“Anyone can buy a house, but only a select few can create and grow a business.”
If you are interested in real estate investing, this blog was written specifically for you. I have seen far too many people spend far too much money getting trained on real estate investing (I did – see Rich Dad Poor Dad/Wealth Intelligence Academy Bootcamp Review). A large portion of these people never actually invest in real estate. Some will, but they will not be able to achieve their goals. A small portion will have lots of success. These are lots of things that separate the people in each of these groups, but one thing stands out to me above the rest; the successful people focus on building a business.
Why Most Businesses Fail
In The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It, author Michael Gerber describes why most small businesses fail. Among other things, he describes the “E Myth” as the assumption that all businesses are started by entrepreneurs. He argues that in most cases businesses are started by technicians, people who are experts in their trade, not entrepreneurs. The example that Michael uses is a woman who bakes pies and decides to start a pie baking business. She is an expert at baking pies, but running a successful business is about much more than baking pies. There is the technical work (in this case, actually baking the pies) plus hiring/firing workers, bookkeeping, payroll, managing the financials, marketing, customer service and a bunch of other tasks that need to be handled.
Baking Pies & Real Estate
So why am I talking about baking pies and how does that apply to real estate? If you focus on getting trained in real estate investing, you are getting trained to be a technician. You are getting trained to work in a real estate business, not on a real estate business. As I said with the starting quote, anyone can buy a house. You find a house you like, secure financing (from family, friends, banks or a private investor) and purchase the property. But then what? Now you own it, what the heck do you do? How are you going to make money with this house? Do you understand how you read a P&L (Profit & Loss) statement? How do you manage accounts receivable? What asset protection do you need in place to protect yourself? What portion of your budget should be allocated to marketing? What success rate should you expect from direct mail compared to Google Adwords? What type of business entity is best for you? What type of contracts do you need for your business? What is the difference between GOI (Gross Operating Income) vs. NOI (Net Operating Income)? What laws must you follow in your area pertaining to real estate? Do you understand how to plan out a project and execute that plan? Do you need a website?
Business Education vs. Real Estate Education
The above are just a few of the questions that you will need to know in order to have s successful business, real estate or otherwise. If you spend all of your time learning about real estate, you may be able to answer some of these question, but you will have turned yourself into a technician. You will know how to purchase a property, but you will most likely not know how to create and operate a real estate business. You will have a hobby, and a busy one at that. So you created a job for yourself, and since you have most likely not built a solid foundation for your business, you will work a lot and struggle. And you will not be as successful as someone who focuses on building a business, lean workflows, systematizing and automating those systems.
So how do I recommend that you learn how to run a business? Stay tuned to a future blog where I provide several recommendations.