3 Stages in Your Journey to Success
For whatever reason, a lot of real estate investor have this idea that a career path in real estate is strategy-based; we’re all supposed to start with wholesaling, move on to the bigger checks (and bigger complications) of retailing, then buy single family rentals, and then, we we’re really knowledgeable, wealthy and experienced, end up in apartments or notes.
In real life, there’s no such prescribed life cycle; lots of people start out in rentals, or even note-buying; I myself discovered wholesaling only after nearly 5 years in the lease/option business.
But there IS a path that we should all recognize and be on that has nothing to do with our age at entry, or our favorite asset class or exit strategy, and that’s the journey from trading our hours for (highly-taxed) dollars to having our lifestyles completely paid for by our assets.
This metamorphosis takes place in 3 stages, the terms for which were coined by the great Pete Fortunato.
Starters are folks who are still learning and exploring the trade. They’re willing to do what it takes to get educated and to do the hard work of finding deals, which means that, in a sense, they’re still trading hours (spend finding, constructing, and managing properties) for dollars. If they’re smart, they’re doing all this work to set the stage for the next step in their evolution, where they can produce more of their income from more tax-efficient, less strenuous money created by owning assets.
Once starters begin to gather some real assets and see that those assets actually produce rental or interest income that the government doesn’t take so much of, they Estate Builders. Estate builders are in the process of acquiring enough property (whether that be single families, multi families, commercial properties, or even notes) to produce enough income to completely pay for their lifestyles. How much property that is depends on the type of property and what “lifestyle” means to the individual; as few as 10 or 15 paid-off single family homes could produce enough income to launch an estate builder into the final, and hopefully longest, stage.
When that happens, the estate builders become Enders, meaning that they no longer, for the rest of their lives, have to get ANY income from trading hours for dollars, nor do they need to get any more assets to live happily ever after. This doesn’t mean that the ender never does another deal, but she does it because it’s interesting, or helps someone else get started, or to set up the next generation of her family for wealth, not because she has to.
Obviously, most people who get into real estate, at whatever age and in whatever strategy, have as their goal to be an ender, as quickly as possible. They may not always be able to state that goal quite in the way I did; they’ll say things like, “I just don’t want to have to worry about money anymore” or “I just want to be making enough to stay home [or have my spouse stay home] with the kids” or “I don’t want to have to work until I’m 85”, but it all amounts to the same thing: “I want my assets working for me, so that I can do things with my TIME other than work for money”.
Each of these stages has its own set of challenges: with Starters, it’s getting over the fear, getting the initial education, just sticking with it long enough to actually become estate builders. With estate builders, it’s about getting enough money to get all the properties they want to become enders, and about the fact that they typically have a lot of debt against their properties during this stage, and about finding the time to find deals when they’re also now managing x number of properties or assets AND, possibly, still working a job. With enders, it’s continuing to find significance when they’re reached a goal that they’ve worked toward for, often, decades.
Sadly, people in the various stages of their journeys don’t interact much.
A say “sadly”, because starters, estate builders, and enders have a lot to offer each other—and most of them don’t know it.
Let’s take a typical starter, who goes to a typical real estate association meeting, and quickly realizes that 70% of the people in the room are starters, just like him. But he’s determined to make connections with the “do-ers”, which is what he considers the estate builders in the room to be.
So what does he do? He introduces himself to every person he can find who’s done more than 10 deals, who seems to really understand the local market, and who no doubt has a lot of connections and resources that the Starter would like to know about. And then he says the fatal words: “I’d love to take you out to lunch sometime, and pick your brain. You can even choose the place”.
This poor starter quickly becomes shocked and disillusioned by how unfriendly and unwilling to mentor a new guy the successful people are. He gets reactions ranging from, “No, I don’t have time for that” to “I have a mentoring program; if you want to talk to me, you’ll join it” to, as I recently heard, “I’ll go to lunch with you for an hour if you pay for lunch AND give me $100”.
But let’s flip that around for a second and look at what’s happening in this scenario from the point of view of the typical estate builder. He’s done his time, had some success, learned a lot at the cost of a lot of hours and, sometimes, a lot of money. He’s busy—he’s still very actively working in at LEAST his real estate business, but might still have a job, too.
And he gets approached 10 times at every real estate meeting (that’s not an exaggeration) by a starter who’s worked up the courage to talk to him, with the request for “Just a minute of your time to ask one quick question”. If he answers all of them, he literally won’t get to go to the meeting he took time out of his busy scheduled to attend. And then he gets the inevitable “Can I take you to lunch sometime?” question, which to him sounds like, “Can I spend $30 to try to learn everything you know about real estate in an hour, and also to try to get you to help me anytime I need it from here on out?”
If the estate builder has been around that block a few times—and most have, if they regularly attend seminars or workshops or association meetings—he’s well aware that he can spend dozens of hours with a starter that he really DOES want to help, only to have that starter take none of his advice at all, and disappear off the face of the earth after a few months. Oh, and let’s remember that the estate builder may even believe he can really ‘help’, since he’s not an educator, and doesn’t have well-formed thoughts and opinions about what other people should do to get started, and maybe he’s an introvert on top of that, and the idea of eating a meal with a stranger is just totally unappealing.
The problem here isn’t that Starters are needy and greedy or that Estate Builders are closed off and unhelpful. It’s that neither person in this scenario is thinking about trading value. One is thinking about getting value, and the other is thinking about having to give one kind of value—actually financial instruction—without getting similar value in return.
What the starter SHOULD be thinking is, “What does this Estate Builder need, that I can provide, in return for what I need, which is help?”
And once you start thinking THIS way, the opportunities for each stage to work with the others are endless. Starters can bring leads, deals, sometimes money, energy, willingness to trade hours in construction, or putting lockboxes on doors, or taking pictures of vacancies, and trade them for the ability to tap the knowledge and resources of the estate builders. Estate builders can trade their knowledge for more opportunities—because if there’s one thing starters are good at, it’s beating the bushes for opportunities that they don’t know what to do with.
So starters, your main job is to get yourself educated in every way that you can, so that you can stir up opportunities that estate builders can participate in, while you learn, and so that the estate builders don’t feel like they’re obligated to teach you from scratch. Estate builders, your job is to understand what starters can do for you that you can’t or don’t want to do for yourself, and then give them what they really want—access to you—for those things, instead of just assuming they have nothing to offer. Oh, and to present this trade to them in a way that doesn’t make them feel belittled or victimized.
And enders? Your job is simple. Help the estate builders and serious starter get where you are, by helping them construct deals that they otherwise can’t, because what you want is purpose, and intellectual stimulation, and this will provide both—plus investment opportunities for all that cash you don’t know what to do with anymore.
If we all recognize that it’s OK to ask for value to give value, we can all be enders, faster.