I’m currently mentoring a few investors who are really excited about the business of real estate investing. I like to feed off of their excitement and I enjoy listening to them when they talk about something new that they’ve learned and want to use in the business. However, this also brings up the very tricky subject matter of what deals to take on and which ones to leave for a later time. As with my last article, the experienced investor may read this and say, “Yes, I get it, I went through that period of my career where I looked at every deal with rose colored glasses but I’m smarter now.” To that investor I would say that yes, you probably are smarter now but we must constantly be taking our own temperature (so to speak) to determine really where we are at that moment in our real estate business. Even though you may have bought and sold 100 or 200 properties and you have years of experience, there are always going to be new and possibly distracting opportunities that people are putting in front of you.
I recently got an email from a friend who has an exciting opportunity in Costa Rica that he’s been talking about for a year. He organized an LLC and is looking to raise millions of dollars specifically for this project. Every time I speak to him about it, it sounds better and better. There’s always an update from him about how he just had another investor get involved and the project is looking great, etc. Of course, I’m sitting here and listening to this and each time I get more interested. But the reality is that at this point for my particular situation, there is a greater chance that this opportunity would only take me farther away from my goals and into an area that I’ve done very little research on.
Which brings me to the subject of what one of my investors-in-training said to me recently. He said, “Dave, I have this opportunity in Texas that is a pre-construction deal that I think I am going to do.” Keep in mind that what he and I have been working on has been almost entirely the wholesaling side of real estate, where he is taking the least risk possible with the greatest potential reward. And now he approaches me with something that he knows very little about, hasn’t had enough interest to even research the market extensively, has no real contacts to speak about in the area and knows no one who has actually been successful with the project. These are all things that I asked him about to which he knew almost nothing. However, the one thing that stood out in his mind was that the potential return on investment was in the mid six figures. In other words, once he heard about that and looked at the website and heard the sales pitch, everything else didn’t matter as much. The hard questions that need to be answered anytime we look at a deal, he seemed to justify in his mind that it was worth the risk. They say that love is blind but sometimes we as investors are blind as well. We hear that one thing or we believe that somehow we have the inside scoop and that we need to act now to take advantage of an opportunity or it may be gone forever. To make wise decisions on real estate, click here.
While there is some truth to the fact that some opportunities need to be seized at a particular moment, for the most part, there are always going to be good deals available if we want to find them. I’m not advocating that we scoff at every opportunity and pass on everything but I am saying that the same amount of time and work that made you good at one thing in real estate will be required to be good at another area of real estate (or any business for that matter). A statement that summarizes this idea goes something along the lines of “Trust, but verify.” This is true not only of real estate but also most aspects of life. Even when creating a new business relationship with someone, I may trust what they are saying but I’m going to ask the questions that reveal whether or not they have an intimate knowledge of what they are speaking about. To do that, I must first have an intimate knowledge myself by doing the proper homework. Only then can I look at an opportunity and say that this one is not fool’s gold.
To learn more about how you can work directly with me, Click Here