Barriers to Entry aren't so Bad

7 Replies

It’s kind of crazy how the economics of things always seems to even things out. One demonstration of this is the concept of ‘barriers to entry.’ I remember when I was back in school and this was just some business vocab word, but coming through the real estate battery and seeing many of our members struggle with it, it seems to have its place.

All the time i see investors get hung up on a certain aspect of investing, some buy courses and never put together a deal while other investors buy a course and slingshot themselves into a deal. The difference between these two types seems to be that some people are more savvy at taking on barriers to entry than others and many of those barriers are mental.

Real estate investing isn’t rocket science, doesn’t require an sort of degree, but certainly does involve an effort... especially at the beginning. But really in its own way it is a good a thing because it keeps the pool of investors at a reasonable size, enough to keep opportunity alive for the active investors.

I think when we find ourselves stuck on something it’s in its own way a good thing because it thins out the heard. If others aren’t doing it because they are stuck or unable to get something set up, then you have an advantage in the market. Not to say we’re all adversaries, I love the team work that takes place in real estate, but when you’re sitting at an autoresponder with writers block it’s nice to know that the extra effort means something. :)


Ryan, I agree with you on several points. Especially when you said the barriers have there place . It wasnt to long ago when "everyone" clamed to be real estate investors and due to the easy financing and the exploding home values many people made really good money. But now that things are not so easy and you actually have to "think" & "work" to make a deal happen there arent so many investors. It is important for us all to remember that there is still "more than one way to skin a cat".

Great post.

I got into wholesaling right when the market started taking a nosedive. I had a heck of a time in the beginning, and it took me over a year before things finally started to click. Even though that was one tough year, now that I look back on it, I'm glad for the struggles that I went through. I'm pretty sure most people would have thrown in the towel, and it feels good to have persevered and made it through the learning curve.


Absolutely, Warren Buffet has been quoted as saying 'Be fearful when others are greedy and greedy when others are fearful.' For awhile I thought this quote was bullocks because I interpreted it as a wash, two sides of the same coin, but now I've come to realize it makes sense and the time you described fits the bill perfectly.

I think competition is always healthy but unbrideled compeition that allows anyone compete shifts the playing field in an unfavorable direction. Barriers to entry are actually things I look for and forward to because they keep things honest. If I go to the trouble of developing a complete autoresponder and broadcast system I want to make sure that my efforts aren't for naught.

The fact that the business we are in has so many barriers to thin out the herd yet still offers opportunity for those who face it head on is just a thing of beauty. I just wish end buyers would stop submitting offers on REOs lol.

I just love the economics of how the dust settles so many ways in this business.

Today is the day of the REO, last year it was the day of the Short Sale (at least here anyway) and lord knows that dealing in REOs is much easier than negotiating short sales. But on the other hand since REOs are easier there are more people competing in that area while there are less investors working the shorts with less compeition increasing their spreds. I like this example as you get what you put into it.

The hard work brings greater opportunity and the 'easier' work doesn't get the as much. There is always more than one way to skin a cat, heck, my investing niche is totally geared towards tenant/buyers, it's not a windfall of profit, but it's good and fits my day but I also do a lot of work with broadcasts and autoresponders to keep it going.

I don't think it would be unreasonable to say that you get what you put into this business.

The last eight months presented a "shock to the system". Lots of investors and mainly mortgage brokers knew that the bubble is going to burst, but were in denial. Other didn't believe it would burst at all, and the general retail home buyer, The Joes and Janes of America, didn't even know there was a bubble. Many of whom jumped on the gravy train of the early and mid 2000's now in foreclosure shock and some of them swear they'll never own a house again in their life. This new reality makes it actually a healthier socioeconomic environment. It allows landlord to provide quality housing and also enough properties for those who do want to own affordable homes. Sort of a balance, if you will.
As for those who are "get rich quick in real estate" dreamers. They are who they are - dreamers. They dream, they don't envision and those are two different type of people.

And then off course, there are those who afraid. Afraid of success, afraid of failure. Whatever fear they succumb to, they wouldn't do a one move unless they are absolutely positively sure that they are doing the fail-safe move. Sure there's no such a thing. There are always variables, unpredictable factors, "Miscellaneous items" like in any other part of life. This process of weeding out the unfit, leaves the world of real estate investment more balanced.
We REI are all different. Some are more ambitious then other, some or more competitive then others, and some are just better sale people, but in the end of the day, we all love what we do, we always wish we could do more if we just had more money to do it, and we all thrive to succeed and learn. That what set us apart.

I believe that the main barrier to entry for each of us is right between our ears. How you talk to yourself, especially when the going gets tough will dictate how successful you are in the real estate investing business.

I welcome this downturn in the market.

Whenever something bad happens, there's always something good that comes along with it. It's all in how you see things and more importantly, how you respond to them.

Absolutely Shaun, the barrier to entry ultimately boils down to the static between the ears. I'm a big fan of this down market because some how by the grace of God I mentioned to stay at least par, and everything else is just more interesting.

Innovation is born of necessity :)

Originally when I wrote the post I was considering the risk vs reward, effort vs. reward btw short sales and reos. Then it just took on a mind of its own.

But revisiting the idea it makes a lot of sense to be aware of the barriers when we're considering the motivations of others because the barriers will in some way, shape, or form leave an impression on the result of motivations.

A barrier could even be applied to sellers who can't get over the hope that god or obama is going to save them.

One of the most important lessons learned by certain people after the Civil War was that in times of chaos great opportunities are presented. There are only two kinds of opportunities, the ones you can see and ones you cannot.

Keep your eyes open and try to see the opportunities this market presents daily.

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