Begin With The End In MindPosted on February 28, 2014 by
As a beginning real estate investor, what is it that we are getting into real estate investing for? Have you figured out what that is yet? Is it because you just love real estate? You love it so much that you would do it for free right? Probably not, but it is a means to an end and for many people including myself. We see it as a quicker, more effective, and more realistic means to an end than other options (ex: our traditional 9 to 5). But when you say means to and “end”, what is that “end”? Is that a clearly defined destination for you?
Is it retirement? If so, what does retirement look like for you?
Is it financial freedom? If so, what does financial freedom look like for you?
Is it a net worth of a certain amount of money?
Is it a passive income of a certain amount of money each month?
Is it a house on the water, a big boat, lots of nice cars, lots of vacations?
Is it simply Time Freedom – being able to do whatever you want with your time, because your bills are paid, and everything else is taken care of?
Is it a combination of most of the things I’ve listed above?
OK – time to get specific though. What is it going to look like exactly? Visualize it and then write it down. And now, more importantly, what are you going to do to get there?
Are you going to wholesale houses? OK – how many? I hope it’s a lot. Wholesaling is definitely a means to an end, but be sure to add to it.
Are you going to buy rental properties? How many? Where? What types of properties? What type of ROI are you shooting for? Using bank financing, private money, or your own money?
Are you going to fix and flip properties? Great – how many? Where? What types of properties – high end, low end? Big complex projects or easy ones? Profit margins you are shooting to hit? Using private money, hard money, or your own money?
Here is an example as a means to an “END”. Let’s say Joe is 40 years old and is just getting into real estate investing. He knows what he wants in the “END” and is shooting for this in 10 years. His “END” is to live on the beach in Florida with his family, his wife and two kids. He wants to be able to wake up, make his kids breakfast then take them to school (him and his wife alternate based on their morning schedules – juggling tennis lessons, yoga classes, kickboxing, or fishing trips). Then come home and check his emails and make a few phone calls for an hour to tie up any loose ends – business or personal. He then goes to the gym (or driving range to work on his golf game). The afternoon is still wide open. It’s free for reading, writing, surfing, a golf or fishing outing – or to pick up the kids and get them to whatever after school activities they need to get to. After that, it’s dinner with the family and wind down in the evening – help the kids with their homework, TV, movie, etc.
You see in 10 years, Joe has built up a rental portfolio of 40 single family homes and a few multifamily properties – another 20 doors. His monthly net positive cash flow is $18,000 after any private mortgages, taxes, insurance, property management and maintenance. His net worth is $5,800,000. He can do whatever he wants because his $18,000 a month covers all his bills and has plenty left over for saving for vacations, saving for college funds, saving for a rainy day, etc. And his property management maintains the properties so he doesn’t have to do anything other than check in every once in a while.
How would $18,000 a month of passive income work for you?
OK, so you’re thinking that this doesn’t sound realistic, right? Well I know plenty of real estate investors that have far exceeded these numbers in less time. It doesn’t sound easy though does it? Well no – if it was, then everyone would have done this. It will take some dedication, determination, persistence, and a rock solid plan (roadmap). Joe wrote down his roadmap and his goals so that he stays on track.
Joe started wholesaling houses and eventually started making about $10K a month just wholesaling in his 1st year. He was able to reinvest 20% back into his marketing and was able to bring on some part time employees and assistants to help him out. Within 2 years he was making $20K a month and $10K was all profit with only a couple hours a day in work. In his 2nd year he also picked up 2 rental properties on seller financing that produced $600 a month in positive cash flow. In his 3rd year he continued his wholesaling business and also did (4) fix and flips for $92K in net profit. He used that to buy one rental property free and clear and a down payment on (4) more – he is now up to (7) rental properties that are making $1900 a month in net positive cash flow (on top of making $10K net a month wholesaling). In his 4th year he did his wholesaling business and (6) fix and flip for $177K in net profit. He used that $$ to buy (3) free and clear rentals and bought (3) more on seller financing. Now he is up to (13) properties and $4300 a month in net positive cash flow. He continues doing this for (6) more years until he gets to his “END” and it is at $18,000 a month in net positive cash flow and he can relax and really enjoy life. He no longer does any wholesaling. He manages his property manager and does a fix and flip every once in a while. That’s it.
Now it’s your turn. Write out your “END” and then how you will get there. I’ll see you there.