Posted by JD Esajian // August 8, 2014
“Investment is most intelligent when most business like” – Warren Buffett If investing is better when conducted most business like, does it mean that more real estate investors ought to be investing in a more businesslike fashion? Should every real estate investor be investing as a business? What does that really mean? What does it look like? Does that limit the types of properties and strategies that can be applied? Where can help and support be found for building a more businesslike property portfolio? What does Real Estate Investing as a Business Mean?
“Businesslike” investing suggests a less emotional, better organized, well thought out approach to real estate. Definitions of ‘business’ can range from describing a profession, to commerce and trade, to an actual company. All of these definitions likely influence Warren Buffett’s decision to be more businesslike in investing. It has certainly worked for him, and for his own prized real estate investments, and real estate companies. It could mean running a real estate company of some type, owning an investment (which is distinctly different from managing one), or just being more businesslike in every day investment and real estate decisions.
Why Should Investors Approach REI as a Business?
There are many practical benefits of taking a business approach to real estate including:
- Scalability
- Better true investment decisions
- More profitable investment moves
- Efficiency in organization
- Separating personal from investment finances, assets, and income
- Building substantial additional value within a business entity
- Tax reduction
- More free time
What does Building a Real Estate Business Look Like?
Not everyone envisions building a company and mounting an international conglomerate when they get interested in investing in real estate. So will you need an office, hundreds of staff, and have to go back to wearing uncomfortable suits again?
Most won’t.
Many simply want to generate some extra income, and perhaps build more wealth over the long run. Others aspire to building multinational real estate empires. Yet, what we are really talking about here is approaching investment with a businesslike mentality, and structure. Even for those wishing to go really big, most will find they can now operate a multi-million dollar company from their patios via their smartphones.
However, there ought to be businesslike characteristics regardless of size. This may include incorporation and forming a registered business entity, obtaining business credit and bank accounts, setting up a new business phone number, hiring professional vendors to help out, and having a real estate website.
What Types of Properties can be Invested in as a Real Estate Business?
Not all will incorporate as a C Corp, or LLC. Regardless, of which entity type is chosen, or none is used, every type of property is open to investment.
This may include:
- Single-family homes
- Small multifamily properties like duplexes, triplexes, and 4 units properties
- Apartment buildings
- Office buildings
- Industrial real estate
- Hotels
- Retail property
- Vacant land and lots
What about Real Estate Investment Strategies?
The same goes for real estate investment strategy. Virtually any real estate investing strategy can be formalized and systemized to create a business model.
These REI strategies include:
- Wholesaling houses
- Fixing and flipping homes
- Acquiring and holding income generating rental properties
- Commercial real estate investing
- Mortgage debt investing and note investing
- Private mortgage lending
- Options
- Buying, selling and leasing various real estate related rights
- New construction
Where can Real Estate Investors find Support in Building a Business?
The majority of new real estate investors may have very little experience in starting and running a real business. So where can they find help in investing more intelligently, and building a real estate business which can produce better returns, and build more wealth over the long term?
Simply relying on out of date books, and trolling online real estate forums may not be well suited for investors that want to invest intelligently and businesslike. Look for an organized real estate course and proven system that has synergy with your big picture goals. Build on this by seeking out a mentor or coaching program which actually offers business building help, or combines both real estate and business.
Is This the Best Approach for Everyone?
Certainly not all investors want to, or are suited to full time investing, or even running a real estate investment business. There is nothing wrong with that. Yet, all can benefit from taking a more businesslike and smarter approach to investment. This applies whether simply renting out your old home, flipping one or two houses a year, or investing capital in real estate startups.
Those that want the best results, with the lowest risk, and see the value in fast tracking to their goals, while avoiding the pitfalls will see the wisdom in educating themselves on this approach to investing, and will incorporate the best elements to suit their personal goals and aspirations.
