Solitary Confinement

On today’s show we are talking about a problem that many real estate investors experience. It’s also rarely talked about. We’re talking about solitary confinement. 

A large number of real estate investors spend a large percentage of their time working on their own. For many investors, the list of solo tasks seems endless.

The bill payments, reviewing leases, reviewing construction reports, posting updates on social media, responding to email, completing the application for a building permit, reading the latest update to your insurance policy. The list is endless. It all feels like busy work.

This was not the carefree life of passive income and financial freedom that was talked about in the weekend seminar when you got into real estate at the very beginning.

Well folks I’m here to tell you that there is no such thing as passive income. Real estate is an active business, just like running a service business. It is like running an engineering firm, or an airline. Real estate is a capital intensive business and therefore a disproportionate amount of emphasis is placed on the capital aspects of the venture. 

There is a problem with the do it yourself model of real estate investing. It means that you are doing it all yourself. It means that you have not hired the staff needed to build a sustainable business. 

I was talking earlier this week with an investor who was struggling with this very issue. 

The key is to hire. But before you can hire, you need to be working on projects that have sufficient scale to afford hiring. Your first hire absolutely should be a professional book keeper. 

After that, you want to hire someone who can truly step into your shoes and perform just about any task that you might do yourself. Your goal is to replace yourself. 

If you hire a virtual assistant, you can definitely get some help. But in my experience, the caliber of work you can delegate is limited. In most cases you end up delegating tasks, but not the responsibility. The delegated task even when completed, come back to you. If it comes back to you, then the leverage you get from hiring is dramatically diminished. 

The next issue with hiring is whether to hire full time or part time. You might not have enough work, or even enough money to afford full time. 

In my experience, part time employees have a number of things going on in their lives. It can be difficult to count on deliverables when you only have a part time commitment. 

In particular, I find that part time arrangements are rarely long term arrangements. You are likely to get into a cycle where your employee gets a full time job elsewhere and then you are hiring again, training again, and in the transition all of the work come back to you. Whatever help you had in the past vanishes. Whatever life balance had been restored, disappears.