I talk about this a lot, Hell it is THE challenge for Week 1 of my Mindset Calibration course. HUGELY important to know WHY you want to be involved in real estate investing. As I’ve been on BiggerPockets forums lately, I have been challenging lots of newbies on WHY they want to get started. Even when I tell them money can’t be the answer (a most certain by product if done right), the answer to the first couple of evolutions to this question is typically: to obtain financial independence (money), to have another stream of income (money), or to create wealth (money).
IT IS NOT ABOUT MONEY!!!
Money is a by-product from investing in real estate, or at least it should be if you have set proper and strict investing criteria and are patiently sticking to them. MONEY IS NOT YOUR WHY.
Real estate investing is NOT EASY, especially to start. That is why it is ESPECIALLY IMPORTANT to start out on this journey by discovering YOUR why for wanting to be involved in real estate investing. And when I’m writing about this concept typically I type YOUR in all caps to emphasize YOU. It is YOUR WHY, not your mum’s, not your dad’s, not your brother’s or sister’s nor your friend’s, it is YOURS! Focus on yourself here.
Think of this scenario. You’re just starting your pursuit for your first property, without a WHY. If you don’t know YOUR WHY, you don’t know what goals you want to accomplish and then you certainly don’t have any established investing criteria to analyze deals. And not having investing criteria or sticking to those investing criteria will get you financially into trouble. Speaking from experience, the only time I’ve lost money in a real estate transaction is due to one or two reasons (a) I didn’t have a clear picture of my Why -> Goals -> Criteria or (b) I abandoned my established criteria that supported my Goals -> Why.
Knowing YOUR WHY Establishes Your Goals
“If you don’t know where you’re going, any road will get you there.”
– Lewis Carroll
Lewis Carroll hit the nail on the head with this quote. Meaning if there is no destination in place, like most of us who mind numbing-ly just get through the work day on the corporate carrousel, you’ll eventually end up…where?
Knowing YOUR why is the cornerstone of your investing career because it will lead you to establish goals that support YOUR why and from those goals you’ll establish supporting investing criteria. Think of the waterfall affect, your investing criteria fill up a pool of supporting drops to YOUR why.
For example: my WHY equals these three:
I want to provide generational wealth for these three. And yes that is money, but its not centered around me its centered around how my kids and (eventually…hopefully) grandkids can live a life outside of financial barriers – without acting like spoiled brats :). In the more immediate future I want to provide a lifestyle for us that isn’t hindered on anyone’s schedule except ours. In order to do that, like most wealthy men and women have figured out, I have to figure out how to stop exchanging time for money. This is a 3-5 year goal for us. MUCH BIGGER GOALS beyond the 3-5 year mark have been discussed but seeing as they are not super clear and secondary, we’ll just focus on the more immediate, especially for the remainder of this blog post. And real estate is the best way for us to do that. In 2018, we made $231/hr from our rental properties.
Knowing your GOALS Establishes Your Investing Criteria
To keep our lifestyle and stop exchanging time for money in the next 3-5 years we need to accumulate passive rental income from 100-500 doors. The reason the # of doors is such a wide range is because ownership in each unit can vary based on partners and our participation level but it is somewhere in that range. So, our investing criteria is pretty simple cash flow per door is $100+/month and yields a 15% Cash-on-Cash return.
Challenge: Do The Discovery
What’s YOUR why?
I want to challenge you to discover YOUR why. And if you already think you know what that is, go through this exercise anyway. As you being pursuit for your first (or next) property, you will potentially kick over 100s of rocks before you find that gem. This can be exhausting work, physically and mentally, especially since you don’t know when you’ll reach the closing table. This process can be an emotional roller coaster (which we want to stay away from our emotions as much as possible – this is a #s game) but knowing and being very clear about YOUR WHY will help you stay grounded with your emotions and help you stick to your established criteria once you find a potential deal.
Having trouble discovering YOUR why?
If you’re having trouble discovering YOUR why, you are not alone. This is normal. You are normal! Also accept as life changes, situations change and YOUR why has the potential to change as well – I call these course corrections. Point being, discover IT right now, begin pursuit and make changes down the road. A couple of resources to help you discover:
- 7 Levels Deep : take some time to go through this exercise. This site says 10-15 minutes, but take as much time as you want. If you’re pressed for time, rush through it and then come back and do it again once you have time.
- Start With Why and Find Your Why by Simon Sinek: I highly recommend the Audible audio books here.
- Our Closed Facebook Group: thousands of members willing to help. Join and engage by asking for help from people who were where you are now.