My advice for anyone getting into any new business is to focus on a target market.
Your market is NEVER everyone.
In our business of real estate investing, here are two examples of the first few months for many first time “investors”.
Let’s call our first guy Burned Out Barry. He is happily married and makes a good income. He works a sales job that gives him a crazy travel schedule every month. He realizes he needs to find another source of income or he will have to work until “he is 90 years old”. Since he has a flexible schedule he will “give real estate a try”.
Month 1. I’m going to be an investor like these people on TV. It’s easy!
Month 2. I need a better agent to help me find deals.
Month 3. This is hard. I need to take a class. Online. While I’m traveling.
Month 4. Wholesaling! Quick money sounds great! I need cashflow. That’s the ticket!
Month 5. People hate me. I’m a bottom feeder with no friends. Even my third agent won’t call me back.
Until Barry burns out. He never really does anything and eventually moves on because houses were too expensive and that stuff on TV “doesn’t work in my city.”
ON THE FLIP SIDE – let’s take a look at Successful Sally.
Month 1. Sally decides she wants to help other women who are going through a divorce. She is going to make offers to buy their homes, but as a backup plan, will also offer to list their homes if they want to go the retail route.
Month 2. Sally completes her Realtor class and is hired by a local company that is “investor friendly” to their agents.
Month 3. Sally buys a list of local people whose name appears in the local courthouse for divorce. She starts her first mailing.
Months 4-12 Sally buys updated lists and continues her mailing. Each month her pitch to potential clients gets better.
The first six months, Sally doesn’t make a dime.
BUT SHE IS HAPPY.
Sally gets to talk to other women are going through the same process she went through a few years earlier. In an odd way, it’s a little therapeutic for her to be helping these new friends.
Sally isn’t making money, but she is helping people.
Suddenly, in month 9 she gets a listing.
In Month 10 – another listing. And A single mom with a big alimony check pops up as a referral from what she thought was a “failed” listing presentation.
Month 11 her offer to purchase a property is accepted. Rental income for her retirement!
By the end of the first year Successful Sally has made a little over 20k in commissions, and now owns a rental property that cashflows $300 each month after all her expenses.
Why was Barry burned out and Sally so successful?
Focus is the obvious answer.
The not so obvious answer is a little more complex.
But let’s break it down to just 2 parts.
Sally set herself up to succeed because she was uniquely qualified to serve her target market.
Sally focused on a market that was – in certain situations – very motivated to sell property. As we mentioned in our last post, divorce sometimes creates a situation where people are motivated to sell their property for a variety of reasons.
If I talked with both of these “investors” at the end of the year, Sally would be happier and feel more fulfilled with her choice to be a real estate investor. Barry on the other hand would tell me he has a long list of people he has “offended”, wasted their time, or who just flat out rejected his offers to “help”.
One final thought::
Barry focused on making more money for himself.
Sally focused on serving her target market.
And that change in focus made all the difference.
- Where are people making the most money in DC?
- How much time does it take to flip a property in our area?
- How much money, at a minimum, should we want to make on a deal?
- Where do you think prices are headed?
- What mistakes do you see people making?
- What should we do to get started?
Washington REIA Network, President
Profitable Property, Founder
P.S. The Rehab Immersion Course – Spring 2016 Class we announced at WREIA is off to a blazing start. We found our subject property, did a deep-dive property tour, two days at my office pouring through details and a second tour back at the property halfway through the renovation. And it’s not over yet.