Are You Sabotaging Your Wealth-Building Potential by Doing Too Much?

by | BiggerPockets.com

Like many of you, when I first started investing, I did everything myself—new door locks, landscaping, cleaning, dump runs, you name it. If it needed being done, I was doing it.

After all, that’s what an entrepreneur does, right?

Turns out, I was more of an “entrepren-doer” than an entrepreneur.

Looking back, I realize I wasn’t running a business. I was working a job—a job that I worked really hard for and saved a lot of money to buy. If you think about it, that might be about the stupidest thing anyone could do. Work hard, save, and buy a job—because, of course, we all want to leave our 9-5 right?

This is a big problem in the world of real estate investing, and a lot of us are missing it. Working to replace your job with a new job is not a good plan. If we want to do something about that, we need to step out of the circle of fear and control (leading us to think we need to do it all) and into the circle of trust and planning (allowing us to let others do the job better than we can). If you can break this cycle, you’ll be on your way to learning how to run a business, not work a job.

The Power of Leverage

This principle of leverage is what makes good businesses run. No one can do it all alone, and nobody is good at everything.

Henry Ford recognized this and created the assembly line. Having an employee specialize in one job allowed them to improve at that task far faster than if they were working 100 different small jobs.

Modern day sports teams have taken this to the next level. By purposefully assembling a roster of various kinds of talent, they are able to create game plans to attack opponents’ weaknesses by leveraging the individual skill sets of the players on their roster.

We all have our strengths and weaknesses. Learning to leverage other people’s strengths for your own gain is what separates a good business from a great one—and a group of athletes from a championship-level team.

When I was forced to start investing in other states, I quickly learned I needed to depend on the wisdom, experience, time, and expertise of others. I physically couldn’t be there to do things myself. We all know this is something we should do, but oftentimes the temptation to do it ourselves is just too much.

Why is that?

There is no shortage of business books expounding on the fact that as a business owner, we should only be focusing on those tasks that bring us the highest return on our time. Focus on what we’re good at, double down on our strengths, and hire out the rest, right?

But knowing and doing are different things. All too often, if the opportunity is right there in front of us, we just can’t help but jump in and do it ourselves.

It wasn’t until I stopped doing those things that I really succeeded. Getting myself out of the daily grind of working in my business allowed me to start focusing on my business. That’s when things really took off.

Now, I’m able to buy houses in other states, fix them up, refinance them, and rent them out—all while going to work on my new business and making more money than I’m investing in real estate. This has allowed me to create an awesome system that consists of earning income, amplifying that income, then investing that income. By the time I hit the investment phase, I’ve already got a new round of money I’ve earned to take its place. I’m chasing a form of investment utopia, where I can continue to invest without running out of capital and without needing to borrow it.

The secret to executing this system is planning and leverage.

First I come up with the plan, then I leverage out the work.

Related: The Ultimate Guide to Adding Systems & Outsourcing to Work Less in Real Estate

The Plan

First, the plan.

In my personal wealth building system, there are three arms:

  1. Earn it.
  2. Amplify it.
  3. Invest it.

Seems simple, right? In a future article, I will go into greater detail on just how I do that. In this article, I want to show you how I use leverage to make it happen.

The gist of it is, I make money through a business/job. I then amplify it through a short-term wealth-building vehicle such as a hard money loan, flipping a house, etc. Finally, I take what it’s become, and I invest it in a long-term vehicle such as a rental property, multifamily, mobile home park, note, etc.

So, in my specific situation, I am earning money through my business as a real estate agent, amplifying that money through house flips and investing that money into rental properties.

The point I want to focus on in this article is how I use leverage to execute this plan and how without leverage, none of this would be possible. Through the power of leverage, I’m able to make much more money in the “earn it” phase, multiply the money in the “amplify it” stage, and then get way higher returns in the “invest it” stage.

By focusing on leverage (in many forms), I’m able to take a modest sum of money and grow it into a huge chunk of capital. Here are some of the ways I do that.

outsource-income

Earn It

In my personal life, I am a real estate agent and a police officer. These are the two ways I currently earn income (other than cash flow from rentals). I’m on a leave of absence from my police job, so for the last six months, I’ve been full-time in real estate sales. During that time, I’ve risen to number one in sales in my office of 100 agents, built a team of three assistants, been featured on HGTV’s House Hunters on TV, been asked to teach other real estate agents how to improve their business, and written a book slated for release by BiggerPockets in December.

