3 Hard-Learned Lessons for Every Newer Investor

want itHey there Strategic Investors –

It’s JP here with a few thoughts and ideas that come straight out of my world of hindsight. It’s been said that hindsight is 20/20 and that can be so true it almost hurts.

The great thing about me looking back at all my shortcomings, faults, mistakes, poor judgement – and on and on – is that I can now present them to you as helpful, forewarned info. (Embarrassing, though, as some may be… I’ll fall on my sword for the sake of you, my fellow investors.)

The idea here is that you can learn from the wrong turns that I made in my real estate investing journey, and hopefully, you’ll be smart enough to learn from them.

While this lesson will definitely be useful for newbies… all you seasoned veterans out there – do not stop reading – you can also most certainly use this lesson as a super helpful reminder for things you may have forgotten about. Because we all need these from time to time.

Those of you who know me, know that I started in this business around the turn of the century. (It’s neat to be able to say that, but makes me sound really old!) With my 20/20 hindsight, I can say with passion: ‘Oh how I wish I’d had someone to get this honest with me when I first started.’

If I’d had that needed insight, I would have been SO much further ahead and would have done things SO much faster…

So, here we go… I’m going to serve you up a heaping helping of hard-learned lessons so that you won’t have to experience them in your own business.

Lesson #1 – Dangers of Deal Desperation

Do you ever entertain thoughts like this:

“All I want is one deal. Just one deal. I want to know what it feels like to close one deal. I don’t even care if I don’t make a penny. I just want to experience closing my first deal.”

If that’s your attitude, I gotta tell you that you’re treading in some dangerous waters. I had that overzealous attitude as well. I was so green but oh so eager.

Here’s the thing – the excitement and hunger is a good thing. That’s what motivates you to get out there and take action. But use caution – don’t let it mess with your head and cloud your good judgment.

happyImportant Reminder: You’re not in this business to do deals, you’re in this to help people solve their problems and make money along the way.

If you’re doing a deal just to do a deal, you’ll live to regret it. It establishes the wrong attitude and bad habits, right at the outset. In all these years of hanging out with, partnering with and mentoring new investors, I can tell you without hesitation that it will end up costing you in the long run. I’ve seen it happen too many times to count.

Lesson to Learn: Make the sacrifices needed to land that first deal, but make sure it’s a good deal. Why go for anything less? Learn at the starting gate what makes a good deal. Set your priorities early on, two of which should be:

  • Maintain integrity
  • Make money

Be sure you know your market and understand the fundamentals of analyzing profitable deals. Go with the numbers that make good sense – even on your first deal.

Nothing wrong with taking a risk in this business… but you must realize that there’s a big difference between a calculated risk and foolishness. You’re going to feel much better about yourself if that first deal actually results in taking a check to the bank. That’s the experience you should be looking for!

Lesson #2 – Be Cautious When Choosing Your Mentor

Have you ever heard me tell the story of my first local mentor? The upshot is: He took me “under his wing” – to the cleaners. I’m not using this lesson as a place to vent blame but rather to send out warning signals and hopefully save you some grief.

At that time, I was so green I literally did not know what I did not know. (Know the feeling?) It was a painful lesson, but a lesson well learned. I got taken in by the best!

Here’s some of what happened…

Those patch-n-paint rehabs he was letting me “steal” from him at 80% of appraisal weren’t rehabbed all that well, clearly proven by how they started falling apart within a few months of me buying them.

Then there were the second mortgages he took back and assured me he’d simply forgive. That was loan fraud. Oops.

Then I was sold on the deal that $600/month for rent would give me $200/cash flow – nothing mentioned about the $400/month PITI. Another oops. That left nothing in reserve for repairs and/or maintenance. Come to find out his poorly rehabbed houses were scattered all over the place.

learnSo what went wrong? I thought I was doing the right thing in latching onto a mentor.

What went wrong was my eagerness to grab the first investor I’d ever met. And I had no idea the sign hanging on my back spelled VICTIM in bright red letters and the sign across my forehead spelled SUCKER. Yea, it was that bad. He saw me coming from a mile away. His offer to “take me under his wing” was music to my ears. This meant I believed everything he said and did, some of which was questionable – some of which was illegal.

It took a while, but finally the light bulb came on for me! Believe me when I say this lesson cost me dearly, both in time and money. It took years for me to recover.

