Are You Investing by Working Hard or Working Smart?
Years ago when I first started investing I worked my A.. off to create a great investment. Hey, growing up in the Midwest and the son of a workaholic, working hard is all I knew. Actually it served me very well as it gave me the experience I have today. It wasn’t until I moved to Florida in 2003 that I learned about working/ investing smart. The days of me wearing all these hats.
- The researcher to find the property
- The handyman to fix and repair the property to maximize profits
- The property manager to search and market the property to find a tenant
- The tenant screener to evaluate the prospect
- The repairman to fix the toilets as they broke down
- The landscaper to keep the lawn mowed and snow shoveled
Does any of this sound familiar? If so, have you ever opted for an easier way, or perhaps you are new to investing and wish to simply start out working smart and letting trained experts who have specific knowledge and skills in each one of these areas take care of these tasks. I used to think this would cost me more money and dip into my profits. I later learned the opposite is true.
As these trained professionals have economies of scale working for them, they can indeed do a better job more quickly and I could spend time investing and doubling down on investment acquisition. I was now considered a passive investor.
Invest or work?
Yes, I have discovered the obvious. Every hour you spend performing these manual labor tasks is an hour you are not learning more about and actually performing the task of investing.
For some people (we call them active investors), they simply enjoy being personally involved in the day to day activity. They feel they have better control over their profits by doing these tasks themselves. There is nothing wrong with it if you wish to be an active investor. For me it was time to start working and investing smart.
Investing is like golf it is simple but not necessarily easy. The concept of hitting a little ball into a hole with a club is very simple, not so easy to do however. It takes lots of practice. Now in real estate this practice is using your investing dollar and the successes (the holes in one) will generate great cash flow and it is imperative you hit a hole in one. You do not want to make too many mistakes as this will cost you in the form of negative cash flow.
I have found that letting professionals who have perfected these systems of the day to day operation of running an investment property business will be a very smart play. The cost of their service is easily absorbed by the increase in sustainable cash flow. All the while freeing you up to be a passive real estate investor and simply find great deals worth owning.