In our last article we spoke on how a Real Estate Investor needs to focus on what aspect of real estate they want to be involved in. Today we will look at how important it is to create a business model for your investing so that it wont turn into another job.
In the book "Rich Dad, Poor Dad" the author talks about 4 quadrants for working; the employee, the self-employed, the business owner and the money investor. Each has a distinct characteristic that sets is apart from the others. When you decide to become a Real Estate Investor you have to decide which quadrant you want to work in.
Employees typically work set hours and can expect a set pay. Investors do not see that happening when they get into real estate. Self – Employed people are pretty much like employees except they do not have a boss. In both of these scenarios if you do not work you do not get paid.
Business owners work on their business but not in it. They have employees who do most of the work and the owners make sure the business is thriving and surviving. The money investor takes his cash and makes it work for him. He gets interest and a rate of return on his investment.
Most Real Estate Investors fall into one of the two categories; either they are self-employed or a business owner. Self-employed investors purchase properties, work on those properties, lease them, evict bad tenants, advertise vacancies, etc. It is almost like another job. For the hands on investor this is ideal. They love the feeling of being involved in the day- to-day activities going on with their properties.
The other type of investor is a business owner. He goes out and buys properties. But then he has developed a team he supervises which handles every aspect of his portfolio.Men like Donald Trump do not hang drywall or repair floors; he has employees who handle all the details for him.
Neither type of investor is wrong. You just have to decide which type of investor you want to be. If you want to be hands on and involved in the day – to – activities of your properties, then be a self – employed investor. But if you prefer having others do that type of work so you can be free to purchase and sell your inventory, then consider running your investing like a business.
The choice is yours.