success rate of new investors

[moneymagnet]

Anybody have any information about how likely success is to be seen in a young investor who is trying to tackle the market against pros?

Are there any big factors that you could attribute abnormal success to?

Could you put an average amount of time on this before the newbie really knows what hes doing and no longer is getting his feet wet?

How did your investing turn out for the first 5 years or so? Why?

thanks, this forum is proving very valuable for me so far

[JakeRodgers]

Don't get discouraged! That's my biggest advice for newbies. You will fail several times before you are successful, its pretty much guaranteed. I know I did when I was just starting. the key is to learn from your mistakes and take that knowledge and apply it toward your next challenge. just don't give up when the going gets tough, as it inevitably will. stick with your game plan, adjust as you learn, and soak up new info and experience like a sponge.

[Dave T]

There are national statistics that say 98% of all new business startups fail.  You put yourself in the 2% success group by having a plan. 

Start by establishing a long term goal.  What is it that you want real estate investing to do for you, how will your life be improved with real estate investing?  If you answer these questions, thoughtfully, you may define your ultimate goal and consequently how you know you have achieved success. 

With a goal defined, figure out how you want to get there.  What do you need to do today, tomorrow, next week, next month, each month this year, and so on to achieve your goal.  These action steps become your investment plan.

Now work your plan and achieve success.

[propertymanager]

Are there any big factors that you could attribute abnormal success to?

Education (as opposed to spending a bunch of money on education); HARD WORK; and persistence.

Could you put an average amount of time on this before the newbie really knows what hes doing and no longer is getting his feet wet?

The amount of time it takes YOU to know what you're doing depends completely on you!  I spent every waking hour for one solid week studying before I bought my first rental.  At that point, I understood the basics of the rental property business and learned the finer points over the next year.  If you are willing to read the hundreds or thousands of posts on this forum (especially in the landlording forum), you should have a very good basic understanding of the business.  I would also strongly recommend joining your local REIA and making

You will fail several times before you are successful, its pretty much guaranteed.

I totally disagree with this.  If you study hard and work hard, there is absolutely no reason to fail even once (on even one deal) on your way to success.  This is a relatively simple business.  If you learn it before you buy, you definitely should not fail.

Good Luck,

Mike

[brockovich]

I've never had to put a dime of my personal money into the business after I bought my first property ten years ago. I consider that a success. Define your own success and then act accordingly.

[fadi]

Based on statistics, 95% of new businesses go out of business within the first 5 years. 98% of Realtors become inactive, or do not practice it within the first 2 years. Based on these two numbers, I would say the same applies to investors.

The high drop rate is not due to being new fighting for space against the old timers. These statistics explains why only 20% of americans make over $120k, and 2% make over $250k.

The problem is that those who are starting out have no experience in running a business and they run it as a hobby. No processes in place, no checklists, no plan, no financials, no growth plan, no continguencies, and yes... no education

Education => knowledge => credibility => higher closing rations = >trust => strong networking => private money and contacts

Treat it as a business and read on startup business not just investing and real estate.

[moneymagnet]

well for a while I was thinking I had no real edge on your average joe who was trying to start a business. However I very strongly agree because of other hobby's I have, that education before action is absolutely essential. Despite the terrible % statistics, I really feel good about the quality aspect of the responses and feel I already sit high on the bracket because of my theory that I should probably know what the hell I'm doing before I try to make money doing it.

TBH, I'm surprised many people even try this stuff without getting educated on the subject. sounds like it isn't too rare? Sounds like failure isnt too rare either.

[JakeRodgers]

Mike- so you're saying you've never made a mistake in your business ever?? I would find this difficult to believe. just because you study hard and have a great work ethic doesn't mean you are perfect. No one is perfect, its what makes us human. It could be anything-as big as a deal falling through because you screwed up a contract, or as small as missing a certain tax deduction and cost urself money. My point is, do not get discouraged and give up or beat urself up when you mess up. learn from mistakes and don't make then again. fool me once, shame on me, fool me twice, shame on you...

[JakeRodgers]

whoops, kinda screwed up that last sentence, u know what im saying...(see I made a mistake, lol)

[justin0419]

Should've used the edit function to correct your mistake...   

