Quality Over Quantity: The Truth About Real Estate Goal Setting
First and foremost, there are a lot of different types of real estate investors out there.
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Different styles and different goals.
I myself am a “buy & hold” type of guy but I don’t look down on “house-flippers” because everyone has different goals and different needs. Additionally, everyone has different resources. While I certainly don’t have any desire to flip houses, I do love listening and learning from successful flippers (like J Scott for instance) because more times than not, I usually learn something I can apply to my business.
Differences of Opinion
Recently, I was in Louisville, KY and had the honor of spending most of the day with Mike Butler. Mike is the author of Landlording on Autopilot. If you haven’t bought his book, go buy it now!
Mike managed 75 rental properties while working a full-time job as a police officer. What’s even more impressive is that he did this in 4 hours a week. I joked with him that he actually started the 4-hour workweek before Tim Ferris made it popular.
Mike’s book is my favorite book on real estate investing for two reasons. The first reason is the granular details. The book is filled with actionable advice. He dedicates an entire chapter to the application process.
I will be the first to admit I was doing it completely wrong. I had no idea how much more money I could make by simply changing some procedures in my rental business.
The second reason I loved Mike’s book and meeting with him in-person was: he is challenging. If your looking for some fluffy book on how real estate is going to make you millions without any work, don’t buy this book. Rather, Mike and I disagree on a big topic. I love multifamily because of the cash-flow and Mike loves single-family because of the higher-quality renter you get.
It was fun debating someone that was way more experienced than me. Why? Because I will be the first to admit I have a ton to learn from a guy with as much experience as Mike Butler.
Mike has had some great success with single-family rentals because he focuses on high-quality properties where people want to live. As a result, he has very long-term tenants which of-course produces great returns when you buy them at steep-discounts.
I’m not going to give you the nuts and bolts of all of our points, but I will tell you what we both agreed on: FOCUS ON QUALITY.
Why I Don’t Focus On Quantity
It doesn’t matter if you have 2 properties or 200 properties, if they aren’t profitable, they aren’t profitable!
Stop worrying about how many properties you have and start thinking about how to maximize the revenue with the properties you do have. For instance, Mike gets over 110% of his monthly rent every month. You’ll have to read his book to figure out how.
This all bring me to my point about the worst real estate goal I have ever heard of, it’s this: To Own 100 Rental Properties.
Why is this the worst goal ever? Because it doesn’t focus on profit at all. Again, who cares how many you own, how profitable are they?
As someone who has financed thousands of rental properties I know plenty of people with over 100 rental properties that would gladly trade that with 20 highly-profitable and highly desirable rentals.
If you are going to have a goal this year or for the next five years have a free-cash-flow goal. Such as I want to have $10,000 in monthly free cash flow in the next 3 years. Then work backwards and figure out how many profitable rentals you are going to need to get there.
Note, I’m talking about free-cash-flow to you personally after you have made your debt payments, insurance, taxes and any maintenance expenses.
By the way, focusing on this metric is how most lenders are going to analyze you personally and your business.
In summary, I want you take away two main points:
1. Focus on Quality over Quantity
2. Focus on Profit not the number of doors you have