Alan Brymer

You'll Never Sell Your Real Estate Business, So You Should Automate It
by Alan Brymer

Businesses, like real estate, can be planned, built, finished, and sold for a profit. But what if you own a business that buys and sells real estate? Itís not the same. The best you can do is sell the real estate that youíve bought, and thatís the end of it. No one will buy your business and pay you several times your current yearly profits, as they would other businesses. Stinks, doesnít it? Iíll go into the details of why this is, but also offer this self-coined truism as a consolation prize:

"You'll never sell your real estate business, so you might as well automate it."

I. Other Businessesí Options and Exit Strategies

Other industries have it good, or at least some of them. If you were to start a company that, for example, sells chairs, you would make your initial investment and get to work. Youíd test ways to find people who buy your chairs, and youíd develop relationships with retailers who buy from you in bulk and resell your chairs to the public. Once you make enough money to survive, you grow the business by reinvesting profits, borrowing, or raising capital.

Then you get bigger, sell more, make more, and before you know it, you have a track record of several years. You could now sell your business to someone else. But, of course, the more profitable your company is, the more someone will pay for it. Each industry has its own rules of thumb, but for the most part a buyer will offer you a multiple of your companyís yearly earnings (hopefully several times).

Other things besides earnings can increase your companyís sales price, such as systemizing it. If you can show a buyer how your company runs itself without you (the owner) having to do anything, you can imagine how much more attractive it will appear to them. Who wouldnít want to own business that spits out money year after year without much work? Itís worth paying more for.

People and companies who buy businesses also want to buy something that is scalable. This means that they should be able to grow it without having to hire a ton of people. Law firms canít do this, because each attorney can only bill so many hours, and in order for the firm to make more money, they will have to hire more attorneys. Compare this to a software business where people can download the products from a websiteóyou could potentially sell hundreds or thousands more copies per year before you have to hire someone new.

So, selling it gives you a lump sum of money that you can use to start a new business, invest somewhere and retire on, or whatever. Most businesses donít sell because they wouldnít sell for a substantial amount, but itís still many entrepreneursí dream to build a business, sell it for a huge amount, and get the heck out of Dodge. I know a few people who have done this, and I am insanely jealous.

II. Why Real Estate Investment Companies Are Different

The reason Iím jealous is because not all business types are able to do this. Some businesses rely so much on the owner and their specialized expertise, that it would be hard for a new owner without that same expertise to jump in and make it work. Like a law firm. Or a doctor. Or, regrettably, a real estate investment company that flips and or holds property.

The best that we can hope for is to sell whatever assets weíve accumulated. For doctors and law firms, those assets are customer lists, supplies, and maybe the building they are in. For us investors, itís our properties and thatís it. Our companies are only (perceived to be) worth whatever we can sell our properties for.

I think that an investment company is scalable. I can picture a company that buys and sells 100 houses per year and only has a tiny office of staff. But when is the last time youíve heard of a real estate investor selling their business? I havenít. It just doesnít happen. Instead, weíre just looked upon as individuals with real assets that we could sell off, and I doubt any investor would pay market value for them.

III. But at Least You Can Automate It

You can even write systems for your real estate company and get it to the point where it practically runs itself without you. But no one cares. So, if you canít sell your company, you might as well make life as easy as possible and systemize it for your own benefit. Map out who does what, write the systems, and hire the right people to run them for you and give you reports.

And, if itís creating cash and equity profits year after year anyway, this may not be such a bad thing. You just need to know what youíre getting into. So while individual houses have multiple exit strategies, your investment business as a whole has two:

1)Sell off all of your properties and liquidate the company.
2)Own the business foreverókeeping your properties, maybe buying more, maybe selling some.

I opt for #2, but encourage you to make your business as easy as possible to manage for your own sake.

Alan Brymer
Alan Brymer is the creator of The Assistant Who Pays Their Own Salary and the Founder and President of the Utah Valley Real Estate Investors Association. He has been a full-time investor since his first property at the age of 22 and has raised millions in private funding. Alanís investment company was named by the Utah Valley Entrepreneurial Forum as one of the ďTop 25 Companies Under Five Years Old.Ē He is a frequent guest expert for the news media, having been featured on multiple television programs as a real estate expert, published in 12 magazines nationwide, and as a speaker at seminars and associations around the country.

In addition to his real estate experience, Alan is an expert at systemizing businesses. Like many, he attended seminars and bought courses but found that while the techniques of real estate are frequently taught, there were no courses that showed how to run a business in the level of detail that he was searching for. He began to develop systems for his own real estate business, which has allowed him to do more deals in less time each month. He has incorporated these into his consulting and is now presenting them as complete systems modules, the first of their kind for real estate investors.

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