Henry Ford once said “nothing is particularly hard if you divide it up into small jobs”. That simple theory allowed him to create the American automobile industry via the invention of the assembly line. But you can also apply this concept to investing in real estate. We’re going to discuss the small steps of choosing the right niche, learning how it works, persistently looking for deals, and all the small steps which collectively add up to the big step of successfully buying a property. If you think it’s impossible to get into real estate, you’re wrong. You just have to break it up into small action steps.
Episode 5: Breaking It Up Into Small Action Steps Transcript
There's an old saying, and it's very smart, that first you should crawl, then you should walk, and then you should run. And what it means is, in any endeavor, you want to start off in little baby steps and then build up to your big ending. But you have to think in tiny terms to make those first steps possible. This is Frank Rolfe with the Commercial Real Estate Mastery Podcast. We're going to talk about breaking it up into small action steps, how to get into commercial real estate in bite-size, very understandable, not that risky steps. Now, the first thing you have to do if you want to get into commercial real estate is you have to choose a niche. And what a niche is means that's one sector of real estate. Nobody says, oh yes, I'm a master of real estate. There's no such thing. I know people have little certifications and things. They're all meaningless because no one's ever been good enough to be a master of all of the different little niches of real estate. So then what are the niches to consider? Well, you've got apartments, mobile home parks, single-family rentals, self-storage, B&B, office, retail, quite a few of them.
And you've got to find the one that fits in with your goals and personality. We all have our own individualized ideas of where the world is heading, what we think the megatrends are, how we fit into those megatrends, where the opportunity is. You've got to pick a niche that you like, that fascinates you. I've been involved in two different niches. I was in the billboard industry. What I liked about the billboard industry was it was federally controlled. There's only so many spots you can put a billboard in America, and I love the fact the supply was capped. I thought based on supply and demand, that was a good thing to do. And I'm in the mobile home park business for the same reason. It's got what Warren Buffett calls a moat. A moat is something that protects your industry from competition. And in the case of mobile home parks, cities, towns throughout America have not allowed new mobile home parks for about half a century now. But you've got to pick out a niche. You can't just generally jump in. There's no generalist in successful commercial real estate. You've got to pick a niche. And then once you pick that niche, you have to learn everything about it.
You have to become an absolute expert. You have to completely immerse yourself in that niche. You have to read every publication, do every course you can, just read and read and visit and soak it all in because that's what's going to get you successful is knowing exactly what you're doing. So you've got to pick a niche, and then you have to become an absolute professional as far as every bit of knowledge available that you can soak in, that you can take into your brain like AI so you really understand that niche. And then you need to draw about a five-hour circle around your house. Now, why is that? Well, that's pretty much your territory, and that's based geographically on where you live. Because for most people, the five-hour circle means you could go out and look at a property in the morning on a Saturday, and then you could drive home and be home for dinner. It's the ability to get there by car that really makes us feel like we're in control. When you have to fly in an airplane, you feel like you have no control. You have to line up airfare, car rental, hotel.
It's extremely expensive, really limits your capabilities. But when you have a five-hour driving circle, well, that is something that most everyone can do. We can all drive out, and we can all drive back. So that would be your third little step. And then the fourth step is you've got to build a sorter. You've got to figure out what you want to buy versus what you don't want to buy. And you're going to glean that concept from all that educating you did on that niche. You're going to look at all the different deals, case studies. You're going to say, okay, this is what a good deal looks like. This is what a bad deal looks like. Because you have to place every deal you ever look at your whole life into one of those two bags. Either there's the good stack and the bad stack. And you have to be able to move them into those stacks very, very quickly. And then once you've built that sorter, you've got to put as much raw material in that sorter as you can. It's all about volume. So how do you do that? Well, you look at all the different sources of how you can find leads, which we'll go over in a minute, and you pour them in that sorter.
