I come from a background in computer programming and software development. I’ve had a deep respect and love for making money, the economy, and real estate in particular, for many years, but my skillset was vastly different than that, so I focused my attention developing skills in that area–software development. As I’ve moved along, and learned more about my chosen field, and that of my passion in real estate, I’ve started to notice similarities in the two industries. I’ve found skills that I’ve developed as a software developer that are transferable into the world of real estate, in particular to rental property owners. In this post I share 4 such skills, and how they can be cultivated, and used for your rentals.
Pseudocode is the term we use for developing an idea before we develop an idea. It’s a logical description of the steps behind a piece of software which we will use as a guide as we move forward in it’s development. In short, it’s a plan. Now, breaking it down to that point I’m sure you can see the connection as well. Developing a plan for your rental property, even before beginning the purchasing process, will give you so much more information than you would have running in without thinking.
Why is it important?
Developing a plan for code allows us to preconceive the potential pitfalls with a project, and plan for them. It can do the same for your rental. The first pitfall you will run into in a rental property is purchase price, and potential rehab costs. If you spend too much for a property, you won’t have enough to repair it properly, and that limits the amount of money you can receive in rent–if you will be able to rent it at all. Properly devising a plan will allow you to find the maximum price that you are able to pay for the property, and if you then stick to that price, you may have to walk away from a property that you might want, but you will not dive head first into a shallow pool.
A/B Testing, or split testing, is the process where we will develop two–generally very slightly different–versions of a product, such as a website, and release both of them to two statistically equal populations. The reason we do this is to track the performance for each. We then find which one performs best, and use that as our final product. In real estate investing, and rentals in particular, your product is your property.
Why is it important?
Testing will continuously allow you to improve your property. In real estate it is definitely more difficult, but not impossible. This is a particularly useful technique for multi-family homes, such as apartment buildings, where units may be nearly identical, or in some cases even mirror images of each other. Say you’re then toying with the idea of changing your lease agreement. Say for one property you decide to test out your profit potential for heating included, while with the other you have nothing included, just base rent. You would then set aside records for both properties, keeping track of every dollar spent on either in separate records, and at the end of your testing phase–I would suggest the point where the test duration tenant leaves–you would analyze this data and see what you have. You would then see which lease agreement has earned you the most money, and make the final decision at that time to keep that lease agreement for all units, just that unit, not at all, or do more testing.
When you’re developing software you find that you have to look at things from outside of your own comfort zone. While being a developer on a popular cult browser game, I found that I was bringing a lot of my personal views into my decisions as a developer from when I was a player. This caused me to do a number of things with a narrow focus, so I began forcing myself to think outside of my own mind, and tackle the problems at hand from all sides. When you find an issue arise at one of your rentals, you’re going to be seeing it as a landlord. If you then stop, and look at the issue as the tenant, and then again as if you were a complete outsider to the issue, you will find many different solutions to the same problem.
Why is it important?
I’ve shown in the past that when asked one way to increase revenue for a rental property, landlords predominantly say “increase rents.” Thinking differently allows the landlord to instead come up with different ways to add income to their rental, lower expenses, all without burdening the tenant with more rental costs. Now, obviously there are some situations where increasing rents makes sense both economically and logically–such as when your rents are below average for the area. But when your rents are average, or above average, it may make more sense for you to find a unique source of income, or a unique way to lower expenses.
I have begun a mantra for the last year: “I cannot do everything myself.” It’s working. I’m really starting to understand this. Because it’s true, you really cannot do everything yourself. Collaboration is key to any good project, software or not. In the landlording world this means many things. Hiring professionals to do jobs that you may very well be able to get-by doing yourself, and it may cost less, but in the end you’ll have a better product–your property–which will rent for more money–thinking differently–and you will be prouder of by hiring someone who specializes in whatever you need done.
Why is it important?
Getting things done, and getting things done right, are two different things. I have lived in many rentals in my life, and have seen landlords of all the ranges, from being perfectionists and professionals, down to the dreaded slumlord. I am of the firm belief that if you hire the right people, you can only improve your product, and in turn increase the amount of money coming in, and decrease the number of times you have to spend money fixing up the property. You may be able to patch something, but that may mean down the road it will break and cause 10 times the damage to the property. If you had just spent the money to fix it right the first time, you would have saved yourself a ton.
At the end of the day, these ideas aren’t just transferable to real estate, but to life in general. Think before you act, test everything, think differently, and surround yourself with competent, intelligent people. These are more than business principles, they are life principles which I try to live by both in and out of my professional world. And I truly believe you should as well.