Mentors

Luke Yoda

If you Google “Mentorship”, one of the first images to appear is Yoda mentoring Luke Skywalker from “Empire Strikes Back”.  [Side note: it could simply be Google’s spyware adjusting the search results based on my favorite sci-fi movie…sorry Trekkies]  Yoda’s picture is apt for a mentor.  Luke wanted to learn more about the Force.  He had the abilities, he just needed to be pointed in the right direction, the path to Jedi Mastery illuminated.

Mentors have first hand experience.  They have lived what they are teaching.  Yoda fought in many wars, most recently, we saw him fight in the Clone Wars.  He did lose a battle and banished himself to Dagobah, only to further hone his skills.

When Luke Skywalker came along, Yoda did not simply say “This is what you need to do,” but rather illuminated the path Luke needed to take to learn the ways of the force.  Luke still needed to follow the path by himself.

Modern day mentors are very similar to Yoda.  They have made mistakes, they have won victories and also suffered defeats (although not generally at the hands of Dark Jedi).  Mentors do not do the work for you, they illuminate your path.  You still have to do the work.

Over the past couple of years, I’ve begun to understand the importance of mentors.  Why struggle to reinvent the wheel when someone has already created a great wheel?  Ask them to share their wheel and build on their invention.  I’ve been purchasing and managing rental properties for a little over a year at this point.  I’ve read a lot on the subject, I follow the BiggerPockets.com blog, and I am always curious how other local investors look at their investments.  However, I had never asked someone to be a mentor.

For roughly a year, I’ve had real casual conversations with a friend of mine about rental properties and entrepreneurship in general.  I knew my friend owns quite a few rental properties, he had also created a variety of businesses in the past, and his goals and general outlook on life roughly parallel my views.  He and I were on a trip to Memphis recently and we talked more deeply about business.

As he and I were talking, my mind began to connect the dots.  The first dot: My friend has a healthy view of life.  The second dot: My friend owns a bunch of local rental properties.  The third dot: My friend has created a variety of businesses over the years.  At some point on our trip to Memphis, it hit me “This guy should be my mentor.”

About a week after we returned, I approached my friend and explained what I was looking for, what I hoped to gain and how I thought his experiences could help me.  He agreed.

I plan to meet with him on a relatively frequent basis (once a month or so) to review progress over the past month and plans for the next month and next quarter.  I will be sharing my long term goals along with my intermediate and long term goals.  I’m really looking forward to working with my friend in this capacity.

Who can you ask to be your mentor?

Opportunity

Opportunity is all around us, we just have to open our eyes to see the possibilities.  Seth Godin, Richard Branson and Jeff Bezos constantly remind anyone who will  listen that the size of the pie is not fixed but that we are all dining at an all-you-can-eat dessert smorgasbord.  We don’t have to fight for our slice, but we do have to learn to see that in addition to the pie, there is also chocolate cake, cobbler, ice cream, tiramisu, chocolate…

Entrepreneurship is all about learning to see opportunity where no one else does.  Maybe it’s a UFUO.  Maybe it’s a new iSomething.  How about a bicycle in the trash?

This past Thursday, my wife and I were running in the morning.  We ran past the bike in the above photo.  The bike was out for trash in front of a house a few blocks from our home.  Most people would have run past, I’m sure people drove past the bike on their way to work.  WE initially ran past the bike.

About 100 yards past the bike, my wife said, “Do you think we could sell that bike on Craigslist?”  I said, “You know, I was just thinking the same thing, let’s go look at it.”

We ran back to the bike and did a quick inspection.  The tires were flat, there was a little rust on some of the spokes, but everything else appeared to be in fine working order.  As we ran home, my wife pushed the jogging stroller and I ran with the bike.  Between my huffs and puffs, I mentioned to my wife that some friends of ours had done something similar and had sold a found bike for $20.  I figured $20 would be a reasonable amount to make for a quick Craigslist ad and 10 minutes of our time.

