Success in Real Estate Investing – Setting Goals and Working Backward to Achieve Them

While most people associate goal setting with New Year’s, I am going to share with you some tools for converting the goals that you set into metrics that you can measure and work toward achieving daily in your real estate investing business.

I realize that the chances of your goals exactly matching the example I am going to be using is small at best, but it is my hope that the concept of how to calculate out your own numbers will be clear enough so that you will actually do it.

So, in this example, I am going to assume that you want to purchase $600,000 worth of real estate in one year and that the median home price in your market is $150,000. If each house is $150,000 you can determine how many houses you need to purchase in the year to achieve your goal. In this case $600,000 divided by $150,000 per house means you need to buy 4 houses in a year.

4 houses in a year means that you need to purchase 1 house every 3 months. I calculated that by taking 12 months and dividing it by 4 houses.

That means that you need to find and close on one $150,000 house every 3 months… which is a very reasonable part-time real estate investor goal.

So, let’s take a look at what that means you will need to do on a weekly basis. My experience says that there are primarily two ways to find real estate deals: poor methods and lazy methods. Poor methods are the methods you use when you have more time than money and you are willing to invest time to save money for finding deals. Examples of poor methods include calling real estate agents, looking through the MLS, calling on For Sale By Owner ads and things that require little or no money, but do take time.

Lazy methods are the methods you use when you are willing to spend money to save yourself some time. These methods include buying advertising to get motivated sellers to call you with houses for sale. For example: placing “we buy homes” classified ads in the newspaper, mailing out absentee owner postcards, etcetera.

There is a huge difference in the number of houses you need to look at to find a deal depending on whether you are using lazy or poor methods. Lazy methods are usually more on a scale of 1 deal out of every 10 to 20 deals you look at. Poor methods are usually 1 deal for every 50 to 100 houses you look at.

For this example, I will assume you will be using poor methods and we will use 1 deal for every 100 houses that we look at. So, to find one deal, we will need to look at 100 houses with either a real estate agent or that is For Sale By Owner. I am also going to assume that we can close on the house in about 3 weeks, which leaves us about 10 weeks to find the deal.

If we take the 100 deals we have to look at and divide it by the 10 weeks we have to find our deal to buy, then we need to look at 10 deals per week. If we are only doing this on the weekend and we will look at deals on both Saturday and Sunday, that means we can look at 5 houses on Saturday and 5 houses on Sunday to find one potential deal over a three month period with 3 weeks left to close on the deal once we find it.

So, now that you can see how to break down the numbers, go ahead and take your goal of how much real estate you want to purchase and work backwards to determine just how many houses you need to look at each week to achieve your goal. The final secret is to commit, and actually look at the required number of houses each week to reach your goal, whether you “feel like it” or not.