The Momentum Effect

One of my favorite business books is Good To Great by Jim Collins. In this book Mr. Collins gives a great example that I realized applied to me when I was building my real estate business and will apply to you too. The author gives us an example of a great big fly wheel. He describes this as a giant metal disk on a thin pole. Imagine this disk weighs thousands of pounds and is currently stationary. Your job is to get this disk spinning.

It is easy to imagine that it will take time and effort to get the giant, heavy wheel to spin. You will begin with a single shove on the wheel. Very little will occur with this initial input from you. The wheel may move very slightly. You will push and push and the wheel will slowly start to move. Your effort will be great and the results will be minimal. Shove and shove and shove…the giant wheel begins to spin slightly faster and faster.

At a certain magical point the wheel will become much easier to spin. The weight of the wheel is now working for you. Its own momentum will keep it spinning with very little effort on your part. You can now give small gentle pushes and the wheel will keep spinning on its own.

I find this to be one of the best analogies for building a real estate business. In the beginning you will need to apply tremendous effort and the results may seem a bit “lackluster”. If you keep on adding effort and force to your business (in time) it will start to take a life of its own and eventually you will only need to apply minimal effort to realize great results.

Everyone is looking for the one “big shove” that instantly makes the wheel spin fast. In real estate everyone is looking for the one magic deal that puts them on the road to riches. This very rarely happens. Like the example of the wheel, no one shove was any more effective than any other. The momentum was built by shove after shove. The momentum was created by the total of all the effort over a period of time.

When I started in the real estate business 10 years ago, my first deal was a duplex. I then bought some houses. My 1^st multifamily deal was a 9 unit. Then I bought a 20 unit, 27 unit, 44 unit, 108 unit and then a 152 unit property. I didn’t start at the top and my success was built with one “shove” at a time.

I have some friends that bought a really big property (over 100 units) for their first deal. From the outside it looks like they were an overnight success, but that is not true. What you don’t see is all the effort they put into finding the partner or sponsor that allowed them to do a large deal for their first one. You don’t see all of the networking they did and all of the deal analysis they did to find that one good deal.

Deal flow and networking are two of the most important aspects of building a successful real estate business and both take time to get good at. You need to be constantly meeting new agents in your market, advertising and looking for good properties to buy. If you only look at a few deals every now and then, you will start to feel a sense of desperation to get a deal done. If you feel too desperate then you are likely to go after the wrong deal, while convincing yourself it’s the right one.

Networking is the key to going big faster. If you want to pick up the momentum and close larger deals you will need to find the right partners that will bring the financial clout to allow you to do those bigger deals. This is why I say networking is the second biggest aspect of your business. It takes time to build “relationship momentum”. People do business with people they like and trust and that is not developed over one or two meetings. It takes time. My suggestion for networking is to go to www.Meetup.com and look for business networking groups in your area. I don’t go to real estate groups as much because I am less unique in a real estate meeting compared to a business meeting. This is a great way to meet potential financial partners and get your business going.

As they say “Rome wasn’t built in a day” and your business is not likely to be either. Building momentum takes time and constant effort but once you have it…your business will take on a life of its own and it’s all downhill after that.

Good luck,

Bill Ham

bill@phoenixresgroup.com