Today, I'll tell you why buying houses, fixing them up, and selling them for profit, is not the quick moneymaker many think it is. I'll also discuss two key topics that are important to the businesses my family and I have led:
- The True Meaning of Competition
- Find the Hole in the Market, and Fill It
This may sound like a real-estate heavy letter—and it is!—but these examples play out in any industry you find yourself in.
Many people who get into real estate think they are going to get rich flipping houses. Most won't. It's a much steeper climb than they think, and crowded with competition.
As I mentioned in my last letter, it's not necessarily their fault - it's all these TV shows, magazines, and house flipping gurus who make it seem easy. Some might even look at REI Nation as an example of "making it look easy." But, as I hope you've learned from my letters by now, building a business is not an easy endeavor.
In fact, the two biggest services that REI Nation now offers both started as side hustles.
The True Meaning of Competition
When I got into the real estate business, I wasn't following a map. No one taught me how to invest in or "flip" properties. The sole plan I had was to apply the principles I'd learned in business, and see what I could do for myself.
Buying houses for other people's passive income wasn't my original goal, but when the opportunity arose, I didn't just take it, I ran with it. I wanted to be the best I could be, because if someone was trusting me with their investment I was going to handle it like I would my own.
Once I saw what "flipping" really meant to some of my competitors—a term that's come to mean "easy money," for better or for worse—I decided to stop using the word at all. We focused on building up Memphis Invest, now REI Nation, as a trustworthy company that renovates properties preparing them to be investments for our owners and homes for our residents.
But even that service is one that has only gotten more challenging. Where once I could send a well-intentioned letter to a current homeowner to jumpstart my career in real estate, it takes even more of a hunter's instinct in today's market to find the right investment property. These days, real estate is about as hot as it gets.
How do we do it? Our team has spent years gaining experience and building a network so we know how to identify income-producing properties. We calibrate our expectations to know that we will be competing daily—competing with buyers, other turnkey companies, and mostly, with ourselves.
I live by the single truth that if we improve ourselves and our company every day, in the end, you don't have to worry about competition, because YOU are your only competition. The goal of a true competitor is to become a category of 1. Once you've climbed the mountain to the top, compete with yourself to be better, not the people still at the bottom of the mountain. It's hard to get to the top, but much harder to maintain the intensity to stay number 1. You have to motivate yourself and your team everyday to new heights and new goals to stay the best.
One of my favorite authors Tim Grover said, "Being competitive and being a winner aren't the same thing." He's right. Winners win, collect the trophy, put it on their mantle, and then move on to the next thing. Competitors appreciate the accolades, but they are driven by the fight to win more than the act of winning. Competitors aren't racing towards a finish line but are instead constantly planning how to win in bigger and better ways.
Once you see what true "competition" means, you'll begin to evaluate every opportunity as a chance to grow. For instance, if you're starting to invest in real estate, your comfort level with risk is likely low. So, what happens when you do your due diligence and get a house professionally inspected, and see just how much the required renovations are going to cost?
Most lay investors don't know how to look out for problem areas, how to solve them, who to call for advice or repairs, or how to get to the root of the issue on the first go-round. Don't let anyone tell you differently: fixes always cost more than you think in money AND time. Most in the business recommend setting aside 10-20% of your budget for unexpected issues.
That's where our scale at REI Nation gives us a huge advantage over flippers. Our risk comfort level is quite high, because if something unexpected happens and we lose money on a house, we can absorb that loss due to the gains we make with our scale. If the same thing happens on your only flip house—well, most folks don't have the luxury of absorbing the loss and moving on.
That's why, when our company saw an opportunity to grow into a new sector of the industry, property management, we were ready to take the leap.
Find the Hole in the Market and Fill It
If you're looking for more than a one-time payout from selling an investment property, you are going to need to rent it out. But property management can be a major pain for most people and many simply don't have the time or skills to manage it themselves. That's one reason I started a property management company, even though I didn't intend to from the beginning.
When I first started Memphis Invest, property management was just a side hustle. We had 200-300 houses a year to sell, and people far and wide started buying them up. Their next question was, "Who's going to manage this for me?" They didn't live in Memphis and needed someone they could trust to handle the day to day.
Boom. A hole in the market. At this point, we put our heads together and came up with a plan to extend our services to manage houses as part of our full-service turnkey real estate offering.
Over the years, we've seen firsthand how tough property management can be, and how fast and loose some people play with their assets. We learned that, if we were going to do this right, it would take time to implement the kind of policies, systems, and procedures that serves as the backbone for this business now. It takes money, and no mistakes, to make money.
By recognizing a need, I had just turned my side hustle into a business... again.
These days REI Nation finds, buys, renovates, and sells homes. Then our company, Premier Property Management Group, finds residents, and manages the home for our owners. I'm not going to tell you which one is more profitable, but let's just say my newer side hustle turned into a pretty major play.
Commit to The Grind
If you buy a house and try to "flip" it on your own, it may go great. But chances are, it won't. The market is flooded with competition. Renovations can bleed you. And doing your own property management is no picnic.
There are many ways to make a booming business out of a side hustle and the examples in this letter are only that, examples. The question is, how competitive are you?
Do you have what it takes to not just jump in but to follow through? To learn your trade and perform with excellence?
If so, then you're in the right place. We're pretty good at monetizing ideas.
Until next time,
Chief Grind Officer
About Kent Clothier
Entrepreneur, Real Estate Investor, Husband, Dad, and Granddad. Through decades of personal experience, and a few other titles, Kent built a strong community around him at REI Nation. But it didn’t start there. It took 22 years of entrepreneurship – of losing money and making money, building small businesses and multimillion dollar companies alike – before he founded a family business-turned-empire. His sons Kent Jr, Chris, and Brett have worked alongside him, as well as leading successful ventures of their own. Real estate trends, managing towards efficiency, excellent customer service and leading the industry are what fuel him. Over the years, the skills he’s come to value are financial acumen, honesty, and forging new paths in business, investing, and winning.