My second year in real estate was very educational. I had to stretch myself and grow in new ways.
That growth resulted in a very satisfying year. I closed 40+ deals, met many new people, and set myself up for a great third year in the business.
I took a lot of time to reflect on what I learned. The major lessons are below.
It’s pretty cool to compare my second year to the lessons I learned in my first year.
Marketing and Networking
One of my mentors says, “If you’re in real estate, you’re really in sales and marketing.” I’m more convinced of that than ever after this year. That’s why I put this section first.
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- Staying in front of people. A large part of the real estate business is staying visible to your network. Finding a way to keep them updated on what you’ve done (and what you want to do) is essential. This is true for brokerage and investing.
- Digital is huge. If you’re in real estate, figuring out digital marketing methods is worth your time. I realized everything I’ve done in marketing is digital.
- Put yourself out there. Be vulnerable sometimes. I try to talk about my mistakes, and shortcomings on my blog. It’s hard to hit publish on those articles. But, I know those are the ones that people need. People connect with the struggles. They may be facing the same problems.
- Watch what other people do… Copying. I’m trying to get better at this. Whenever there’s something I want to do, someone has already done it better. Big time marketers spend a lot of money figuring out what works. You don’t have to. Just copy what they do. You can get creative later.
- Be patient. Marketing takes time. It takes persistence and repetition. I told the new agent I’m coaching, “post on Facebook about real estate everyday, but don’t plan on closing a deal for 6 months.” It takes time for marketing to work. It takes time for your message to sink in.
- Commit to it. Networking is similar to marketing. It takes time to work. You have to be committed to doing it consistently, or you’re wasting your time.
- Say yes to offers. When people ask you to do things, It’s showing you the way to provide them value. I meet with anyone who asks me to coffee or lunch. Sometimes it takes work to fit it in, but I always make it happen. I really enjoy connecting with people this way. It’s cool that I can point to specific meetings that have propelled my business forward.
Listings
Any realtor will tell you that listings are the life-blood of a brokerage business. This year, I improved my process tremendously. Here are some things I learned.
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- Doing first class listings is the only way to go. In year one, I would take pictures myself and use small stakes for my signs. Now, I pay a little extra for top notch professional photography and a classy sign post. This both saves me time, and helps me provide a better service to my clients.
- Listings tend to come in clumps. I may go a few weeks without listing a property, then 2-3 come up at the same time. Again, having top-notch vendors to work with helps manage this sporadic demand.
- Pricing is still most important. You can’t fool the market. With Zillow and other online sites, pricing has become much more transparent. I generally let clients tell me where they want to price, and manage expectations from there. If I feel we’re high I tell them we’ll need to be patient. If it’s a great house and a market price, I tell them to start packing!
Construction
Constantly doing renovations is complex. Everyone has different strategies for it. Here are some of mine.
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- Are you good at it? I’m not. Not the detailed work part. I know enough about materials and codes to know what I want. I know about how much it should cost. However, I realized I’ll never paint a room as fast as a painting crew.
- Building a relationship goes a long way. Construction involves a huge amount of trust. Investing in contractor relationships will pay dividends.
- Fraud is really common in construction. As I write this, I’ve got three different friends considering legal action against “contractors” they hired.
- Cheap, fast, good. They say you can only have 2 of the 3 in construction. This year I learned that I’m taking fast and good all day long. At this point in my REI evolution, I’m happy to pay up for fiduciary talent.
- Labor prices are sensitive to supply and demand. In this hot economy, everyone wants to build. Demand is high. That has driven labor costs much higher than the last 5 years.
Market Knowledge
Understanding your market is incredibly important. You can learn from reading the research on this blog. You can also learn a lot from doing deals and talking to other investors.
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- Teaching others about your market, helps you learn it even better. I get asked a lot of questions from my investor clients. Every time I answer one, I solidify my own understanding of our market.
- Study the investors having success in your market. The most successful strategies are going to vary in each geographic market. Rental based strategies are the best game in Birmingham. I know this because I look at transactions, and understand their business models. Talking to people in the business will help you figure out who is having success.
- Homeowners don’t like hilly driveways. Kind of random, but I learned this from a flip I listed for a client. The house was beautiful, but the driveway was at an angle and on a hill. The feedback was all about how bad the driveway was. This property didn’t sell even after multiple price reductions.
Negotiations
This is maybe the biggest area of improvement over the last year for me. That’s mostly a function of practice. I’m negotiating deals almost everyday. Here are some tips I picked up.
