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Why Being “Small” in Your Real Estate Business Might Be an Awesome Thing

by Ian Kuchman on December 3, 2013 · 19 comments

  
Small Advantage

When you’re small, there is much to your advantage.

When you’re small, you’re capable of customizing your business experiences.

When you’re small, you can personally know every investor, bank, tenant, etc. You can afford to do the little things for your REI business that matter.

When you’re small, you can ensure every component of your business is getting the full attention it deserves.

When you’re small, you can see to it that everyone on your real estate team is on the same page as you. And if they’re, not, you can find out why just by asking.

When you’re small, you can change directions easily, because you either feel like it or because new opportunities have got to be explored.

When you’re small you can afford to care about the small things that can separate you from the big. When you’re small, you can pay more attention to the small opportunities that yield big rewards.

When you’re small you have control of your income, time, and mobility.

Once You Get Too big, Everything Changes.

Once you’re big, you can’t keep everything in front of you. You can’t nurture potential opportunities. You can’t know all your employees. You can’t know all of your customers.

You lose the critical feedback loop  between your tenants, investors, etc. Vacancy rates go up. Maintenance issues linger. Your properties become boarded-up.

You don’t have enough time or mobility. Your income may go up, but at a cost to your total liability.

Once you go big, you become a slave to your business. Once you go big, there’s no going back.

Getting big implies that there is a trade-off between quality and quantity. Quantity for the sake of quantity.

Small is Great… Big is Dangerous

Big gets too much attention. Everyone thinks that eventually going big is the ultimate goal.

Big is publicized because it makes for easy headlines. Biggest revenue, largest investment capital, most employees, fastest growth. There is always someone mentioning the big.

Biggest may be fun to talk about, but big doesn’t mean that it is best.

Small may not be easy to get excited about. When you eliminate the fascination of big numbers, you are will become aware of the details that matter in your day-to-day life. You will make decisions that will keep you small. You will become aware of the numbers that are representative of your quality of life.

Big can start great, but often ends in mediocrity. Big requires personal sacrifice that will change the course of your life.

We are small, and we should appreciate how being small benefits our quality of life.

Consider the small banks and investors you work with.

Consider the entrepreneurs who understand the value of staying small and who choose to do so.

Consider the entrepreneur who pays more attention to controlling their income, time, and mobility.

Appreciate the small entrepreneurs, businesses, and projects around you that make your life and business better because they care about the people and relationship more than the growth and market share.

Appreciate that you are building your REI portfolio small and slow. Know that because we are small, we have a deeper relationship with our investors, bankers, agents, local hardware store, etc. Know that we have a small business that provides value to our communities. Know that we have a small business that allows us to have a full-time (fill in the blank) outside of our REI business.

Small matters.

Small makes an impact.
Photo Credit: JD Hancock

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{ 19 comments… read them below or add one }

Roy Schauer December 3, 2013 at 2:14 pm

Valid points. But there are always two sides of a coin. I agree about flexibility, accountabilty and customer service when it comes to being small. But everything is perspective. Good article and good thoughts! I have a dream of keeping the small business service but in a big business impact on the community. Only time will tell if it works, but that’s the stuff that builds dreams!

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Ian Kuchman December 4, 2013 at 6:50 am

Roy – I love the take away! Lean business model with big business impact.

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Ray Orellano December 3, 2013 at 2:49 pm

Great article! Was just having a conversation this morning about the same topic (pros/cons of scaling vs keeping things small). Certainly something to consider- especially emphasis on small, slow growth. Although maybe not as appealing to most, if more Companies focused on this strategy, quality of service would definitely be on less of a decline than it seems to be now.

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Ian Kuchman December 4, 2013 at 6:52 am

I say, go as big as you can, as long as the quality of whatever your doing remains in mint condition.

Thanks for the feedback!

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Alison December 3, 2013 at 4:01 pm

I was very conscious of wanting a small business when I started out in 2008. Doesn’t mean that I don’t work *with* lots of people – I have a great team of folks I work with and I’m going to a meeting in a few minutes of an REI group that has 1000 members. For me small just means I don’t have anyone on my payroll who I am responsible for.

After 25 years of working in management for 2 major research universities and 2 Fortune 500 companies I don’t ever want to have employees on the payroll again!

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Ian Kuchman December 4, 2013 at 6:53 am

Thanks for your insight, Alison!

