Consumer to Producer

Even investors must make the transition from consumer to producer.

Capital goes where it’s welcome and stays where it’s well treated.

—Walter B. Wriston

In my experience, the real estate investing journey is equally as much a personal development journey. What is often portrayed about real estate is the good life - time freedom, passive income, private jets, fancy cars, and the like. And that is very alluring. But having all those things is at the end. In order to have, you must do, and in order to do, you must be.

I’m not breaking new ground or saying anything that hasn’t been said. Be-Do-Have is a very well known philosophy. Essentially, you must be the type of person who then will do the types of things to allow you to have whatever is your goal. If you do without being, you’ll either be doing the wrong things or, even if you are doing the right things, you will quit. If you “be” without doing, you’ll never have - and I’d posit this is impossible anyways - actions flow from state. What you do shows who you are.

The things we want to have are attainable, but only after we become the right type of person that deserves them.

Not That Easy

I didn’t understand this at the beginning of my real estate journey. I saw passive income from real estate as something easily achieved by simply leveraging my high income day job to acquire properties. After a few years of doing this, I’d be set. Right?

…No. What I realized very quickly was that wasn’t going to scale at all. Buying a bunch of single family “turnkey” properties gave me the sense of accomplishing something, but the cash flow was so low, I wasn’t really progressing toward my goals.

Why did I choose turnkeys to begin with? Because of who I was at the time. I didn’t want to deal with the hassle of contractors, rehab, and asset management. I wanted someone else to do all of that, hand me the property, and I’d receive the cash flow. In short, I had a consumer mindset about real estate. At that time, picking rental properties was like picking a steak out at the local market.

The quote at the beginning of this post is relevant here - “Capital goes where it’s welcome and stays where it’s well treated”. With that consumer mindset about real estate, do you think capital was going to find me or, even if it did, would it have stayed? Consumers exchange their currency for a product or service, but where is the profit truly made?

The Flip Side

The flip side of the coin is the producer. A producer is the one who creates that finished product that a consumer buys. In real estate, a producer is the value-add investor (pun intended). They look through 200 deals to find the 1 that needs substantial improvement. They handle rehabs, contractors, and asset management. And for that work, they receive tremendous profit. Justly so, because they created wealth. Something that didn’t exist in the world, a livable house or apartment unit, now exists. They improve the lives of their residents, grow the wealth of their investors, and raise the standard of the community where their project is located.

“The Rich create money.” - Robert Kiyosaki

The producer may go by other names, like “capitalist” or “entrepreneur”, but they all mean the same thing. They describe someone who creates wealth for themselves and others.

My Conversion

Again, look back at the quote at the top of the article. If I wanted capital to find me, to stay with me, I had to change my mindset from that of a consumer to that of a producer. I had to be a producer, do what a producer does, in order to have what producers have.

The having, as stated in the intro, is at the end. It’s the goal; it’s what I focus on when things aren’t going well. It is built up over time. I won’t just have it all at once - I have been and continue to build up to it.

The doing is actually pretty simple: Look at properties, build relationships, understand finances, macroeconomics, and property underwriting, and manage people and processes. It’s all the minutia involved in getting to a goal.

The being - that’s been the hardest part but also the most transformational. It’s been a fundamental change in how I think. Instead of looking foremost at my goals, my plans, and my benefits, I’ve learned to focus on adding value to others. If I want to partner with someone, the questions that I start with is “How can I make their business/property/project better? What can I help with? How can I ease their burden?” Of course, it is reciprocal - I will benefit in some way because as I add value to them, they add value to me. But fundamentally, the question starts from an other-focused position. This way of thinking is fundamental to being a producer, in my opinion. And as a producer, capital will find its way to me, because I will deploy that capital in a useful manner that creates value and wealth for others.

What Lies Ahead

Which do you think you are? A consumer investor or producer investor? Or maybe not an investor at all?

You may have picked up from my brand, value-add investing is the strategy I have fallen in love with. I didn’t start my journey on this path, but now I’m convinced it’s the way to wealth, passive income, and time freedom. And the key to that switch in approach was a switch in mindset - to that of a producer, always asking how I can add value to residents, investors, and the community.

4 years ago, I spent my nights and weekends watching Netflix or consuming social media for dumb things like memes. Now, my nights and weekends consist of networking with people further down the path than me, looking at and underwriting properties, learning from books, podcasts, and social media interactions about topics relevant to my goals. What I do has changed, but what had to change first was my being.

“Be the kind of person capital is attracted too.”

Special Announcement

I have exciting news to share: You can now read The Value Add Investor in the new Substack app for iPhone.

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