other wholesaler buyers lists? Are you on their lists?
Finally, take a look at yourself and your own performance in your business. Are you following up properly so that when you do get those leads, you are getting everything you can out of them and converting those leads into buys?
All of these things—advertising, networking, sources for buys, follow-up—are ways to generate more leads or capitalize and better leverage the leads you already have. This, in turn, will drive that volume component of your business that is so critical.
Exit strategies—where it all ends and profits are ultimately realized
Now let’s talk about the back end of your business, your exit strategy. This is the component that feeds that profit goal, which is so critical—in addition to your volume goal, which is driven by your lead generation. On your exit strategies, on the back end of your business, take a look at how those are working for you this year.
For example, for me personally in 2016, I increased my “wholetail” activity, which is kind of a hybrid between wholesaling and fixing-and-flipping. Buy the house, close on the house, clean the house, and then sell it on MLS. That is wholetail. It is kind of a cross between a wholesale deal and a full fix-and-flip retail deal. It is a huge exit strategy change that I implemented in 2016, and I have had wonderful results with it in my investing in Dallas.
When you look at the back end of your business, consider how your business is performing and then apply and adjust your exit strategies accordingly. Do you need more cash in your business? That means you need to increase your velocity. Maybe you need to do more assignments. They are quick, and they generate cash. Do you need more profits? If you have been solely focused on wholesaling to this point, then you need to look at things like wholetailing and fixing-and-flipping.
Finally, do you need more passive cash flow? Have you purchased the rentals that you thought you would purchase? Do you need to purchase more rentals? Do you need to look at owner financing to start to generate passive income streams?
Based upon the performance of your business, are you implementing the right exit strategies? If not, then adjust your exit strategies to make sure you hit that profit component of your year-end goal. Do more rehabs, do fewer rehabs, do more wholesales, do fewer wholesales, buy more rentals, or explore new avenues like owner financing or wholetailing.
In my experience, assessing these two components—lead generation at the front end of my business to drive and reach my volume goals, and exit strategies at the back end of my business to drive and reach my profit goals—and making course corrections at midyear will ensure my success at the end of the year. By doing this analysis now in June, it ensures that I have enough time to make the necessary course corrections and get to where I want to be by year-end.
So I encourage you at midyear to pull over and check your road map. Are you halfway to your destination? Are you halfway to your year-end goals? If so, can you keep doing what you have been doing and finish this year and finish this journey and reach your destination? Is what you are doing today generating the leads that you need and generating the profits that you need to be where you want to be at the end of the year?
You can look at it another way: Can you afford to keep doing what you have been doing this year and finish this year and reach your goal and your destination? No matter what, look at the front end of your business—your lead generation; look at the back end of your business—the exit strategies; take this time—midyear 2016—to work on your business versus in your business.
Step back and make the changes you need. By doing so, not only are you going to know where you are going and confirm your year-end goal and destination, but you also will know the exact road to get you there in 2016.
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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.