There are a lot of smart, successful people all around us. However, not all of them can be self-employed and run their own business. This is a unique skill. In my mind, what differentiates entrepreneurs from other folks is their ability to wear different hats effectively.
Remember the saying: Jack of all trades, master of none. I hate this saying. You don’t have to be a foremost expert in a particular “trade” to succeed. Your value might lie precisely in the fact that that you know several trades well enough to explore connections between them and leverage them together for your goals.
If you are a real estate rehabber, your goal is to make money. When it comes to fixing and flipping, you make money by buying discounted properties and turning them into newly renovated homes ready to fetch the top dollar. To do so, you must be comfortable being a marketer, a seller, and an employee manager. You need to know a decent amount about real estate investing and a fair amount about construction. Each of these “trades” has the potential to make you money or a potential to drain your profits.
You Need to Know How to Market
You must have the ability to find discounted properties. In real estate, you make your money when you buy, and, if you lack this skill, you start at a significant disadvantage. We’ve devoted many blogs to exploring potential ways of locating underpriced properties. You might be going to real estate auctions, buying REOs, or working closely with your agent to leverage MLS. You might be prospecting yourself to identify borrowers who are distressed and are likely to sell. The truth is each successful investor has his or her niche.
For example, we have two equally successful borrowers. One is building a real estate portfolio of inexpensive properties in Hagerstown. She lives in the community and has a reputation for being a fair and honest buyer. Folks come to her when they need to offload a home that is not in the best shape. Her strategy is buy-and-hold. She buys properties that require inexpensive renovations to make them tenant-ready.
In contrast, our other borrower is a rehabber in Washington, DC. His two most recent purchases are dilapidated townhouses. He pours hundreds of dollars to turn them into swanky urban dwellings with top-of-the-line features. His renovations take at least a year. They require many permits and consults with architects and decorators. His business model is entirely different from our borrower’s in Hagerstown, but it makes him equally successful.
If you don’t know how to get discounted properties, don’t enjoy the process of hunting for them, and don’t have the perseverance to wait for the right deal, you have little foundation for success in the rehab business. Like in many other businesses, you must know how to find customers (in this case, potential sellers of discounted properties) and sell them your services.
You Need to Be an Excellent Manager
Once you find the right property, you need to get cranking with its rehab. At this point, time is money, and the longer you hold this property, the more you incur in expenses. To move the process along as efficiently as possible, you need to assemble the best team. Your contractor and your agent are the key players. Though we often refer to them as your team, a better way to describe them is as your employees. Why? Because you’re ultimately responsible for everything they do. Their performance will ultimately be reflected and measured by your bottom line.
Being a good manager is very different than being a good marketer—and you need to be both. Your inner marketer might have put a fantastic deal under contract, but don’t blow it by not switching hats fast enough. Choose your team members well. Create and sign airtight contracts. Take their advice, but don’t delegate. Go and see the progress of your renovation every couple of days. Keep detailed expense logs. Remember, all these people work for you and the success of your enterprise. You will ultimately reap the rewards if everything goes smoothly or will be left holding the bag.
Real estate investing is a terrific business. It propels wealth-accumulation at an unprecedented rate. A beautiful thing about it that it’s not that complex and the barriers of entry are relatively low. We work with many new time investors, and the vast majority of them are a success at the first flip. They might have a different business plan and different strategies, but all of them have the same thing in common. They are natural-born entrepreneurs that are adept at switching gears and wearing many hats.