A scientist named Roy Baumeister did a study where he had students fast for a time before they came to his lab. When they arrived, the entire lab smelled like freshly baked cookies. When they sat down, there was a a bowl of cookies and a bowl of radishes placed in front of them. One group was allowed to eat the cookies, while the other one was only allowed to eat radishes.
While none of the radish group cheated, they stared longingly at the cookies. Some even touched and smelled them.
Afterwards, the students were then brought to a different room to work on a puzzle that could not be solved.
They didn’t know the puzzle had no solution. They were told it was an IQ test.
The real test was to see how long they would try to solve the puzzle before they quit.
The cookie eaters worked for an average of 20 minutes before quitting. The radish eaters quit after an average of 8 minutes. A control group not involved in the cookie test also tried the puzzle for an average of 20 minutes.
The conclusion – the radish eaters depleted their willpower reserves resisting the cookies, leaving little left to push through the puzzle.
What’s this mean for you?
Well, let me ask you:
Have you made a list of goals? Are you easily reaching your goals on that list?
Have you boldly declared that this month (or, this year) you’re finally going to drop 20 pounds, save for your dream trip, and buy 2 investment properties?
If you have created a list of goals like that let me save you the disappointment right now. It’s like trying to resist the cookies, solve the puzzle and be friendly and kind to the cookie eaters all at the same time. You don’t have enough energy and willpower to do it all at once.
I’m not saying you can’t get all those things done but I am saying that it’s going to take an enormous amount of will power and discipline to do them all at once. Even just thinking about them all probably makes you feel overwhelmed and tired, right?
It’s not going to happen all at once so let’s not try to pretend that it will.
It’s not your fault – we all have a limited amount of willpower and need to focus it!!
It’s just like the experiment found. We have a limited amount of energy and will power reserves. You have to choose where you’re going to spend it.
The good news is that as things become habits, you don’t spend much of your energy and will power to do it. I’ve been dedicated to working out for so long, that most days I just go do it. There’s no drain on my will power because it’s a habit.
So keep your list if you want, but pick the first thing you want to tackle. Maybe you want to spend a month or two getting a new exercise and eating plan on track. Once it’s habitual, then you can start tackling what you need to do to buy two investment properties this year.
What is the ONE thing you can do next to move yourself closer to living your ideal day?
Ask yourself that and commit to it. If you commit to ONE thing you are much more likely to succeed. It’s like going straight in to solve the puzzle … you will push forward much longer and be much more likely to create the results you are working towards if you only have one primary mission in mind.
In other words if you want to become a real estate investor commit to that right now. Once you get through the learning curve and get your first deal done THEN you can work on training for the marathon or learning to play the flute.
You don’t have to believe me, but you should believe the research.
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.
Like this article? You’ll LOVE More Than Cashflow: The Real Risks & Rewards of Profitable Real Estate Investing. This is just a tiny excerpt from the Amazon #1 Best Selling Book.
“I have read many different Real Estate related books over the years from many different authors across Canada and the US, but this book was one of the best that I have read in a very long time. If there is one real estate book that you should read this year, it is this one!” ~ From qmanrei on Amazon.ca
When I am done this project I will quit smoking/lose weight
When the time is right I will buy my first investment property.
It makes me sad when I hear people say these things because I think they are kidding themselves.
Someday = never.
If I hear myself say someday, and it’s something I really want to do, I change that to a date or I start it right then and there.
And there is something incredibly powerful – almost magical in it’s power – when you stop saying someday and set a date.
For years Dave and I have talked about writing a book. Last year we were talking about our book and I heard one of us say “someday we’ll write a book about ...”. I said – not someday. Let’s make it 2011.
Dave immediately said, “Well how are we going to do it?”
I said what I almost always say “I don’t know yet but we’ll figure it out.”
I really didn’t have any idea how we would make it happen. Yet as soon as we said it out loud, put a date on it and committed our hearts and minds to it, we suddenly had two different publishers to talk to about proposals. We found ourselves knee deep in a proposal and then a revision. Last week our revision was turned down but we’ve made incredible progress, learned a lot and have had some really great discussions with folks we probably never would have reached out to had we not been moving forward on a book.
I don’t have a book or a book deal right now but 2011 still has a whole lot of time left in it! And, I know that any goal worth doing is going to test you. At least once – usually a lot more than once – it’s going to stand up big and tall in front of your face and say:
Are you really ready to do this??
It will look big, dark and scary. And trust me, you’ll probably consider crying, going to bed, or eating a bucket of sugary treats, but your answer to the big, tall, and scary test is going to determine your success. Your ability – actually it’s not your ability because we ALL HAVE THE ABILITY – it’s your DESIRE to push past the giant obstacle in your way and say is what is going to determine whether you succeed or fail. Your desire to take a deep breath and push forward is what will make it happen for you.
