Wow. It seems like we’ve been through so much together already. I don’t expect you to have Acted in the course of the week since we last spoke, but hopefully soon, you will have. You see, the big problem that we investors run into is we get very focused on one aspect of the business and others suffer. When you are starting out, you will spend time on your strengths. There are three main types of real estate investors. What are they? Well, since you asked:
The Three Main Types of Real Estate Investors
The Bookkeeper – You are great at recording things and you keep a spreadsheet of all your expenses. If this is you, then you probably document all the time you spend on individual tasks, you relish doing the mathematics and balancing the books, you make projections about how much your profit will be in the future.
• You are great at making financial projections and evaluations of the properties. You will be able to determine how much cost will be involved in rehabbing a property.
• You are the quintessential documenter. You will probably keep a document of all the properties you have evaluated and bought or sold, using this data for comparison with other deals to see if they are worth purchasing.
• You desire to have everything in order before making a move. This will keep you from making deals if you don’t take risks.
The Handyman or Handywoman – You love to work with your hands. This is where I lie. If we are being honest, I’m a little bit of a bookkeeper too. You will probably have a combination as well. As far as being a handyman, I love doing procedures in the ER and I love building things on a project. It gives me much joy to see a project through to completion. It refreshes me to do this kind of work after a hard shift in the ER. I can do all kinds of hard labor building something but feel psychologically better when I am done.
• You are able to look at a property and evaluate it by the nuts and bolts. At first glance, you can see much of the work that needs to be done on a project. You know what time it will take and can roughly estimate the cost.
• You will be able to save money by doing much of the work yourself.
• You will know when contractors are attempting to gouge you on the price or are taking too much time to get the job done.
• You are a DIYer to a fault. When you start out, I think this is good, but later on, you will need to devote your time to other things. If you don’t you will not have enough time to expand your business.
The Dealer – You are great working with people. You enjoy coming to an agreement. You are a great salesperson and look forward to haggling to find a price that works for both parties. You don’t mind talking on the phone. I confess that this is my worst characteristic. I am introverted and prefer typing on my computer to meeting people at a conference. I’m working on this, but still don’t feel I am there yet.
• You are great at networking. This is extremely important.
• You are good at seeing the whole picture and not getting lost in the weeds.
• You can make decisions quickly.
• You may be prone to making an emotional judgement about a property.
Now that you know these three personality types, where do you lie? Keep in mind that they are what I have seen in my time in the business. You are likely a combination of two or three. Identify your strengths and weaknesses. Try to make your weaknesses better. If you don’t feel you can do that, then you will need to outsource. One example that fits me: an answering service is handy so that I don’t have to talk with tenants directly most of the time. If bookkeeping is not your forte, then you could head over to Fiverr.com* and pay for the service. Or you might need to find a good contractor to help you with rehabbing. It is not wrong to outsource, but keep in mind the cost when you are evaluating properties.
If You Build It…
Once you have a few properties you will begin to build systems to help take care of your daily tasks. This is the point where you go from investing to building a business. I enjoy getting the checks at the PO Box. There is a temptation to go to the Post Office frequently at the start of the month. Each time I go, it is about 45 minutes of time required. Now, my system has me going there once a week on Monday and on the 7th of the month. I now balance the books once a month. I have a system for advertising for tenants, for dealing with applications, for move-in and move-out. I have systems for dealing with repairs and emergencies. You won’t have all these when you start out and you will spend more time dealing with issues early on. Once you have performed the same fix to the same problem a couple of times, you will build a system for it and the next time it happens, it will be a breeze.
The important part at this step is that you cannot devote your sole focus on a single property. This is very difficult to avoid. You will likely need to get some outside assistance. Perhaps a family member, or an employee will be needed to do the things you can’t or don’t want to do anymore. You will need to have a system in order to follow your plan you have already made. At a certain point, you may be rehabbing one property, leasing another, selling another, or a million other combinations. You will need to be able to manage your properties in all stages of the process. You won’t instantly be able to do this, but that’s not a problem. You will start with one property, master that, then do more and more as you are learning how.
This is How You Will Build Your Business
*I don’t receive any compensation for the referral, I’ve heard good things about it but have never used it myself.