Setting the RIGHT GoalsPosted on August 1, 2015 by
Improper goal setting can really hurt your business. Proper goal setting can make you rich. This is a concept that I see most new investors and real estate business owners learn the hard way. If you don’t know how to set proper goals for yourself then you are very unlikely to obtain any goal. In this article I will help you to learn the art of goal setting.
Whenever I begin mentoring a new student or business client I always start by having them submit their goals. I am actually more interested to see how this person sets goals more than the goals themselves. Most people will set goals based on what they want with little knowledge of what it takes to accomplish those goals. Understanding the requirements of the goals we set will greatly help us achieve them.
I follow a similar process for goal setting that the U.S. military follows. It’s called “Backward Planning Process”. Basically I decide where I want to be. What is my end goal? Once I know exactly where I am trying to go, I work backwards from that point. For example if I want to buy an apartment complex I start working backward with questions like this…
How much does it cost? Do I have the money and if I don’t, who does? Can I qualify for a loan? If no, then who do I need to partner with to get the deal done? How much do I need to put down and where will I raise that money from? How long will it take to close the deal? Do the numbers work? Now that I have these answers I have a plan of attack to reach the goal. Now I can make an offer with confidence. This is just an example but you will need to learn to “think backwards” to create the way forward.
In the real estate business the best way to start planning the future of your portfolio is know what you are trying to accomplish financially and how much real estate it takes to accomplish that. Start by asking yourself “how much money do I need to live on each month?” I don’t mean how much money do you want to live on each month, but how much do you need to breakeven with all of your living expenses. Once you have this number then you have your first goal…make more money than that. Next you need to decide how much real estate or units you need to accomplish this.
On average a multifamily unit will cash flow about $100 a month. If you need $10,000 a month to live on then you only need 100 units. But wait… remember the questions I asked myself? You need to ask the same questions. Do you have all the money to buy the complex? Do you have enough net worth or will you need a sponsorship partner (someone with enough net worth to help you qualify for the loan). Will you need to raise money for the down payment? Most likely you will need some partners in the beginning of your business. If you do then you will have to share some of the money. Now you need more units to reach your monthly expense goal.
By now you should have picked up on a few new goals that you may need to set for yourself.
- Your financial destination goal
- Partnership (sponsor) goal. You need to be constantly networking to find your financial partners.
- Investor goal. You need to be constantly networking for investors
- Deal flow goal. You can’t buy real estate if you can find good deals.
- Education goal. Set goals for your business education.
These are just a few examples of how to think when thinking about goals for your real estate future.
The second goal setting rule I follow is what I call Discipline Goals. Discipline goals are goals that you never attain and reset each week. I know that sounds bad but it isn’t. A discipline goal is something that you must do daily or weekly in order to accomplish your long term goals and they should never be for longer than one week. An example of this would be finding deals (deal flow). If you want to find deals then you need to set some discipline goals such as call 2 realtors a week. Analyze 4 deals a week. Call 2 owners a week. Send out your direct mail letters each week.
You can see how these are short term task oriented goals that you never fully attain as they reset each week. If you are not sticking to these short term discipline goals then it is very unlikely that you will accomplish your long term goals. Set them and stick to them!
Lastly it is better to have no goals than to set bad goals. There will always be time to set goals once you understand where and what you are trying to accomplish. If your goals are set from daydream wishes of riches and not set from solid metrics, then you are less likely to reach them. Setting unreasonable goals sets you up for great disappointment when you don’t attain them. This is one of the large reasons for failure in new investors. Don’t get angry and quit when you don’t reach goals that were never reasonable in the first place. This is why I say take your time with setting goals. If your mentor asks you to set goals and you don’t know how, it would be better to ask the mentor about what it takes to reach your financial goals and set real goals, than it would be to make some up because you feel pressure to do so. Take your time, do your research and set reasonable goals. This is the key to success!