Not a bad six months, right? Don’t give me too much credit. Above all else, there is one thing that’s contributed to my success more than anything else.

Leverage.

To be blunt, I sell more real estate than the other agents in my office who have been doing this much longer than me because I leverage off the parts of my job that anyone can do, and I focus on the high-level activities that only I can do. This allows me to excel at my job and ensures my clients get treated even better than if I did the work myself. Why? Because I hire assistants that are skilled in the areas I am weaker.

I’m a police officer, an athlete, and an investor. My mind works differently than some people’s. I tend to analyze information quickly, think quickly, and speak quickly. When problems are introduced, I immediately work on a solution and mentally run through different scenarios to see which is the likeliest to succeed. I can’t help this. As a basketball player, it’s helped me make the best split-second decision based on the defense. As a police officer, it’s kept me and others alive. As an investor, it’s helped me analyze deals before others and make decisions while at work or otherwise busy.

My mind works the way it does because I’ve conditioned it that way. This is really good for me in some areas, but it’s not very good in others.

Because I tend to think so quickly, I’m not always the best at taking the time to listen to others when they are talking, slowing down to hear them out, or making sure they know they are understood.

Now, of course, I do understand them! But I don’t always communicate that well. It’s just not my strength. I’m a thinker more than a feeler. In this business, however, it’s really important that your clients know you understand them, not just that you represent them well.

That’s why I hire assistants who are strong in the areas I’m weak. My first hire, Krista, is one of the most amazing human beings I have ever met. I’m not exaggerating. Not only is she able to keep up with the heavy demands of our workload and the level of service we provide, but there isn’t one person I’ve come across who doesn’t tell me how incredible she makes them feel. Krista has a gift for making people feel loved, understood, and valuable, and those gifts benefit my business.

Krista is one hire, but there are several others I’ve made who also help my business. Leverage is key!

Not only do my assistants make my clients feel good, but they also take a lot of the menial, mind-numbing tasks off my plate so I can focus on my own area of expertise.

For example, I study real estate in every capacity. I love it, whether that means owning, flipping, holding, buying, selling, representing others, crunching numbers, or whatever else. The best use of my time is helping my clients come up with a strategy based on my knowledge, maximizing the amount we can get them when selling, and minimizing the amount we pay when buying. I can’t do this effectively if I’m also handling all the administrative tasks that come along with managing an escrow—or managing a client’s wildly fluctuating emotions.

By hiring assistants who can perform tasks for me, I can focus on the big picture. For instance, when trying to figure out how much to list a house for, I need to know what the comparable properties are, how many buyers are in that market, and how to get that house in peak condition for sale. By assigning tasks to my assistant, I can get the information I need without having to spend the time to get it.

My assistant pulls comparable properties; contacts real estate agents with listings in the area and asks how many showings they are getting a week; calls our list of handymen and gets quotes for paint, carpet, repairs, etc.; and prepares all the forms or clients to sign. In turn, I’m able to analyze the information she gathers in 15 minutes and let the client know what the plan is moving forward. If I were to gather all that information myself, it would take me the greater part of three hours.

  • It’s a better use of my time to look for the handymen who do the best work than it is for me to call the entire list of them to see who’s available and looking for work right now.
  • It’s a better use of my time to look for people who want to buy or sell and come up with a game plan to net them top dollar than it is for me to spend hours filling out forms and organizing files.
  • It’s a better use of my time to attend conferences where I can study how to become an elite-level negotiator than it is to go to the store to pick out the gifts for the closing table.

By focusing on high-level tasks, I make the company more money and I serve my clients better. By hiring better communicators and more organized assistants, I increase the overall efficiency of our office, and my clients feel as special as they should.

Using leverage supercharges my results.

My job right now is as a real estate agent, but there are so many other jobs where this will work too.

Are you a waiter in a restaurant? Have you ever thought about how many more tables you could handle if you paid the bus boys a little extra to give your section special attention?

Related: 4 Business-Improving Projects I’ve Completed for a Few Hundred Dollars by Outsourcing

Do you work in sales and spend half your day preparing for the meetings where you’ll actually earn the money? Have you ever thought about how much more productive you’d be if you paid an assistant to prepare all the forms and information and conduct the research you’ll need—so you can focus on setting more appointments or learning about the client you’ll be meeting?

