In my business experience, I have learned that there are basically 2 types of business models: 1) High Volume and 2) Big Ticket.
This is important to understand because the choice impacts your strategies and your resources – as the CEO of your own real estate business. And I found that one has very distinct advantages, especially for the part-time real estate entrepreneur.
First, the definitions:
1) High Volume – A high volume business model is one where – as the name implies – there is a high volume of transactions; with low to moderate profit per transaction.
2) Big Ticket – A big ticket business model is one where large price tag items are sold, i.e. “big ticket”. There is a lower volume of transactions but higher profit margin per transaction given the high price point.
The choice impacts your entire business strategy. If your goal is to make $100,000 per year, then you can choose a business where you do 20 transactions per year @ $5000 per deal. OR you can choose a business where you do 2 transactions @ $50,000 per deal.
Know a real estate business that does $5000 per deal? How about wholesaling houses.
Know a real estate business that does $50,000 per deal? How about wholesaling apartments.
But here’s a key difference: A high volume business requires staff and systems to sustain the high volume of activity and transactions. At 20 deals per year, that’s almost 2 deals per month to find a Seller, find a Buyer and close. Without systems and staff, it will ultimately beat you to death.
On the other hand, a big ticket business starts out with less activity and volume – by its nature. It’s focusing on the big ticket deals (where, by the way, there is less competition – more on that later).
So which do you think would be easier to start on a part-time basis? A high volume business or a big ticket business? Well, I chose the big ticket business it’s easier.
Are you limited to one model or the other? No. Imagine evolving into a high volume business that does big ticket deals!!
KEY TAKEAWAY: Big Ticket businesses (like multifamily) are easier to do part-time than High Volume businesses.
Lance
I presume that you entered or became interested in real estate because you heard that it could improve you and/or your family’s financial condition. Well, it absolutely can. And just like you, that’s why I entered real estate.
More millionaires have been created with real estate than any other type of investment.
But let me bust a myth right here. Financial freedom is not about having $1 million in the bank. Yes, that works but it can take a very long time. Let me explain.
There are 3 components to fianancial freedom and wealth creation:
1) Active Income – this is where we exchange our activity for income. It’s hours for dollars. It can be very good paying but nevertheless, it is a job. Real estate wholesaling is active income – and can pay well but it is still a job. Don’t work and you don’t get paid.
2) Passive Income – this is income derived from our assets. The income comes in whether we show up or not. It is does not require our active involvement on a daily (or perhaps any) basis. A key real estate example is income property – like apartments (my favorite).
3) Net Worth – this is equity in our assets. It is our balance sheet. It is the equity in our real estate. But there’s a key definition about assets… An asset is only an asset if it produces passive income. (The equity in you home is not an asset).
Here’s where the NEW strategy for financial freedom becomes important.
In school, I was taught that the path to financial freedom was 1) work hard; 2) get good grades; 3) get a good job so 4) I can stash away my savings for 30-40 years and live off of the interest. That works – as long as we live long enough and stash away enough savings; especially in the early years.
Bascially, the old school formula says: Work for 30-40 years generating Active Income; save a portion to create Net Worth – and then live off of the Passive Income, i.e. the 30 Year Plan.
Again that works but there is a much, much easier and faster way…
It starts with the new definition of financial freedom.
DEFINITION: Finanical freedom is when our passive income is more than enough to pay for our desired lifestyle.
Note that the definition says nothing about how much money you have in the bank. If your desired lifestyle is $6000 per month, you just need passive income of $6000 per month or more to be financially free.
The strategy to finanical freedom is that you build or buy Passive Income vehicles (using other people’s money) so that your Passive Income exceeds the costs of your desired lifestyle. And THEN you are FREE to create your Net Worth.
You see, it’s faster and easier to become financially free than it is to become wealthy.
Wealth creation and savings can take decades. Financial freedom can be done in 1 apartment deal – it can certainly be done in a few years.
This outlook changed my entire strategy to real estate and business.
KEY TAKEAWAY: Buy or build passive income vehicles (using other people’s money). I call it Nothing Down Financial Freedom (TM).
Lance
Like so many beginning real estate entrepreneurs, I first purchased course after course after course and never did a deal. For the first 12 months, I never even attempted marketing.
Can you relate to this?
My evidence indicates 95% of all real estate investors experience this. In fact, probably 95% never even earn the money back to pay for the training – if they earn anything.
Is the problem the training? NO. 99% of all real estate trainings are loaded with sound information and techniques.
So what’s the problem? Well, I finally figured it out. And it cost me years and tens of thousands of dollars to do it.
The formula for success all boils down to this simple formula:
Success = Skillset + Mindset (TM).
Skillset is the technical side of the business; how to find deals, how to fund deals and how to farm deals, and everything in between. Skillset is an obviously important component BUT it is NOT the sole component – as so many are lead to believe.
The critical component is mindset. And by mindset, I mean the ability to take action despite fear. The keyword here is action despite fear. And we all have fear holding us back.
Mindset is not about willpower; it is not about working harder.
Mindset is about transforming the limiting beliefs that are holding us all back; tranforming and replacing those limiting, disempowering beliefs with empowering beliefs. It happens at the subconscious level, where all manifestation begins.
And the transformation can be done by you. It is all about beginning the process of creating new habits – which originate at the subconscious level.
Recognize that goal setting and willpower is a conscious activity. Goal achievement is a subconscious activity. Upon making that important distinction, I began taking the steps toward real estate and multifamily success and my life completely changed. And you can do the same.
Just remember the critical formula: Success = Skillset + Mindset (TM). It is so critical; you will see it in all my trainings and in everything I do. It is the core of my philosophy about success in real estate.
KEY TAKEAWAY: Success = Skillset + Mindset (TM).
Lance
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