The Path of Least Resistance

As the newest Financial Freedom Program mentor here at the Lifestyles Unlimited® office in Houston I have noticed a few common threads and patterns in the behavior and mindset of new real estate investors and those who want to try investing for the first time.

Common Threads

Fear. The first of those common threads is fear. Fear is a great motivator. Unfortunately it motivates people into not taking the actions they need to improve their lives. Fear of rejection will keep a man from approaching a beautiful woman. Fear of loneliness will keep a person from getting out of a bad relationship. And fear of failure will keep a person from investing in real estate.

Magic Bullet. Another common thread that I have noticed is that many people, mostly the skeptics, are looking for a “magic bullet” or the one answer that holds the key to their success. Nothing that we teach is new or secret and we do emphasize that success in investing does take work. At Lifestyles Unlimited® we teach a particular model of investing and we teach mindsets that investors need to hold if they are going to be successful. There are no magic bullets and the only secret we know about is that there are no secrets to success.

Lack of Knowledge. The third common thread with many prospective investors is a lack of knowledge in how to make money investing in real estate. Solving this problem will in turn solve other problems, most notably the problem of fear. It is true that people fear things that they do not understand and let’s face it, we are not born with an innate knowledge of how to make money investing.

More Than One Way to Skin a Cat

Of course there are many roads to wealth and obviously investing in single family homes or apartment buildings is not the only way to achieve a lifestyle of success. Some people make their fortune importing goods from far away; some people make their fortune as professional athletes; others make their fortune from inventions; still others make their millions illegally.

However, for the average person, the people like you and me who are not athletic, not very inventive, and not prone to partaking in illegal activity, one of the easiest roads to wealth is by investing in residential real estate.

Don’t Reinvent the Wheel

The reason Lifestyles Unlimited® teaches a particular model is because we have learned, through many years of investing in real estate, that it is the path of least resistance. One of the mindsets that we teach here at Lifestyles is that there is no need to reinvent the wheel. It’s something that both Del and Steve are frequently saying on their radio shows.

Their experience and the experience of countless fellow investors has taught us that, although there are other ways to make money in real estate, we teach the way that will cause you the fewest problems and offer you the most protection against losses. (See the article entitled “Do’s and Don’ts of Real Estate Investing”). Notice I say we “teach” you how to invest.

Don’t Stray

One of the last things I remember Del Walmsley saying at the end of his two day class on real estate investing is that most of us are not going to listen to what he just spent two days teaching about. That we would go out and do things on our own, rather than the way he teaches. It’s true that people do that. I get calls from members all the time who stray from our model path of least resistance.

While it is possible that those investors who do things differently than the Lifestyles model teaches can make money and be successful, there are many problems that they will encounter and stumbling blocks that they will face that can be mitigated by following our proven strategies. So again, there is no need to reinvent the wheel. Learn from those who are successful and be successful yourself.

Addressing the Common Threads

Let’s go back to the common threads I mentioned at the beginning of this article and address them in the reverse order that they were presented.

Lack of knowledge

This is the easiest of the problems to eliminate when it comes to getting started as a real estate investor. While it is true that you can spend a lifetime learning about investing, the real “meat and potatoes” can be learned in fairly short order. When I started investing in real estate I knew very little about houses. I still have to tell myself “righty tighty, lefty loosey” when I’m turning a screwdriver.

Fortunately there are countless ways of learning the nuts and bolts of home maintenance, financing, property management, etc. and many times it is very inexpensive or even free to learn. For example, The Home Depot teaches classes on home repair for free! You can get free instruction on how to re-tile you kitchen floor. Call your nearest location, or check them out online.

Two web sites that are packed with information that is helpful to both the real estate investor and all homeowners alike is the Fannie Mae and Freddie Mac websites. The links below will direct you to dozens of forms and documents that are used in single family home transactions, helpful information, tools and educational resources:

https://www.efanniemae.com/sf/formsdocs/forms/index.jsp?from=hp
www.freddiemac.com/uniform

Better yet, you can go to the Texas Real Estate Commission web site and familiarize yourself with documents specific to Texas:
www.trec.state.tx.us/formslawscontracts/default.asp

To familiarize yourself with the terminology of mortgages, go to the website: http://www.mortgage101.com/article/mortgage-terminology

Better yet, you can call Lifestyles Unlimited® (866.945.6565) and ask about one of our free workshops, where you can actually meet the mentors face to face and get more information about the group.