Do you run a small business doing hair, makeup, eyelashes, or other cosmetic-related services? Have you ever thought about how much more business you could do if you hired an assistant to organize your database of friends, family, and past clients so you can start marketing to them regularly?

Most of us never even give a second thought to how much better we could be if we leveraged off some of the lower level tasks we do everyday, but I promise you, the opportunity is out there.

Amplify It

In my personal world, I amplify my capital primarily through flipping houses, so that’s what I’ll concentrate on most.

When you flip a house, you are almost always leveraging every part of it, in some capacity.

  • You likely used an agent or a wholesaler to bring you a deal. That was you paying someone else to do the biggest part of the job for you—finding the deal.
  • You likely used some form of loan to purchase the house. That was you paying someone else to make it all possible—funding the deal.
  • You likely hired a contractor to fix up the property. That was you paying someone else to do the worst part of the job—rehabbing the asset.

You probably even used some form of calculator or spreadsheet to help you run your numbers—the most confusing part of the deal.

You may not realize it, but you are already using leverage every time you amplify your money. If you give it out as a loan to someone else, you are literally leveraging their efforts to make you money the whole time.

The whole magic of amplifying your money is that someone else is making it grow, while you focus on making more. It requires leverage to do this. If you aren’t leveraging the amplification phase, it’s not really the amplification phase—it’s more the earning phase.

Leverage helps you amplify your money before you invest it, while allowing you to still earn more, keeping the cycle in motion.

Invest It

This is the section everyone at BiggerPockets is so excited about. It’s why we’re here! The whole point of earning and amplifying is so you can invest.

When you invest in real estate, you’re leveraging a lot of other people to get the job done—agents, lenders, contractors, repairmen, property managers, bookkeepers, etc.

Rather than focusing on the way investing is inherently leveraged, I want to talk about the way I use leverage to supercharge my investing business.

I buy rentals in other states. To do this, I need help. This may sound like a disadvantage, but I’ve found that it actually gives me a huge advantage. I’m forced to leverage things that other investors are tempted to do themselves. I don’t have the option to do it. I have to find someone else.

This has forced me to trust others to do the things that they are better at than me anyway.

I buy houses sight unseen routinely. I’m often asked how I do this. It’s the easiest question for me to answer.

Why do I need to see it? I don’t! The inspector needs to see it! The appraiser needs to see it! The contractor needs to see it! The agent or property manager needs to see it! These are all people who look at houses, and inspect them from different angles for a living! 

On my best day, I won’t be half as knowledgeable as one of these guys on their worst day. They have experience—and likely an aptitude for—doing this. Why would I need to get involved in the process?

For those of you who wonder how I avoid being taken advantage of from a distance, stay tuned for my next blog post. The gist of it is that I use one of my “core four” (deal finder, property manager, contractor, lender) to overlook the work of another.

So, in practical terms, I have the property manager make sure the contractor is doing the work he says he is before I pay. My agent makes sure the property manager is giving me accurate rental rates. The lender makes sure the agent’s sending me good comps. The property manager makes sure the agent is being honest about the area/neighborhood, etc.

By leveraging each of these components to overlook each other, I make it very hard to be taken advantage of. I also make it very hard for me to get too involved in the process at all!

real-estate-networking

Mastering Your Area of Expertise

If you want to be successful at anything, you need to strive to master it.

This is true for business as well.

When you go to a hospital, do you get upset when it’s not the surgeon who comes to clean you up and prepare you for surgery? What about the fact that they have office assistants filling out the paperwork and checking you in?

Do you get upset and feel cheated when the anesthesiologist is the one choosing the drugs to knock you out? Or are you happy you have an expert in that field taking care of and watching over you?

Hospitals are run by leveraging the talents of the people involved, so everyone does what they are best at. The work of a nurse is not the same as the work of a doctor, surgeon, or CNA.

Don’t you want your surgeon spending all their time researching cutting edge literature, learning from other skilled surgeons, and mentally focusing on what they are about to do before they cut you open?

It’s time we started thinking about this in our business as well. Does keeping the books drive you mad? Imagine if you redirected all that passion and time into finding deals! Or better yet, find people to leverage to find you deals!

