How to become a full-time investor
Are you dabbling with your investments part-time yet secretly desire to become a full-time investor? If so, then this article will give you the recipe to becoming a successful full-time investor.
The dream of leaving a mundane job to follow your passion of investing full-time crosses every part-time investors mind at one time or another. The desire often occurs while reading a great investment book, watching an infomercial or getting motivated from attending a weekend seminar showing how easy it appears to replace your current income. That desire is often amplified once the first profit cheque registers in your bank account.
Being a full-time investor for almost a decade now has been both very challenging at times as well as very rewarding. It’s like anything though, the more you do it, the easier it becomes. Being directly involved with many part-time investors who, through our weekend seminars and one-on-one mentoring programs, have become full-time investors has allowed me to see the recipe to success in action. Further, networking with thousands of other investors throughout Canada and the U.S. confirms similar patterns of successful full-time investors versus the part-timers.
Outlined below are the most distinctive characteristics and patterns found within successful full-time investors:
You’ll need to have courage in order to be a successful full-time investor. While many well-educated people will tell you that a business plan is the most important factor, I would disagree. I’ve seen the greatest business plans in the world sit on shelves covered in dust because the writer did not possess the courage to forge ahead. By far, courage is No. 1 on the list.
Simply read about real life experiences to see if you disagree. From investors who sent out hundreds of letters to motivated sellers without a single lead for several months to those who had nightmare tenants followed by vacancies for several long months. Who was paying for the groceries during this time? Did doubt cross their mind? Absolutely.
Not knowing when or where the next paycheque is coming from can be very frightening and one of the most commonly overlooked aspects to becoming a full-time investor. Foregoing a safe steady job and a regular paycheque ,regardless of what everyone around you says, to become a full-time real estate investor requires courage, and lots of it.
You’ll need a reason. Ask yourself why you want to become a full-time investor? Most say it’s because of the money. Dig a little deeper and you’ll find the real reason. The real reason is what the money means to you. For women, it’s often security while for men it’s typically some type of freedom: the freedom to be your own boss, to spend more time with family or the freedom from layoffs and downsizing. Identify the reason early and then engrain it in your mind and soul. That reason will keep you motivated when you hit the many bumps and obstacles on the path to success.
A sense of urgency
Many of the most successful business owners, entrepreneurs and sales people create a sense of urgency in everything they do. You’ll be hunting for your next rental property, your next rent-to-own, your next flip, your next joint-venture investor or a more efficient system. If you do not have a sense of urgency then neither will anyone else around you.
Without a sense of urgency, your investors won’t get back to you in a timely manner. Your mailings to those motivated sellers will be sluggish providing time for them to list their property with a Realtor. Delaying a meeting with a potential investor allows time for them to meet with their financial planner and buy some GICs instead of investing in your real estate deal. To be successful, create a sense of urgency or hire someone who will.
If you have courage, a reason why and a sense of urgency, then you can sit down and write a plan.
Your plan should include the following:
- Income and expense statement: Create an income and expense statement itemizing your projected income and expenses and showing your projected bottom line. This statement is the foundation of any profitable business. A solid foundation allows you to build a structure that will stand forever. A weak foundation will crumble with the slightest amount of weight. Be sure to track your income and expenses at least once a month.
- Sales: Figure out how you are going to make money. How profitable is your business model? Break it down into measurable pieces. How many rentals, rent-to-owns, flips or monthly cash flow do you need to complete each year to cover all your expenses and make a profit?
- Marketing: No one knows what you are offering unless you tell them through marketing. Low-cost marketing is ideal especially when you are starting out. Big budgets don’t necessarily mean big results. Understanding and implementing effective marketing creates big results. Our first rent-to-own sign eight years ago was a handwritten bright orange 24” x 30” piece of craft paper that said “Rent-To-Own, $5K Down, $1,500/mo.” It was low cost and very effective.
- Systems: Systems are the way you are able to expand. They allow you to work on your business, not in your business. Create your business as though everything you do now can be done by someone else. If your best use of time is talking with people on the phone, then have your systems handle everything else. Have your system pre-screen callers so that you are only talking with those who are highly motivated. For example, when you pick up the phone, do you have a standard set of questions you ask a motivated seller? If not, create a script and use it. When someone sees your postcard, sign, business card or ad, where do you send them? Can they get more info on your website? Do they call an 1-800 number pre-recorded message? Create a marketing system and move people through it. Then, hire someone else to step in at any point to run your system.
- Product: What’s your product? Whether you are getting investors to invest in your long-term rental projects, rent-to-owns, flips, multi-units, etc, you are selling yourself. When you talk with a potential investor, a lawyer, a Realtor, a banker, a tenant or a property manager, as an investor, you are the product. Would you buy your own product? If not, what would you have to change before you would buy it personally or recommend it to friends and family?
- Exit point: How long can you pay your expenses without money coming in before you are out of business? Too many times, people continue pouring money into an unprofitable business model in the hopes that it will turn around. Set a dollar amount or timeline that you are willing to spend before turning a profit. If you have not turned a profit within that timeframe, STOP and re-evaluate the whole plan. Keith Cunningham once said, “When you find yourself in a hole, stop digging.”
- Team: Have several professionals review your plan such as an accountant, a business consultant, another investor, a mentor and a business lawyer. This is a great way to start building your team, too. Ask for their professional opinion and then refine any weaknesses within your plan accordingly.
Build a group or network of other like-minded people that will support and encourage you to keep going. Networking with other investors and staying connected is essential.
Hire a mentor or coach
Hire a mentor if you have the means. An experienced mentor can guide you through the obstacles and help you become successful much quicker than through trial and error on your own. Find someone who has done what you want to do. Don’t ask a stockbroker how to invest in real estate. Ask a full-time real estate investor with experience in the type of real estate investing you want to pursue. Ask them for references and then check them.
In summary, becoming a full-time real estate investor requires courage, a reason why and a sense of urgency. Combine those with a well thought-out plan, a support group and a mentor and you’ve got the ingredients for your recipe to success. Get out there, go full time and have fun. It can be very rewarding.
Paul M. Hecht is an investor, seminar leader, mentor, real estate agent and author of Everyday Real Estate Millionaires: How Average People REALLY Do It.