Are you running a real estate business? Or working a hobby? In this interview you'll learn some very important differences and why you may not be achieving the results you're looking for.
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I was recently interviewed by JP from RE Mogul. We discussed some major differences between running your business as a business, or as a hobby. Either is fine, depending on your target, but if you’re trying to do one and doing the other unintentionally, here’s how to fix it.
JP Moses: Hey, this is JP Moses. Welcome back to another exciting episode of Real Estate Mogul, one of our fancy video conversations with some of our insiders here. We love having these conversations with our advisers.
Today I’m on Skype recording here for your viewing pleasure with David Corbaley. David is the marketing commando. The marketingcommando.com actually is his website. You should check it out.
I’ve known David for, I don’t know. David, how long have we known each other? Maybe three years. I’m just guessing here.
David Corbaley: Yeah, three or four years.
JP Moses: Something like that. We’ve been in Masterminds together and Close Quarters. He’s an intimidating fellow, I’ll tell you that, until you get to know him, but super awesome.
He’s a former Green Beret, former professional firefighter, and really has this incredible, unique marketing system he’s put together for motivated sellers that’s really very different from what other people have out there.
Today we are going to have a conversation, probably going to end up being a two-part conversation. Maybe we’ll break it up into a couple of different lessons here in Mogul.
We want to talk about getting deals consistently and why your business isn’t really a business yet. Obviously, some of you have legitimate businesses by the definition we’re about to give you.
I think this will still apply to you. You’ll still learn a lot from the business versus hobby discussion that we’re about to have, but hang with us. Don’t be offended, if we happen to feel like you don’t have a legitimate business, even if you’ve done some deals.
David, let’s talk about it. We were talking a little bit before I hit record here about the difference between a business and a hobby in real estate and what separates the two. Go ahead.
David Corbaley: When I think about this, JP … First of all, thanks for having me on the call. I appreciate it.
When I think about a conversation like this, the first thing I do is relate back to my own beginnings. Everybody starts there. We all start there.
We have this inkling, “Gosh, I want to have a business,” or maybe, “I want to be in real estate because I have a friend that is,” or whatever brings you to that point, you know that you want to be in the real estate niche, whether it’s as an investor or maybe an agent or whatever that is. You start to go down that path.
Most of us begin by we’ll get online or we’ll learn from a friend or we’ll find a course and buy our first course and start to learn. That’s the beginnings of our real estate journey.
JP Moses: Don’t forget the late night infomercials.
David Corbaley: Yeah, absolutely. We see those in some of us. That’s where you begin. From that point, there’s a few factors that come into play.
I think one of the biggest ones are you might honestly have right in front of you a course that you got for whatever that literally has everything you need in it right there. Within the pages of that book or what’s on that DVD or CD in front of you might have everything that you need if you actually went through it step by step, to go out there and not only turn your first deal, but start to build a business that will feed you and your loved ones for a long, long time in ways that you never imagined.
I think one of the problems is it might be right in front of us, but the belief system isn’t there. That was a problem for me because I knew I was hungry for it. I was a firefighter at that time when I decided I really wanted to get into business.
There was an infomercial for me. I actually saw a Rich Dad, Poor Dad infomercial. I bought his course and I was going through it. The reality for me was, “I’m never going to buy a traditional business. I’m a firefighter that doesn’t make a whole lot of money. It looks like some kind of real estate.”
I had been dabbling in the Carleton Sheets stuff and had ideas on that, never took action on it, which I think is pretty typical. We get into this learning mode and, “Let me start to learn. All these is cool,” and a concept is cool, but there’s the confidence thing and there’s the “Can I really do this?”
I got the Rich Dad course and realized, “Okay. Real Estate is my thing.” I ended up in some forums online. I actually met a guy who seemed like he was pretty savvy and seemed like a trainer online. I got some tips from him.
I went out there and did what he told me to do. I actually picked up a deal. I picked up a lease option deal. Extremely excited about that, like, “Wow! Am I really doing this?”