Don’t be afraid to start leveraging off the parts of your business that you don’t love or don’t excel at. The greats aren’t afraid to do so. You shouldn’t be either. When you learn to trust the work of others and leverage their talents to help your own business, you find you have the capability to invest anywhere, whether it’s down the street or across the country. There are people everywhere who know how to do the jobs you need done in this business. Start looking for them instead of looking for excuses why it can’t be done!

Are you interested in real estate investing but there is nothing to buy that makes sense where you live? Are you tired of seeing the amazing success of others investing in markets better suited for buy and hold real estate and wish that could be you? Do you want to take advantage of wealth building opportunities but are frustrated by the fact there just isn’t any way to do that until the next market crash?

In The Book on Investing Anywhere, real estate investor and police officer David Greene shows you exactly how he’s built a multi-million dollar portfolio on blue collar wages buying out of state rental property without ever even seeing it. Slated for release December 14th, this book is available NOW for pre-sale!

What tasks have you handed off in your business?

Let me know with a comment!

About Author

David Greene

David is a real estate investor/agent/author/entrepreneur/police officer in the CA SF Bay Area. David's goal is to achieve total financial independence through real estate and to help as many others do so as possible. When not hunting bad guys, he hunts deals and loves talking real estate. To learn more about David, visit his website where you can also sign into his free investor's newsletter and follow along as he walks you through his deals and shares his latest projects.

19 Comments

  1. Christopher Smith

    Sounds like a well thought out and very efficient business model that you have. Mine is very similar and its based upon delegating out all the ministerial activities to a management company. If you find a solid one the time they can free up is invaluable either as time you can dedicate to much higher value added activities (strategic business planning & execution or other personal endeavors). Plus I have absolutely no desire to play Maintenance Supervisor or Accounts Receivable clerk for a gaggle of tenants (even though I must say most of my tenants have been great folks thanks to very skilled management company screening)..

    I too have an out of state rental portfolio and its worked out very well over a number of years now. I’ve never seen any of my out of state properties in person, the closest I’ve ever gotten to one of them is seeing it on Zillow. Management Company takes care of everything on the ground and consults with me as necessary for any major maintenance (for which there has been remarkably very little) and the setting of annual rental adjustments. Its pretty close to an auto pilot operation.

        • David Greene

          Yeah, sometimes it can feel like comparing apple to oranges.

          What i do is convert the metric I use so I can use an apples to apples approach.

          Basically, I decide what the ROE (Return on Equity) would be if I kept it as an investment. Then I look at the amount of money I will make if I flip it, and I determine if that money would get be a better return elsewhere.

          So for instance:

          If the home will have 40k in equity and cash flow $500 a month, that would be an ROE of 15% ($6,000 yearly income divided by 40k investment).

          If the property is going to net me 25k if I flip it (after taxes, commissions, etc) I would look at what kind of return I would need to earn on that 25k to get me the same cash flow ($6,000 a year) I would have earned had I kept it as a rental.

          Sooooooo,

          I would need to earn a 24% return on the 25k profit I made if I flipped it, in order to match the $6,000 a year I would be making if I kept it.

          In this instance, I wouldn’t be likely to find something that would earn me 25% as easily as just keeping the property as a rental, so I would hold it rather than flip it.

          Of course, other factors come into play. Sometimes the area isn’t great for a rental, or you need cash right then and there, so you flip. But in general, I convert my math so I can have a good apples to apples comparison in order to know if I should hold or flip.

  2. Michael Woodward

    Absolutely agree!! Great article! This was a game-changer for me when I realized that I was doing the wrong work (low level tasks) a while back. We all have the same 24 hours in a day but the top performers just use them differently.

    Thanks for the article…. and thanks for your service as a police officer!!

  3. Debbie Kay Boman

    Thank you for this article. Can’t wait to read your book and follow up articles! I have been working on time management and this sounds like a process that works for you and I can implement easily. Thanks again, and repeat of your service as an officer.

  4. Denis Beausejour

    Otherwise I love what your up to. I have two properties (Miami, FL and Chicago, IL) and I’m trying to figure out what my next deal looks like. Definitely suffer from analysis paralysis. I started 10 years ago and was put into landlord status thanks to a job move + market downturn. Will have to publish my story some day but can’t wait for the book to come out!