When we got home, I did a more thorough inspection of the bike.  Again, nothing seemed wrong with the bike.  There were working front shocks, working breaks, the derailers appeared to be working correctly, so I filled the bike’s tires and rode it around just to make sure everything was in working order.

A friend of mine, who does a lot of biking, was working at my house that day.  He inquired about the bike.  I told him the story and he suggested we list the bike for $40.  After some deliberation, we decided to list the bike for $50.  Within twelve hours, we had three responses, and all wanted to come to see the bike immediately.

The first couple to see the bike, wanted to haggle.  The rear derailer was not working (I run; I know nothing of gears and sprockets).  The guy said it was worth $40.  I told him about the other two people interested in looking at the bike.  He didn’t really budge, but as he pulled the cash out of his wallet, he gave me the $44 in the picture above.

I was content with $20, so $44 was more than good enough for me, all for seeing an opportunity and wheeling a bike home from someone’s trash.

We all have the ability to see these opportunities.  Think of how many times you  say “Wouldn’t it be great if someone…”  That’s your opportunity.  You just need to take the next step.  I agree, wheeling a bike home and listing it on Craigslist is a lot less scary than designing a new product or starting a new business.  However, I don’t want to be 80 and regret not trying something (Watch: Jeff Bezos’s Princeton graduation address from 2010).

What is your opportunity for today?

Book Report: Investing in Duplexes, Triplexes & Quads by Larry B. Loftis, Esq.

Investing in Duplexes, Triplexes & Quads by Larry B. Loftis, Esq.

IMG_20130912_085239_952QUICK LOOK:

Recommended buy?  Yes
Amazon Link & Price:  Investing in Duplexes, Triplexes & Quads  — $14.49
Original introduction to book: Biggerpockets.com
Reading Difficulty: Taking candy from a baby
Quick Synopsis: Investing in small multifamily properties of 2-4 units is the way to financial success.

Chapters:
1) Why Real Estate?
2) Why Residential Multifamily is the Best
3) The Making of Millionaires
4) Creating Wealth from Thin Air
5) Buy and Hold, Pyramid, or Refinance?
6) Using Brokers to Your Financial Advantage
7) Finding Your Property
8) Valuation of Your Property
9) Verification and Due Diligence
10) Making Offers
11) Closing and Your Costs
12) Managing Your Property
13) How to Sell and Pay No Taxes
14) The Fastest and Safest way to Wealth
15) Where do You go from Here?
Appendix: Real Estate Appreciation by Metropolitan Area

 

“Investing in Duplexes…” is a recommended read on Biggerpockets.com; I had also seen the book at Barnes & Noble and flipped through the book.  The book is not a difficult read.  I’m a slow reader and I was able to finish the book in about four hours.

This book offered a few new ideas and techniques I plan to start incorporating in my investment strategy.  Most of the ideas in this book are refinements of my existing techniques rather than entirely new techniques.  One example: when purchasing a property, close late in the year but early in the month.  If you close late in the year, there is a credit for real estate taxes.  By closing early in the month, you will receive 90%+ of the rent as a credit at closing and your mortgage payment won’t be due until the beginning of the following month.  I knew about the prorated rent as well as the tax ‘benefit’, but had never considered the benefits of using both of these techniques to significantly reduce my down payment.

“Investing in Duplexes…” is divided into four sections: 1) Real Estate Wealth Building; 2) Buying; 3) Holding and Selling; and 4) Your Wealth-Building Program.  Each section is roughly broken into four chapters.  The real meat of Larry Loftis’s book is in Sections 2 and 3.  Section 1, “Real Estate Wealth Building”, covers the Why of real estate investment.

Larry Loftis firmly believes the key to increasing your personal wealth and planning for retirement is through continued investment in residential real estate, specifically residential multifamily real estate.  Loftis defines residential multifamily real estate just as Fannie and Freddie do: 2-4 unit buildings that are either owner occupied or non-owner occupied.  Loftis specifically makes a case to purchase quads or triplexes.

