Getting Started: My Sprint Up the Real Estate Investing Mountain
When I was first getting started in real estate investing, I studied a few different successful investors whose business models really intrigued me. These investors were buying, fixing up, and selling 50 houses per year!
The investors were also averaging $20,000 profit per house. I could do that math: 50 x $20,000 = $1 million per year!
My business partner and I decided that $1 million per year would probably be good enough for us (haha), so we decided that these investors would be our models. Building a business as successful as theirs became our goal.
My partner and I were both go-getter types who liked to make things happen fast, so we sprinted full speed ahead up the real estate mountain towards this new goal. Within a few years, we made progress and started buying a lot of properties. But did we make our $1 million and ride off into the sunset? Not exactly.
Some deals were great, others were not so great. To handle the massive amount of business, we brought on help for things like marketing and short sales, and we kept our fix-up crews constantly busy. This increased our overhead, which ate up chunks of the profits.
Because we had so many projects going, our days were busy, and we spent less time learning from mistakes, analyzing our past deals, and thinking about our strategy.
When the dust settled, we had still done well. We increased our bank account, and we bought a lot of deals with low-interest, long-term financing that our tenants would eventually payoff if we just held on long term.
But we also accumulated some “dead weight” with hard-to-sell deals in less-than-perfect locations. We also spent a lot of time cleaning up messy or complicated deals that sounded a lot easier in the seminar than they were in actual execution.
This sprint up part of the real estate mountain taught us some important lessons:
- Buying, fixing, selling, and managing a bunch of properties is a LOT of work!
- Growing fast entails a lot of risk, primarily because you make mistakes along the way as you get busy and outgrow your existing capacity.
- Life doesn’t start after you get to the top of your “business mountain.” The pinnacle we were trying to reach wouldn’t satisfy all of our personal needs. (In fact, getting to the top of the mountain really wouldn’t satisfy any of our most important needs!)
This third lesson hit me like a hammer. It caused me to really step back and think about what my true needs were. It made me think about why I was in business in the first place.
I thought about the fact that as entrepreneurs, we essentially invest or sacrifice time, energy, and capital today in hopes of a greater return tomorrow.
Most of my “successful” role models in real estate investing and business were essentially on a non-stop, soul crunching, workaholic sprint to the top of some mountain that would take years and years to reach. It’s almost inevitable along this climb that you experience negative repercussions in terms of health and personal relationships, but these skeletons in the closet are rarely discussed when these sorts of models are glorified at seminars or during networking.
How much of my personal capital (my time, my money, and my mobility) was I willing to sacrifice until I got to the top of the mountain?
What were the true costs of these sacrifices?
And most importantly, were they even necessary to accomplish what I really wanted?
I still struggle with these questions to an extent. But as a result of this struggle, my business partner and I have made and continue to make changes to our business model that have brought us a lot more peace and confidence.
Here are a few of the most important changes we made to our business philosophy:
1. Not a Sprint, Just a Steady Climb
We started to see the growth of our business as a steady climb up the mountain instead of a sprint. If we went too fast, we might not get acclimated to the higher altitude. Mistakes, possibly deadly ones, could result. Plus a nice steady pace would allow us to enjoy the scenery.
2. Plateaus, Rest, and Enjoyment
Along this climb we could inevitably find plateaus where we could rest. These plateaus could last for months or years. They would give us time to regroup, discuss the lessons from our last climb, and rebuild strength for climbs in the future. Other climbers may pass us as along the way, but this climb isn’t a competition with others. We are only competing with ourselves to get to the top in a manner that enriches our lives along the way.
These plateaus were also wonderful for short term goal setting. Unlike the top of the mountain, these plateaus were attainable. A top of the mountain goal could be something like $10,000/month in free and clear income. Because it’s so far out of reach, the entire path to the summit is difficult to see clearly. But a more intermediate goal like $1,000/month in passive income was certainly attainable. So we could push hard to these plateaus and then celebrate once we got there.
3. Mini-Retirements
No more deferred life plans! The plateaus are also good for one of my favorite activities, taking mini-retirements or sabbaticals for extended travel. The trip that my wife and I took in 2009 for four months to Spain and South America was directly a result of reaching a plateau. We certainly hadn’t reached the top of the mountain, but we were able to enjoy ourselves for a period of time as if we had!
Side note: If mixing work and long-term travel excites you, you should read my favorite books on the subject Vagabonding by Rolph Potts and The 4-Hour Workweek by Tim Ferriss.
As a question of life philosophy: why would you save all of the things you want to do and contribute until the end of your life anyway? What if you don’t make it? Deferred life plans work well on paper and in financial planners’ offices, but sickness, decreased mobility, and – yes – death can’t be easily scheduled on our calendars.
Here are some questions that may be helpful guides for your own entrepreneurial climb:
- What big mountain (or mountains) am I climbing?
- What sacrifices am I making in order to climb this mountain? Are they worth it? Am I even on the right mountain?
- Are there any plateaus that I can reach in the near future?
- Am I enjoying the climb, or am I saving all of my enjoyment of life for the top?
Thank you for taking the time to read my articles. It’s a privilege to be a guide for you along your own personal mountain climb!
Enthusiastically your Coach,
Chad