This leads me to what I want to share with you today. I just read an absolutely brilliant book by Mark Murphy called HARD GOALS: The Science of Extraordinary Achievement. This book is not another goal setting book even thought it’s all about goals. This book is all about getting so fired up about your goals that achieving them isn’t the issue.\
Goal Setting for Real Estate Investors – You’re Excited But Are YOU Ever Going to Make it Happen?
His conclusion is that most people do not achieve the goals they set for themselves because they never really got fired up about the goals in the first place.
I’m fired up about what I am doing. Most mornings I get out of bed before my alarm goes off at 6:15am. My days aren’t easy but I am excited about what I am doing.
When I was working for someone else I had to DRAG myself out of bed after hitting snooze two or three times in the morning. I rarely use snooze now. I WANT to get up. I am excited about what’s ahead.
It’s that kind of fire and passion about your goals and your vision that makes implementation easier.
Couldn’t you just see the meetings when someone first dreamed up the iPhone?
Seriously – nothing like that existed. They probably had no idea how to make it. They started with the goal and figured out how to get there because it was exciting and cool and would revolutionize cell phone technology in the world.
When you set an exciting goal you will not waste too much time worrying about the fact that you have NO IDEA how to do what you’re setting out to do. You’re pumped up about it – and will not be deterred. At least you will be if you follow the HARD Goals model laid out for you by Murphy in his book.
Mark Murphy puts it this way: “How do we sear this goal into our minds, make it so critical to our very existence that no matter what obstacles we encounter, we will not falter in our pursuit of the goal?”
And his book explains just how to do that. At a very high level it involves creating a mission or a goal for yourself that is:
Heartfelt: you need to have a deep emotional attachment to the goal – either to the people involved or the payoff of achieving the goal or to the goal itself.
Animated: your goals are competing for your finite resources of time, energy, attention and memory so make sure you can REALLY see your success. The more lively and robust the images in your mind the better the likelihood you’ll succeed. Include colour, shape, even lighting, emotions and actions. The more lively and vivid the better it will be seared into your memory!
Required: there’s no choice – you have to achieve this goal.
Difficult:It’s scary, requires new skills and you have never done anything like this before.
I want you to read this book… it has EVERYTHING to do with getting started as a real estate investor if you’re struggling and is powerful if you’re trying to achieve something else great in your life (business or personal) … so I am not going to give you all the good stuff but I do want to share one of the most powerful thoughts I was left with from the book.
What are the most significant and meaningful accomplishments in my life?
For me things like quitting my job, completing my MBA, and rocking the mountain bike race course on my second MOMAR adventure race all came to mind immediately. Just take a moment and figure out what some of your biggest achievements were.
Now, ask yourself:
Were those accomplishments easy? Did they take little effort or a lot?
Did I already know what I needed to know when I started out?
Was I scared?
Did I have doubts?
In every case you’ll find that you worked your butt off, you didn’t know what you were doing when you set out to do what you did, and you had a lot of doubts along the way but you kept going.
If you’re trying to do something like start investing in real estate and you’re feeling fear think about what real estate will give you. Most of our Real Estate Millionaire Bootcamp students want to spend more time with their kids, replace their income or that of a spouse, they are worried about their security in retirement and need to get control over their future.
In all of the cases their motivation is strong because they feel they have to succeed now. And, right now, they don’t know all they need to know to get where they want to go. And most of them openly admit to some fear. But they are moving forward.
If you’re not moving forward or you’re using the word SOMEDAY a lot … pick up a copy of this book and start saying “ON x date” or “Today I am going to start”.
Maybe we don’t have a book or a book deal just yet, but for years we thought about it and nothing happened. As soon as we started putting a date on it and making the goal vivid and real we moved closer to it than we had even thought possible. And something tells me it’s going to happen – this initial rejection is just the first test we’re facing to see if we really want this goal.
Remember: “At some point you’re going to hit a stumbling block, because every goal worth doing is going to test your resolve and ask you to decide if you really want to keep going.”
If you’ve created HARD goals for yourself, you’ll push past that stumbling block and succeed.
Oh … and in this book they quoted a 2010 study by the Employee Benefit Research Institute that said thatonly 16% of workers felt confident about having enough money for retirement. If that’s you then I think you had better get on your retirement plans. And reading a book like this just might give you the blueprint you need to get really fired up about getting your action plan in place.
A few years ago my Dad told me that he’d set a new goal. He wanted to owe the bank $10 Million Dollars.