Magic Bullet

The second of the common threads was the search for the “magic bullet”. Again, one of the mindsets that is often mentioned on Del and Steve’s radio shows is to learn how to be successful from somebody who already is successful. We have a “Required Reading List” for our members and mentors here at Lifestyles Unlimited®, and although nobody is asking us to turn in book reports, we feel that the knowledge and wisdom shared in those books is invaluable. And one thing you may take from them is that hard work is pretty much the only real secret to success. (The required reading list can be downloaded by clicking on the Free Listener Kit on the home page).

I recently had a new member call me and ask me for one technique that I could share with him starting today. One technique that could help him start making money today. This member had not yet taken our two day class that is packed full of investing know-how. I told him to go to our web-site and log in as a member, then he could start viewing some of the past guest speaker events. Rather than do the work of educating himself, he instead gave me reasons why he believed that none of our guest speakers would give him techniques on how to make money investing in real estate. He passed judgment on the instructional videos even before watching them. He instead kept asking me for just one technique on investing. “Buy below market value”, I told him. That was my big secret. That was my magic bullet.

Fear

Lastly is the very common thread of fear. Fear of failure. Fear of ridicule. And most of all, especially present to the investor, is the fear of losing money. By teaching the average investor how to be successful, we eliminate the fear of the unknown. By having unlimited access to mentors and fellow investors, our members can eliminate the fear of making costly mistakes.

By being successful, you too will eliminate the fear of being ridiculed. Our members have access to instruction on the web-site, they have access to our vendors and of course they have access to other like-minded investors. Our guest speaker nights are a great opportunity to spend time with attorneys, CPA’s, roofers, pest control guys, mortgage companies, home inspectors, etc.

Before I bought my first property I looked into the mirror and said to myself, “Myself, what is the worst thing that can happen here?” I was buying the property from a man who was selling because he was preparing for a surgery that he didn’t know whether or not he would survive; the likelihood was high that he would not. For all he knew he would be dead in a couple of months.

I thought that no matter what happened, whether I ended up going broke, being ridiculed by my friends, or having to be up at all hours of the night fixing broken pipes…no matter what, I would still be alive and well. Fortunately, the seller survived his surgery and is still today a successful real estate investor himself. I realized that indeed I had nothing to fear but fear itself.

Thank You

So I say thank you to the Lifestyles Unlimited® family who have welcomed me and made me feel right at home and I invite you to come by and say hello to me yourself. If you are in the Houston area feel free to come to one of our introductory workshops. If you are already a member then call the Houston office and say hi. I would love to hear about your successes and if you are still letting fear stand in your way then call me and let’s get that monster out of the way and get you on the road to success.

Comments

  1. Great job Alfonso!

  2. Trent Yeo says:

    Here’s something I find ironic: Most people have a fear of real estate because they feel like they don’t have control. The “what ifs” are too discouraging for them to take action.

    But for those of us who own real estate and operate it successfully, we have the exact opposite fear…handing our money to a “trusted financial planner” or “financial expert” to handle our money for us. Once we hand that money over, we are now completely out of control.

    No longer can we pick qualified stocks to put in our own portfolio (we control which tenants we put in our houses) or make the expert responsible for repairing his faulty decisions that made us lose money (tenants responsible for maintenance and repairs).

    How about transparency? When you hand your money to a financial expert you are giving them permission to “invest your money wisely” on your behalf. You basically pat your money on the butt, wish it luck and HOPE that it comes back from fat camp a much fatter sack of money.

    Not with real estate. We KNOW that we are making money the day we buy the property. How? Comparable sales and rents. There is no guessing or hoping involved. The information needed to evaluate a deal is accessible and transparent.