When I got my tenant in there, you would think that there’s no turning back, but that was just the beginning. I got a tenant in there. Really excited. Got an option payment. “Wow! I have this money. I’ve never had a lump sum of money like this.” It was $4,000. Yeah, you make a living in the fire department, but you never have a lump sum of $4,000. It’s a lot of money to me at that point.
I continued on my journey. Instead of taking that same method that I used and just blowing it out and doing deal after deal after deal like this, I decided, “Gosh, there’s got to be other ways I can do real estate.”
I think that’s a good thing to do. I think you should diversify your strategies, but I diversified it in many different ways because I was so hungry to get a deal.
When you’re really looking to get a deal, when you’re just hungry for a deal because you had that taste, you got a deal, you made a little money, you’re like, “This is awesome,” then you’re out there looking for another deal, and you might not know that the challenge is not quite knowing how to get the deals. Not just how to get one or two, but how to get them consistently.
For me, that was my biggest challenge because I had gotten one deal off some marketing that I did. I think I had an ad in the paper or something like that. I kept that ad in the paper, but every week went by. I was getting billed weekly for this thing.
Every week went by. It just chipped away at that. What ends up, looking back, being a measly little $4,000, it isn’t that much money when you really start to have success in this type of business.
JP Moses: It’s a far less money than it ever used to be, I’ll tell you that.
David Corbaley: Absolutely. But then, at that time, it was like, “Four grand. It’s amazing.” That newspaper ad was just chipping away at that $4,000 every single week. I wasn’t getting calls on it. I don’t know if I got lucky the first time or what, but it was about not having enough lines out there in the water.
What happens is you don’t have leads coming in. When you do get one, you’ll pounce on that thing like a dog on his new rubber toy or whatever it is. You want that deal so bad that you’ll finesse and work with that one little lead that you’ve got, even if it’s the most terrible lead that you should never even touch. You’ll end up getting this deal signed up.
You’ll end up on a bomb of a deal that turns out to be something you should have never messed with in the first place, you don’t spend a lot of time and effort on it, instead of moving forward and continuing your marketing and continuing to grow that stream of leads coming into your what might not quite be a business yet.
Again, you might have a thriving business. I know a lot of people are newer in this type of business, or haven’t gotten to that expert level yet.
That’s what happens. As you spend so much time working on this dud deal that you should have never taken in the first place, you forsake actually marketing and getting more leads.
JP Moses: Let me interrupt you for a second.
David Corbaley: Sure.
JP Moses: I want to rewind a minute or so back to you as the struggling firefighter and you got that first $4,000 check. If we go inside your mind and your motivations at that point, what was your desire at that point? Why were you in the real estate game?
Was it because, A, you saw an opportunity to make money in real estate and perhaps the money you make from real estate could replace the money you make from your firefighting job, and that’s a transition that appealed to you, or – and this is a different thing – was it because you wanted to build a business, a real estate investing business, and you had your eye on that ball?
Before you answer, I’ll just let you know what I’m thinking here, this concept of building your real estate hobby or a real estate business. Another way to put that, I think, is the process of transitioning your thinking from “I want to make money in real estate” to “I want to build a real estate business”. There is a distinction between the two.
That’s not to demonize the real estate hobbyist or the one who just wants to make money on real estate. I think everybody probably starts there. If you stay there, there’s nothing wrong with that. If you just want to do a deal every once in a while, it’s fun and it gives you extra money.
I know people who really don’t want to quit their jobs at all. I know a guy, he wholesales houses. He’s a pilot. He doesn’t want to not be a pilot anymore. He loves his piloting job, but he also likes doing some real estate deals. That’s a real estate hobbyist, in my view. He makes money in real estate.
I’m trying to, I guess, clearly define the space between the two or the differences between the two for people so that everyone who’s dialed in here can decide for themselves which they are and which they want to be.
Rewinding back to my question, where were you back then?
David Corbaley: That’s a great question and a great way to ask it because there are a couple of parts to that answer. The first is I was coming off the tail end of a divorce and all of the financial troubles that can potentially go with that.
