So how did an ordinary guy like me end up with a portfolio consisting of hundreds of rental units and a cash flow that's more like a cash torrent? How did I become a real estate mini-mogul, enjoying freedom and self-confidence?
I practiced some of the essential traits that most successful investors possess as was outlined in Part 1 of the Mini-Mogul series: determination, energy, persistence, people skills and decisiveness.
Do You Have What it Takes to Be a Mini Mogul? Part 2, addresses the ingredients you will need to produce the success that you desire and are capable of achieving with real estate investing.
Trait #6: Optimism
One of my friends, Karen, dabbles in real estate. She bought her own home and a four-unit building, but she never expanded beyond that. She recently confided to me how much she envied my strongest and most unforgettable trait: my optimism.
I was shocked. I'm actually a full-fledged pessimist. My wife calls me “Mr. Glass Is Half-Empty”. Either Karen saw something in me I didn't know was there, or I had done an excellent job of fooling her. I thought about her comment and realized that although I am usually a pessimist, I am a big time optimist when it comes to real estate investing.
Historically, real estate values increase over time. Given the right location, both cash flow and property value will increase. I believe real estate works.
Whatever you believe will happen, will indeed happen. You create self-fulfilling prophecies with your every thought, whether or not you are aware of what you are doing.
When you think of your personal future, do you feel good about it? Do you envision yourself living in abundant security or do you see yourself struggling and living in confusion? Or are you not able to visualize your future at all?
When you think of becoming a real estate investor, does a small voice inside your head cheer you on, or does it jeer at you for being so stupid as to believe you could succeed in such an endeavor?
How about the future of civilization? Do you think humanity's basic goodness will bring the world to peaceful coexistence, or do you have a bleaker view of the future?
Are you an optimist or a pessimist? I have yet to find a real estate investor who believes his or her new investment is ready to tank. When thinking of what the future will bring, I'd rather be on the side of the optimists.
Trait #7: Knowledge
Knowledge is power. Knowledge of what you are doing in real estate enables you to make lots of money. Whatever your specialty in real estate investing, the more you know about it, the better your decisions will be and the more money you will make. For example, if your niche is apartment-building acquisition and rehabilitation, you need to know how to:
- project income and expenses
- secure real estate financing
- arrange for competent management.
You will also need to research your local demographics and its housing needs and determine which cost-effective improvements to make on your property. Much of the information you'll need is available in books, magazines, newspaper articles, and television programs. You can also learn from seminars, coaches/mentors, helpful people, and experience. Are you a lifelong learner? Do you enjoy gathering research? Can you remember what you read and hear, and then apply it to yourself? Can you build time in your schedule to gather the information you will need?
Lack of knowledge should never be used as an excuse to refrain from real estate investments. The knowledge you need is truly accessible.
Trait #8: Self-confidence
Self-confidence is key to success in life. Real estate investors must believe in themselves and have the courage to act confidently based on that belief.
Some people exude self-confidence in certain areas but appear timid in others. For example, when I am inspecting a new investment, I am in full command. Call me Field General Pockross! In another, less familiar situation, such as a hike down the Bright Angel Trail of the Grand Canyon, I would have to crawl to the chasm's floor.
Self-confidence means in part that you look to yourself for approval for a job well done, rather than waiting for someone else to commend you. If you are self-confident, you will not depend upon someone else to tell you how you look, how you should wear your hair, or how you should dress.
Does this describe who you are? Are you self-empowered? Do you operate the steering wheel of your life? Or do you feel you need someone else's permission to be alive? Do you have a sense where yourself ends, and other people's begin? Do you know who you are?
The good news is that self-confidence can be developed, and real estate is a wonderful arena to accomplish exactly that. Each successful small step you take in real estate builds on the previous one, to the point where you feel confident to make upcoming decisions and take subsequent actions.
Trait #9: Mechanical Aptitude
Mechanical aptitude must be passed down in families through the genes. I'm convinced the mind either “sees” systems in three dimensions and understands intuitively how they function and fit together, or it does not. Mine does not. I wish it did.
I am worse than a mechanical idiot. The U.S. Army Mechanical Aptitude Test had, at the time I took it, twenty-five multiple-choice questions. A monkey randomly selecting one of the four possible answers would get six correct. I managed to get four right, and I promise I tried my best. (I suppose that's how I ended up being a clerk-typist.)
Somehow I've survived my mechanical-aptitude deficit, but I have made a point of understanding the basics of carpentry; plumbing, heating, electrical systems; and construction methods and code compliance.
Do you have a natural mechanical aptitude? As a child, did you take things apart to see how they worked? (Putting them back together is another conversation.) Do machinery and tools fascinate you? Are you attracted to do-it-yourself books, television programs, and Web sites? When you go to a home-improvement store, do you lose track of time just wandering around, looking at the various kinds of merchandise?
The best-case scenario is when a property owner knows how to do his or her own repairs and enjoys the activity, because do-it-yourself investors save money on every job.
The operative word here is knows. If you don't know how to do plumbing work, for example, don't attempt it. Hire a plumber to do the job and watch carefully as the repairs are made. Ask questions along the way. Your plumber may not be overjoyed about offering a tutorial, but you'll pick up valuable information.
At the very least, a real estate investor must know how each job should be done, approximately how long it will take – for example, a stopped-up toilet shouldn't take two days to fix – what materials and tools are necessary, if any equipment needs to be rented, and how much everything will cost. This helps to keep your contractors in line. And if I could learn this, anyone can.
Trait #10: Passion
Someone once said, “If you love what you do, you will never work another day in your life.” I envy and respect people who have a passion for what they do. I think if they love their field, they'll do an excellent job. And yet, surveys indicate that a high percentage of people are unhappy with their jobs. I see evidence of this in people all around me. The exception seems to be real estate investors. Many of them really like what they do. I believe an important ingredient for success is that you like to play the real estate game. Not everyone enjoys every aspect of property investment. Some investors love to bargain and get the best deal they can. Some like to be detectives who track down opportunities.
Others satisfy their ego by building a huge real estate empire. Still others love to rehab buildings, thereby increasing their value. Some people simply love to count their money. Most investors like controlling their own destiny rather than punching a time clock (or wanting to punch their boss).
Do you have a passion for real estate? Ask yourself:
- Do I really like to search for properties?
- Do I enjoy negotiating deals and managing assets?
- Do I like to pore over books about real estate investments?
- Do I read, without fail, the Real Estate section and ads in my local paper?
- Do I enjoy talking about real estate with friends?
- Do I like to attend open houses?
- Do I drive around neighborhoods I like, just to see what's on the market?
Feeling passionate about real estate is helpful, but if that's not how you feel, it's not a deal breaker. I don't have great enthusiasm for real estate per se, but investing in property has proved an excellent way to reach my goals of financial and personal freedom . . . and I feel great zeal for them. I like some parts of being a real estate investor, of course, but I was not born to be a real estate investor and can't say it's my calling.
If you like most of what you do, you will enjoy doing the tasks that appeal to you, and you'll feel more positive about completing the aspects you don't enjoy as well.
I did not become a mini-mogul over night. I applied each of the above traits and abilities to varying degrees to achieve success in real estate investing. I want you to be successful and will give you all of the final tools you need in Part three of Do You Have What it Takes to Be a Mini Mogul?