Throughout the “Real Estate Wealth Building” section, Loftis describes how he and others profited from the purchase and ownership of real estate.  He makes the case for real estate through a variety of examples.  Loftis invests in the Florida real estate market, with a focus on Orlando, and New Smyrna Beach.  Many times I find examples in real estate investment books hard to swallow: they could simply be invented by the author to illustrate a point.  However, an aunt and uncle of mine used to live in Orlando, so I have a personal connection with the area.  I knew some of the areas Loftis mentions and I also knew about the rent and appreciation in the area, which added significant credibility to Loftis’s arguments.

Probably the best chapter in Section 1 is Chapter 5, “Buy and Hold, Pyramid, or Refinance?”  This chapter really struck a chord for me because Loftis lays out an investment strategy which he refers to as “Refinance”.  This is the same strategy I have been using and will continue to use for the foreseeable future.  My agent and my banker never really described this strategy, nor could I find it specifically referenced anywhere else, which lead me to doubt my own plan.

Loftis recommends purchasing a property, rehabbing the property over a one year period and refinancing the property at the end of the to then reinvest the cash from the refi in another property.

To me, this investment plan seemed like a no-brainer.  You still control the asset, yet you have access to the equity.  Properly managed, there should not be an issue with this plan.  Finally, I found someone who agrees with me.  Maybe I had read about this plan in other books, but Loftis really hit a home run for me with this strategy.  Chapter 5 is a Must Read.

Section 2, “Buying” thoroughly describes the purchasing process and how to reduce your down payment costs.  Most of these items I had already learned but my implementation needed to be tweaked to help improve my returns.  In some instances and situations, by tweaking my strategy during the purchase process, I may reduce my down payment by up to 40%, which really improves the cash-on-cash return.

In Chapter 9, “Verification and Due Diligence”, Loftis’s law background is quite evident.  The chapter opens with the quote from President Reagan “Trust, but verify.”  Loftis encourages you to use the numbers provided by the seller as an initial starting point when evaluating a potential purchase…but to then call to verify each piece of information you are provided including taxes, utilities, service companies, etc.

I have never called to verify a specific piece of information when I’ve purchased a property; I’ve only used the seller supplied information.  I almost got burned once with some water/sewer bills and simply figured “caveat emptor” ruled these transactions.  After reading Loftis’s book, I plan to do some more due diligence on these purchases prior to signing the deed.

As you would expect, Section 3, “Holding and Selling” is about property management and reduction of taxes during the sales process.  Loftis’s book was not really geared toward property management, and Section 3’s two chapters (Chapters 12 and 13) are very slim.  Overall, I was not very impressed with Section 3.  However, Loftis does finally get through to me to look for rental properties for middle to high income earners.  To date, my investment strategy has been to invest in low to low-middle income rental properties, slowly building cash flow to purchase the middle to high income rental properties.

With my strategy, I do sometimes have to deal with bonehead tenants.  For example, I recently had a tenant tell me that they got tired of paying bills, so they refuse to pay their water and sewer bills (my reaction: “Come again??”).  Loftis argues that middle to high income earners will generally not try to pull a stunt like that.  That being said, I do have other tenants, in the same town as the ones mentioned above, who are low income earners, but who are incredibly polite, courteous and do pay all of their bills on their own.  They just aren’t great money managers.

Section 4, “Your wealth-Building Program” was also a very slim section.  In this section, Loftis lays out the three ways he sees to create wealth with real estate: Buy and Hold, Pyramid, and Refinance.  When he lays out these sections, the process is more of a bullet point presentation which really helps to sum up the book.  If I were young with no pets or kids, I would very seriously consider Loftis’s “Pyramid” program.

