Line in the Pond – Real Estate

I’ve been busy of late. This is a line I’ve been reeling in heavily recently.  It might be a mackerel.  Real Estate.

Real Estate? Like buying houses?

Yep, like buying investment properties.

I don’t have a background with real estate.  What I do have is a 🔥burning desire🔥 to learn and pursue real estate.

I believe the great thinker and former prime minister of the UK, Benjamin Disraeli:

I have brought myself, by long meditation, to the conviction that a human being with a settled purpose must accomplish it, and that nothing can resist a will which will stake even existence upon its fulfillment.

I bet Ben would understand that once I decided to pursue real estate, it was only a matter of time until my goal was realized.

So Why Real Estate?

There are 2 main reasons.  Real estate is a powerful investment and it’s passive income.

Real estate is an investment.

(oh no, he’s stepping onto the soapbox)

Although I enjoy life and do spend money, I would reckon my wife and I tend towards investment heavy (a discussion for another day).

In the USA, we toss the word “investment” around as mindlessly as we toss a baseball in a game of catch.  (For those of you not in the US, I don’t know… maybe “the way you toss cricket ball” or something… 🙂 )

See, an investment is only something that makes you money back in the long run.

 

 

When your co-worker puts his hands on the water cooler and proudly shares, “I invested in a new car this weekend”… Is this actually an investment?  I

 

suppose his new motorized ego stroke could be an investment if you stretched into discussing fuel economies or it was used for business.  Most likely, he’s used the word incorrectly…and he makes me uncomfortable when I want a glass of water.

Merrium-Webster defines an investment as “an asset to produce income or capital gains”

M-W’s careful word choice here of an “asset” is interesting.  Dig deep and think back to those days twiddling your thumbs in finance class.

Asset: An asset is something that adds future economic benefits and is opposite of a liability

Liability: A liability is some sort of obligation that takes away from your current or future economic benefit and is the opposite of an asset

Rich Dad, Poor Dad by Robert Kiyosaki is a great book that weaves a story and his experience with the difference between assets and liabilities

Real estate is investing in an asset.  In fact, an investment property is an asset that provides arguably continuous revenue.

Real estate is passive income.

Because of the continuous-ness (this should be a word), I consider investing in real estate to be passive income.

Note: there are varying opinions that would disagree with this observation

There are three types of income, however.

I consider income in a similar manner to Multi-family real estate investors Jake Stenziano and Gino Barbaro’s breakdown:

  1. Earned Income: Regular working wage (e.g. W-2 earnings)
  2. Portfolio Income: Income that is much easier to manage (e.g. Stocks, bonds, mutual funds)
  3. Passive Income: Income that gives you long term, continuous revenue and high control (e.g. Royalties, Real Estate)

So don’t get me wrong, managing a property can be a lot of work, but I believe it’s heavily front loaded.  As my old friend Allen Brubaker says,

The more you boost it now, the less you better off you are in the future

Ok, ok, I have digressed.

(steps down from soapbox)

Making the Decision

My wife and I deciding we would invest was easy.  Preparing to implement was the tricky part.

Let me share a few tips to help you be more successful.

Here are 3 tips I used to help implement my business strategy (and these tips could be used for any business, not just real estate).

Tip 1: Get to learning

Get a book, or two, sit in a quiet chair and get started.  (Don’t get too many, though)  Read, read, read!  Learning the buzzwords in any organization can demystify that trade.  Most people are fearful and anxious because they have too many unknowns.  The only way you will feel more comfortable is to familiarize yourself with the lingo.  The best way to learn a language is to immerse yourself and a new business language is no exception.  Patterns will emerge and those fears will lift like a morning fog.

Here’ a note of caution.  Learning too much can be a terrible waste.  Yes, you read that correctly.  Some people feel they need to learn more and more and aren’t ready to start their adventure or take that next step.  This is a form of perfection paralysis .  Dan Coyle, author of The Talent Code wrote the rule of thumb at 30%.

Our brains evolved to learn by doing things, not by hearing about them.  This is one of the reasons that, for a lot of skills, it’s much better to spend about two thirds of your time testing yourself on it rather than absorbing it.  There’s a rule of two thirds.  If you want to, say, memorize a passage, it’s better to spend 30 percent of your time reading it, and the other 70 percent of your time testing yourself on that knowledge.

Tip 2: Find a Coach

All the most successful business people had a mentor.  Mentors can shorten your learning curve, help you avoid pitfalls and point you in the right direction.

I was looking for a coach in the Lancaster, PA area.  I swallowed my pride and took a few risks.  I scourged the newspapers and online articles for a few real estate influencers in the area, hoping I could take someone out for coffee.  It worked.

Commercial break: I love this technique.  If you want to learn something quickly, invite a guru to coffee and don’t forget your notepad.  You’ll learn a whole lot in trade for a few drips of java.  In return, the influential people themselves are often flattered and occasionally don’t mind sparing a few minutes to share knowledge with someone genuine.  Just remember to be respectful of their time, and don’t stand them up  (I really didn’t mean it, …sorry, Noah)

If you have a mentor or coach, you’ll be able to have more comfort with the difficult path you travel.

Tip 3: Split the Risk

Get more comfortable and go in with other people.  You split the reward, but also the risk.  In the worst case, if something goes badly, that burden is split amongst multiple people.  That situation might even be recoverable with your teams’ additional brainpower.  Conversely, working with partners can help you get up and running more quickly than you could going solo.

For me, our team used the “divide and conquer” technique to research and prepare our real estate investing gameplan.

One of the benefits that is more subtle is the mystery of synergism.  No, not like a buzzword for a sweaty high school gymnasium pep rally.  I mean the idea that partners feed off one another and really motivate each other is of enormous value.  Read about it in There is No One Man Show.

So Where to Now?

Well, I’m going to be busy for a little while longer.  We have to prepare the property and implement the plan, and it will take a little work.  My hope is by front loading the work now, we’ll reap the harvest in the future.

The struggle I’ve got to work on is making sure I don’t lose any other fish while reeling this catch in.  I’m glad to have my partners Derek and Noah to help me along the way.

 

But for now, I can say…”Hello, nice to meet you.  I’m Jacob and I’m in real estate”

 

If you have any comments on this story or disagree with what I’ve written, let me know!

Email me or comment below.  I’d love to hear your perspective.

If you like what you’ve read, please consider subscribing so I can share with you my journey and you might not make the same mistakes!

-Jacob

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