What Being a Property Entrepreneur is All About
- Despite a government onslaught in recent years, becoming a property entrepreneur remains one of the easiest ways to become a millionaire
- Having money is probably not the most important ingredient for being a successful property entrepreneur
Not everyone thinks of the same thing when they use the word “entrepreneur”.
In this blog, an “entrepreneur” is the owner of a business – the person entitled to the assets and profits of the business and having ultimate control of it.
By way of contrast, a typical manager is not the owner of a business; notwithstanding the importance of their role, many managers are just employees – subject to dismissal or removal from their job if they don’t meet expectations.
You could call yourself a “property entrepreneur” if you own a single property which you spend a few hours a week managing as you continue to do your full time day job.
However, that is not a “property entrepreneur” for this blog.
A “property entrepreneur” is someone devoting their full time to a large ever-growing property business with no limit on the size it can grow to.
In other words, it is someone building a property empire.
This blog looks at the main characteristics of being a property entrepreneur under three headings:
1. The key features of a property business
2. The main roles, challenges and benefits of being a property entrepreneur
3. How to become a property entrepreneur.1. THE KEY FEATURES OF A PROPERTY BUSINESS
Nature of a property business
Naturally, the main characteristic of a property business is a focus on properties, land or real estate.
You can make money out of property by:
- Trading in properties – buying and selling them or making and selling them
- Investing in properties for income or rent, as you do when you purchase properties to rent out to tenants
- Investing in properties for capital appreciation or growth – either short term (such as by adding value by building or renovating) or long term (such as by holding a rental property for many years and waiting for property price inflation to work its magic)
- Providing services in relation to property – without necessarily owning properties – examples including: letting agents, estate agents, managing agents, property sourcers, builders and developers, hotel operators and serviced apartment operators.
Raising investment capital
Running a property business typically requires a large amount of investment capital, especially if the business model is based on owning, building or developing properties.
Sources of capital will include:
- Your own funds
- Funds from family, friends and colleagues
- Joint venture funds
- Mortgages and Loan funds from a variety of lenders
- Value you can add yourself in the course of your property business by doing things such as: refurbishing, developing, building and title splitting
- Income from property related services, the profit element of which you can treat as capital and use to buy properties.
Managing the assets
You will need to manage and protect your property assets during the period you own them, hopefully adding value in the process.
Your exact managerial input will depend on your skills and expertise and the staff you employ.
The type of property business you choose will determine the approach of you and your staff.
If your focus is on building a large portfolio of properties, holding them for years and collecting the rental income until such time as you decide to sell, you and your workforce will need to concentrate on tasks such as:
- Buying and selling properties
- Getting in and signing up tenants
- Collecting rents
- Maintaining, repairing and insuring properties
- Checking out tenants at the end of tenancies
- Engaging input from lawyers, accountants, financial advisers, architects, surveyors, builders, contractors, furniture assemblers and other experts and specialists as and when needed.
If you want to convert or build properties prior to selling them for capital profits, your concentration will be on sourcing and buying the properties followed by contracting the workforce to carry out the necessary work.
If you are in one of those property enterprises where the emphasis is on the provision of services related to property, your task will be to identify, train and retain a high quality workforce able to meet the needs of your customers, grow your turnover and enhance your profits.
Achieving and maintaining profitability
As with any business, the bottom line of a property business is all about profit. Businesses which make a loss, inevitably fail.
As a property entrepreneur, like any other entrepreneur, you need to understand business fundamentals such as:
- Cashflow forecasting
- Controlling expenditure
- Maximising income
- Growing profitability
- Optimising staff performance
Beyond that, as necessary, you need to engage or employ the experts or personnel needed to help you with the range of financial, administrative and operational matter which will ensure the success of your business.
2. THE MAIN ROLES, CHALLENGES AND BENEFITS OF BEING A PROPERTY ENTREPRENEUR
There are countless roles a property entrepreneur can take on. Some entrepreneurs carry out most or all of the jobs in their business.
You may find such a hands-on approach helpful when you are just starting up and need to save money; however carried on too long, it may stunt the growth of your business and could even harm it.
Say you are an electrician and decide to set up business renovating rundown or dilapidated homes.
At the start, it will probably make sense for you to do the electrical work yourself. But if you are true entrepreneur that is not something you will do for a minute longer than necessary.
It is worth thinking of an entrepreneur in the following way:
- An employee does the work
- A boss manages the employees and the work
- An entrepreneur increases the work and grows the business and profits.