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Mike Gibson December 3, 2013 at 5:57 pm

To me, it seems like a matter of personality and personal preferences. I like the simple lifestyle. The way I describe ‘simple and small’ is to do everything myself. To others, ‘simple’ may mean outsourcing everything they can. As has been mentioned many times, find out what works for you…what you enjoy doing…and JUST DO IT. Be aware of the blogs, new courses, new regulations, etc., but don’t let those things alter the course that has been placed in your soul.

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Ian Kuchman December 4, 2013 at 6:57 am

Mike, thanks for the feedback. I’m glad this approach is working well for you. Good luck with your endeavors!

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Mike Gibson December 3, 2013 at 6:02 pm

Just read this “Related Post”, as set out above the ‘Comments’ section and really enjoyed it, as it fits hand-in-glove with this blog:

http://www.biggerpockets.com/renewsblog/2013/01/31/simple-real-estate-investing-business/

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Ian Kuchman December 4, 2013 at 6:48 am

Good read, thanks!

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Adrian Tilley December 3, 2013 at 9:05 pm

Interesting take, but I disagree with some of your points about being big being inherently negative. I’m sure some of those on the site and who have been on the podcasts might agree that it’s possible to get big without losing your flexibility and control.

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Ian Kuchman December 4, 2013 at 6:46 am

Thanks for your feedback Adrian. I’m not necessarily saying that being big is inherently a negative thing. I’m saying that being big has a whole host of challenges that may not be worth it in the long run. In addition, I think it is possible to maintain some flexibility and control when you scale way up, but compared to small/lean businesses, there’s no comparison (generally).

Again, thanks for the feedback!

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Kevin Brown December 5, 2013 at 7:05 am

Love the article. Being big is not in my business plan, and I doubt it ever will be, Im perfectly content to grow organically, and as long as Im building wealth (through equity in rentals) and making enough to support myself and my family, I don’t feel the need to be a billionaire

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Forreste Markowitz December 5, 2013 at 11:27 am

Thank you for this article. I have been operating my real estate brokerage for a few years now. I am also an investor. Nobody warned me how hard or slow it would be to earn money in real estate. But, because I am small, I am able to treat each client and investment with the utmost care. I sincerely needed this great article right now. It just reinforces my decision to work in the real estate profession.

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Michael Woodward December 5, 2013 at 1:29 pm

Great article! I agree completely! I wrote out a personal plan several years ago for implementation/creation of a billion dollar company…..after some time and a little more maturity, I decided that I would rather have a life.

My personal motto now is, “The bigger you get…the bigger you get” (quoted from Brian Burke). I’ve realized that it really is possible to have a very high income with minimal personal input ……IF you have the right systems. That’s what I’m working on now.

Thanks again for the article! Good luck to you!

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Evan Stich December 5, 2013 at 3:22 pm

I completely agree with the sentiment that a small business can provide a quality product to the tenant.
I do intend to pursue a much more passive business model as the years go on. In order to get to this, I will have to establish sound relationships that will build a team that I can rely upon to keep my business running in the same manner as if I were an active participant. With the right steps, I believe both can be achieved… all in time.

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Donna December 6, 2013 at 7:15 pm

I agree that small is beautiful. My plan is to turn 2 or 3 houses a year for a comfortable income, and, to my way of thinking, relationships are key. You’ve got to have excellent contractors who respect you and one another to make everyone’s work life palatable and profitable. I’ve seen flip shows where investors are busting the contractors’ chops and expecting people to work all night to get a job done NOW. Some people may call me too soft, but my style works for me and those I work with. At the end of the day, we all make money, and have a shared sense of accomplishment at bringing new life to battered old homes.

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Daren H. December 6, 2013 at 11:04 pm

I am definitely a “go small” guy but I will not go so far as to say small is better. It just depends on the person and how you want to go about your business in my opinion; however, as the article suggests, there are some realities to being big. Just take a look at our US Government :) Big, slow, inefficient but does handle a ton of customers and makes a ton of money, ha ha ha ha.

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Shaun December 18, 2013 at 1:58 pm

I agree with all the points about efficiency, being nimble and building strong relationships when you are small.
Totally disagree that you are a slave to your business if you get big.
In fact I’d say without hesitation that the ONLY way to achieve real levels of freedom is to get quite big. When you are big you have to source most things. Yes their are downsides without a doubt the you have to decide if the time gained is worth a smaller yield and loss of some of those small advantages.
The only way you are a slave to the business when you get big is if you try to keep running it like a small single person operation.
I do think it is possible to get to big to fast and that is where those issues will likely come up.

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