In this program, Loftis recommends living in one unit of the 3- or 4-unit building you have purchased, fixing that unit, then moving to another unit in the same building, and repeating until you have refinanced or sold the fully updated multiplex.  Then you repeat the process.  Loftis’s plan is much more nuanced than I just presented, and I highly recommend reading, understanding and considering his “Pyramid” plan.

Overall, I recommend purchasing and reading this book.  I say ‘purchase’ because you can then take all the notes in the margins you want, dog-ear the pages and stick the book on your shelf for future reference.

Calculating your Rent

The perennial problem in business is what to charge for your product.  Charge too much and you can’t sell, but charge too little and there is no profit.  How do you know what to charge for a rental?  Fortunately, there are a ton of resources online to help you decide how much to charge.

Just like any other any other product (your real estate is your product), market research will help you determine how much to charge.  Do you charge the maximum the market will bear?  Maybe.  Maybe not.  It’s possible that you may be better served to charge slightly less than the maximum the market will bear to open the property to better renters who may decide to live long term in your rental.

How I spend many nights.

How I spend many nights.

Before I even start ‘market’ research, I use a calculator that I developed to determine what I would have to charge to make the profit I want.  My calculator is a detailed Annual Property Operating Data Sheet (APOD) and is available for you to use.  Disclaimer: I developed this calculator for my own investments.  The calculator will work for you as well, but does not guarantee success; it’s simply another tool to use.  Ultimately, the decision to purchase a property is yours alone.  (see: Resources; Using an APOD <Not online yet>)

After I know how much I must rent the property for, I start my research on the local craigslist to see if my style of house will rent for what I want to charge.  A lot of property owners (myself included)

My next step is to go to rentometer.com and conduct the same search.  This allows me to see roughly how many similar properties are in the area.  Rentometer provides a good barometer for the type of properties that are in high demand.  Is a three bedroom or a four bedroom house in higher demand (aka: which can I charge more for)?  It’s easy to test your hypothesis, simply change the inputs to the search.

Craigslist and Rentometer offer a great springboard to start your search, but how much demand is there for your rental?  How can you be sure there is demand for what you want to purchase?

For this, I also resort to craigslist.  I produce an ad for my property with my desired monthly rent.  I describe the property, how many rooms, pets (or not), size of the yard, what utilities the tenants are responsible for, etc.  The one key bit of information I always include in the listing is that the property will not be available for three months.  This gives me time to purchase the house and make some small renovations.

My experience is that half of the respondents are not serious, one quarter of the respondents do not qualify as good renters, and the remainder may be good tenants.  If I am flooded with responses, I know I’m not charging enough for the property.  If I get no responses, I may be charging too much for my rental.  My non-scientific test for the appropriateness of rent is to get at least five inquiries within the first 24 hours of the post at a certain price point.

Once I have a good feeling for what the market will bear, what I need to charge for rent, and the number of respondents for my craigslist post, I have a pretty good idea what to charge.  I try to keep my properties nice, therefore keeping my rents higher.  Higher rents also tend to indicate the tenant has a job and is able to pay to live in a nicer place.

I do not want to have the highest rent on the market; tenants then start thinking that you owe them something because of the high rent.  I prefer quiet, responsible tenants, and that is worth a few dollars per month.  If rents are too low, the tenants don’t take care of the property, which can lead to costly improvements in the future.

Rent is not a static number.  Always be aware of the changing demands in your local market.  Is a developer building 1,000 new homes?  How about a new high rise?  Is a large local employer leaving the area?  All of these things affect the rent you are able to charge.

Do you use any resources I haven’t mentioned?

