There are 7 P’s for Real Estate.
You know that real estate is a great investment.
Let’s consider why real estate is a great place to invest to create wealth.
We’ll take a residential investment property and break it down into 7 components.
There is an owner, a property manager, maintenance person, the tenant and the property.
The 7 P’s are different aspects of a functioning real estate business.
Here are the 7 P’s for Real Estate:
1. Principle
In real estate the principle(s) is the owner. They provide guidance and direction for the business, they make decisions and are responsible, but because there is a property and a renter and legal requirements for how the leasing is performed, the learning curve and direction by the owner is not very complicated. Because the work load can be outsourced if there is a catastrophe or medical emergency the business can continue to operate.
2. People
The principle can also choose to act as the employee and do the work related to running the property (business), or they can outsource it and hire a property manager to do it for them. Other service providers (handyman, roofer, plumbers, landscapers, etc.) are typically hired by the manager. If the manager is not doing a good job, they can be readily replaced, or you can take back the job yourself. Managers also come complete and have everything they need to do their job, so no hiring, training, payroll, human resources, retirement, etc.
3. Product
The product is the use of the property by the tenant.
4. Process
Processes are worked out by the property manager and principle, and they
5. Priorities
Priorities are simple… rent it up, keep it rented, keep the rent close to current market.
6. Public
The customer is the tenant. Not too much else comes into influence the property.
7. Property
The physical property, its condition, and amenities. This does have to be maintained regularly and occasionally there are unexpected problems.
Real estate is a business, and a very simple business at that. It does not have a lot of moving parts, and does not require a lot of people or upkeep. This simplicity can allow for it to be profitable without very much oversight.
Read our previous blog post on The 7 P’s for Business.
