Two house flippers buy similar deals—but one’s profit is double the other.
Two wholesalers buy equivalent houses—but one offloads his for a $25,000 profit in a day, while the second struggles for two months to net $5,000.
If you want something done, a lot of people can do it. But if you want excellence, the field of qualified applicants narrows.
This illustrates a critical point: How something is done is not nearly as important as who is doing it.
Dan Sullivan and Dr. Benjamin Hardy wrote a book about this critical topic. It’s called Who Not How: The Formula to Achieve Bigger Goals Through Accelerating Teamwork. As we’ll explain, the lessons of this book are crucial for passive investors.
Here’s the premise: When entrepreneurs and managers plan a new project or try to grow their firm, they typically ask the wrong question. Instead of asking, “How do we do this?” they should be asking, “Who can do this for us?”
Shifting from a how-mentality to a who-mentality is a game changer for passive real estate investors.
Why Shift to a “Who, Not How” Mindset?
Unless you’re a solopreneur by choice, you must assemble a team. Who you put on that team will make or break your results and your future. Look at any great NBA basketball team for proof.
Apple pioneer Steve Jobs was obsessed with this practice. By hiring the most creative, ingenious team members, Steve believed he could produce over 50 times the results produced by an average employee. Jobs said, as quoted in Inc. Magazine:
“I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to 1. Given that, you’re well advised to go after the cream of the cream…A small team of A-players can run circles around a giant team of B and C players.”
Those who implement this powerful principle achieve a dual benefit: Their achievement levels rise, and they achieve radically more freedom—a massive win-win for everyone involved.
What are some specific benefits of adopting this mindset?
- More time: Let someone else do what they’re good at so you can focus on the mission.
- Less stress: Working in your “zone” will result in more joy and fewer headaches.
- More focus: Those who delegate their weaknesses are free to focus on their strengths.
- More money: Fewer distractions and more focus translate to more profits and wealth.
- Better relationships: Delegating, collaborating, and partnering will result in a level of joy and harmony at work that a nondelegating workaholic could never dream of.
- Greater purpose: Those who hire the right “who” aren’t bogged down in administrative details. This provides the energy to pursue your dreams and passions.
This Is a No-Brainer for Entrepreneurs, But How Does It Apply to Investors?
I’m glad you asked.
Many investors hear about the potential income-producing, tax-slashing, growth-yielding benefits of real estate investing. Though they have demanding full-time careers and lives, they try to acquire and manage real estate on the side.
It usually doesn’t work. Most are disappointed with the returns they achieve for the effort, hassle, and risk they exert. (It’s not like those house-flipping shows on HGTV!) Many quit and return to Wall Street’s casinos.
We think there’s a better way. Those of you who have shifted from active to passive real estate investing appear to agree.
Passive investors have figured out the “how” of the equation. That’s a good start. But to get to the next level, consider “who, not just how.”
Who?
Switching from active to passive, or starting there, is a great decision. While this may create time in your schedule and reduce the many risks and hassles of active property ownership, it is just the first step.
Those who stop here often make dreadful mistakes that could actually increase their financial risk and destroy their investment nest egg. You’ve got to figure out the right “who.”
Many passive real estate investors screw up royally at just this point. They experience the “aha” moment and decide to pursue a passive investment strategy—but then they choose the first operator they hear about, or the syndicator their friend just invested with, or the marketer with the slickest website or shiniest brochure.
This is often a recipe for disaster. I should know. When I sold my staffing firm in 1997, I became a full-time investor. I invested in a series of deals that produced, at best, less-than-satisfactory returns. In several cases, I lost all my principal.
I was not really an investor at all. I was a speculator.
I did little due diligence, investing in assets I knew little about and trusted others who had done the same. And I selected deals based on form over substance.
I want to see you achieve a better outcome. And I might even be able to help.
Most passive investors have full-time careers, families, and hobbies. The more they focus on their specialty, the less time they have time to research real estate and other investments. This is where so many make big mistakes.
I’ve been investing in real estate for almost a quarter-century. The more I learn about due diligence, the harder it becomes.
How could this be?
It’s because the deeper I dive and the more time that goes by, the more things I discover that could go wrong. (Examples abound!)
I hate to discourage you, but if you’re a newer passive investor, you should know that due diligence is hard. It takes a focused effort (typically over months) and knowing what to look for and where to find it.
Who, not how
This is where “who, not how” comes into focus. If you’ve already decided to invest passively, I recommend you choose the operator first and the deal second.
A mediocre operator can screw up a great real estate deal. But a great operator can turn most mediocre deals into profitable investments. I can virtually guarantee you’ll be a better investor if you choose the operator first.
That’s a great “who”—but that’s not the only one.
You shouldn’t just choose the operator before the deal. You need to select the right operator.
And that’s no simple feat. In fact, as I mentioned, it can be grueling.
So, who will you partner with to get this done? And get it done well?
Passive Investing With PassivePockets
Whether you’re new to real estate or have migrated from active to passive investing, PassivePockets is here to break down the basics and encourage you in your passive investment journey.
PassivePockets will allow you to access education, private investor forums, and sponsor and deal directories—so you can confidently find, vet, and invest in syndications.
Join the wait list today and connect with a strong community of investors who realize you can build great wealth in real estate investing without babysitting tenants, unstopping toilets, or “trashing out” abandoned units.
Final Thoughts
All the best businesses I’ve been involved in utilized the “who, not how” principle—long before the book came out.
The same goes for every one of my best investments. I’ve been a real estate investor for a long time, and I wouldn’t even consider investing in many of the deals I thought were “sure things” 20 years ago.
As I said, the more I know, the more cautious I’ve become. I hope you feel the same.
We hope you’re focusing on “who” instead of “how.” It will pay dividends in so many areas of your business, life, and investments. Let us know if we can help you on your journey.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
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