In challenging times, it’s a smart idea to revisit the fundamentals of good business. This April, go Back to Basics with Inman.
We’ve been stuck at home for quite some time now. As a result, we’ve done everything from catching up on long-neglected books to tending to our gardens. Solving puzzles with the family and hunkering down in front of a board game has become sort of a daily ritual.
You can learn a lot about people from the way they approach board games. Are they competitive or just focused on having fun? Are they casual with the rules, or do they scour the rule book at every opportunity? Are they looking for a win-win, or do they want to come out on top no matter what?
The game that we know as Monopoly was originally called “The Landlord’s Game.” Its focus was to show that a system that rewards wealth creation is better than one that rewards only a few monopolists. Here’s what you can learn from this classic board game.
1. Watch out for debt
In Monopoly, it’s tempting to buy everything you run across in an effort to build your property portfolio. However, if let your cash resources get too depleted, a bad roll or two could lead to financial ruin.
As you build your real estate business, it’s tempting to go all in on every platform, product and promotion you see. However, this can lead to excessive spending. A bad month or a cancelled contract can wreak havoc on your budget.
Be careful of taking on too much debt. Examine the ROI on the things you invest in so you can ensure that you are making good choices and gaining value from the things you purchase.
2. Plan for the unexpected
You may spend a little extra on improvements assuming you’re going to make it up when you pass Go — then a Chance or Community Chest card puts all of your best-laid plans to naught.
We’ve all heard the maxim “pay yourself first,” which is especially true when you’re running your own business. You need cash set aside for the expected — taxes, fees and ongoing expenses — as well as the unexpected, like for extra marketing or a move to a new brokerage.
The unexpected isn’t all negative. It may involve an unforeseen investment opportunity or a chance to participate in a conference requiring travel (that is, of course, after things change for the better and stay-at-home orders lift). You’ll need money available to allow you to jump in with both feet when a big break presents itself.
3. Follow the formula
Monopoly is all about scale — buy up properties and begin building houses. Build more houses, and upgrade to a hotel. There’s always a way to scale up and increase the value of your investment.
My colleague Andy Dane Carter said, “Growing up, Monopoly was one of my favorite games. I thought about the game a lot when I first started learning about real estate investment.”
Carter’s book, 100 Doors, uses the Monopoly analogy to talk about scale. “Buy four Green Houses and 1031 exchange them into a Red Hotel — or in our case, a cash-flowing apartment building,” he advises. Creating a replicable, reliable formula is the way to ensure manageable scale.
4. Keep a cool head
How do you react to a bad roll of the dice or an unexpected losing streak? If you let it — and your fellow players — get to you, you’ll probably find yourself on the losing side in most games, not just Monopoly.
It’s not easy being a real estate agent or broker — if it were, everyone would do it. You struggle with cash flow, market conditions and a host of unforeseen situations, like the current global outbreak. How you respond to these often makes the difference between a reasoned, thoughtful approach and a spontaneous, emotional one that you may live to regret.
If you find yourself reacting emotionally rather than acting reasonably, it may be time to incorporate some mindfulness into your routine. Just 10-20 minutes a day can help you become calmer, more centered and better able to control those overcharged responses so that you make better decisions.
5. Make the most of your opportunities
You went into the game planning to plant your hotels on the priciest neighborhoods, then sit back and collect the big money. Instead, you find that someone else got to them first, and you’re left with the small potatoes on the board.
It’s easy to go into real estate thinking you have a plan, and then find out that your plan isn’t working. Whether you were counting on your sphere of influence or your marketing strategy, you’ll sometimes find that you need to regroup and come up with a new plan of action.
Instead of getting stuck, look around at the opportunities that have presented themselves to you. Maybe you’ll find that instead of the seller-based model you had counted on, a buyer-based model makes more sense. Maybe you should focus on a specific niche or cultivate some investment opportunities. Flexibility is your friend and can help you maximize your chance to succeed.
6. Consider the value in a niche
While others are buying up the board, you’re quietly focusing on dominating a few affordable neighborhoods. Soon, you’re bringing in big rental payments while other players struggle.
Many people go into real estate planning to be generalists. They want to help everyone and work everywhere. While it’s a generous impulse, it doesn’t work very well — especially for creating and communicating your unique value proposition.
Focusing on a narrow niche can help you create an irresistible brand and message. That’s because building your expertise and experience in a specialized market translates into an irresistible reason for potential clients to work with you. When you’re the very best at something, you create a powerful incentive for people to reach out to you.
7. Always have a backup plan
You cornered some neighborhoods early, but the dice are just not on your side. No one has been landing on your properties, and now your resources are dwindling.
We all have times when things are not going our way. Maybe the market is in a slump. Maybe your referral network has cooled. Maybe Mercury is in retrograde. Whatever the reason, it’s important to always have something else going on to make it through the lean times.
Here are some possible backup plans to get you through:
- Pursue additional education and training and develop another niche.
- Build a portfolio of investment properties to create passive income.
- Become adept at low-cost content marketing strategies — blogging, social media and video — to create and manage online sources for lead generation.
8. There’s no one way to win
Maybe you went all in on the railroads, or maybe you cashed in with Free Parking. Maybe the dice were on your side, or you guarded your cash reserves smarter than the other players.
In many industries, there’s a clear path to success with only a few winners and lots of losers. By contrast, real estate offers a variety of ways to win, and there’s always a new strategy to try.
Make your money as an investor or become an independent broker. Be a top-flight luxury agent or make your mark in a narrow niche. Identify a hot market before anyone else, or get in on the ground floor of a new construction project. In real estate, you’re only limited by your insight, market knowledge and imagination.
9. Keep Go-ing to reap the biggest rewards
You’ve white-knuckled it, but you’re rounding Go. Collect $200!
The easiest thing in the world is to give up when times get tough. However, it’s important for you to keep looking for new ways to put the time and experience you have to work. Although you may need to make some adjustments as you Go, it’s the Go-ing that brings the rewards.
Keep moving forward, keep learning from your mistakes, and keep putting one foot in front of the other. Take an honest look at what you’re currently doing and figure out how to put the pedal to the metal. You’ll look back someday and be grateful that you didn’t quit when times got tough — you found a new way to win.