Constant Learning

In order to succeed, you need to be a student.  If you ever think you know enough about your business, you’re doomed to not be successful.  Your business may survive, but you won’t be the Big Dog.  Think of how many companies try to replicate the success of Apple’s iPad.  If Apple didn’t have the top brains studying the next improvements, they would be surpassed by every tech company in Silicon Valley within two quarters.  (Some would argue that’s starting to happen)

Real estate is no different.  You may not be playing against other investors, but I guarantee the banks are trying to make money.  Guess how they make their money…that’s right, from your loans, which are paid for by you.  Not understanding your financing options, not understanding the risks involved, not understanding the local market and not understanding tax law are no excuses for failure.

In addition to simply starting my business, I have had to become a student of business and business structure, forced to learn how banks work to earn money, how real estate markets work, how to pitch ideas, how to wire a light and light switch, how not to plumb a bathroom and how to approach friends/family for personal loans (and how to repay those loans).  While I benefit from all of this learning, I know the learning will not stop here.

Through this first year of business, I have poked and prodded my Tolerance for Risk and learned how that tolerance changes over time, what types of Risk I am willing to shoulder and what types of Risk I want to avoid.  Through this first year, I have also developed useful tools to quickly determine if a rental property is a good investment or not.

I have included a list of resources and books that I have found instructive.  I constantly visit the websites I have listed.  Most of the texts I read prior to starting my real estate business.  Don’t think though, that you can’t start a business prior to reading all of these texts.  A strong will to succeed coupled with an immense desire to learn will lead to success.

“Anyone who stops learning is old, whether at twenty or eighty.  Anyone who keeps learning stays young.  The greatest thing in life is to keep your mind young.”  Henry Ford

UFUO #2 – Update 4

Plumbing:  Many people really dislike plumbing.  For me, it’s more like putting Legos together.  First comes this elbow, then a 24″ straight run followed by a quarter turn ball valve…

UFUO#2 needed some minor plumbing improvements.  Most of the plumbing issues were ‘trim’ issues, meaning the previous owner had never properly supported the pipes or simply used a convoluted plumbing design.  The water pressure is incredibly high at UFUO#2, so for better or worse, I installed an expansion tank.  I should get a plumber to install a backflow preventer and a pressure reducer…all for another day.

The plumbing to the kitchen is stubbed out below the floor.  I plan to use Sharkbite fittings to convert from copper to PEX.  I’ll get these fittings at Home Depot.

 

Unique Fixer Upper Opportunity (UFUO)

Single Family Home #1

Single Family Home #1

I always want to reduce my risk when I am shopping for a potential rental property.  I accomplish this two ways: 1) Do enough research to feel confident the rent will cover the costs of ownership (including ownership disbursement) and 2) Hidden equity.

Hidden equity takes a few different forms, but normally I am looking for what I call UFUOs – Unique Fixer Upper Opportunities.  These homes generally offer the greatest potential return, if I am willing to put in the time to fix the house.  Once the house is fixed and rented, I will refinance to extract the equity and keep my portfolio growing.  I think of this as a “flip-to-hold”.  I still control the houses (and associated cash flow) while monetizing my time and efforts through a cash-out refinance.

When you look to purchase a UFUO, you again want to minimize your downside risk.  When I look for properties, I specifically want to know the following: Will the rent from the improved property easily cover my loan plus the improvements?  Will the equity cover the improvements?  Am I comfortable completing the improvements myself?  Am I able to exactly pinpoint the necessary improvements?

On occasion, I will purchase fully rented houses or duplexes which need to be improved only if the current rent will cover the operational costs plus loan servicing.  I know that when a tenant leaves, I can then fix the building, which will improve the rent to the next tenants while increasing my equity stake in the building.

Everyone’s definition of a UFUO is different.  Maybe you only want to paint and replace the carpeting.  Maybe you’re willing to purchase a real dump for $10,000 (they do exist) and completely rehab the entire place.  I usually look for something in between.

UFUOs offer ‘hidden equity’ if you are willing to complete most of the work yourself.  An appraiser will consider ‘replacement cost’ as part of the appraisal (this is only one part of the appraisal).  The replacement cost includes the cost of materials as well as the cost of labor and any associated markup on materials.  The ‘hidden equity’ is created by saving on labor and any associated mark up on materials.

