When I first started out as a real estate investor, I was of the “control freak” mindset, and I really thought I had to learn, know, and do everything myself. Today, I take the opposite view.
In my note company, for example, my partners and I sit down periodically to assess, or even re-assess, what tasks should be kept in-house and what should be outsourced.
Why the shift in thinking? Mostly it’s because things change, especially markets and technology. Also, regardless of whether you’re an individual or a business, your needs change as you grow.
And to be honest, I wish I had started outsourcing some things sooner. Here’s why…
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Strengths & Weaknesses
Over the last several years, I’ve been studying successful people in order to shortcut my own growth as an entrepreneur, and I’ve learned to listen to outsourcing advocates like Tim Ferriss of The 4-Hour Workweek fame, who says we should develop our strengths and outsource our weaknesses, rather than trying to improve them.
Two of my weaknesses growing up were learning to speak French and play the guitar, and I wanted to do them better even though I wasn’t a “natural” at either.
What does it take to master a skill? For many, it just takes focus and time (10,000 hours, according to Malcolm Gladwell). But for some folks, that process is easier and faster because they have a natural knack or love for it. In my case, I’m just not that good at playing guitar or speaking French, and it’s probably not the best use of my time to keep trying.
But do you really have to be good at everything? As my buddy, Louis Schiff, author of Business Brilliant: Surprising Lessons from the Greatest Self-Made Business Icons, has noticed from his surveys, the ultra-wealthy are really only good at one or two things, and they outsource or hire the best for everything else.
When my partners and I first started our note company, we kept as many things in-house as we could, and we only outsourced things we couldn’t do ourselves. Obviously, much of this was out of necessity or due to a lack of capital, so the partners and early employees wore all of the hats, so to speak.
But as we grew, it became more about efficiency and management rather than direct control, and what we outsourced also changed, especially as market regulations have influenced how we do business today. It’s just funny how some things we outsourced have come back in-house, and other things we kept in-house are now being outsourced. As I mentioned above, things change.
Outsourcing Your Way to Multiple Streams of Income
Not only can outsourcing enable you to focus on what you are best at, but it may also give you time to create additional streams of income. And sometimes, something that you outsource can even become a future income stream (where you take back control).
Let me explain. One of the most powerful concepts I learned about investing came from Robert Allen, author of Multiple Streams of Income. He taught me to ask the question: Why not make more money with some of the value chains that are close to my normal activities? In other words, how can you increase revenue by adding profitable channels back into your business model?
For example, when I was first starting out as a real estate agent, I just did what all the other agents did: I focused on selling houses and earning commissions. But after reading Robert Allen’s book, my thinking changed. Not only did I shift my focus to the niche of real estate investors, but I also looked for more income streams. So, I left the traditional real estate office and opted for a 100 percent commission platform (RE/MAX), thus increasing my income.
Next, I became a partner in a title company and also started doing property management to pick up residual income going forward from all the investors I sold properties to. Plus, I still had my contracting company providing services for this same audience as well.
As a real estate agent who became a property manager, it made sense for me at first to manage my own properties as well. Eventually, though, I even outsourced this. The point is that I shifted my focus to creating additional income streams.
There are plenty of other folks who have done this as well. For example, my friend Jim Bennett of Stonehenge Funding has a hard money lending business that evolved from his real estate investing business. Or take Doug Skipworth, whom you may know from BiggerPockets. On top of the 1,500+ rentals he owns, he also has multiple streams of income, such as property acquisition, rehabbing, real estate sales, and property management. You get the idea.
As we’re entering a new year and thinking about scaling or adding new income streams, maybe it’s a good time to take a look at your current situation and think about what should or shouldn’t be outsourced.
I’d also love to hear what some of you are thinking — how do you feel about outsourcing more this year? And what strategies will you employ?
Let’s discuss in the comments section below!