Investing in Real Estate vs.
Gambling
Investing in Real Estate: is it like gambling?
I was recently playing craps in Biloxi, Mississippi. Now
this isn’t exactly like investing in real estate, but there are
similarities. Craps has the best odds in the house in Biloxi, if you place
the right bets, however, many people choose to play the “sucker” bets.
Sucker bets, when won, do pay out great. Unfortunately, the player usually
doesn’t win, and therefore the House has much better odds. The House makes
much of it’s money on those sucker bets. Slot machines are the biggest money
maker in a casino, but sucker bets are right behind in second place. Many
people will not be patient and work with the odds and place bets where they
should. They go right for the sucker bet and try to win big immediately
versus going for the more conservative approach which is more likely to win
over time. Real estate is much like this.
Most people won’t or can’t stay in the game long enough to
win at craps. For example, I ran into a Realtor friend of mine at the
casino, I know from Michigan. She stopped at the table to play for a few
minutes. It happened to be a bad few minutes. We ended up losing around $300
during the 30 minutes she was there. She left upset. I stayed and played. I
knew to stay in. We weren’t chasing loses. We knew the table was ready to
break free. Right after she left I had one roll that put us up over $1000,
which was enough to play on for the rest of the night. Unfortunately, she
didn’t get to see it or share in it. This is just like so many real estate
investors – so close yet so far away. I am sure she was thinking, “Poor
Wendy is staying and losing more money.” I don’t casino gamble a lot and I
certainly don’t make any money or lose any money casino gambling, it is just
an example that is similar to real estate.
When playing craps you always want to pull your money out
first on your winnings and then start to press your bets, because it is then
that you are playing with the casino’s money. Let their money start to work
for you. Then you start to take more out each time you win. It is like real
estate, each time you reinvest more and more and soon it is all the profits
you are working with.
Unfortunately most new investors don’t stick with
investing long enough to break free. I define breaking free as: financially
free, free from a job, free to make additional financial choices and
investment decisions.
I see this as one of two main reasons
No clear direction or path – or lack of clear
goals. Most investors don’t have a clear set of direction. They
just don’t have focus. Without focus you will not be pointed in the right
direction. If you don’t have a direction and focus you will not likely be
successful in the real estate business or any other business. Many people
can be successful in a J.O.B. (Just Over Broke) where someone else has the
vision and is setting the direction. Investors that are serious about this
business MUST get serious about setting goals. They need to set up their
business plan and get focused. There are many good books in the market on
goal setting. I also have a goal-setting course that is very simple and easy
to follow, but goal setting is a key element to being successful in this
business or any other business.
Tenacity. Most investors won’t
stick to it. When times get tough they want to quit. Many times speakers and
educators make is sound easy in order to sell a course. It is not always
easy, but it can be easier than what most people are probably doing for a
living.
There are times when things go wrong in this business. It
is not perfect. When you can learn to laugh at things that go wrong, you
will become more successful. For example: You will get told lies about rent
checks and why they are late. There is nothing you can do about it, but
start to evict the tenant. Yes it is very stressful, but learn to take it in
stride and just start the eviction. It will seem very hard for you at the
time, but trust me laughter relieves stress. Learn to laugh. Realize there
are more important things to be stressed over, like how and when are you
going to buy your next property.
Get through the trials and one by one they will start to
feel smaller and smaller. I can’t tell you how many times things went wrong
on my deals. There were many nights I cried myself to sleep over something,
but the next day I got up, started the day and figured out a solution. Don’t
let anything get you down too long. When you put it into perspective it
probably is really not that big of a deal. When you run into a road block or
have a situation you feel you can’t solve, ask for help. Ask people around
you for advice. Ask at your local real estate investor group for advice.
When I teach my Lease Options BootCamps, and I get a road block type of
question, I don’t answer it, I let the class answer it -- the class will
come up with 5-10 answers on any one given situation. It shows the students
that asking around and brainstorming with others will give many solutions to
one problem/situation. Ask and you shall receive.
When your first deal is completed, reinvest as much as you
can into more deals. In craps, if you put your entire winnings back in it is
called “pressing” your bet or “parlaying” your bet. This is when you will
really start to get large payoffs. As you invest more and more you will
start to have your investments working for you and not you working for you
investments. Once you get enough deals going then you can hire someone to
help you do some of the administrative, bookkeeping, property management and
others tasks that will free you up to either do additional deals or relax.
You choose.
Note: by no means am I suggesting you play craps or
any other type of casino gambling – it is used only as an analogy for this
article. Craps is truly GAMBLING vs. INVESTING in real estate.
© 2007 by Wendy Patton
Wendy Patton is widely
recognized as one of the most inspiring speakers on "Little or
No Money Down" real estate investing. Her real estate savvy and
great depth of experience and knowledge has helped her in
orchestrating the most complete and easy to follow, Lease/Option
Program in circulation.
Home Study Courses by
Wendy Patton
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