  5. I love the site. But the biggest problem I have with Bigger Pockets (BP) is that half the people writing most of the articles are middle classes part timers that think they have all the answers about real estate when their day jobs are completely unrelated. This guy is a police officer claiming he makes tons of cash and pontificates like he is Warren Buffet. If he was so successful, why doesn’t he stop being a cop, and instead dedicate his full time efforts to being an RE investor?

    I think I’m done with BP for a few months and might start reading less social media geard sites (where the owners benefit from free user generated content). I just don’t like how everyone tries to sound like an expert when in reality they don’t have a ton of qualifications. It feels like every article I read it is about somebody bragging about how many units they own when the units are probably worth less than 100k -200k each and they still have weird jobs. My two cents.

    • David Greene

      Interesting take Dan.

      This response prompts a few questions.

      If you wanted to get in shape, but also had a full time job, would you want to take advice from someone who works out 8 hours a day and never leaves the gym, or someone who works out 45 minutes a day but has the same or beter body of the guy who stays there all day?

      Wouldn’t it be reasonable to say the guy who can get the job done in 45 minutes is actually a BETTER person to follow than the guy who has to be there all day to do get the job done?

      A second question would be, what if the guy who has a job actually likes his job, and doesn’t want to spend all day at the gym, because he prefers it in small doses?

      I’m sorry if you think I was trying to sound like an expert. If you’d prefer to read articles from someone who DOESN’T know what they are doing-there are much better sites than BiggerPockets for that.

      You could always pay a guru to teach you this stuff. After all, they are working full time in real estate!

      Lastly, I don’t think it really matters how much a unit is worth. What matters is the equity they have and the cash flow they produce. Owning a whole bunch of units worth 500k but being underwater on all of them would be pretty foolish compared to owning 20 units worth 100-200k with a ton of equity and a lot of cash flow.

      I think, if you choose to continue learning about real estate investing and don’t take the hiatus you described, you’ll find that most successful investors own properties on the lower end of the price spectrum because these are the properties the majority of tenants can afford. With no tenants, you won’t be doing well as a real estate investor. Rent paying tenants are the backbone of the entire industry. Providing them with something they want is really all a real estate investors is doing.

      And, if a person can afford to rent a house for 500k, they are probably just going to BUY it themselves, not choose to rent and pay it off for someone like me.

      But then again, what do I know? I’m just a blue collar worker with a “weird” job who never claimed he makes a ton of cash (but kind of does) because he learned the fundamentals of real estate investing and has learned how to make it work for him (while he does other things that earn money, so he can keep buying more).

      But hey, that’s just my two cents!

    • Cindy Larsen

      You should take care not to be so judgemental that you miss the value to be had here on BP. Real estate investing is not rocket science. It is a fairly well defined process that can be understood by anyone with a reasonable level of intelligence and determination. What a person does for their day job is not really relevant. I have degrees in Math, Physics, and Library Science. I have over 25 years of experience in the software industry, from programing through Director of Program Management. So what. I’ve learned a lot here on BP from David and lots of others.

      Part of the value is seing different perspectives and different scenerios people have experinced. It is in reading the articles, and then the comments where other experinced people disagree with something the author says. The value is in having a community of smart, successful, experenced people who have practiced every aspect of real estate investing, have learned lessons, and are willing to share those experences. For free. because, face it BP is a community of Real estate investor geeks. The RE gurus do NOT share information for free, and trust me, they have no secrets that you will not find on BP.

      Yes, David is obviously inviting us to buy his book. No one is forcing you or me to do so. I personally, am not comfortable with investing remotely, so I may not read it at this point. And I may read it later. That said, I will eagerly read any posts David makes. He is a smart guy who has taken his personal time in the past, to help me by answering questions for me, just because I asked. Often, I agree with David. Sometimes have different perspectives. I find that valuable.

      Also I’d recommend that you read some of the articles people have written about why NOT to quit your day job, whatever it is. OR you can choose to just dissappear if the BP community is not for you. Your loss.

    • Chris Ayers

      Talk about judgmental.

      1. He never claims to be an expert, but he is sharing his systems that does do which make him successful …. on a free site mind you. He might not have some extra letters next to his name, but is that what you are looking for as qualifications are concerned? Achieving your goals via making money time and time again should be a qualification in itself.

      2. If you love what you’re doing then why quit? I still like my day job and have no plans to do RE full time like Dave. RE is also a job for some but an investment for others. Plus the benefits of a W2 job (health, dental, 401K, life, AD&D) do make a difference.

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