We all instinctively sense that entrepreneurs are different.  But what is it that makes an entrepreneur tick?  What makes an entrepreneur successful?  What is the entrepreneurial mind-set?  Let’s explore the elements of the entrepreneurial DNA.

You may have a day job, but if you are an income property owner you are also an entrepreneur.  But be careful, if you use your employee brain to deal with your entrepreneurial endeavors, you could fall short as a landlord.  Here’s why: 

Value Extraction Mind-set vs. Value Added Mind-set

Employees (and professionals) trade “time” for money.  When an employee “checks in” the money clock starts ticking (professionals call it “billable hours”).  An employee wants to know how much money will they make per hour, what are the benefits, when are the days off?  This is a  value extraction mind-set.

The purpose of making this observation is not to pass judgment, but to point out an important distinction in mind-set so you can cultivate the mind-set that will be most productive and profitable to you as an entrepreneur.

Entrepreneurs trade “added value” for money.  An entrepreneur has to have a value added mind-set.  Further, an entrepreneur’s money clock doesn’t start when he or she “checks in,” far from it.  An entrepreneur has to produce a product and/or increase the value of something, and sell it for more money than the entrepreneur put into producing (or renovating) the product, in order to get paid.  The entrepreneur gets what’s left over after all the bills are paid, so there’s always that element of titillating (but hopefully “informed”) risk.  If the entrepreneur fails to add value or fails to sell the product for a sum greater than the entrepreneur put into it, he or she will not get paid, regardless of the number of hours put into the endeavor.

Let’s apply this logic to landlording:

A landlord who has more attention on extracting value from their rental business than adding value to the lives and enjoyment of their tenants and the value of the property, may end up both unhappy and unsuccessful.

How long has it been since you stayed at a fine hotel or ate at a fine restaurant?  Think of that experience for a minute.  I always pay attention to the quality of the experience.  I immediately notice cleanliness, whether the shower-head functions properly, whether the shower is nicely caulked (I know, what a geek!), the amenities, the common areas, or in a restaurant the ambiance, the presentation, the skill of service, etc.  The quality of the experience is the value I take away in my memory, as their customer.

Likewise, the quality of their experience is what your tenant takes away as your customer.  Only this time, you are the servant.  You have the privilege of serving your great tenants and in return you get to build a lovely estate that will serve you!  It is your job to add value and quality to the experience of your tenant, your customer, and to do it with an honest and good spirit.  You have to LOVE seeing your tenants happy, just as you would LOVE to see your clientele happy if you were operating a fine hotel or restaurant. 

That is the value added mind-set you need to develop as a landlord.

Let’s apply this logic to investing in property:

As an example, my son and daughter-in-law and I bought a horrible roach and mold-infested, filthy house a few years ago.  As I remember, we had scheduled our inspection on a Monday morning at 9:00 AM.  When we arrived, there were 8 or 9 men asleep in the house and a couple of kids running around.  There were roaches crawling on the toothbrushes in the bathrooms and all over the unwashed dishes in the kitchen.  The condition of that house would have seriously gagged a maggot.

The basic house was good and in a decent area, but it’s unlikely (even in the days of hot and cold running loans available) that a bank would have financed that property in the shape it was in.  The house needed an investor/entrepreneur.

We bought it, gutted it, renovated it, cleaned it up, 100% totally de-roached and de-molded it, and rented it to a nice family.  (We didn’t slap a coat of paint on it and rent it or sell it to some unsuspecting schmuck.)  The neighbors were ecstatic.  We added value to the property, added value to the neighborhood and added value to the living experience of the nice family that moved in.  We were rewarded with lovely tenants, positive cash-flow, and a nice equity from raising the value of the home.

That is the value added mind-set you need to develop as an investor and landlord.  And when you do, you’ll be breathing rarefied air.