Real Estate Investment Is a Business

I was talking with a long-time real estate investor over lunch. He said that he had recently realized that real estate investment is a business.

Many real estate investors think that real estate provides passive income (and it does) and that they can sit on the beach while the checks roll on in. However, they don’t realize that it takes work and a plan to develop that passive income.

Self Employed or a Business

Many people find themselves self-employed. They end up trading their time for dollars. If they don’t work, they don’t get paid. Robert Kiyosaki calls this “Owning a job.”

Business owners leverage the work of other people to convert employees’ time and effort for dollars. Business owners build a system and a team to produce a product or a service. Business owners can go on vacation and have the business run on its own.

Real Estate Business

Owning rental and investment real estate is very similar to a business. You have clients – tenants, a product – housing or rental space, managers – property managers, sales – leases and rent, and profit – cash flow.

Realizing that real estate is a  business helps the investor develop a plan or strategy to reap the greatest reward from the business. How?

Image courtesy of sritangphoto / Freedigitalphotos.netImagine a strip retail owner. If she thinks of her rental space as a product, she can envision who she will sell it to, how she will market to them, and what they are willing to pay. She can also think through objective ways of making her product (space) more attractive to tenants — fresh paint, a new sign, cleaner landscaping.

Correctly thinking about systems and personnel enable an investor to step away from the day-to-day entanglements of real estate. Viewing your real estate investments as individual businesses can help you to improve the profitability of your properties and your personal wealth.

What do you think? How else does real estate correlate to business? Leave a comment below.