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- Learning to say no politely is the best negotiating skill. “NO” can be a harsh response. People don’t like to hear it. I don’t really like to say it. My wife taught me how to say “NO”, without even saying the word. It’s extremely helpful in negotiations. You can decline, while still maintaining a friendly relationship with your counterpart.
- Read “Never Split The Difference.” If you want to learn negotiations, this is the book. Total game-changer.
- Explain your circumstances. This makes it easier to get what you need in negotiations. Let’s say you’re selling a house… There is a big difference between saying “we won’t reduce the price to 100k.” and saying, “we can’t reduce the price to 100k, because the seller has a mortgage and needs the payoff to buy her next home.
- It’s definitely not all about money. Mastering the non-monetary implications of a negation is a way to huge success. Myself, and many successful investors I know, make sub-optimal financial deals all the time. We make them because we know we are winning in experience, credibility, relationship building, etc. In the long term, it gets you closer to your goals. You learn to give a little to get what you really want. It’s the price of admission to the big boys table. Pay the price or wait outside.
Goals
Goals are important for everything, not just real estate. They help you get more of the right things done.
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- I consistently write goals down. I think that is the 80/20 of goal setting. I’m not good at the other 20%, but manage to hit or come close on most of my goals
- At the beginning of year 2 I wanted to own 1,000,000 worth of real estate. I surpassed that in November when our family bought a new home. That’s not the way I wanted to do it, but it counts. The other big chunk has come from buying cash-flowing properties, which was my goal.
- My goals for year 3 are to:
- Close 70 deals.
- Get my brokers license.
Seasonality
Everyone knows the real estate market is seasonal. But going through two full annual cycles gives a new perspective on it.
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- The real estate market has a rhythm. It gets hot in the summer and cold in the winter.
- As we moved into November an December I’ve found an endless supply of investment deals. There are way less homeowners looking to buy, so more people choose to sell to investors.
- Next year I’ll be ready to buy more during that season. More experience will lead to better preparation.
Letting Go to grow
This is important for growing any business. It’s also incredibly difficult.
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- It’s impossible to do everything yourself. It’s also lonely. I have a lot more fun working with good people who are experts than trying to do it all myself.
- But it’s hard to let someone else do your work. I spent $200 on a VA service I never used this year. I just couldn’t find anything I trusted them to do.
- I did find some things to let go of. Here are the things I (mostly) let go of this year
- MLS contracts and paperwork
- Construction oversight
- Tax fillings
- Some property management – working to let go of all of it.
- I found people who are outstanding at these tasks. Professionals who, I know for a fact, have my best interests in mind. I try to let them do their thing.
Work Life Balance
We all need balance. Even if you don’t feel like you do. It takes a while to catch it after a jump into real estate.
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- In the beginning you have no balance. This was a struggle for me and my family this entire year.
- Loving what you do is a blessing and a curse. Real estate is fun. It’s super easy to get sucked in. You don’t have to look hard to find people who lost track of what’s really important. At times I needed to be reminded about my priorities.
- We’ve been raising two babies under two years old and we have a third on the way. That’s a lot of new mouths to feed. But, at the same time it’s a lot of precious moments I don’t want to miss. I got better at balancing it all this year.
Partners
A complete game changer for real estate investing. Teaming up is the best way to grow quickly.
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- Working with partners keeps you sane. In the last year I’ve had deals blow up, properties vandalized, and trees fall on my house. That’s the nature of the business. Bad things happen almost every day. One of the best ways I’ve found to get over it, is to work with partners. Having someone to split these problems with, financially and emotionally, keeps you from going off the deep end.
- You can do more deals when you work with partners. I started looking for private lenders when all of my available capital was stuck in deals. If I didn’t find lending partners, I would’ve been “on the sidelines” for months. With private lenders in place, I’ll be able to buy 2-3 houses per month this year.
- Let lawyers do their thing. Private financing and partnerships seem abstract, like there has to be a lot of steps involved. The truth is that your lawyer can probably handle it all. The same one you use for closing, can write a promissory note, or a Joint Venture agreement.
Failure
You have to look at failure and disappointment as growth opportunities. They never go away, but you can learn to deal with them better.
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- Define problems in your terms. Look at the big picture and see how much this issue really matters. Chances are, it doesn’t.
- I had a lot of failures this year. I should probably write about them more. Deals are constantly falling apart, I make resolutions and don’t follow through, rehabs go over budget, etc.
- Luckily, I have people like my wife. She talks me out of my worst ideas before they can become big failures.
Thanks for reading! I hope I was able to add some value to you. Please send me an email or comment on facebook with any thoughts.