I know a lot of people who WANT to be real estate investors but aren’t. And the reason is: They’re scared. Some will admit it, some won’t, and some will blame it on an external factor or restate it with words like “unquantifiable risks” but it almost always boils down to fear.
- There’s the fear of trying to find the money in the first place to do a deal (either the fear of asking at the bank and potentially blowing up your credit if a deal goes bad or the fear of rejecting when you ask other investors for the money).
- There’s the fear that you’ll get totally hosed on a deal by someone, perhaps paying too much for a property that isn’t worth it.
- There’s the fear that you’ll do the deal only to get totally hosed on the other side of the deal — by evil tenants or by a housing market that turns south when you are trying to flip the property.
Not to mention, the fear of liability, the fear of succeeding and having to make big changes in your life, the fear of spending money you don’t have right now, the fear of telling your friends that you are doing something only to have to face them later when it fails… I could go on and on.
So how can you overcome your fears in real estate investing? Well one of the reasons we feel fear is because of the unknown. It’s wired into our DNA to fear the unknown and to stick close to things that are familiar and comfortable. So the system I developed to overcome fear (which I’ve used when doing real estate deals, investing in equities, investing in businesses, or working through a tricky client assignment) illuminates the unknown, helping you move forward confidently.
It’s a surprisingly simple method that I call “sequencing” and it’s a system I developed while being a technical writer for an insurance company.
SEQUENCING YOUR WAY OUT OF FEAR
Sequencing is basically creating a detailed step-by-step list of the entire process or procedure or system or business model that you’re going to do. And it works for any kind of real estate investing.
Start by listing the steps of the process from start to finish, as best as you can. For example, if you want to be a landlord, then your initial sequencing effort might look like this:
- Get prequalified for a second mortgage
- Find a good property
- Buy the property
- Rent it out
You’ve created a really simple, basic list (or sequence) of the steps you need to take to become a landlord. But as you look over that list, you realize that there are many steps in there that you didn’t actually cover. So you go back and add a few more detailed steps.
- Find out how much downpayment is required for a second property
- Look for ways to access that money (i.e. Line of credit, savings, etc.)
- Check credit to ensure that it is optimized for the best possible mortgage
- Find a mortgage broker who can help find the best rates
- Get prequalified for a second mortgage
- Identify what qualities make a good rental property
- Find a real estate agent to work with
- Look for properties that fit the criteria identified earlier
- Put an offer in on the property
- Close the deal
- Advertise for a tenant
- Review tenant applications
- Sign a lease
Okay, this is a little closer to what the landlord sequence probably looks like. See? Already you’ve started to shed light on the process.
But you’re only getting warmed up! Now it’s time to go deeper. This is where you start to read, research, ask questions, get educated, and get mentored to fill in an even longer list. Look at each step in your sequence and ask yourself…
- Can I narrow it down even more (perhaps by turning one step into several smaller steps)? If you can narrow it down, do so. In the 13-step sequence I listed above, each step could theoretically be narrowed down to even more, creating a list of dozens of steps. For example “advertise for a tenant” could be several more steps, including “identify the qualities of a good tenant”, “find the most effective locations for rental advertising”, “sign up at 5 rental advertising websites”, “create the copy for my tenant advertisement”, etc.
- Do I know everything about that step or is there more I can learn? If you’re not sure how to get from one step to the next or how something works behind-the-scenes, make a note and go research that thing.
- Do I feel comfortable acting on this step? This is a huge question to answer. Perhaps you can narrow difficult steps down into several easier, smaller steps (and you should try to do that) or perhaps you realize that one aspect of the effort is simply too difficult for you (in which case you need to find some kind of work-around).
Expect to create a list of dozens or even hundreds of steps.
“Hundreds?” you ask. Yes. Hundreds of steps. That’s okay. Another reason that people don’t become real estate investors is because they don’t know where to start and everything seems overwhelming. But by creating a sequence of hundreds of steps, you make it easy and obvious what you need to do next.
Keep going until you have created an amazingly detailed sequence that you can act on. Once you have the sequence, you have a step-by-step checklist that will take you through the entire process, with nothing scary or unknown.
That’s it! It’s almost so simple that you might wonder why you never did it before or you might wonder if it works. Trust me, it works. Build a sequence, act on that sequence.
Remember reading in Robert Kiyosaki’s Rich Dad Poor Dad book about finding a formula that works for him? That’s basically all this is. You’re building a formula in a numerical sequence.
BEST SEQUENCING PRACTICES
There will be times when you learn something that doesn’t seem to fit in your sequence. That’s when you need to ask yourself if you missed something (and add it in) or if there is a reason why this step might not be included in your sequence (i.e. it’s a step that is only done in certain areas but you don’t have to do it in yours).
Once you’ve done the sequence once, you may find that you can make it even better next time. Some steps can be eliminated, streamlined, or done concurrently with other steps. You’ll go faster (and probably more profitably) the next time.
And here are the two most important sequencing best practices (they work in tandem)…
- You can never be too detailed. You can create any sequence that is thousands upon thousands of steps, even for the simplest deal. If you need to do that, do so. The more detailed you get, the more knowledgeable you become… and the less fear you’ll have about doing the deal.
- A sequence is only useful if you act on it. A lot of aspiring real estate investors mistake research and learning for action. You should learn how to become a better investor but at some point you need to act. This sequencing exercise is designed to empower you to act but it is possible to still use it as an excuse for inaction (i.e. “My sequence isn’t complete yet”). So get as detailed as you can (see the tip above) but don’t get so detailed that you simply don’t move forward.
Bonus tip: Your sequence becomes an asset in your real estate investing business. It’s an asset that you can use over and over… and perhaps even sell to others.