Real estate investing can sometimes feel like a very elaborate balancing act. You’re working on marketing efforts, raising capital, finding new properties, and adding value to your existing properties – all at once.
But when it comes to your business strategy, your focus should be very narrow. In other words, you don’t want to spread yourself too thin by starting up 4-5 different businesses that have very little in common with one another.
Let me illustrate this with a story. I was recently talking with one of my REI friends, and we had an interesting conversation.
My friend started by saying, “I just want to get some advice from you. I'm thinking about buying a wholesaling business. They already have marketing campaigns, Podio, sales scripts, a direct-to-seller marketing campaign, and they're already doing some Facebook ads. I don't really do any wholesaling and I don't do any marketing for that right now. Should I buy this marketing and wholesaling operation?”
So, we start talking about whether this could be a good idea, and then he tells me, “Hey Josh, I'm also thinking about investing a couple of hundred thousand dollars into a residential assisted living facility. You know, a property that I can stabilize and create cashflow from.”
So, switching topics, we started talking about the residential assisted living facility, and then he tells me that he wants to raise more capital and do more fix and flips that he can sell quickly for profit.
And THEN he says, “I also have an ECOM business that sells headphones. We make headphones overseas in China and we ship them into the United States. That’s really how I make my money. It’s a bread and butter business for me, and it’s very established. We've done it for a long time. Also, Josh, I’ve heard you talk about how you own 1,500 units of apartments, and I'm really excited about getting into apartment investing too.”
At this point, I’m trying to tally up his businesses in my head. Between wholesaling, residential assisted living, fix and flips, his ECOM business, and his desire to get into apartments, there’s like FIVE different business opportunities he’s either currently pursuing or wants to pursue. It was clear that he was ambitious, but his game plan was all over the place.
THE SOLUTION? SIMPLIFY.
So, I thought for a minute, and then I said to my friend, “Listen, you are an entrepreneur through and through. It's obvious that you have the entrepreneurial ‘organ.’ This is your biggest asset and it's your biggest liability.”
I went on to explain that, when someone catches the entrepreneurial bug, we typically try a lot of things to figure out what we're going to like. And we often fail at many of those things.
I would say that 80-90% of the business ventures or strategies I’ve tried haven’t worked out. But, as I told my friend, what I notice in very successful real estate investors and entrepreneurs is that they eventually plant their flag and narrow down their business efforts.
As an entrepreneur it's natural for us to think, “I want to focus on the investments that will bring me the biggest financial gain now.”
But you need to ask yourself a couple of things. One of them is… why are you investing?
Is your goal really to focus on creating equity, generating long-term cashflow, and establishing generational wealth? Is it about building your balance sheet, not your P&L?
To help my friend identify his main goal, I said, “Listen, if your goal is legacy wealth and passive income, then if you acquire this wholesale business, you're acquiring it to create that passive income. But you probably don't want to dabble in residential assisted living and apartments and wholesaling and rehabbing rentals and ECOM all at the same time, right?”
Because what happens when you spread yourself too thin by pursuing too many opportunities? You start to ignore the one or two businesses that are struggling and focus on the ones that are really succeeding.
And, when you ignore the struggling businesses, you bleed to death by a thousand cuts. In other words? The failure of the struggling businesses will drag you down, impeding your overall success.
Ask me how I know. Let’s just say… I've got that trophy. I've already earned that t-shirt.
So, take it from someone who’s been there, done that. Instead of focusing on too many businesses, plant your flag, identify one or two areas where you want to excel, and stick with them.
NARROW YOUR FOCUS AND EXCEL.
A good example of someone who planted their flag successfully is my friend Jack Petrick. He had several businesses running at once, but eventually decided to focus only on value-add apartments and put all his energy into those investments.
But it wasn’t easy. When I talked to him earlier this year, he said, “Look man, I can't find any apartment deals. We're marketing and we're calling brokers. We're sending out direct mail, I'm calling ‘for sale’ signs and ‘for rent’ signs, and we’re doing everything we can to find apartment buildings but it’s just not happening.”
I encouraged him to stick with it, since he had already planted his flag. A few months later, I talked with him again, and he had three properties (164 units, 142 units, and 89 units) either under contract or nearly under contract.
So, because Jack planted his flag in the ground and worked hard toward his goal – even when challenges popped up – he, all the sudden, had tripled the size of his portfolio.
That's the difference between “going wide” and building multiple companies and “going narrow” and investing in one thing.
PREPARE TO PLANT.
If you are an entrepreneur or business owner, my challenge for you is this: plant your flag. Identify one niche or specialty that you’re going to work hard at… and let the other business ventures go.
If your business is stable and thriving, and you really want to start a second company, it should be a direct offshoot or sister company that is congruent with your first business.
And that's what I did with my investing, Strategic Real Estate Coach, and Freeland Ventures. They're all congruent because most of the “customers” overlap. In other words, the investors I usually joint-venture with are the same people who I lend to or borrow from… plus they often use my coaching products or mastermind program. It's the same customer for each business.
But having an ECOM business, investing in residential assisted living, wholesaling properties, and investing in apartments… none of that is congruent. None of those things work together.
So, as you’re preparing to plant your flag, ask yourself these three questions:
- Why are you investing? Is it for long-term cashflow or immediate income?
- What are you passionate about and what do you enjoy doing the most?
- Which strategy or business model is going to make you the most money?
By compiling these answers and analyzing your options, you can arrive at your answer. And, when you focus on a single strategy, you’ll be more likely to increase your profits, create a sustainable business model, and build long-term wealth.