The Del Walmsley Radio Show – Del Relates the Processes of Skiing and Real Estate Investing

“You’ve got a feasibility period where you can go in there, and you can test the water…

…and you can look at the details, and you can make a decision whether or not you want to stick.

And sometimes you’ve got to pull out.

It’s just not the right deal.

It doesn’t make sense.”

Step by Step

I just got back from two weeks of skiing in Vail and Breckenridge. It’s really interesting. I learned a lot of things going through this process that I wanted to share with you.

I thought that this process that we went through—our family going skiing is a perfect example of how to be successful in business. You set up with a goal, you set up with a process — you want to do something. And how do you get through it all? Step by step by step is really the key. And that’s really what I saw and thought was interesting while I was bringing this all back.

Start back with this: We’re at the time of year right now where we need to be planning; we need to be goal setting. I sat down with my partners and our management staff for apartment complexes, and we started setting up the budget for 2010.

We’re anticipating the increase in rental income and we’re anticipating the controlling and reduction of the operating expenses and bringing these projects online at a much more profitable level next year than this year.

Research

Now, that’s a process. It’s a process that has to start somewhere. And it has to start at the same place that all other processes start which is with research—what is actually possible. So let’s go back and let’s take a look at this situation of going skiing.

“X” number of weeks ago we decided that we wanted to go skiing for the Thanksgiving holidays. Now, the interesting thing is it’s the first week of skiing. So the first thing we had to do is we had to research where were the possibilities to go skiing.

And I think the same thing is true about going out and investing in a business is you have to figure out what works right now. Where’s the money to be made at? The stuff that we were doing two years ago in real estate is not the stuff we’re doing right now. The stuff we did two years ago won’t work right now.

The stuff that we’re doing right now probably won’t work two years from now because the market is so volatile and moving rapidly from one end to the other—which if I have time today I’ll cover some of that.

Rules

But first of all you have to understand that you can’t live by the same set of rules. You can’t believe in the same thing to be actually the same for the rest of your life. The only guarantee in life is change—that things will change.

So we had set some plans very early on in the season about six months out that we’d go skiing in Ruidoso, New Mexico. But as it got near, we found out that there hadn’t been any snow and there was no base.

Now, I had to make a decision, and I had to know exactly when the drop-dead date was to get out of our reservations and not lose any money. So that’s the same thing—if you’re going into a business, you are going to lock something up in a contract like an apartment complex or any other business.

Feasibility Periods

You’ve got a feasibility period where you can go in there and you can test the water, and you can look at the details, and you can make a decision whether or not you want to stick. And sometimes you’ve got to pull out. It’s just not the right deal. It doesn’t make sense.

That happens more times than not on multi-family deals compared to single-family deals—more often than not you don’t pull out, pretty easy to analyze. But a multi-family deal takes a lot more analysis.

So that deal went south. We immediately got back on the horse and started searching for another opportunity. In which case I found an area that had an 18-inch base—so there was again the opportunity. Again then we had to go into feasibility.

We had to call and research and set up contracts to be able to go there and stay and to rent a car and go through all this process to find out if this was really going to be a vacation—if it made sense economically, time-wise, et cetera, et cetera, et cetera. Same process. We’re going through the same thing that we had already gone through.

Due Diligence

And this is like doing your due diligence a second time going through a different project. You know the other one failed, now we’re right back on the saddle again doing it again. And this is something a lot of people don’t do. They fail with the first crack and they give up, “Hey, that was too much work. I don’t want to keep going. I’m ready to give up and lay down and just say, ‘Hey, won’t happen this year.’”

But that’s not what we did. What we did and what you need to do and what business people need to do is they need to reevaluate and then go back and attack another opportunity. And so that’s what we did. We went out and attacked another opportunity.

We found Vail. We decided to go to Vail. Now, lining this up and putting this all together—that’s pretty simple. Find out what the costs are and our range for the cost to be taken care of either by borrowing the money or putting the money down yourself—of course I borrowed it on a credit card which I would pay off later.

Education

But we set the whole deal up and you get ready to go and then you go, right? Wrong. You left out an entire process. The process is that my girlfriend had never been skiing ever. She had absolutely no idea what to do. Just like you have absolutely no idea what to do compared to what I know what to do in the apartment business or the housing business.

So there is a process that you need first which is called education. You need to know what to do. And so I had to get my girlfriend educated. And the first thing we did was take her down to a clothing shop to a ski shop and say, “Hey, give us a list of the stuff she needs to have because she needs to be prepared.”

Proper preparation prevents poor performance. And if you get there and you don’t have what you need, you’re not going to be able to perform. So for you that’s going to be your first step also—proper preparation. You need the education.