Lesson to Learn: As a newbie, beware of being bedazzled by stardom. Just because an investor is successful doesn’t mean that person will be a good-fit mentor for you. It doesn’t even mean they will have your best interest at heart. Same goes with seasoned investors who, perhaps, are interested in doing JV deals…

Ask lots of questions. If they’re unwilling to take the time to answer them, chances are they’re not a good choice.

Ask for references only to learn if this is a person of high integrity. My best advice: Trust cautiously and verify well.

Lesson #3 – Don’t Be an Education Junkie

I’m sure you’ve been around the block long enough to know how important it is to invest in your education in this business. You’ve probably even heard (or quoted) the great Brian Tracy when he says:

“If you think the cost of education is expensive, try the cost of ignorance.”

And that is so true. However, in your quest for education, beware of the potential minefields. Every time you turn around, there’s another latest and greatest course or boot camp that’s coming your way at the cost of thousands of dollars.

Here are my words of wisdom on the matter…

There’s a huge difference between wisely investing in your education and being sucked in by the latest bright and shiny object that happens to be in front of your REIA group or on your computer screen.

On the one hand, investing time and money into your education can cut your learning curve almost in half. But, again, on the other hand, you can literally drown in too many courses, webinars, boot camps, seminars and meetings.

educatedI’ve handed out plenty of crying towels to those newbie investors who eagerly attended a free seminar at a hotel meeting room. In that super-charged atmosphere, they were enticed into dropping $25,000, $35,000, or more, on education that they probably could have uncovered at their local library. No wonder they were crying.

What’s the best answer? Balance.

Have a plan in place where you’re not only budgeting dollars for your education but for your time as well. Know your own weaknesses and maintain self-control. Most REI products are expertly marketed – and nothing’s wrong with that – but they’re designed to hit every one of your hot buttons.

Here’s my advice about education in a nutshell:

Beware of “free seminars” held in hotels: All are designed with similar sales funnels. They give tantalizing bits of info and take big chunks out of your wallet. They are highly adept at preying on people’s dreams.

Beware of the credit limit scam: Ever hear this pitch? In the presentation, they’re letting you in on the secret of how to raise your credit limits. Look out, you’re being set up! Later they will ask you to pull out that freshly-raised credit limit to buy their products.

Beware of obscenely high-priced education: $10,000? Come on. That’s just way too much for anyone to fork over. It’s simply unnecessary, too. Don’t give in to these guys who price their courses in the tens of thousands of dollars.

Instead, start with lower-priced books and courses, and then slowly move up if needed. What does your library have available? What’s on the shelves at Barnes and Noble? What’s available on Amazon books?

Personally, that’s the way I started, and it was amazing how much I learned by taking this route. Slowly, but surely then you can move up to the $97 to $497 range.

As you grow in your business, you will then discover your niche at which point you can get focused. Once you’re in this position, you can consider investing a few thousand into something you’re committed to and bring in the big guns such as boot camps and more extensive courses, etc.

The next danger is that you purchase the educational products and then stick them up on the shelf and forget about them.

No, no and NO!

boardMake yourself go all the way through it as quickly as possible. Next, allow yourself 90 days to give it a try. You must take action and apply the concepts you’ve learned. This is the test to see how they suit you. You now have better criteria to judge whether or not you should invest in more education or just hunker down and work with what you know for a while.

Lesson to Learn: I’m totally in favor of investors investing in quality industry education. At the same time, I get really weary of seeing investors get addicted to buying course after course and not acting on it. There’s no wisdom in being jerked around and sucked in by today’s hottest offer. The wiser solution involves self-discipline, common sense and balance.

That’s a Wrap

Okay, friends, I trust that this lesson has been an eye-opener and/or helpful reminders for you…

Take to heart these lessons of mine from my own personal school of hard knocks. Hopefully, they’ll help you steer clear of your own hard knocks!

jpWhat Have Your Learned?

Do you have any mistakes to share in hopes of others avoiding them? Drop ‘em in the comments section below.

One Response to “3 Hard-Learned Lessons for Every Newer Investor”

  1. Jeffrey Kozar Reply

    Just wish I had seen this before I GOT sucked in and
    out of several grand of useless material.
    You guys seem like the REAL deal so Iam going to stick to YOUR program and see how it goes.

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