Moneymagnet,
Remember, every investor had to start out somewhere and was or still is competing against more experienced investors in the market.  You're starting your journey by learning here.  Once you feel you've got a grasp of the basics and your personal finances are in order, go make that first deal. 
Success in this business can be attributed to treating it like a business.  The stories I've heard about failure generally involve either someone just completely not knowing what they're getting into or someone not establishing guidelines and sticking to them.  My Realtor was just telling me yesterday about a lady who bought a house for too much money on a variable rate.  The fees and interest were horrible and she ended up owing more on the house after a few years than what she paid for it.  She got transferred and decided to rent it.  She decided she wanted to rent it out herself.  Then the renter fell behind.  The renter would pay a portion of the rent sporadically.  She later decided to try to sell.  The deadbeat renter then refused to allow showings of the house.  My Realtor told her she needed to get the renter out of there.   She said she wanted to keep the renter because they paid "every once in a while."  You can't get the solution you want if you're not willing to do anything about the situation. 
You buy properties because they'll make you money - not because you think the properties are "cute."  It's ALWAYS about the numbers.
If you get your systems in place, you'll feel more comfortable taking on other properties. 
Our investing is going pretty well so far.  We're a couple years into it and accumulating properties at a good pace for now. 
Many "investors" you see trying to get started have seen the REI infomercials or heard the stories of someone who made tons of money in REI.  Many come to the board here with no job/money/credit and are hoping to land some big deal.  You have to position yourself to make a bank want to lend to you.  Investing will completely change your mindset about things.  A few years ago, I would've put money into my truck.  Now I put things in the context of "how many houses can I get into for that money I wanted to spend on something else?"
I also don't think you need to make many mistakes before you succeed.  There are inspirational stories of people who have done that (i.e. Abraham Lincoln), but you should be able to get a good education from here and set yourself up for success.
Buy property right, be efficient in your repairs/rehab, and treat people fairly.

[sebringc4]

fadi, can you recommend a book or two on startup business? I've spent all my time on real estate and investing throughs books and this forum. Learning about a startup business is a great idea.

With regards,
sebringc4

[moneymagnet]

right now I'm reading a book about house flipping it seems a little too anecdotal and journalistic and not enough equations and systems for success. Anybody know of a book that if I read you could probably say I'm about ready to try it out?

[propertymanager]

Mike- so you're saying you've never made a mistake in your business ever??

I didn't say anything of the kind.   I said:  "If you study hard and work hard, there is absolutely no reason to fail even once (on even one deal) on your way to success.  This is a relatively simple business.  If you learn it before you buy, you definitely should not fail."

I have certainly made relatively minor mistakes from time to time, but I have not made any serious mistakes that have caused me to "fail", which is what we were talking about.  I've never bought a property that wouldn't cash flow.  I've never had my business fail due to lack of cash flow.  I've never had my business fail because I don't screen the tenants or because I let the animals run the zoo.  In my opinion, it is inexcusable to fail.  We aren't blazing a trail in real estate investing.  Others have been there and done that, and all we have to do is follow in their footsteps.   Spending the time to study the business and working hard should prevent almost every failure.

Mike

[JakeRodgers]

Well, Mike, I guess you and I will have to agree to disagree on a couple of points. First, I would say failure is excusable, as long as you get back up, try again, and don't make the same mistake. How many times did Edison fail before he figured out the light bulb? Secondly, I would not consider REI a simple business, by all means quite the opposite, its a very complex industry encompassing many different disciplines.  I wouldn't consider analytic calculus easy either, and just because people before me have learned calculus doesn't make it any easier. The last thing I'd like to say on the topic of failure is to make a baseball analogy. Nobody, not even the best batters ever, hit anywhere close to 1.00. I've never seen a player strike out and decide to leave the sport  because he struck out once. they get right back up and face the pitcher the next innning. These guys are peak athletes, students of the game at the top of their game, and yet they fail on a daily basis. Doesn't mean they're any less successful in my opinion.

[propertymanager]

Jake,

There is a big difference between striking out in baseball and losing thousands; tens of thousands; or your life savings in real estate.  Baseball is a game and striking out is a normal part of the game.  Operating a rental property business is a BUSINESS and there is no excuse for failing, when all the information you need to know to succeed is readily available at little or no cost (right here on REIClub; at your local REIA; etc).

I have a degree in engineering and I can tell you for a fact that there is absolutely no comparison between analytic calculus and real estate investing.  Real estate investing is a very simple business and unlike Edison, you don't need to invent anything or blaze a trail to succeed at it.  All you need to do to succeed is learn the basics of the business; work very hard; and be persistent.   

Mike