ENGAGEMENT
REALTY MATTERS
Designing Your Business
HOW CREATING SYSTEMS CAN LEAD TO A PATH OF SCALE
by Brian Wojcik
This also may explain the high ratio of investor turn- over; many new investors exit after only a few years in the business. The statistics are consistent and alarming: approximately 53 percent of small unit-count housing providers lose money according to IRS Schedule-E filing summaries, totaling $64 billion annually. Some may chal- lenge that statistic with the concept of phantom losses due to depreciation, interest deductions, etc. Differing opinions aside, a more specific loss classification is tell - ing. Nondeductible rental losses, which usually occur if there isn’t enough passive income to offset the total loss, over the last 10 years are roughly 1.6 million filings (ap - proximately 2.7 million rentals) to the tune of $18 billion ($6,700 each rental) annually. Those losses are typically indicative of something gone extremely wrong and are difficult to dispute. In other words, 15 percent of small- unit-count rentals have losses in a big way. Interestingly, as an aside, that number closely correlates to national delinquency levels for low-cost housing.
BUSINESS BY DESIGN
Evaluation of a real estate opportunity comes in two forms: • Use in search of a Site, or • Site in search of a Use
In other words, a business produces something and needs a suitable location; conversely, a location is available for a suitable business. A parallel approach and methodology can be conceived to assist potential real estate entrepre- neurs to evaluate if real estate is appropriate for them. This is the question often missed by most beginning investors.
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