7 Things To Consider When It's Time To SCALE!
When scaling a real estate investment business, there are several significant challenges that we had to overcome while getting to the 7 figure mark in holdings and roughly $10K net cash flow.
Let me preface this to everyone: "Everyone will have a different take on what are the most important aspects to scaling your investment business, so while I want to have a healthy debate, I'm not ranking or ordering these in any sort of hierarchy of importance."
Here are the most common issues we faced...
- Access to Capital: Scaling a real estate investment business often requires a significant amount of capital. Acquiring properties, renovating them, or expanding your portfolio requires substantial financial resources. Securing funding from lenders or investors can be challenging, especially if you don't have a proven track record or if the market conditions are unfavorable. This is where OPM came in. We built relationships through friends, family, and business associates to create enough "interested" investors that were willing to put their money into our ventures, projects, or BRRRs.
- Market Volatility: Real estate markets can be unpredictable, and they often go through cycles of booms and busts. Scaling a business in a volatile market adds an extra layer of risk. Economic downturns, changes in interest rates, or shifts in local market conditions can affect property values, rental demand, and profitability. Adapting to market fluctuations and developing strategies to mitigate risks is crucial. While all these market conditions are critically important, there is money to be made in any market at any time. Risk = Reward in my eyes.
- Talent Acquisition: As your real estate investment business expands, you will need to build a reliable and competent team to handle various aspects of the operation, such as property management, acquisitions, financing, and legal matters. Finding skilled professionals who align with your vision and can contribute to your business growth can be a challenge, especially in competitive markets where talented individuals are in high demand. This can be challenging if you are not 100% committed to vetting and growing your team through a hiring process.
- Operational Efficiency: Scaling a business requires efficient systems and processes to manage a growing number of properties and projects. Inadequate operational systems can lead to inefficiencies, delays, and increased costs. Implementing scalable technology solutions, streamlining workflows, and establishing standardized procedures can help improve operational efficiency and support growth. This is where we shined. From start to finish, there was a process put in place that was constantly challenged, A/B tested, and perfected.
- Market Saturation: In popular real estate markets, competition can be fierce, and finding attractive investment opportunities can become increasingly difficult as the market becomes saturated. Scaling your business might require exploring new markets, both geographically and in terms of property types, to find untapped opportunities. Conducting thorough market research and developing a comprehensive growth strategy are essential to overcome market saturation challenges. This shouldn't be an excuse for anyone, but in my market - competition was EXTREME. Limited inventory of good deals was an everyday occurance and typically 2 to 5 of the same investors were looking at the same lead's property each week. LOL
- Regulatory and Legal Considerations: Real estate investments are subject to various laws, regulations, and local zoning requirements. Scaling your business may involve dealing with complex legal and regulatory frameworks, obtaining permits, complying with building codes, and navigating zoning restrictions. Engaging with experienced legal and compliance professionals can help ensure your business expansion remains compliant with all applicable laws. Build your dream team from the ground up!
- Risk Management: With growth comes increased exposure to risk. Scaling your real estate investment business involves taking on more properties, tenants, and financial obligations, which can expose you to potential liabilities. Implementing risk management strategies, such as comprehensive insurance coverage, thorough due diligence processes, and appropriate legal structures, can help mitigate these risks. This is 100% one of the most overlooked aspects of scaling. Be sure to consult the right experts and get the advice from CPA's, attorneys, and others who ACTUALLY OWN REAL ESTATE.
It's important to note that each real estate market and investment business is unique, and the specific challenges faced during scaling may vary so don't use this as a blueprint for your own business until you get some advice from your mentor or coach. Don't re-invent the wheel is my advice...
Best of luck everyone and don't stop hustling!