too much time or groping in the dark, so to speak. From my educational classes, the instructors and speakers emphasized the importance of having a plan and working that plan. As Yogi Berra once said, “If you don’t know where you are going, you might wind up someplace else.”
I learned the importance of starting a real estate business, like any other business, with some basic knowledge and a plan. A plan provides a road map so there is no guesswork. You just need to be disciplined and stick to it. Also, a clearly written and communicated plan can be incorporated into a contract that guides the conduct of all the contracting parties. A contract may also provide for inspection and review points that can unearth mistakes in a rehab in a timely manner to be rectified.
As you will note in this chapter, I have had a long experience starting with venturing in this business without the necessary required knowledge, making several mistakes, then stepping aside, taking a much-needed strategic retreat, then re-starting my career in the right way. This re-starting involved factoring into my budget amounts and time for education so I could build my business on a strong foundation, the way you need to when starting. If you are already in the business and experiencing turbulence, you may need to take a strategic retreat and re-group. I hope my story inspires you to re-start in the right way like I did.
Chapter 3:
From an Insecure to a Confident Investor
Do you ever wonder why some people feel insecure in the daily operations of their businesses while others seem to manage just fine? Have you ever stopped to think why some people lose money, lots of it, year in, year out, while others seem to move along methodically, with less struggle?
As a newbie or someone who has been in any business and still struggling, these are questions you may confront from time to time. In real estate investing, since people deal with big dollar items, business challenges can be daunting. There are usually many moving parts to real estate investing. There is buying, rehabbing, renting, and selling. In all these processes, you can say that a contractor plays a pivotal role at every stage. A contractor could help with analysis before buying. A contractor could be key to your success or failure in the rehabbing process. A contractor is key to your maintenance issues in the rentals. A contractor could also help with the building design that keeps prices low so you can make a profit when you sell.
In the field of real estate investing, mastering the art and science of dealing with contractors can make or break your business. Many contractors are aware of their enormous power in real estate, and they wield it to maximum advantage no matter your situation. Some contractors are decent and they will advise and work well with you. Some are horrible, to say the least. Many are somewhere in between. The challenge is determining which contractor you end up working with. That’s the six-million-dollar question. That’s the question this book will help you answer.
This chapter outlines the framework that you will need to go through to learn to work with contractors in amicable and less confrontational ways. In all facets of life, starting a new business can be scary, even to a seasoned businessperson. Like in any business, some education is necessary, whether that is through a formal classroom structure or through the school of hard knocks. Street smarts, as some may say! In a formal classroom setting, or even through other media outlets like the internet, you usually pay upfront unless you get some funding or waiver. The key thing in this setting is you are paying upfront unlike the school of hard knocks, where you leave yourself exposed to the world to teach you. As many street-smart learners will tell you, the world can be unforgiving. If you leave yourself at the mercy of the world, you may have to go through some tough lessons that may take a long time to learn and may involve heavy, heavy losses before you find your footing.
This is what some people call paying at the backend. You lose first, then double pay to cover your losses and then some. When paying at the backend, getting in may not be that expensive, as you cut out initial educational expenses, but you will pay for your mistakes dearly. Typically, the choice is with the investor. This is how I got into real estate, and I paid dearly for setting myself loose to the world to teach me. I went into business without the necessary education first. To this day, if a new investor comes to me for advice on how to start any business, I usually stress the importance of including the educational and consultancy amounts as part of the start-up capital. This way, they prepare themselves to hit the ground running, armed with some knowledge that will help them make informed decisions from the get-go when dealing with sellers, mortgage bankers, and contractors.
Getting some education before starting a business and getting familiar with the landscape in which you and your business will operate is key to answering these basic questions: Do you ever wonder why some people feel insecure in the daily operations of their businesses while others seem to manage just fine? Have you ever stopped to think why some people lose money, lots of it, year in, year out, while others seem to move along methodically, with less struggle?
Relevant business education and familiarity with the landscape in which you will be operating provides good grounding. As opposed to people who may start their business without the necessary knowledge, you will have your foot anchored in solid foundation and not in sand.
From my experience and from talking to many real estate investors whose businesses are struggling, there is usually one overriding problem they struggle to solve: they need to know how to find good contractors who’ll get their jobs done on time so they don’t lose their investments. The process of interviewing contractors so an investor ends up with good ones is a major dilemma for many investors. The majority of the investors have one simple dream: to have great contractors that get their real estate projects done on time.
Although the field of real estate investments is large and varied, the area of rehabbing may be narrowed down to three key aspects: contractor, contractor, and contractor. Indeed, many rehabbers dread the thought of dealing with contractors, yet many people who cannot build properties on their own have to use them. It’s kind of a love-hate relationship. You hate the contractors, but you need them.
As you look back on any building projects you or anybody close to you have undertaken, you may want to see if you have had the same questions on how to find a good contractor and if you shared the same dream outlined above. This book will help jog your memory to see if you have had the same questions and how you handled them. These questions should be helpful to you:
•Do you dream of hiring great contractors that get your real estate projects done well and on time, but have no idea where to start?
•Do you constantly lose your investments because of hiring contractors who are not suitable for your jobs?
•Do you know that it is possible to learn a streamlined, practical and well thought out methodology for finding the appropriate contractor for your jobs?
To help you answer these questions, this book will give you a framework of how to approach the contracting process with ease and confidence.
This chapter presents the road map of how you proceed to master the process of hiring the right contractor, who will finish your projects in a timely manner, so you can stay in the investing business. The steps below, when followed sequentially, should place you in the right path of profitability with peace of mind:
•Find a contractor you can trust
•Spot when contractors start to lie
•Make sure your project gets completed perfectly on time
•Avoid