The first house I purchased needed minor repairs; new outlets and switches, some plumbing work and a really good cleaning (also a paint job, but that was minor).  Then I needed to find tenants.  While the first house needed very few repairs, the whole experience was so new to me that I was pushed to the edge of my comfort zone.  When I signed and handed over my $17,000 check, I nearly cried because I was so scared of this investment.  Leaving my Realtor’s office, I thought “what have I done?”

Driving home, I knew my brand new rental business was no longer a game.  Not simply a pastime of mine, looking at dilapidated properties with my Realtor, imagining myself owning them with cash coming in every month.  Now I was into it.  I owned a property that needed to have work done.

When I picked up the keys and walked into the house, I felt like vomiting.  I was that scared.  I told myself that I was dead if I stopped moving; if I became paralyzed with fear.  I had no choice but to keep pushing forward, so I did.  I got the plumbing system working, I fixed the electrical system and I found tenants.

I chilled my heels for, oh, about four months.  Then I was on the hunt for another property.  This time, I wanted to bag a big one.  A real UFUO!

After my first experience, I learned that traveling 25 minutes to the investment property wasn’t a huge deal, so I decided to allow my MLS search to extend to a 25 minute drive from my house.  This opened up a few additional markets for me to explore.

The most recent UFUO I purchased was a half rented duplex.  The rented side was in OK condition.  It needs a paint job, new flooring and minor touchups to the kitchen.  The rented side was also under market rate by about 15%.  Upon my purchase, I immediately increased rent 7.5% with a planned increase of 7.5% at the beginning of the lease’s renewal.

The unrented side almost needed to be gut rehabbed.

There was human and pet urine soaked into the subfloor, the wiring was old knob and tube (with a shoddy Romex patch job), the bathroom was horrendously small, there was pet urine on the walls, the kitchen had two different counter types at different heights, there were moldy things left in the cabinets, and last but not least, the steps going to the second floor were falling apart (as in the treads were not secured to the floor and fell out as I walked on them).

I purchased the duplex knowing that it would cost me between $40 and $80 per month to own, excluding utilities.  These losses were paid for through the profit from my single family home.  Using my APOD calculator, I knew that once the full duplex was fully rented, I would make about $500 per month, or I could cash out the equity to purchase another property and still make about $100 per month.  This $500 per month actually represents a swing of approximately $600 in profit from the $500 per month plus the $40-$80 and utilities.

When I brought my parents through the duplex, I had only been working on the wiring.  Looking back at that visit, I’m surprised my mom actually set foot inside.  I had completed the wiring in two rooms plus the basement.  There were still urine stains on the floor, dirt and debris from some demolition, stained walls and ceilings, two HUGE holes in the kitchen ceiling from where the ceiling collapsed on me and a huge hole in the bathroom subfloor from where the toilet had leaked for ages and rotted the floor away (yes, really disgusting).

Most people could not get past the current state of disrepair in the building.  I could see the potential; what the duplex could become.  There were good bones in place.

The duplex was a potential goldmine; it just needed some work to unlock the $500 per month cash flow.  If you do the math, that’s a $3 per hour raise for completing the rehab work and managing the property.  When this whole project is complete, I estimate that I will have between 400 and 500 hours working on the duplex, which roughly equates to three month’s work.

Before I purchased the duplex, I knew I was going to have to spend a lot of time getting sweaty and dirty and spending time away from my family, but my wife and I knew this temporary sacrifice was worth it.  Specifically, this property represents 16.6% of my goal of bringing home at least $3,000 monthly from my rentals.

This UFUO presented an excellent opportunity for me.  This property may not have been the best opportunity for you however.  The duplex was an excellent opportunity for me because I knew I could accomplish all of the tasks by myself, saving all of the labor and materials markup expense.  When I purchased the duplex, I did contact a variety of contractors to determine what they would charge for various improvements.