    Last point: Do your 401Ks, IRAs or mutual funds have insurance if disaster strikes? My houses do…

    Trent

  3. Alfonso says:

    Trent, great points. I’m working on an article right now that will address the control of your money issue, and will debunk 401(k)’s as the great investment vehicle they are made out as.

  4. Great article. Very “in-depth”. The biggest thing that I see is that people don’t understand that in real estate investing, they have to fail in order to succeed. As a result, most don’t ever take any action. The only real way to fail at this business is to never start.

  5. [Trent wrote]
    Last point: Do your 401Ks, IRAs or mutual funds have insurance if disaster strikes? My houses do…

    FYI:
    You can have insurance in your portfolio, like any insurance policy, you have in any asset (car, house, life, property), and they work similar like any insurance; time premiun, deductible, etc.

    The morale is; because you dont know them doesnt mean they doesnt exists! and this principle is applicable to any businesses

    Thanks, Alice
    PS: google these terms “stock insurance options”

  6. Trent Yeo says:

    Thanks Alice,

    Excellent point…I figured that would come up.

    The moral is: just because it exists doesn’t mean people use it! If everyone had an insurance policy on their 401Ks, IRAs or mutual funds there would’ve been no massive loss of wealth over the last 8 months; employees of Enron would not have been devastated when the tree their nest was sitting in got struck by lightning.

    If you are using financing to purchase a house, you’re lender will not even give you the money until an insurance policy large enough to cover their interest is in place. It’s kind of like a built in idiot button!

    Here’s the point. Your AVERAGE “investor” (these ‘investments’ are really savings programs disguised as investments) simply hands his/her money to an “expert” and may or may not even read their quarterly earnings/losses report. They are completely hands off because they simply don’t know what else to do or they prefer to blame someone else when things get bad (it’s true!). Their only “insurance” is diversification.

    Remember what Warren Buffet said about diversification in “The Tou of Warren Buffett”: ‘Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing’.

    http://books.google.com/books?id=msOBPzhVqGgC&printsec=frontcover&dq=tao of warren buffet&ei=HBRBSrqJHaHCM5KH8cMO

    I blame our education system for not teaching financial literacy, but that’s a whole ‘nother story!

    Hope that clears up my thoughts…

  7. Thank you Trent for the response.

    Following you metaphor: When the “average” investor goes thru those programs (IRAs, 401k, etc) basically they are paying in full the house, so it doesnt require insurance. But What if it required before invest (like the finance’s example)? But its not, why because its not their money its your money at risk, Protect yourself!

    I admit some companies doesnt help or disclose information to the “average” guy to prevent major losses, but do you own home work, adjust your risks levels based on your tolerance, protect yourself even with “diversification”, But the ignorance will drive you to South Park in like any businesses.

    Alice,
    PS: Its sad people lost a lot of money, but before blaming other people/system start blaming yourself.

  8. Alfonso says:

    Alice, concerning your PS…I once got involved in the commodities market and got burned. I lost the money I had been saving for a year, my girlfriend at the time lost confidence in me, saying I was irresponsible. I lost opportunity in other investments that were skyrocketing but I was not able to take advantage of them. I was a bit shell shocked, but the sad truth is that I had nobody to blame but myself. I fell for a fast talking salesman. This guy was good. He was great. And I was broke.

    Please keep an eye out for my next article that I hope to have out next week.

  9. Dude, yu da man! Much respect! Excellent article and writing. There are many, many wannabees out there and you and LU can help them make the right decisions and take the right steps. C U at the Q.

  10. Amber FitzPatrick says:

    I loved this article. My favorite parts were the personal stories, specific details and website referrals you used. The fear factor hit home for me as well but i have learned that nipping it in the butt is the only way to beat it. Thanks for reiterating everything Lifestyles believes and teaches.

  11. I have been to one of your seminars and enjoyed it very much. Currently I have a real-estate opportunity that I need help in screening but I can’t remember, does your organization assist with this for members\non-members?

    Regards,
    Bill Ranshaw

  12. Bill, screening a deal can be pretty in depth. It is certainly something we offer to our members, but for non-members it is not a service we offer. It would not be fair to our members if we offer the same degree of mentoring to non-members. I hope you find somebody with experience to assist you. Have a great day.

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