What Is Real Estate Investment Success?
That’s great. But are you making money?
“I just closed on a 60-unit apartment deal.” Says one investor…
“That’s great, I just put a 180-unit under contract last weekend.” Says the second…
“You guys are amazing!” says the third…
Ok, maybe it did not go exactly like that, but there seems to be a theme at many of the real estate events I have been attending. I am fascinated and excited for everyone that is having success. I love to hear it. But I also wonder… Are you making any money?
More Deals Does Not Always Equal Success
Real estate investors are like fisherman. They want to show the photo of them with the biggest fish. Sometimes investors will try so hard to catch that biggest fish that they end up with a broken line and no fish at all. It is easy to make money as a real estate investor if you know how, but it is also easy to lose everything if your eye is on the wrong target.
I was interviewing someone for our Loan Officer position when I got a chance to share my experience with aiming for as many properties as possible. I was a young, new motivated real estate investor. I had dreams of financial freedom and thought a lot of properties would get me there. When I set my goals, they revolved around number of transaction and size of my rental portfolio. I was buying a lot of houses and was able to tell people about it at the real estate meetings. People looked up to me. I was important, and that felt great. Goals really do motivate you and I was pushing hard to accomplish more deals. This meant doing deals, even if they weren’t that great. The result? I lost everything! I had to start over.
As part of my portfolio today, I own six houses in Memphis with no mortgages, but I still make more money on one du-plex I own in Lakewood, CO that has a loan against it. Five free and clear houses sound way more impressive than one leveraged du-plex, but the du-plex gets me closer to my true goal. I wanted to share this for two reasons:
Stay Focused On The Real Goal
Your primary goal should never be several properties. Period! The number of properties could be a piece of the goal, or better yet, a way to accomplish your goal, but it should not be THE goal. My guess is that if you are reading this, you want to be financially free. The true goal is probably not the money. The money helps you accomplish the real goal. The real goal is likely freedom. Freedom to give back to people in need and people you care about. Freedom to take time for yourself or your family. Freedom to buy something or participate in something you want without any worry about the price. You know… Freedom.
To get there you need to figure out how much income you need to cover everything you need and want. This income should not be tied to a job or in any way trading time or skill or anything for it. It should be 100% passive and show up in your bank account whether you are watching the football game, sleeping in, or enjoying a cocktail on the beach. Real estate is the best way that I have found to accomplish this.
Once you have that income number dialed in, you can build your goal around that. If a du-plex gets you closer than a 30-unit building or six houses in Memphis, buy the du-plex.
Don’t Get Down by How Many Units Other Investors Have
I personally find it inspiring to hear about other people’s success, but I have also worked really hard at not comparing myself to anyone. That is not always easy to do. It is easy to feel jealousy, which can bring you down and interrupt your mission. When you are at the meetings and other investors are sharing their success, remember you are only hearing what they want to share. There is always more to the story, and although they may be killing it, which we should hope that they are, they may be aimed at the wrong goal. They may be putting themselves into questionable deals so they can share how many units they own or control. Although I would never ask, I always think to myself, “That’s great, but are you making money? “