Don’t Let The Opinions Of Others Influence Your Direction
By JD Esajian on December 11, 2015
The real estate business is not easy. For every investor that enters the business, one or two are probably on the verge of exiting. The biggest reason is because most new investors think things will happen overnight. When they realize that it often takes several months to gain traction, they become annoyed and frustrated with the process. This leaves many disgruntled investors, each of which are intent on letting everyone know how they feel about the business. It is always important that you listen to as many different opinions as possible, but it doesn’t mean you should base your business on them. You need to take everything with a grain of salt. Everyone is entitled to their opinion, but just because something didn’t work for someone doesn’t mean the same will happen to you. Here are some of the more common negative opinions, and reasons why you may want to ignore them:
“Don’t buy in bad neighborhoods.”
In a perfect world, you will only invest in hot, up and coming markets. Those properties do exist, but they are often few and far between. This may cause you to look at what some may consider “bad” neighborhoods. Here is where you need to block out other people’s horror stories and look at the data. The most basic concept of real estate investing is to purchase property below market value, and to ultimately sell it for a profit. The numbers are the numbers, regardless of where the property may be located. Buying below market value gives you flexibility if you decide to rent, or if you pursue the rehab option. The bottom line will not be as high with lower priced properties, but in many cases, the percentage gained will be much higher. As long as the area is on the way up, there is potential in the property, regardless of what anyone may tell you.
“Never work with a partner.”
This sounds like a classic example of someone who got burned and has a bad taste in their mouth. Anyone can enter a bad partnership if they are not careful. What they may not tell you is that they didn’t hold up their end of the agreement, or didn’t discuss numbers before they started. There are dozens of ways a partnership can go bad. However, with the right partner your business can grow quicker and stronger than you ever imagine. The key is not to jump into a partnership before you are fully comfortable. You need to discuss different scenarios, work allocation and finances before you make a commitment. Sure, there will always be stories about partnerships gone badly, but you rarely hear about the ones that yielded results. Your bottom line may be reduced by working with a partner, but you will have many more opportunities throughout the year. As long as you and your potential partner are on the same page ,you should ignore what you hear.
“Don’t waste your time at real estate investment clubs.”
Like most things in life you get in what you put out. Simply showing up at a real estate investment club meeting will not make your phone ring off the hook. You need to put the work in to make new contacts, follow up and repeat this process for several months. Those people that tell you they are a waste of time probably showed up late, left early and didn’t talk to a single person. For every person that says real estate meetings don’t work there are handfuls that have made important contacts every month. All it takes are one or two new contacts to change your business. By showing up with the right mindset you can have success where others may have failed. This means being willing to step out of your comfort zone and talk to people you normally would not. It means taking the business cards you get and calling all of them no later than the next day. It also means being willing to show up for at least six months to give it a fair chance. Investment club meetings are not a waste of time if you attack them the right way.
“Always follow the 70% rule.”
In real estate you need to walk a fine line between following rules and knowing when to break them. There are a handful of popular rules that many successful investors follow on every deal. However there is another segment that says that every scenario must be treated individually. The reality is that no two properties are the same. What works for one property in one area may not work for another. It is always important to have rules and structure but you also need to know when you can deviate. There are times when overpaying slightly makes sense if the potential spread is higher. If you follow the rules too closely you may never close any deals.
“Never buy short sales or foreclosures.”
In many areas short sales and foreclosures may have peaked a few years ago. In addition the process is still lengthy and the discounts may not be as deep. Because of this the popular opinion may be to ignore these altogether. While there may not be an abundance of short sale and foreclosure deals there are still many good ones available. You just need to change the way you find them and reconsider the numbers. You should never blindly throw out a deal strictly because it is a short sale or foreclosure. The people around you may complain about the length of the process or that their deal was rejected after months but this is all part of the deal. The process is not easy but the rewards may be high.
Listen to everyone around you, but ultimately make your own decisions. You should know the motive and backstory of who is giving an opinion. What didn’t work for someone may be a gold mine for you.