Flipping Houses: Strategy vs Tactic Part 1

October 24, 2014

As I travel across the country educating investors on flipping houses and how to make money in real estate. I am often asked “What is the one thing that separates the successful investor from the struggling investor?”. There are several things that I believe separates successful investors and struggling investors. The first thing that comes to mind when flipping houses is strategy versus tactics. I tell my students that one must understand their strategy before they initiate their tactics.

In today’s modern digital age, many young or inexperienced entrepreneurs see a cable show, read a blog article, or even attend one of those real estate “guru” events and get the “itch” to give real estate investing a try. At the “guru” seminar, they’ll hear some slick shark salesman give them a preview of some new, hidden, secret tactic in real estate that will make them a million dollars overnight. It could be buy/fix/sell, lease options, notes, short sales, or multi-family…but they get excited and want to stop everything, run out and try this new real estate investing “tactic.”

Just like life for the rest of us, this excited new investor eventually falls on hard times. They come across problems, something goes wrong and then they’re out of the real estate game just as quickly as they jumped in! Then they go back to whatever it was they were doing previously. This struggling entrepreneur and the person that jumps in and out of real estate does so because they lack the understanding of what they are actually trying to accomplish in real estate! They do not understand the strategy!

One must be able to say, “Financially, this is where I’m at; over there – wherever that is for you – that’s where I want to end up. That’s my end-goal. I’m going to use real estate as the vehicle to get me where I want to go. Real estate will not be my life. It will not be who I am.” To personalize this, let me say it this way: real estate does not define me. But I’ve used real estate as a vehicle to take me from my parents basement during the market crash to being a successful investor and finally, financially free today.

My very first goal in real estate was to make enough money/cash flow from rental properties to pay all of my normal monthly bills. At that time, I needed about $4,500 every month. Once I reached that $4,500 mark, I had arrived at my destination, my goal line. However, accomplishing my goal was much easier than I had thought it would be. So now, I wanted $10,000 per month. Once I reached that destination it was, “How about $15,000 per month?” Strategy will change and grow as we reach our destinations.

There are two main points one must understand to make it in real estate:

First, focus on your strategy, which is knowing where you are and where you want to be. That’s the path that you are going to go down; your game plan; your road map to change your financial destination. You’re going to follow this strategy. You will use real estate as your vehicle to get there.

Now that you know your strategy, the next step is to decide your tactic. Will my vehicle be multi-family? Lease option? Short sale? Buy, fix and sell? That list goes on and on. Pick one of those and say, “This is the tool inside of real estate that I am going to use to get from point A to point B.” That’s what will set you apart from those people we talked about at the beginning who don’t know where they’re going or how they’re going to get there. Know your strategy. Stick with your tactic.