I received quotes for the electrical work ($5,500), painting ($3,000 excluding materials), flooring refinishing ($4,000), misc carpentry work ($3,500), new bathroom ($3,500) and new kitchen ($4,200). The total expenditure, if I had used subcontractors was $23,700.  I knew I could save at least half of that amount if I were to complete the work myself.  I have decided to sub out some of the work, but my total investment into this property will be approximately $13,000, or a savings of nearly $11,000.  That $11,000 will become my equity once I have the project completed.

This UFUO will be successful for me because of the following:
1) The future potential rent is in line with the local market and easily carries the operating expenses and loan servicing,
2) I knew I was able to complete the work myself, and
3) The increase in the equity of the duplex should more than cover my investment.

Failure

Google “Failure” and you’ll get this definition: 1) Lack of success; 2) An unsuccessful person, enterprise or thing.  Google gets the definition only partially correct.  The definition of Failure should include: 3) A requirement for personal, professional or institutional growth.

Imagine if every baby could immediately stand up and run as fast as Usain Bolt.  Crazy right?  How about the first time a child recites the alphabet?  A through Z correctly?  Probably not.  When you first rode a bike, did you ever fall over?

Everyone fails.  Failure is good.  Failure is needed for growth.    When you first stepped on the gas pedal of your first car, was it a smooth acceleration?  No, but through that failure, you learned how to properly accelerate through your initial failures.

Read through any entrepreneur’s story and you will find at least one failure, probably multiple failures.  It doesn’t matter if the entrepreneur’s name is Richard Branson, Elon Musk, Henry Ford, Mark Zuckerberg, or Warren Buffett, they’ve all had failures.

The only difference between you and those names (besides the spelling) is that they learned from their failures.  They said, “all right, this way didn’t work, but the idea is still sound, so let’s try…”  Entrepreneurs know how to react when their idea(s) don’t pan out.  They may keep working towards the same end result, but with different methods.

Einstein is quoted “Insanity is doing the same thing over and over again and expecting different results.”

My brother and I were talking about failure recently.  He is living in San Francisco, but struggling to find a good paying job to support life there.  He mentioned that leaving the city would feel like a failure to him.  We discussed this feeling, and happened on the notion that failure is a fluid medium.  On one hand, it would be a failure if he were to leave the city without exhausting every opportunity for work.  However, on the other hand, if he would stay in the city after every reasonable opportunity had been investigated, that would be a failure.  So on one hand, failure is leaving, while on the other hand, failure is staying.

Dr. Jack V Matson, a mentor of mine, coined the term “Intelligent Fast Failure”.  Intelligent Fast Failure is the ability to move quickly through a variety of ideas (business or otherwise) while minimizing and managing risk.  Through Intelligent Fast Failure, Dr. Matson has started a variety of successful businesses and owns a variety of patents.  Dr. Matson doesn’t punish failure, so long as the mistakes you make don’t repeat themselves.

I have failed many times.  A couple notable failures include: Half Acre Farm and the Laundromat.  Each time, I learned at least one thing.  From the Farm venture, I learned that I tend to jump into an activity without the necessary stick-to-it-ness that is generally required with starting a business.  I learned I need to measure my pace better in such a way that I don’t get burned out.

With the Laundromat, I learned how to push myself through fear.  Fear of rejection and fear of failure.  That’s not to say that I still get fearful feelings, just that I learned how to step through those feelings and not let them dominate my future.

As I write this post, I realize that failure is usually associated inaction.  Most of the words used to describe the opposite of failure (not necessarily success) are action verbs: moving from the city; step through those feelings; exhausting every opportunity, etc.  Imagine if you were so fearful of failure that you didn’t step on that gas pedal?

“Failure is simply the opportunity to begin again, this time more intelligently.” Henry Ford

“If you don’t start, you can’t fail.” Seth Godin