234: Are You a Real Estate Investor or Real Estate Entrepreneur?

SHOW NOTES FOR EPISODE 234: ARE YOU A REAL ESTATE INVESTOR OR REAL ESTATE ENTREPRENEUR

What is the difference between being a real estate investor and being a real estate entrepreneur, and why does it even matter?  In this podcast episode, Bill shares how differentiating and determining whether you are an investor or an entrepreneur is critical to your future real estate success.

A FEW UPDATES:

• House Mom is working out great (episode #230 – “House Moms”)
  • We also were able to quickly weed out bad tenants
  • Because of her availability for showings there and something we implementing called Stealth Tenant Marketing 2 (to be featured next in next week’s Fun Facts Friday) (Also see episode #038 on Stealth Tenant Marketing)), we are able to quickly fill those vacancies with great tenants and experience minimal down time
  • She is treating the place like her home – I love it (planting tulips in our garden…
• Making progress in Memphis
  • New property manager in place
  • Properties getting fixed up and rented
  • Found great website to list properties for handicapped, special needs, government-funded rents
• Moved my son to Idaho and we are looking for a small apartment in that great market – just did a direct mail effort
• Continuing our search for larger apartments
  • Our criteria remains stringent
  • Also considering smaller properties (more likely to find mom and pop owners)
  • Other asset classes – commercial – office/retail, self-storage, mobile homes
  • Big concern: what will happen when there is a market correction
  • Hey, and just a reminder, if you refer a property to us and we purchase it, there is a handsome finder’s fee involved.
  • Secondly, if you have a property that meets our criteria and want to partner with us, I would be interested in talking with you.

OK, well, on to our topic…

Are You a Real Estate Investor or Real Estate Entrepreneur?

Often, people who invest in real estate think of themselves more as “investors,” more than entrepreneurs and/or business owners – especially us Old Dawgs who don’t want “another job.”  And perhaps for those who are truly passive (those who invest in syndications, buy notes/deeds, & liens) that may certainly be the case.  But if you are buying rental properties and are responsible for generating cash flow — you are more an entrepreneur and/or a business owner than just an investor.

According to investopedia.com, an investor is any person who commits capital with the expectation of financial returns.  

Now, with that definition, yes we would be investors, however, if you are buying rental properties, you are doing more than just committing capital in the hope of gaining a financial return – you are in control of the process. 

An entrepreneur, according to dictionary.com, is a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk (to generate a profit).

It’s important to distinguish the two because an investor is making a decision contingent on someone else’s ability to produce a return.  However, an entrepreneur is making a decision based on his or her own ability to produce a result.  That’s a big difference!

If your real estate investing activities involve:

• Buying and renting out rental properties
• Buying, rehabbing and selling properties
• Building properties
• And other more proactive real estate related activies

Then you are an ENTREPRENEUR!

Let’s take a look at both an investors vs. and entrepreneurs

For example, let’s look at the following…

• Profits
  • Real estate investors, if they are prudent, carefully evaluate and select investments in which other people are responsible for generating the profits and returns. Like when you buy Apple stock, you are investing based on the company’s ability to produce, or more specifically, the company’s management’s ability to produce.  Although an investor is concerned that the company generates a good profit, typical investors are more focused the rate of return on their investment. But, in this case, the investor does not have any control on how that company generates the return.
  • Conversely, entrepreneurs are also interested the rate of return, however, the entrepreneur is responsible for how that return is generated.
• Success
  • REIs success comes through the careful, prudent selection of “good” investments, trysting in the ability of others.
  • An entrepreneur is responsible for achieving his own success
• Team
  • An investor can select an investment based on it’s management team but they have no say in the selection of the team
  • An entrepreneur is responsible for selecting and building his or her own team

Why am I even bringing this up, well, the distinction is important because it’s really a matter of your mindset.

If you go into your investing activity thinking that the outcome is a result of other people or other circumstances, you are limiting your opportunities for success. It affects the way you see things.

For example:

A Real Estate Investor mindset may see..

• Can blame their investments poor return as a result of…
  • Bad property management
  • Troublesome or difficult tenants
  • Local market conditions
  • Rising expenses
  • Just a bad property purchase
  • And they will just spend their time constantly putting out fires or just sell the property altogether