I nearly choked on the freshly baked chocolate chip muffin I’d been devouring.
“Why in the world would you want to owe the bank $10 Million dollars, Dad? I thought you were trying to retire!!”
He went on to explain that it wouldn’t be $10 million dollars in debt from living life extravagantly. If he and Mom just spent the money going on cruises, buying nice cars and eating at expensive restaurants while accumulating that sort of debt load, that would be bad debt. But, his intention was not to get into bad debt. It was to get into good debt.
The concept that any debt can be good can be a tough one to wrap your head around. We’re taught that when you owe someone something you should pay it back as quickly as possible. And, in general, debt comes with a negative stigma. And, in many cases, it should. Debt that is accumulated for the purchase of “stuff” is not good debt.
But, when you take on debt carefully, only accepting debt attached to an asset that will generate cash to cover the cost of that debt then that is good debt. In the case of real estate investments and their associated mortgages, it’s debt that someone else is paying for through the rent they pay. It definitely qualifies as good debt!
So back to my Dad’s $10 Million dollar dream … I’ve heard Donald Trump say, “If you’re going to think, you might as well think big.” In my Dad’s case he realized that it is going to take the same amount of time to pay of $1,000,000 in investment property debt that it will take to pay off $10,000,000. He said to me:
“It’s going to take me 20 years to pay it off whether it’s $1,000,000 or $10,000,000 so it might as well be $10,000,000.”
In other words, if he’s going to wait 20 years for his assets to be paid for by his tenants he might as well be waiting for a $10,000,000 pay day instead of just a $1,000,000 pay day.
AND – the incredibly rewarding part of his plan is not just that he is thinking big and challenging himself at a time in his life when most people are content to roam the golf course and play the slot machines at the casino – it’s that the properties he started buying a few years ago in pursuit of his $10 Million dollar debt dream have gone up in value substantially and are creating a VERY nice cash flow that helps him pay for his living costs today!
I’m also working hard to follow in my Dad’s footsteps. So when my Dad recently said to me “Julie, you and Dave are in way more debt than we were at your age” I know he is proud of what we’ve been able to achieve and is complimenting us on our progress!
I encourage everyone to take a lesson from my Dad and his $10,000,000 dream:
It’s NEVER too late to start making your dreams come true – so what’s holding you back? Plan your plan and starting working that plan today.
Make sure you know the difference between good debt and bad debt. Get rid of your bad debts quickly (or better yet, don’t take on any bad debts if you can!) and grow your good debts quickly yet carefully. It’s only good debt if someone else is paying it off for you!
If you have to wait 20 years … you might as well make the pay day a good one!
Last edition we talked about whetherinvesting in real estate is right for you. Assuming you’ve decided it is, then the next consideration is what are your real estate investing goals. When we bought our first two properties we were quitting our jobs to move to Toronto from BC. I was going to do my MBA and Dave was going to find a new job. My goal was to make my money work for me while I was in school.
Why is it so important to know what your real estate investing goals are? In order to figure out what type of property you are looking for you will need to know what exactly you want to get from real estate investing. Are you looking for monthly positive cashflow, longterm appreciation and equity building, or a combination? Are you interested in investing for the long term or the short term? How much time do you have and what is your risk tolerance?
Before you can determine your property type, it’s necessary to assess your current financial state and understand what you are trying to achieve and what is possible.
Your Five Year Plan – Goal Setting
This is a technique we use over and over. Sit down right now and write down:
Where you want to be financially in five years (be specific, for example do you want to be earning $100,000/year in your job, own two properties that are giving you $500/month in positive income, and have $20,000 in RRSPs)?
What can you do in the next 12 months to achieve each of the above items (once again, be specific and try and make the items measurable)?
What can you do in the next six months to move towards your 12 month goals?
What must you achieve this month to move towards your 6 and 12 month goals?
Review these goals regularly. We used to do it monthly, but now we just do it quarterly. Find what works for you, and stick with it.
We will leave how to achieve your goals aside for now, and just focus on finding a property type to help you move forward in your real estate goals. Some initial considerations before you begin a property search:
Will you live in one of the rental units or will you be an absentee landlord?
Do you have any savings to use for the purchase (or can you use your RRSP’s as part of the first time Home Buyer’s Plan)?
What size of mortgage can you qualify for?
What is your risk tolerance?
How much spare time do you have to devote to the property?
Do you have any construction/renovation knowledge (or know somebody that does)?
Will you manage the property yourself, or will you hire a property manager?
Can you afford to supplement the property monthly if necessary?
Think carefully about your answers, as each one has an impact on your choice of property. For now, let’s focus on the very first decision: Living in the building with your rental unit or being an absentee landlord.