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
9 Responses to Big Ticket vs. High Volume Real Estate
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I have been reading each of your emails and find the subject matter to be of great interest to me.
Please send me any additional information (i.e.- How to find these types of deals) I would be most appreciative. Thanks
Great work.
I also have been reading each of your emails and really do find the subject matter very interesting.
Please send me additional information (i.e.- Where is the best place to find leads) I would appreciate any help you can. Thank you very much.
Lance,
I think this is a great model to work with.I am trying to get your system. It is hard spend money when your a single parent with two kids. Just came out of my divorce. If had the money I would have already been in it. I am a real estate agent, branch manager of mortgage co. and an investor in Michigan.This market is great if you have the buying power…..notice I didnt say money. Hope to here from you soon, I always read your emails everyday . Thanks for the information.If I can just get the system and the right leads I can do this.
I just want to thank you for taking time to share such precious knowledge. We know how much your time is worth yet you spend some of it enlightening and motivating some of us that are less informed. You make a lot of sense with your informative and interesting articles and teleseminars. Thank you!!
Lance, Great info, question i have is if one joins as your apprentice do you help if one has a q or does one have to wait till the next training class
I have also been reading each of your emails and find the subject matter to be of great interest to me.
Please send me any additional information (i.e.- How to find these types of deals) I would be most appreciative. Thanks
Lance thanks for your insights -we are a “Ground Up” Developer based in Toronto (www.bgigroup.ca),but haven’t done existing Apartment Buildings acquisitions.
I am very interested in considering your system to open up that option, especially if we can rehab and upzone for condo conversion etc. for the turnaround.
Since I’ve been developing and building “big ticket” for 46 years and I definitely agree with you. I’d also like to help field Development questions where I can, that your students may have.
Lance, I am thankful to to be a part of your learning team. It is your mindset and your way of sharing your knowledge that inspires me and keeps me tuned in with all senses on alert!