As your portfolio grows, you will begin to discover the value of systems in your business. With a single income property things usually remain pretty simple and even if you let things slide a little, you can usually pull it together when a vacancy arises or tax time rolls around. As you begin to acquire more properties this is not the case, and you’ll hit a wall if you haven’t implemented some basic systems to stay on top of your portfolio. Ensuring success in real estate is as simple as implementing and following the right systems.
Why systems are important
- Clarity – In order to implement systems to handle various areas of our business, we are required to think through the processes in each function of our business. By doing this we gain clarity on what our business is, how we operate it, and are then able to ensure that what we’re doing aligns with our goals.
- Contingency – As a byproduct of thinking through our business systems, we inevitably come across some “what if” questions. The process of implementing systems encourages us to come up with procedures for dealing with the day-to-day, but also forces us to consider some of the “what-if” scenarios we might encounter. Even if we don’t have formal plans for every possible scenario, thinking about these possibilities in advance leaves us better prepared to handle the inevitable challenges every investor faces.
- Continuity – You may or may not be concerned about what happens to your business after you’re done with it, but having solid systems in place helps with continuity. What if you want to take a 2 week vacation? Do you have strong enough systems in place to disappear for a couple weeks and know that everything will be taken care of? What if you want to take a year off and travel the world? Would your business still be thriving upon your return?
Types of systems for real estate investors
Different strategies require different systems, but here are a few common areas where you may wish to implement solid systems:
- Acquisition – finding deals, making and managing offers, due diligence, closing
- Financing – qualifying for loans, bookkeeping, managing refinancing
- Property Management – advertising, leasing, rent collection, evictions, maintenance, renovations
- Relationship Management – prospecting, investor updates, conflict management
There are several other categories depending on how you structure your deals, the type of properties you purchase, and the strategies you work with. The idea is to create strong systems to support each area of your business, so strong a monkey could run the show.
How systems help us achieve our goals
Most investors are in the game to make more money, increase their available free time, or both. If you’re looking for “passive” income, systems are the key ingredient which will allow you to leverage your time and make sure your money is really working hard for you. In short, they help us achieve our goals.
To create truly passive income, you need to create the ability to take yourself out of your business. The idea is to build your business upon a foundation of solid systems so that minimal input on your part is required. Take the time to work on your business rather than in your business.
Think of your business as a franchise where you build detailed systems to handle the operations. Aim to set things up so that you could leave for a year with minimal impact to your bottom line.
Things to consider
Regardless of whether you own 0 properties or 100, if you’re going to invest in real estate here are 3 simple questions to ask yourself:
- Which areas of my business do I spend the most time in?
- Which areas of my business cause me the most frustration?
- Which areas of my business do I procrastinate on?
Once you’ve answered these 3 questions, consider whether any of those areas would benefit from having better systems in place. Chances are most of them will, so get to work!
If you can have a monkey run the show while you hang out at the zoo, then you’ve mastered the art of creating systems in your real estate investing business. Imagine the freedom… it might be worth more to you than winning a Lotto 6/49 jackpot.
photo credit: aaron.michels
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