Start A Business Or Invest In Real Estate?

Morning, y'. All. What's up, guys? I am walking into a workshop that I'm hosting at Capital Factory in downtown Austin. We're doing hot seats with successful entrepreneurs. I run a little group that is focused on getting businesses to eight figures and creating a sellable process so they can exit their businesses. That's kind of the whole point of building something so you can exit it someday, invest it for passive income while making a big impact in the world. And the conversation came up yesterday in the workshop about the difference between starting a business or investing in real estate. And the reason that this came up was because there's a group of people in our group, which is called the back room, that buy businesses. And basically what they do is they partner with big banks or they partner with what we call institutional debt, which is a fancy way of saying people who make money by lending money to other people who buy businesses. And the conversation came up of, well, that's interesting. We always hear about using other people's money to buy real estate, but what about using other people's money to buy businesses? And I made the analogy that they're very similar, just with a different number of zeros. So what's interesting is when I got started as an entrepreneur, I was attracted to the idea of passive income. And.

What I was really attracted to was the idea that you could do something like invest in real estate. You could use bank money or other people's money to buy a house or an apartment building, have other people rent it from you, have them pay for the stage, service on the debt while you lived on the cash flow. But no one ever told me that the same exact thing happens in business. No one ever told me that there are professional equity groups that will have access to money through the same type of financing and buy businesses where the profits are much, much higher. So if we run the numbers on buying an apartment building, after all is said and done, you might profit $2,000 a month or something. I have.

A partner in my mastermind in the back room. My mentoring group, who got started was not an entrepreneur five years ago, started a business, took it to 20 to 25 million dollars in about three years, sold it, and now he is acqu Businesses. And what he recently did was use the institutional money, use bank financing to buy a business without his own money, and that business will profit about $5 million a year or $500,000 a month. Now, same type of structure, but completely different numbers. Now, what's interesting about the same strategy applies across the board. You're looking for cash flow. You use other people's money and other people's time to get that cash flow. And as a result, you build your empire over time. I suspect, and I've talked about this publicly, that this is how I'm going to get my Cleveland Indians. My dream is to buy the Cleveland Indians and to make him a perennial World Series champion. And I don't think I'm gonna get there making YouTube videos. I don't think I'm gonna get there selling stuff on the Internet. I'm gonna get there by going all in over the next 10 years of developing businesses so that I acquire one with other people's money, build it into a conglomerate, into a billion dollar.

For billions of dollars, so that I can write a check for the Cleveland Indians. So I wanted you to see, like, I know a lot of you are looking for the proverbial passive income idea, and you hear about the same ideas over and over again. But that same model applies to not just things like real estate, it applies to business. It applies to million multi million dollar deals that have much higher cash flow flow.

That same model of using other people's money to make more money is not limited to just people paying you rent. It has the same thing with sales. This is one of the things I was telling one of my mentoring groups yesterday is that money can't do anything without you. It's so interesting. Look at this chain for a second. At the.

In this model, at the very top, you've got banks who lend to business buyers at 10% interest or whatever it is. It tends to be between 10 and 15% interest. And their whole model is they're going to make a profit on the debt, they're going to make a profit lending money. That's their model. And then in the middle, there's the people who buy the businesses or invest in the businesses. Businesses, they invest that capital that came from the bank and they buy the businesses and they write the entrepreneur a big check to have that business, to have that asset. And then at the bottom of the chain, the driver, the engine of it all, is the small business that's taking sales. Which is so interesting, because what that means is all this institutional money at the top, all of these big numbers, all this big money, is counting on you, is counting on the entrepreneur to make sales. Which is why I say entrepreneurs are always building something way bigger than they understand. Like that idea of making $10,000 a month or $100,000 a month or a million dollars a year is so much bigger than just how it affects your lifestyle. It also impacts the investors. It impacts the people at the A lend. It has ripple effects that socialists don't see. It has impacts that entrepreneurs don't see. Positive impacts of growth.

Sorry for the noise, we're in downtown Austin. So it has these ripple effects that are very rarely calculated when you're analyzing your business because.

It impacts so many other companies and so many customers. So all this to say, the same principles that applied in real estate apply on a much, much bigger scale in business. And that's how the 1% makes their money. That's how people get fabulously wealthy. And that's how I'm going to buy the Cleveland Indians. Hope you found this helpful. Let me know in the comments and I'll talk to you guys soon.