Two Way to “Scale”. Which did (do or will) You Choose?

[Don Konipol]

I think there are two ways to “scale” your real estate business or investments.  (Maybe there’s more than two, if you know any others please let us know).  
1- do more deals (investments, loans, etc.)

2- do bigger deals (investment, loans, etc.)

I chose bigger exclusively.  I went from $25,000 loans to $100,000 loans to $250,000 loans to an average loan size of $2,000,000.  On real property purchases I went from $50,000 to $500,000 to $1 million +.  

Which way did you (or which way do you ) scale your real estate activities. Or did you chose to scale at all? Staying exactly as you are and doing the same thing may be the best strategy for many. 

[Alecia Loveless]

@Don Konipol I’m currently mostly focused on doing more deals. If possible, deals that are slightly bigger.

I haven’t created an OOS team yet anywhere and actual BIG deals do not exist where I currently invest.

I’m looking more for the 5-10 unit market but if the right smaller deal comes along I would still do that too.

[Allan C.]

@Don Konipol I think the biggest barrier people see before choosing either path you noted is accessing capital. But assuming people already have capital, I think a combination of your options is needed, depending on market.

For example, in some markets $1M, doesn’t get you much. In order to scale one needs multiple properties so they can achieve economies of scale through service providers. Having realtors, lenders and repairmen willing to give you time and cost effective services requires the surety of more work.

On the other side of scale is time efficiency. As many have noted in recent threads, quality of assets ends up being a larger driver to manage less doors (either self or through PM) while still achieving the same yield.

I’d be interested to hear how people optimize their portfolio after achieving their desired scale. Do they sell lower performing assets, reposition, keep all?

[Chris Seveney]

Quote from @Don Konipol:

I think there are two ways to “scale” your real estate business or investments.  (Maybe there’s more than two, if you know any others please let us know).  
1- do more deals (investments, loans, etc.)

2- do bigger deals (investment, loans, etc.)

I chose bigger exclusively.  I went from $25,000 loans to $100,000 loans to $250,000 loans to an average loan size of $2,000,000.  On real property purchases I went from $50,000 to $500,000 to $1 million +.  

Which way did you (or which way do you ) scale your real estate activities. Or did you chose to scale at all? Staying exactly as you are and doing the same thing may be the best strategy for many. 

 What if you did both :) . I will stick with my note investing as that is what I primarily do now over traditional real estate (which I also still do). When I got involved in notes I started with doing more deals - i was buying lower priced assets and choosing quantity over quality which was "risky" but I did very well and learned a ton. When I started to grow my box buy continued to change and loan sizes got bigger and bigger. 

To give an idea I would say out of my first 250 deals, maybe 5 had a balance over $50k, of my last 250, maybe 5 had a balance less than 50k. 

[Don Konipol]

Quote from @Alecia Loveless:

@Don Konipol I’m currently mostly focused on doing more deals. If possible, deals that are slightly bigger.

I haven’t created an OOS team yet anywhere and actual BIG deals do not exist where I currently invest.

I’m looking more for the 5-10 unit market but if the right smaller deal comes along I would still do that too.

Doing MORE deals is a viable growth / scaling strategy.  My only issue with it is that it requires a larger “organization” and management and administration of that organization. As I am very bad at people management/administration; but fortunately very good at deal making / analysis I scale “to my strength” and away from my weakness. 
However, more money has been made the other way; scaling to volume.  So, perhaps I’ve forfeited a chance for great wealth, But, as Clint Eastwood once said “A man’s got to know his limitations”. 

[Joe S.]

Quote from @Don Konipol:

I think there are two ways to “scale” your real estate business or investments.  (Maybe there’s more than two, if you know any others please let us know).  
1- do more deals (investments, loans, etc.)

2- do bigger deals (investment, loans, etc.)

I chose bigger exclusively.  I went from $25,000 loans to $100,000 loans to $250,000 loans to an average loan size of $2,000,000.  On real property purchases I went from $50,000 to $500,000 to $1 million +.  

Which way did you (or which way do you ) scale your real estate activities. Or did you chose to scale at all? Staying exactly as you are and doing the same thing may be the best strategy for many. 

 I’ve done option one primarily.  last year I did 18 purchases.   I would need a different model if I did option two .We Would definitely be interested in doing larger transactions.