Hey hey — Patrick Riddle here to talk with you about the 80/20 rule in real estate.
It started with a great question from a reader in North Carolina that a lot of you are probably also thinking about.
Here it is:
“Hey Patrick, I’m just getting started in real estate investing. Where should I focus most of my time? I don’t feel like I’m making much progress yet. I appreciate any help and direction you can give me. Thanks.”
To answer this question, let me share with you what I learned years and years ago from an investor friend of mine Lou Castillo.
According to Lou, 80% of investors fail their first year… but he knows what to focus on to make sure you’re in the successful 20%.
Here’s Lou’s response…
I was just reflecting on the past few weeks of conversations I’ve had with investors from around the country. All of them have one thing in common… they don’t want to rely on luck to determine how much money they make. They want consistent, predictable results.
But most of them are struggling and spinning their wheels in place…
Why Do 80% of Real Estate Investors Fail Their First Year?
Did you know that about 80% of investors fail in their first year? It’s true. The problem is a lack of fundamental business building knowledge, and how to apply it.
You don’t build a business by hoping and wishing. You build a business like you build a house… you lay the foundation, and you work up. There’s no other way that I know of.
So, what is the foundation of our business?
It’s finding profitable deals from motivated sellers. Simple.
What really irks me, though, are all of those late-night TV commercials about real estate investing… making it seem as if all you have to do is drive around looking for abandoned houses or call the For Sale By Owner (FSBO) ads in the Sunday paper, and you’ll make $60,000 your first month.
The reason I get so upset by that is because it sets up false expectations with investors – which later leads to frustration.
Have they ever actually tried those ideas? It’s ludicrous. I’m not saying you’ll never find a deal like that. You could get lucky. But we already established that we don’t want to rely on luck to make us rich.
Instead, a compelling marketing campaign is needed to drive those sellers to call.
You want motivated sellers calling you!
You don’t want to be driving all around town hoping to find a deal. You want to sit at your desk and just qualify the sellers.
Look, the truth is that you’ll probably need 20–30 leads from motivated sellers to find 1 great deal. It’s a simple game of numbers. Talk to enough sellers, you’ll find a great deal.
Take Note: You can’t rely on just a few leads a month and expect to have a steady stream of deals coming to you.
Marketing is your answer. Let it do the work for you. Save your gasoline. Stay at home and speak with sellers calling you. Only visit those properties that appear to be good deals based on your phone conversations.
What kind of results can you expect?
At first, not much… it takes a little time for marketing to take hold. Then you’ll start getting dribs and drabbles. Then you’ll start getting a lead a day, which will grow into 1–2 leads a day…
Doesn’t sound like much, right?
But 1–2 leads a day is 30–60 leads a month. At 20–30 leads per deal, you’re talking an average of 2 deals a month.
If you made a bare minimum of $10,000 every deal, you’d be earning between $120,000 to $240,000 a year.
That’s not luck – that’s predictable.
Can you see how much easier and more profitable this approach is?
Don’t keep waiting for luck to smile at you.
Create your own luck. Implement a marketing campaign and drive those motivated sellers to call you TODAY!
Start building your business foundation right now.
BOOM!
High-five to Lou!
Now do you see why I wanted him to answer that question. He just said it all in a simple, straightforward way. Stop reading, start marketing.