By: Stephen Cook
Tip Number One : Quality Over Quantity
In the past, I set goals to complete a certain number
of deals and as a result, found myself at times pursuing
volume over quality. This sometimes put me into bad
situations, costing me both time and money. For example,
I might have paid too much to buy a home just so I could
say I did a deal and hit my target. While I did experience
many situations that other investors never encounter,
this is not the way to do business.
Today, I realize that I didnít need to do as many deals
as Iíve done. Now I pass over a ton of opportunities
that I would have taken years ago. Rather, I sit back
and cherry-pick, waiting for the ďhome runsĒ to come
along. Thatís not to say that beginning investors should
wait for the big deals. Most donít have the resources
to compete with the experienced investors, including
myself, who donít need the smaller deals to survive
but can afford to be patient. We can bide our time until
the best deals present themselves and still have enough
resources to take advantage of them when they do.
What I am saying is that beginning investors should
do what they need to do to survive, keeping in mind
that it is better to do one quality deal than a multitude
of average deals. As a beginner, you must get into the
game, but do it carefully with good deals. Then go from
first to second to third to home, taking it one step
at a time. Crawl before you walk and walk before you
run. Otherwise, by rushing into things, you run the
risk of making mistakes that will set you back months
or even years.
Tip Number Two : Set Goals And Put Them On Paper
I did not have concrete goals when I began, so two
years after getting started, I was in about the same
place as when I started. I ran around in circles and
covered a lot of ground, but didnít get too far from
my starting point. Only then did I develop a plan (smart,
huh? Only took a few dozen ďseminarsĒ and a few more
whacks upside my head).
So I teach my students to put together a plan sooner
rather than later, preferably before they even start
investing. Anyone who drafts a realistic plan and sticks
to it can achieve as much in one year as I did in three.
Not that creating a plan is easy, especially when you
donít know what to expect. Accurate goal setting is
actually very difficult, and not many people teach you
what you need to set REAL goals. Most teach goals that
get people excited, good in the sense that it usually
prompts people to take action, but bad in that it develops
unrealistic expectations and sets people up for disappointment.
To set realistic goals, speak with experienced investors
in your chosen field (wholesaling, rehabbing, lease-options,
ďsubject toĒ) and get their honest opinions regarding
profits per deal and the average time required to complete
a deal. Then, based on this and your current resources
of cash and credit, set your long-term cash, cash flow
and equity goals for one year, three years and five
years. Once you have these long-term goals, fill in
your short-term goals of three, six and nine months
by outlining the steps you need to take to accomplish
your long-term goals. Unless you draft a plan similar
to this and truly commit to it, you are going nowhere.
Tip Number Three : If Possible, Keep Your Best Deals
Looking back, I have owned a lot of homes that I wish
I would have kept. I donít regret having sold them since
every sale contributed to my success, but I did have
some gems that have more than doubled in value since
I sold them. When I sold, I just didnít believe that
the areas would take off like Realtors and others were
telling me. So I cashed out and used the profits for
other things. If I had held the 50 best deals that I
have sold to others and done nothing else, my net worth
would probably be three times higher than what it is
Not that Iím complaining. My net worth used to be negative,
and today it is pretty respectable. Iím just advising
you to hold onto your best deals if you can. Sometimes,
though, it is necessary and understandable to sell a
property for cash profits even though it would be nice
to keep it. Use your best judgment.
Tip Number Four : Donít Limit Your Profits
When you purchase a great deal, donít feel obligated
to pass all of the savings on to your buyer. I could
have generated more profits than I did from many of
the properties that I wholesaled. Often, when I purchased
a SUPER deal, I passed along the SUPER savings to my
buyer with the attitude that I should only make $2k-$4k
Well, this was a mistake. My advice to you is to take
what you can get. Donít inflate your prices above the
market and gouge people. Give them a good value. However,
donít think itís necessary to limit your profits just
so a buyer can benefit. After all, this is business.
Let the market set your price. There will be plenty
of times when your profit isnít as large as you expected.
Take advantage of the big hits when they come.
Tip Number Five : Separate Business And Charity
Sometimes, I used my business as a charity when I shouldnít
have. My recommendation for you is never to do the same.
Donít let someone live rent free or give someone else
more for a service than what it makes good business
sense to give.
Iíve learned that I need to run my business for a profit,
and that I need to do all I can to keep it profitable.
Iíve also learned that itís OK for me to be charitable
with my profits, but that I canít be charitable with
my business. Giving your business away before you make
profits cuts your wellspring off at its source. Itís
not prudent, and your business will suffer greatly as
a result if you choose to do so.
Tip Number Six : Hold On To The J.O.B.
As Long As You Can I know itís hard to hear this, especially
for those of you disgusted with your current position,
but I recommend that beginners with good jobs hold onto
them for a while. They provide a safety net while you
are learning and particularly allow you to establish
yourself with banks and credit card companies. Convincing
these organizations to work with you as a self-employed
person is tough.
Tip Number Seven : Start As Early As You Can
I first became interested in investing at the age of
18, and I wish I had pursued it from that age. Instead,
I waited 10 more years to get started. As of this writing,
Iíve only been investing for 5 years and itís hard for
me to imagine, based on my current position, where I
would be if I had started when I was 18 years old. Itís
never too late, but you need to start NOW!
Tip Number Eight : Use Partners Wisely
Use a partner only when you need them. In other words,
choose someone with time, money, knowledge or skills
that you donít have. They should bring to the table
something that you need. All too often, two people with
a dream and nothing else decide to be partners. Not
good. Partners need to complement each other, not have
the same qualities.
Today, I teach others to use partners strictly on a
deal-by-deal basis. The form of partnership I teach
most often is one where one person puts up all of the
money and the other is responsible for everything else.
In retrospect, I would not have taken on the one partner
I had. In time, I didnít need a partner anymore, yet
I still had one and felt as though I was giving half
of everything away. He probably felt the same way.
Tip Number Nine : Dare To Dream
Finally, Iíd like to stress that if you can dream it,
you can do it through effort and perseverance. Having
money, a decent job, and good credit make investing
easier, but are not necessary. When I began my career
as a real estate investor, I had no money, no job and
poor credit. In the past five years, through the grace
of God, I have come a long way. So set your goals and
start taking the steps necessary to achieve them. Reevaluate
and adjust every so often, but donít quit and donít
let anything stop you.
About the Author: Steve Cook
Since 1998 Steve Cook has flipped hundreds of
houses as an active Baltimore-area real estate
investor. Steveís unique specialty is the ďflipping
homes 1-2 punchĒ, a proven system of real estate
investing that powerfully combines wholesaling
houses. Also the founder of www.FlippingHomes.com,
Steve is dedicated to helping others in this thriving
online community succeed through understanding
and aggressively applying his time-tested, step-by-step
approach to flipping
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