The Main Secret Millionaires Use That Others Don't

The Power of Scale

I'd like to discuss one of the most critical aspects of the million-dollar real estate formula: scale. If people truly understood how to harness the power of scale, there would be many more millionaires and billionaires in the world. We all have the same 24 hours in a day, but what sets millionaires and billionaires apart is their mastery of the concept of scale.  I recently shared more thoughts on my podcast: 

Imagine this scenario:

In 2015, I was actively buying single-family homes, mainly foreclosures. I had about $200,000 in liquidity to work with, and I would attend foreclosure sales, bidding on properties I believed were worth around 75% of their market value. Some weeks, I'd win properties and make money, but other weeks, I'd come up empty-handed. I soon realized that managing 20 single-family houses became challenging. The time spent managing these properties and dealing with issues like plumbing, late payments, and maintenance was overwhelming. I had hit a ceiling with this strategy.

Fast forward a few years, and with roughly the same amount of time and effort I'd previously spent on a single-family house, I acquired a 270-unit apartment complex. The time I invested in analyzing this massive property was nearly equivalent to what I'd spent on a single-family house. However, the returns were exponentially greater. That apartment complex has generated a net gain of approximately 10 million dollars, far surpassing the returns I could achieve with single-family homes.

So, what's the secret here? It's the power of scale—the ability to achieve more with the same or less effort. This is what separates millionaires and billionaires from the rest of the world.

Making Money Irrelevant

Another key aspect of scale is making money irrelevant to your real estate investments. Initially, I had $200,000 to invest, and I'd leverage that to purchase and manage single-family homes. However, as I looked into bigger deals, I realized that my limited funds were a constraint. That's when I began to meet people who wanted to invest in real estate but lacked the knowledge or time to do it themselves.

Instead of teaching them the intricate details of real estate investing, I started structuring deals in a way that allowed them to invest alongside me. This approach made money irrelevant because it opened up the possibility of pooling resources and accessing much larger deals. The same $100,000 that could buy a single-family house could now participate in a $200 million real estate portfolio. This mindset shift was pivotal in scaling my real estate investments.

Streamlined Management

Lastly, an often-overlooked benefit of scale is streamlined management. When I was managing 20 single-family homes, it became cumbersome, and I had to hire property managers. However, managing property managers added complexity and cost. This problem is not unique to single-family homes; even small multi-family properties face similar challenges.

But when you move into larger properties, such as a 200-unit complex, the dynamics change. You can afford a full-time management team, leasing agents, and maintenance personnel. Surprisingly, the cost of managing 100 units can be nearly the same as managing 200 units if they are concentrated in one location. This streamlined management makes it more efficient and cost-effective to handle larger properties.

Conclusion

 Scale is the secret ingredient in the million-dollar real estate formula. It's about optimizing your time, making money irrelevant, and streamlining management. Whether you're just starting out or already experienced in real estate investing, embracing scale can take your portfolio to new heights.

Best, 

Ryan 

PS - To discuss passive income real estate opportunities, go to: https://linktr.ee/serviocapital