For me, there were a couple pieces of that. One is I needed to make extra income. The other is I didn’t realize what it was back then, but I had this desire inside of me that I wanted to do my own thing.
Coming from the military, I loved the structure, I loved the camaraderie. I miss it to this day, as part of my life. Being in the fire department, I had that same thing. I had the structure. Not anywhere near what it was in the military, but I still had that structure and the team environment.
What was missing for me was that sense of … I certainly had a sense of accomplishment, but that sense of, “This is mine. I built this. This is my thing,” not necessarily my business.
The intent wasn’t necessarily to, “Oh, I want to build a big, thriving business,” or, “I want to have a real estate business,” so to say, I just, number one, had the need for additional income. A lot of firefighters would do side jobs. They’d work in concrete or be home inspectors, whatever it was.
JP Moses: Yeah. Actually, the couple who mows our lawn here is a married firefighter couple.
David Corbaley: Yeah, there you go, see. Because you work the shifts, you work 24 shifts, so you have entire days or books of a couple of days off a few times a month. You have time to do something extra.
I didn’t want to go get another job. I guess that’s the difference. I needed the extra revenue, the extra income. I didn’t want to get a job. I wanted to do something for myself.
I had this desire inside that I want to build something on my own. I want to use my own brain and create my own, whatever it is. That’s when I came across the Rich Dad and things like that. It’s steered me down the real estate path.
That was what my mindset was back then. To add on to that, I feel that, absolutely, I think if you want to be a hobbyist, phenomenal, because if you can go out and turn one or two … Actually, the guy that I bought my very first house from, right when I was getting out of the military, that’s what he was. He was a school teacher. He wasn’t an investor; he was a builder.
He would build two to three houses per year and he would only do that because if he would have built more … I asked him, “Why don’t you just do this more?” He said, “It’ll take me up into the next tax bracket.”
He would build two or three houses a year. He was a school teacher. He probably made a very nice living. He did what he enjoyed doing with the real estate thing. Being a hobbyist, I think, is phenomenal.
I didn’t know, it didn’t happen until a few years into it that I realized … Probably four or five years into my real estate business that I realized, “Wow! At heart, I’m truly a businessman. I am an entrepreneur. I want to run my own thriving business.” It just hit me. It was a little bit later in life, but it hit me.
Now I look back and I realize, “Wow! That’s what I want, is a great, thriving business.” Back then, I didn’t know.
My point is I think a lot of people don’t realize yet that they are, at heart, deep down inside, they’re an entrepreneur at heart, or a true business person and that just hasn’t come out yet. It will. If you’re not, if you’re just a hobbyist, that’s totally fine, too.
JP Moses: I love that. I think we should pause the conversation. This might even … I don’t know how many parts this may be – a three part, but we’ll see. We’re going to pick back up in the next part with drilling in a little more into understanding and clarifying the differences between a real estate hobby and a real estate business.
For now, I want to leave everyone with a challenge to, number one, understand where you are right now. If you’ve been in the game for two or three years and you’ve cracked the code on how to do a deal and how you can be profitable in a deal, you’ve overcome that milestone.
Ask yourself am I a real estate hobbyist or do I have a legitimate business, as best as you’re able to determine that right now just from our conversation. Try and, I guess, put your finger on where you think you are in that spectrum.
Then decide if you are where you want to be. Are you fine? Are you great with being a hobbyist?
Maybe you’re not trying to build some empire, maybe you’re not interested in that, maybe you don’t want to go bigger than a certain point, or bump yourself into the next tax bracket. I don’t know. Everybody has their own version of what your ideal life is going to look like, and I can’t tell you what that is, but you need to identify what that is and figure out more and better where your real estate activities fit in to that best to help create that reality for you.
I want to leave it at that. Any final thoughts before we sign off on this one, David?
David Corbaley: No, I think that’s a great challenge for them. I think it’s an incredible thing to think about. It’s really going to help you understand your own mindset about your business or hobby.
JP Moses: All right. With that said, thank you, my friend. We’ll pick our conversation back up in the next part.
David Corbaley: All right. Thank you.