Whereas, a Real Estate Entrepreneur…

• Can look at their investments poor return as a result of…
  • Inadequate planning. Not just an issue of troublesome of difficult tenants, but the lack of a a strategic effort that weeds out difficult tenants and creates a system that
    • Replaces poor property management or trains existing property management to implement a plan that
      • Cleans out troublesome tenants
      • Replaces them with a solid base as the result of an aggressive market effort targeting your “ideal target tenant” that may entail
        • Establishing stricter tenant screening guidelines (maybe even hiring a third-party application/screening company like RentPrep – see episode #129 – Finding and Keeping Great Tenants)
        • Marketing to local employee groups known to be solid tenants:
          • Local area hospitals, schools, large employer groups
          • Contacting HR departments, sending them flyers/postcards to post on their employee bulletin boards with a special offer of one month’s free rent exclusively for their employees
        • Instead of blaming local market conditions, working with what you have to maximize your return based on those conditions
        • Instead of blaming increasing expenses, aggressively looking “outside the box” to cut expenses in unique and creative ways such as…
          • Instituting a RUBs program that takes “owner expenses” such as water, gas, trash, etc.) and splitting that bill equally over your entire tenant base.
          • Charging for additional services
        • Instead of blaming your woes on a bad property purchase, instead, look at repositioning your property, considering the area challenges and presenting it in a way that still generates a good return but with less headaches.
          • If your property is in not such a great area, instead of throwing up your hands and saying “well, I’ll never get any good tenants here, I’ll just try to get as good as I can.” Instead, look at maybe a specialized target group that needs housing in that community but will not trash that place.
            • Contact the local VA and maybe there are veterans who need housing
            • Talking with non-profit organizations that specialize in finding housing for handicapped or people with special needs.
          • In many cases, their rent will be governed with regular government checks that are sometimes higher than market rents.

The whole idea here is mindset.  If you have the mindset that you can control the outcome of your investments – you will directly affect your overall profits and success!

• Entrepreneurs MAKE things happen!
  • I can control what type of tenants I have
  • I can do things to increase my rents even ABOVE market rents if you position the property properly
  • I can reduce expenses (install water saving toilets, shower heads, etc.)
  • I can force appreciation and therefore, increase my property value
• Entrepreneurs
  • CREATES things
  • GROWS things
  • Can CONTROL things

What Is A Real Estate Entrepreneur?

A real estate entrepreneur is an individual who purchases property with the goal of building wealth.

Entrepreneur Vs Investor

So how does a real estate entrepreneur differ from an ordinary investor? And what specific characteristics do they possess?

A real estate entrepreneur and an investor are essentially one in the same; they use real estate as an investment vehicle to generate income, appreciation and tax benefits. However, there are a few noteworthy caveats that must be taken into consideration.

A real estate entrepreneur is generally defined as ambitious, risk tolerant and self-motivated.  They seek to create something out of nothing, and not only recognize opportunities, but rather seize them.  It’s a mindset more than anything, as it combines vision with passion and grit.

“The Entrepreneur,” according to Michael E. Gerber in his book, The E-Myth,” is the visionary in all of us. The dreamer. The energy behind every human activity. The imagination that sparks the fire of the future. The catalyst for change”

4 Top Characteristics of A Great Real Estate Entrepreneur

Becoming a real estate entrepreneur doesn’t happen overnight.  It’s a continuous process that requires daily use and attention. Four attributes of a real estate entrepreneur include:

• Possessing an entrepreneurial mindset
• Having a commitment to attaining a real estate education
• Building relationships, partnerships and teams
• Being consistent with positive daily habits

Entrepreneur Mindset

Far and away, the most important quality a real estate entrepreneur has is the right mindset.  This intangible quality is a key building block in success, whether in real estate or business.  Having the mentality to never stop learning or pushing forward is vital to overcoming regular challenges and obstacles.  A real estate entrepreneurial mindset is the x-factor between entrepreneurs and investors.

When first starting out in real estate, you will not be an expert by any means.  But with the right mindset, including desire for continual learning and improvements, investors can better position themselves moving forward.

Remember that an entrepreneur mindset is not an inborn characteristic — it’s an individually learned behavior that gets stronger with use.  As a real estate entrepreneur, your attitude and set of beliefs will be essential to getting your business off the ground.

Are You A Real Estate Investor Or Entrepreneur?

Although a real estate investor and real estate entrepreneur may sound like one in the same, I reiterate that there are some key caveats that distinguish the two.  A real estate entrepreneur is essentially an investor who has taken their investing activities to the next level by developing an entrepreneurial mindset, practicing positive daily habits, continuing their education, and developing key relationships.

So what are you?

Are you looking at your real estate investments as just another investment, like your Amazon stock, index funds, or money market account.  If you don’t get the return you want, you just sell it.

Or are you the entrepreneur who envisions the bigger picture?

If you’re looking at your real estate investing activities for the long run, not only as a means to fund your retirement years, but as a legacy to hand down to future generations, you are creating something that should be build to last a lifetime – a business enterprise that can be sustained!

Rethink your role in real estate investing and take it to the next level!

IF YOU LIKED THIS PODCAST, we would love if you would go to iTunes, Stitcher or GooglePlay and Subscribe, Rate & Review our podcast.  This will greatly help in sharing this podcast with others seeking to learn real estate investing as a means to achieve a successful retirement.

Check out our other podcasts at olddawgsreinetwork.com.

Get a FREE copy of our 3-Minute Rental Property Analyzer at olddawgsreinetwork.com.

Episode Sponsor: Meno Studio – menostudio777@gmail.com