We always ask our potential coaching clients to complete an application form. Working with people who are the right fit for what we offer is important to us. We only coach a small number of people each year, so we want to work with people that we can help in a massive way.
When we first started asking people to complete the forms, I was absolutely baffled by the numbers people had set for themselves as their real estate investing goals. We would ask questions like: What do you want to accomplish in the next 12 months? We had so many people responding that they wanted to buy eight properties or 17 in the next year. Those numbers were so strange. How did people come up with them? And why did so many people think eight or 17 was the magic number for the next year?
Eventually I realized it was because they were looking to earn recognition from a club they belonged to, and those were the levels at which you could earn recognition.
I loved that these folks were keen to take action, and that looking forward to earning a reward had them excited about making things happen, but my concern was that someone else had given them a goal. Even more concerning was that the goal was based on the number of properties and nothing else. “Seventeen properties” is not such a good thing if it doesn’t move you closer to living the life you want to live. And it’s definitely not a good thing if you’re buying any property just to get your recognition and reward.
In 2005, we woke up to the realization that the dozen properties we owned had taken us in exactly the opposite direction to what we actually wanted to create in our lives. We had set out in pursuit of wealth, yes; but more specifically we wanted to make enough money so that we had control over our time.
Instead of creating freedom, we had effectively created total chaos, stress and financial strain in our lives. We owned properties in four different cities at that time, worked with four different property managers, and were experiencing serious problems that ranged from bad tenants to fire code violations to shady property managers.
Yes, for a while we were actually making really good money. In fact, most of the properties we’ve owned have had positive cash flow. One of our properties produced $1200/month positive cash flow.
For us, it wasn’t that we had tried to squeeze ourselves with deals where the numbers didn’t work (which is a very common problem with investors who are pursuing a certain number of deals). Our problem was that we were too spread out and not involved enough with our properties. How can you be involved when your properties are all over Canada?
The Problem with Our Real Estate Investing Goals Back Then
We realized we weren’t clear on why we were investing. We were pursuing no-money-down deals and riches. We’d allowed a real estate course to tell us the deals we should do, and we ended up with a giant mess of a portfolio that took years to clean up. We made decisions based on where we thought the most money was to be made and we ended up very unhappy.
Owning properties in different cities sounds sexy but the reality is: it’s chaotic. You can’t rely on your local team to solve problems because your rock star plumber in Nanaimo, BC can’t help you in Niagara Falls, Ontario. And your fabulous handyman in Toronto isn’t going to commute to Niagara Falls to fix your units.
Five properties that are paid off will do a lot more for you than 17 that are leveraged as much as possible. Three great deals will do more for you than eight bad ones.
Numbers aren’t the most important consideration as a real estate investor – despite what most investors will tell you. What’s important is whether each deal you do moves you closer or further away from the life you want to live. Make sure you’re setting real estate investing goals for yourself, based on what you are trying to create for you and your family.
When we got clear on what we wanted real estate to do for us, and what we wanted our typical day to look like, we sold all our Ontario properties, and kept only our properties in BC. We eventually moved to Nanaimo, where 80% of our holdings are, and we focused on building a team to help us. Now everything is much simpler and we continue to look for ways to make things even simpler.
We didn’t get into real estate to complicate things, but that is exactly what we did until we got clear on why we wanted to be in real estate.
Image Credit 1: Julie Broad (our Client Mingler in Toronto, ON) Image Credit 2: © Thevegetable | Dreamstime.com
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