And it's just like mining for gold. If you look how the gold miners did it back in the 1800s, they started off with a pan, and they take some dirt out of a creek, they put it in the pan, and they swish it around because the gold would fall to the bottom of the pan, but the mud and the other rocks, they weren't as heavy. So they would all fall out of the pan. And then when gold miners realized that you could sort gold from mud and rocks by weight, they started taking down entire mountains with giant water hoses, getting all that dirt to go through their sorter so they could find even more gold. So they found that volume, in fact, was the key. And in commercial real estate, it's no different. Having a lot of volume is what creates your success. It's all about looking at lots and lots and lots of deals, which takes us to step number six, which is create a giant volume using the following manners. Number one, online listings. Almost every sector of real estate today has a repository somewhere of online listings. And there's many places you can go.
There's loopnet.com if in your individual niche or places like Mobile Home Park Store. But you can find all kinds of commercial real estate online. So that's one item. And then you have brokers because just about every niche of real estate has some degree of brokers in the brokerage community that push and work on just that finite sector. And there's quite a few of them. In the mobile home park space, there's about 100 of them that just do mobile home parks. So make a complete list of those brokers and reach out to them. And then you augment that with cold calls, which is where you basically call up owners to see if they'd like to sell. It's not menacing. It's not that hard to do. And then direct mail where you send out postcards or letters to sellers to see if they would consider selling. So those are great ways to create a lot, a lot of volume. But what happens then? Well, as deals start coming across your desk from online, from brokers, cold calling, direct mail, you got to make offers. There's no point in even dabbling and looking at any niche or sector if you're not going to make a lot of offers, because without an offer, you have nothing.
So when you look at something, you have to be bold enough to say, well, okay, I'll tell you what, I'll buy that from you for 350 grand. No matter what they have it priced at. We've bought many deals at half of what they had on the listing, sometimes even when it said firm. There's nothing firm in real estate at all. So just make lots of offers based on the fundamentals that you've already learned as far as what the values are. And then as you go along, when you have someone who agrees to the price you throw out, then you just tie that deal up. Get it under contract. Get it in your possession. You've probably gone to an estate sale. You saw a candlestick. You like the candlestick. So what do you do? You grabbed it and you carried it around the estate sale so no one else could buy it while you analyzed it. Maybe you go on your phone. You go to Google. You look at the hallmark of the candlestick. You see when it was made, if it's actually sterling silver, what is valued at on eBay.
If you still like it, you buy it. If not, you put the candlestick back and you walk out of the estate sale. That's the same with any sector of real estate. You tie things up and then you analyze them, which takes us to the next step, which is you do due diligence and financing if you want to go forward on those deals that you tie up. Tied up deals should never scare you. The only thing that should scare you is when you actually sign up and buy it. Because on almost all contracts, any good contract is going to have a due diligence contingency and a financing contingency unless mom and pop are going to carry the paper, in which case you do not need the financing contingency. So you complete your due diligence, you complete your financing. If it still fits exactly as you want it, then you go forward. But if it's not, if in due diligence you realize that the rents are lower than what you figured or the thing has got structural problems, then you can cancel. And if you can't get a loan for it under the terms you want to meet your down payment and the interest rate, once again, you would walk it.
Which leads us to the final item, which is to buy it and to enact your plan. Because at that point in the movie, you've gone, you found a property, you've learned all about it, you've done your diligence, you've done your financing, and you know at this point there's really nothing that can derail you as long as you've got a reasonable plan. But you have to take that final, final action step. You have to have the guts to go ahead and close on the deal, write your check for the down payment, step into the shoes as the owner and start operating it. Now, it all sounds easy enough, right? But it really is kind of easy because every step I said on there, there is really no risk, nothing to worry about till we got down there to pretty much number 10, which is the actual pulling the trigger and buying the deal and taking it over. So you can do all those other action steps without a worry in the world. And there's no better way to get the real estate business than through volume. Volume is absolutely the key to success. And there should be nothing to hold you back.
There's no reason why you can't go out, make lots of offers, tie lots of deals up, analyze lots of things, because again, there's nothing that's concerning until the final moment when you buy it. And by the time you hit that final moment, since you did all of those earlier small steps, you will feel like you have a true mastery and it will not frighten you to actually pull the trigger. This is Frank Rolfe with the Commercial Real Estate Mastery Podcast. Hope you enjoyed this. Talk to you again soon.