You have to be able to prove what you know.
What would it take to knock your real estate investment socks off? For Brian Persaud, it was hearing a trusted mentor tell him it was Brian’s job to “Look behind the curtain”
before he made any decisions. Brian thought he understood what due diligence meant before he heard that comment. But when that mentor told him to “Look behind the curtain,”
Brian realized just what was the true link between due diligence and personal responsibility. It was a lesson Brian liked. He already knew investors had to have a sense of the “big picture.” Now he knew that the underlying details mattered more.
A full-time investor by the age of 25, Brian’s savvy take on real estate investment soon earned him a regular spot on Rogers TV. With his own portfolio of residential real estate still in the growth phase, he is a testament to what happens when investors take the action necessary to get them to where they want to be.
This focus on action is important for two reasons. First, it takes action to find and buy properties and manage a portfolio. Second, real estate investing is about the creation of long-term wealth, but it’s not meant to be a 40-plus-hours-a-week job. There will be weeks when it takes long hours to close a deal or solve a problem. But a good deal of the action an investor takes involves setting up the systems and relationships that reduce the stress involved with making sure that business runs well. That kind of action leaves more time to enjoy the rest of your life. Two notes of caution:
1. When it comes to success and the long hours associated with hard work, you can’t have one without the other; and
2. Hard work is rarely exciting.
These two points really hit home on the record-keeping front. In this area, hard work often involves the near-constant replication of some pretty mundane tasks. You really do have to pick the right bank account (Tip #18), identify every deposit (Tip # 20), keep your records in meticulous order (Tip #23) and so on, and so on. Do it, do it, do it. As Brian’s story shows, the results are worth it, worth it, worth it.
What you know is important. But what you don’t know can really hurt you. Brian Persaud learned that the hard way. A university-student-turned-real-estate-investor, Brian figures his first investments included a lot of the same mistakes other novice investors make. With that experience safely tucked under his belt, he’s not looking back.
A couple of years ago, Brian had a few major real estate deals go up in smoke. The experience burned. It also taught him he needed more control over the things that were actually in his control. In terms of due diligence, that meant he had to spend more time looking behind the curtain to find specific ways to reduce the risks he took with other people’s money. He also needed to stop spending cash he didn’t have.
To meet both goals, Brian committed to change the way he did business. First, he renewed his commitment to deals that worked for his money partners. That meant more focus on making sure everyone’s needs were met, so expectations were managed in advance, which led to fewer surprises as deals progressed. Whereas he used to leave
verbal discussions thinking (and sometimes acting) as if he had a formal deal in place, he now takes detailed meeting notes and follows them up with written confirmation about what he thinks went on. This opens the door for a final deal solidly based on details.
“There are so many ways for a deal to fall apart. I think you really have to will a deal to happen. You have to work from the perspective that you really want that deal to be done and you have to be certain that the deal is solid.”
He also moved his investment focus closer to home. His real estate experience to date had served him relatively well, but stressed by the fact that some of his properties were several provinces away, Brian saw some value in focusing on a particular geographic area. Following a system that promotes economic fundamentals, “I started researching the Toronto market and realized I didn’t have to leave the province, or even the area, to find good properties,” says Brian. Taking what he was learning about economic fundamentals, quality properties and quality tenants, Brian targeted the Toronto area and set out to find properties closer to home.
Since an investment business is about more than buying property, Brian also took a critical look at his record keeping. Determined to keep meticulous track of his cash flow, he went to his accountant for help. The accountant helped Brian set up financial records useful for business and tax planning. That includes a better system to track and file receipts so they are easily accessed when needed. Brian now puts each day’s receipts in a special place in his office every day. He sorts through that pile once a week and places receipts into appropriate folders. He keeps the original receipts in case he’s ever audited, but he and his accountant can work from the PDF files created by scanning the receipts. Brian concedes that scanning receipts takes time and it costs money when you pay someone else to do it. But that level of receipt organization makes Brian’s accountant’s job easier and faster, which also saves money. “My accountant takes care of the actual deductions and I provide whatever he needs to do that,” says Brian, who figures he sees his accountant once a month.
A self-proclaimed high achiever who wants to grow his investment business as wisely as he can, Brian admits he takes a very disciplined approach to money. “Right now, I live off the cash flow of my real estate. That requires me to be very disciplined in terms of knowing exactly where my business is at. I do that because I have to,” says Brian.
ACTION STEPS
• Commit to constant improvement: Set aside some time to think about your
investment business. What’s making money? What’s not? What causes you stress?
What comes easy? What do your answers to these questions tell you about what you need to change?
• Make change happen: Mediocrity is madness. Where can you go to learn how to
strengthen your weaknesses? Who can you talk to? Where can you learn about
“systems” you can adopt? What will you need to do to make sure you follow those systems?
• Write an action plan:
- I will surround myself with people who are achieving what I want to achieve.
- I will set up a lunch meeting with an investor who is willing to share her time and experience.
- I will ask my accountant what I can do to make his job easier and thus save me money in the long run.
- I will begin/end every day/week with a predetermined plan. This plan must include properly filing every piece of paper I have dealt with that day or week. (I will plan it into my daily agenda if that’s what it takes to make it an operational business habit.)
- I will program my e-calendar to remind me about certain tasks that I need to take care of. (If I say I will look for properties Wednesday morning, I will block off the time to do that. If I say I want to review my mortgages three months before they’re due, I will make time to do that. If I say I will file my receipts weekly and separate them into the appropriate folders (repairs/maintenance/entertainment/ education) I will do that.
• Look for ways to build strong relationships with people who know more than you do:
Not everyone needs to meet their accountant every month. Do you need more extensive short-term help for long-term gain?
PART 3
FOR THE RECORD:
YOUR NEW BUSINESS MANTRA:
ORGANIZE AND DELEGATE.
ORGANIZE AND DELEGATE.