The most effective entrepreneurs identify what they can do best in terms of managing, directing and adding value to the business – delegating all other roles to managers, employees, contractors, advisers and other third parties better able to do them.
One of the most important challenges for property entrepreneurs is sourcing money to fund their business.
Properties are typically very expensive and if you are to run a property business where you will own many properties, you are going to need to source huge sums of money, probably on an ongoing basis.
Getting in money is one of the tasks successful entrepreneurs often take first responsibility for – relying on a range of people for assistance, such as:
- Chief financial officer (CFO) of the business
- Bank manager or advisers
- Financial advisers
- Tax advisers.
If you talk to property entrepreneurs these days, most of them will probably tell you that finding the money is not their hardest task.
The biggest difficulty is often sourcing suitable properties of the right type and price, which will meet their profit targets.
To be a successful property entrepreneur, a crucial factor will be your ability to set up an effective system for identifying and buying well-priced land or properties required for the success of your particular property strategy.
Another big challenge is finding and retaining good quality builders and contractors.
A lack of knowledge, experience or expertise may be your biggest hurdles.
Whatever the greatest challenges you face, make sure you address them sufficiently and engage the right people able to meet the challenges.
It is worth thinking widely about the benefits of being a successful property entrepreneur. It is not just about being wealthy, having loads of valuable assets and earning great chunks of money.
Properties are extremely useful things – essential for people and businesses alike.
There is a shortage of affordable homes and that is the fundamental cause for high house prices which compel people to rent and push up the rent of those renting.
If you can help the government to meet its current target of 300,000 new homes per year (a target it has missed year after year) – no matter how small your contribution – you will be helping to hold back higher house prices and higher rents.
True you will not be some great champion for charity – on the other hand, you will not be an arms manufacturer.
3. HOW TO BECOME A PROPERTY ENTREPRENEUR
There is no set way to become a property entrepreneur. However, most people probably evolve into the role.
You could start with one investment property (keeping your day job) and see how it goes from there. Over time, you can grow the number of properties you own and you will at the same time increase the amount of money you have to invest.
You will have the benefit of leveraging and can grow the extent of your borrowing as your income increases.
If you are successful, there will come a point when you feel confident enough to go full time and all out with your strategies and plans.
This evolutionary approach is relatively leisurely and low-risk.
You will have ample time to assess if you are any good as an entrepreneur and, with proper preparation and perhaps some luck, you should be fit to succeed by the time you make the decision to take the plunge and go full time.
“Big bang approach”
The alternative to the evolutionary approach is “the big bang approach”.
This is where you set up a property business on a full time basis, even if you have limitations in terms of knowledge, experience and expertise.
If you opt for this approach and you have plenty of money or access to plenty of money, you will give yourself a fighting chance of success. But even then it carries a considerable degree of risk.
If you go for the big bang approach and you lack money and knowledge, you could well be courting failure…certainly you should expect a few serious bumps on your entrepreneurial road
None of this is to say that the big bang approach can never work; for some people it will work and can be a quick spectacular success.
But it is unlikely that you will see fast or great success without teaming up with or engaging experts and personnel of the highest quality who can make up for your own deficiencies in knowledge and expertise.
Becoming a full time property entrepreneur – as distinct from owning some properties or providing property related services on a part-time basis – is not something for everyone.
You will need one or more of money, knowledge and expertise to succeed – along with great systems and first rate personnel, advisers and partners.
Luck is probably going to play a part from time to time, and you may need to get up as you get knocked down more often than you would like.
It is probably best if you take on the challenge of being a full time property entrepreneur after several years of carefully learning the property game – identifying the strategies which work best for you, working out long term market trends, learning how to maximise profit and gains and building up an awesome “power team”.
If you are planning to just jump into property full time without much knowledge or experience, you shouldn’t expect things to be plain sailing.
Enjoyed this blog? Please share it with friends.
Have you ever thought of becoming a property entrepreneur? What has stopped you so far? Please leave your comments, observations or questions below.
You may also find the following blogs useful:
Think like a property millionaire (the fundamentals of a millionaire mindset)
No money property investing (brief overview of no cost property investing)
Instant property entrepreneur (how to become a property entrepreneur today)
Buy refurbish & refinance (the strategy about adding value to a property)
Option to purchase (profit from your control of a property)
If you have not signed up to get my latest blogs sent to you weekly, please do so HERE
Rebel Property Coach
My website is: www.rebelpropertycoach.com